Danone achieves free cash flow, eyes new acquisitions

USA – Danone has reported a significant increase in free cash flow, reaching €3bn in the 2024 financial year, a €400m rise from the previous year.

This milestone marks an increase of €900m since 2022, a development that has strengthened the company’s position for future mergers and acquisitions.

CEO Antoine de Saint-Affrique stated that Danone is ready to take a proactive approach to acquisitions, emphasizing the company’s commitment to expanding its market presence.

“We want to move to the front foot on acquisitions,” he said during an analyst call, suggesting that the company is evaluating new opportunities for growth.

According to CFO Juergen Esser, return on invested capital (ROIC) has also improved, reaching 10%—a level last seen in 2016.

He attributed this achievement to a strong focus on working capital management, which has led to a record free cash flow.

He emphasized that maintaining double-digit ROIC is crucial in supporting Danone’s acquisition strategy.

A report by Danone indicated that since the introduction of the Renew Danone strategy three years ago, the company has been investing approximately 100 basis points annually in its brands and operational capabilities.

De Saint-Affrique described this approach as essential for maintaining Danone’s competitive edge, particularly as consumer interest grows in gut health, the microbiome, protein, and immunity.

He noted that Danone is keen on leveraging scientific advancements to drive consumer-oriented innovations.

The company has also been engaged in a drawn-out acquisition process involving Lifeway Foods in the U.S. D

anone initially sought to increase its 23% stake in the company last September, but its offers were repeatedly rejected.

Without directly mentioning Lifeway, de Saint-Affrique acknowledged Danone’s ongoing interest in the kefir market, stating, “You’ve seen us make a move on kefir in the U.S.”

Danone’s financial strategy remains focused on acquisitions that enhance its market position.

De Saint-Affrique explained that the company evaluates potential deals based on their ability to improve market share and strengthen its presence in new regions while ensuring financial responsibility.

He stressed that any acquisition must have a limited impact on ROIC while structurally improving Danone’s business.

The company’s underlying earnings per share (EPS) rose by 2.5% to €3.63 in 2024, supported by €27.4bn in sales, representing a like-for-like increase of 4.3%.

The recurring operating margin also improved, reaching 13%, compared to 12.6% in the previous year.

Danone’s strategic focus on consumer health aligns with evolving trends, particularly the increasing use of GLP-1 weight-loss drugs in the U.S.

De Saint-Affrique noted that this trend has created a demand for high-protein products, reinforcing the company’s position in the dairy and nutrition sectors.

He also highlighted a shift in consumer preferences towards natural and healthier foods, a trend that he suggested is gaining momentum under the new U.S. administration.

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