Danone to cut 900 jobs in Europe

Danone, the Activia and Evian foods group in which US activist investor Nelson Peltz has taken a stake, said yesterday it would shed 900 jobs amid “a lasting downturn in the European economy” that led to a 4 per cent drop in 2012 net profit to €1.79 billion.

The Paris-based company warned that the outlook for this year remained “negative” in Europe – which accounts for 40 per cent of sales – as it lowered targets for sales growth and operating profit margin for this year compared to 2012.

The 900 job losses – equivalent to 10 per cent of the managerial workforce and 4 per cent of the European total – is the company’s biggest job-cutting exercise in 12 years and will come at a one-off cost of €450 million to be booked this year.

A quarter of the job cuts will be in France and the rest in 25 European countries spread over two years through voluntary redundancies and internal repostings, to make annual savings of €200 million.

Danone has said the plan was in the works before November when Mr Peltz’s Trian Fund Management took a 1 per cent stake, calling on the company to boost operating profit margins to 15.1 per cent.

In his first public comments since Mr Peltz called for “a leaner cost structure”, Franck Riboud, chairman and chief executive, told the Financial Times: “Mr Peltz has taken a 1 per cent stake – fine, but we have a policy of never commenting on discussions with shareholders, and we won’t change the rule for Mr Peltz.”

Asked about the possibility of returning cash to shareholders via an exceptional dividend, he said it would “make sense if you have an exceptional gain, but not when you are losing 900 jobs”.

Mr Riboud said the 3 per cent fall in net revenues in Europe and the 10 per cent drop in operating income last year in the region was “clearly not sustainable and we will overcome it”. – Copyright The Financial Times Limited 2013