Medical nutrition division still has 'role to play': Danone

By Mark ASTLEY contact

- Last updated on GMT

Medical nutrition division still has 'role to play': Danone

Related tags: Dairy giant danone, Africa, Danone

After months of speculation, French dairy giant Danone has announced it does not plan to sell its medical nutrition business.

Following a review of its "situation and prospects" ​yesterday, the Danone board of directors, chaired by former CEO Franck Riboud, confirmed it will not sell the company's medical nutrition division.

Medical nutrition, which the smallest of Danone's four business segments with with €1.3bn (US$1.6bn) in sales in 2013, manufactures products for those weakened by illness or chronic conditions.

It has been widely reported over the last year that Danone was seeking a buyer for the division to raise cash for acquisitions. 

The likes of Nestlé, Abbott Laboratories, Hospira, and Fresenius have been touted as potential suitors. Reports even emerged in November that Danone was considering an initial public offering (IPO) of shares in the business.

Now, after months of speculation, Emmanuel Faber, who succeeded Riboud as CEO in October 2014, insists medical nutrition still "has a role to play"​ at Danone. 

“As 2014 draws to an end, I want to re-emphasize that message and reiterate that each of our core businesses – Fresh Dairy Products, Waters, Early Life Nutrition and Medical Nutrition – has a role to play in living up to our mission and achieving the profitable sustainable growth that is an integral part of our strategy," ​said Faber.

"Fast-growing regions"

Danone added that "against this backdrop"​ it plans to accelerate its development in "fast-growing regions" ​- particularly Asia and Africa.

Over the last two years, Danone has “consolidated existing positions and entered new markets”​ across the African continent.

In October 2013, Danone and private equity firm the Abraaj Group sealed a deal to jointly acquire West African dairy vendor, Fan Milk International.​ A few months later, in July 2014, Danone agreed a deal to purchase a 40% stake in Brookside Dairy,​ East Africa's largest dairy manufacturer. 

More recently, the French dairy upped its existing interest in Moroccan dairy, Central Laitière,​ to more than 90%.

fan milk
Danone jointly acquired West African dairy, Fan Milk International, in October 2013. (Image: Danone)

While costly, investment of this sort in Africa will continue, Danone said.

"Investments made for this purpose over the last two years have resulted in a higher use of debt in the past, at a level that could imply a credit rating on notch lower, and that is appropriate for this current period of development given the company's sound cash-flow and debt structure,"​ said the company.

To support its African ambitions, Danone has set up a new "multibusiness structure"​ to accelerate its expansion in the region.

Pierre-Andre Térisse, who has served as Danone chief financial officer (CFO) since 2008, is appointed executive vice president of this newly formed Africa division.

Cécile Cabani, vice president of finance in Danone’s fresh dairy business since 2010, will replace Térisse as CFO from February 20 2015.

Gustavo Valle, the current executive vice president Europe, will fill the void left by Cabani in Danone's fresh dairy division.

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