Danone (Paris:BN)

The Danone Group is the world leader in fresh dairy products and the world number two in terms of bottled water volumes. It is also the world leader in medical nutrition and the world number two in baby food. In 2011, the company recorded a turnover of 19 billion euros, more than half of which was generated in emerging countries. The group employs 100,000 people worldwide and has more than 180 production sites. Its products are sold on five continents. The group's best-known brands are Danone, Actimel, Danette, Activia, Taillefine, Evian, Volvic, Badoit, Blédina, Milupa and Aptamil. Danone competes with companies such as Nestlé, Unilever, Kraft Foods and Cadbury Schweppes.

The company was founded in 1919 in Spain by Isaac Carasso. He had the idea of introducing yoghurts, which were very popular in his homeland of Turkey. Ten years later, Daniel Carasso, the founder's son, launched the company in France. In 1967, the company merged with Fromageries Gervais, which had been in existence since 1852. In 1969, Gervais Danone merged with BSN, then the number one in beer, mineral water and baby nutrition. BSN owns the brands Evian, Blédina, Kanterbraü, Kronenbourg, Amora and Panzani. The group's main activities were fresh products, beverages, pasta and ready meals.

In 1987, the company bought General Biscuit, which owned the LU brand. Two years later, the group acquired several European subsidiaries of the American Nabisco, including Belin biscuits. The brand became the number one biscuit in Europe and number two worldwide. From 1979 to 1985, Danone acquired brands such as Carambar, Liebig, Vandamme, La Pie qui Chante, Maille, etc. In 1996, the company refocused on the three most promising businesses: fresh dairy products, mineral waters and biscuits. These three sectors alone accounted for 85,% of sales. The company then sold Panzani, Amora, Marie, William Saurin, Liebig, La Pie qui Chante, Carambar, etc. In total, more than half of the grocery activities and all of the confectionery were sold. Three brands were then highlighted: Danone, Évian and Lu.

In 1999, the group withdrew from the beer niche, notably with the sale of Kronenbourg in 2000. (What a pity!). This refocusing confirms the group's desire to move towards health and healthy eating. The Danone group is therefore expanding internationally and mainly in emerging markets. In 2007, Danone refocused again and separated from its Biscuits business. The group sold Lu and bought the Dutch company Numico, one of the world leaders in baby food and medical nutrition. The Biscuits and Cereal Products division was then sold to Kraft Foods for 6.3 billion euros.

Since then, the Danone group has been divided into four areas: fresh dairy products, water, infant and medical nutrition. On April 23, 2012, while Danone was eyeing the acquisition of Pfizer's infant nutrition business, it was ultimately its Swiss competitor Nestlé that acquired the American pharmacist's powdered milk. Just like medical nutrition, the infant nutrition business is growing strongly in emerging countries.

Today, faced with the deterioration of the economic situation in Europe, Danone wishes to launch a savings and adaptation plan for its organizations to regain competitiveness. The objective of this plan will be to adjust its costs to the new context by achieving approximately 200 million euros in savings in Europe. It will aim to reduce the operating costs of the group and its European subsidiaries.

Danone offers a average yield appreciable of 3.37%. Despite this very appreciable yield, the distribution ratio remains cautious, with 46.90%. The dividend is progressing steadily, at an average annual rate of 6.8%. Like other stocks in the same sector, Danone has low volatility, with 13.42%. The beta, with 0.45, also confirms that the stock is not very sensitive to market variations.

One might think that a French group of international scope could be considerably influenced by the fluctuations of the dollar. Indeed, when the greenback falls, this means that the group must lower its margins to continue to sell at the same price abroad. However, we note, with a $risk of -0.25, that this is not the case. On the contrary, it even means that a weak dollar tends to be beneficial for the share price. This is explained by the geographical diversity of production sites but also the use, like Nestlé, of financial instruments to hedge against exchange rate risk, such as swaps.

Danone is part of my strategy Ex-US, which seeks stocks that pay a solid dividend and offer good protection against currency and market risk. The company reminds me a lot of Nestle from the point of view of its products, its orientation towards emerging markets and towards medical nutrition. The title offers a fairly generous dividend, while being not very volatile and not very sensitive to economic fluctuations and those of the dollar. With 3 stars, Danone thus offers a good profitability/risk ratio. It is a title to keep under the elbow with a view, why not, to a future purchase.

Sources: Wikipedia, Swissquote, dividends.ch, Danone