Danone to cut costs by €200m

Danone, the world's biggest yogurt maker, plans to cut about €200 million in costs over two years as an economic slump in Europe persists.

Savings will come from cutting general and administrative costs and changing the company's management structure, Paris-based Danone said today in a statement.

The plan will be based on "voluntary measures" with a focus on "internal mobility," Danone said.

The maker of Activia yogurt has struggled in southern Europe this year as the region's debt crisis continues to take a toll on consumer spending.

Danone in June cut its full-year forecast for profit margins because of declining consumption in the region.

Activist investor Nelson Peltz last month said his Trian Fund Management planned to engage with Danone management and said the company is undervalued.

The cost-cutting plan "demonstrates that the top management is highly focused on fixing the business in Europe," Pierre Tegner, an analyst at Natixis, said in a note. Trian took a stake of about 1 per cent in Danone, the Financial Times reported last month.

While Me Peltz is supportive of chief executive officer Franck Riboud, he was expected to push for cost-cutting and for Danone to be more disciplined in its use of cash, the FT reported, citing unidentified people.

"Combined with ongoing productivity programs, this plan will free up resources to make Danone products and brands more competitive," the company said in the statement.

Danone's third-quarter revenue missed estimates as weakness in Spain and Greece caused the slowest growth in sales of dairy products in more than three years.

Mr Peltz made his first fortune in the 1980s through leveraged buyouts financed by high-yield bonds sold by Michael Milken.

He also has earned a reputation for improving the operational management of companies, many of them consumer-focused.

The 70- year-old investor typically buys stakes in companies and then pushes them to boost their value by cutting costs or merging.

Bloomberg