Danone (BNFP; Baa1/BBB+) 7Y FV
€ Bmrk 7Y IPT MS+110-115 vs FV 75 (+35)
- please note overhanging risk from NEC lawsuits keeps Reckitt (A3/A-) wide
More high-grade F&B supply; Danone for the unfamiliar is the parent of essential dairy & plant based products (52%), specialised nutrition (31%) & water (17%) - Activia & Alpro are examples. Well diversified across the globe - unfortunately that meant taking a €1.2b loss after losing control of management in its Russian business.
It is giving guidance for +3-5% LFL sales growth and adj. EBIT margin to grow (FY23 was 12.6%) for both this year and in medium term (FY25-28). Analyst consensus is waiting there on both. 1H sales were reported -2.9% but LFL +4% with volumes +2.1%. Adj. EBIT margin was 12.7%, +45bps yoy. FY guidance was reaffirmed then.
Gross/net debt is €12/10b levered 2.6/2.2x on FY24 EBITDA consensus (-10%yoy). It targets Baa1 ratings (Moody's says) and publicly targets 2-3x corridor. We don't see near term rating risk.
Second visit this year - seems like it doesn't like dual tranches. It had €750m roll off in May (issued €700m in late April). Today seems to be for the only other line due this year; €1.25b in Nov. If it sizes to that, we don't expect a revisit this year. Front maturity next year is €750m due Jan.