Danone to Cut 900 Jobs After Profitability Declines

To address a lasting downturn in the European economy and consumer trends that have led to a significant decline in its sales in the region, Danone announced on December 13, 2012 that it was preparing a cost-reduction and adaptation plan for its organizations to win back its competitive edge.

19 Feb 2013 --- In keeping with that announcement and following a period of in-depth analysis, information on the plan is being presented today to Danone’s European Works Council.

The project calls for three major changes:
1. A reduction by approximately half of management units, achieved by combining teams from several countries into multi-country units. Danone will continue to do business in the same number of countries and maintain a division-based structure to make best use of features specific to each business line.

2. The combination within subsidiaries of several management functions that currently operate separately.

3. Focusing each level of management (corporate, division, region, etc.) on missions and projects that have a direct impact on business growth. This will also involve simplifying key management processes.

As proposed, this model will boost responsiveness and speed up decision-making. It will also generate savings on general and administrative costs that will contribute to the cost-reduction plan announced by Danone on December 13, 2012, enabling Danone to win back its competitive edge in Europe.

The proposed plan would lead to the suppression of around 900 management and administrative positions across 26 European countries and will be conducted in contact with all works councils representatives, at both European and local level. The project will emphasize internal mobility and voluntary departures through a dedicated platform favoring internal mobility, support for personal projects and individualized assistance for employees leaving the company. It will be deployed over a two-year period.

The news came as the company reported its 2012 results, with sales of over €20 billion, up +5.4%, with free cash-flow over €2 billion, with sales growth of at least +5%.

In Q4 2012 consolidated sales increased +7.3% as reported to total €5,136 million in the fourth quarter of 2012. Excluding the impact of changes in the basis for comparison, which include exchange rates and scope of consolidation, sales were up +4.9%. This organic growth reflects a +3.2% increase in sales volume and a +1.7% increase due to the price/mix effect. The +1.8% exchange-rate effect reflects favorable trends in currencies including the Mexican peso, the Russian ruble, the US dollar and the Chinese yuan.

Chairman’s comments “2012 was an important year for Danone in many respects. Important in that we achieved some major milestones: our sales exceeded the €20 billion mark for the first time, reflecting our ability to bring health through food to an ever-increasing number of people. And for the first time, too, our cash-flow topped €2 billion—double the 2008 figure. Finally, even as our Group grew rapidly from 2008 to 2012, our CO2 emissions held steady. Which means a 35% reduction in the carbon intensity of our business. Most of these achievements were due to our operations outside Europe, which now generate 60% of our total sales and reported profitable growth averaging over 10% in 2012. We must make every effort to pursue lasting expansion in these markets. But 2012 also saw some of our business in Europe come under pressure from a severe deterioration in overall consumer demand, which led to a 3% decline in our revenues in this region and a decline of over 10% in our operating income. Clearly this situation is not sustainable, and we will overcome it. In December we set a €200 million target for savings and announced that we intended to launch a plan to adapt our organization. Today we are initiating discussions with our Works Councils over the plan’s main measures, which are designed to win back our competitive edge and achieve greater efficiency in Europe. We will also continue to revamp the product ranges offered by our business lines. So 2013 will be a year of transition, with vigorous development in business in our growth markets and a drive to strengthen operations in Europe. A year aimed at returning our activities as a whole to strong, profitable growth by 2014.”