Danone SA – Risk Profile
- As per GlobalData's proprietary risk methodology, Danone's overall risk score is 3.26, signifying medium risk
- A robust operational risk profile has boosted the overall risk profile of the company
- A lower current ratio and a high degree of financial leverage negatively impacted the financial risk scores
Danone SA (Danone) has a good risk profile and is one of the leading companies based on our proprietary risk assessment of the food sector in the consumer industry. Its operational risk score fares better than the sector average due to its strong R&D and leading market position. However, low liquidity could be a cause for concern.
About the Company
Danone is a manufacturer and producer of dairy and nutritional products. The company offers fresh dairy products, bottled water, early life nutrition, and medical nutrition products. The company markets its products under Danone, Activia, Evian, Volvic, Aqua, Gallia, Actimel, Nutricia, and Bledina.
Danone is one of the leaders in the food industry, with reported revenue of $27 billion in 2021, which declined 4.89% from 2020. Net income increased 3.24% in 2021 compared to 2020.
Risk Pillars
Our proprietary risk assessment uses a combination of four risk pillars – Country, Industry, Operational, and Financial. Scores are based on a scale of 1 to 5, 1 being the lowest risk and 5 being the highest.
Danone's overall risk score is at par with the sector's average score. The company's country and operational risk pillars fare better than the other risk pillars. Companies like Dali Foods Group Co Ltd, Calbee Inc, and Foshan Haitian Flavoring Food Co., Ltd. lead the sector.
Country Risk: The company has a country risk score of 3.56, with most of the revenue derived from Europe (56.76%) followed by the Rest of the World (43.23%). Presence in diverse territories insulates it from the risk associated with economic and political factors of a specific region.
Industry Risk: The company's primary exposure is from the food sector. Most of its revenue comes from the food business (85%), followed by non-alcoholic beverages (15%). A moderate industry risk score of 3 indicates lower profit margins and weak growth projections for the food sector compared to other sectors.
Operational Risk: Our operational risk score is based on four pillars – business positioning, scale, operational efficiency, and profitability. A high operational score highlights Danone's large scale of operation with more than 89 brands under its umbrella and strong R&D that enhances its portfolio of offerings. Leading market position provides the company an edge while competing for opportunities. However, low return on invested capital negatively impacted the profitability score.
Financial Risk: Low liquidity due to negative working capital cycle days has affected financial scores. A debt-to EBITDA ratio of higher than 3 indicates that the company is heavily leveraged. However, good interest coverage ratios have positively impacted the financial risk score.
About our Methodology:
GlobalData risk scorecard for a sector provides the analysis of various risks a company is vulnerable to. Our risk framework comprises four pillars – country, industry, operational and financial. The country risk for an entity signifies the risk of operating in a particular country. GlobalData's proprietary country risk assessment framework is used to calculate the risk for individual countries. Industry risk is an integral part of risk analysis, and it implies the riskiness and stability of the industries in which a company operates. The operational and financial risk profile comprises a company's risk and return potential based on its key operational and financial metrics. Our scores are based on an average of the latest three fiscal year data.
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