Danone's net profit for fiscal year 2025 declined by 9.7% due to a €725 million expense and a recall of infant formula.

Danone Group (EPA:DANO) reported a 9.7% decline in full-year net profit on Friday, due to increased transformation costs and asset impairments totaling €725 million, four times higher than the previous year, which masked the company’s “broad and high-quality” underlying sales growth.

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Net profit attributable to the group fell from €2.02 billion last year to €1.83 billion in 2025, with non-recurring operating expenses soaring from €179 million in 2024 to €725 million. In 2024, the company recorded gains from asset disposals, including the sale of its dairy business in Russia and the U.S. organic dairy brands Horizon and Wallaby. Earnings per share decreased by 10.1% to €2.82.

On an organic basis excluding one-time items, operating income grew 3% to €3.67 billion, with the recurring operating profit margin increasing 44 basis points to 13.4%. Recurring diluted earnings per share rose 4.6% to €3.80.

Full-year sales remained essentially flat, decreasing slightly by 0.3% to €27.28 billion, as a 5% currency headwind (mainly due to depreciation of the dollar, Argentine peso, and Chinese yuan) offset a 4.5% like-for-like growth. The underlying growth was driven by a 2.7% increase in volume and product mix, along with a 1.8% contribution from pricing.

Danone disclosed that it is “coordinating with authorities” to recall certain batches of infant formula products in unspecified markets, citing evolving food safety requirements. The company stated that the current financial impact is “not significant,” but a full assessment can only be made once the recall is complete.

This disclosure is noteworthy because, including infant formula, the specialized nutrition segment is the fastest-growing category for the group, with like-for-like sales up 7.4% to €9.28 billion.

This segment is the main growth driver in China, North Asia, and Oceania, where like-for-like sales increased 13.2%.

North America is Danone’s second-largest market, with sales of €6.32 billion. In Q4, sales volume and product mix declined 0.5%, the only major region to see a volume decrease during that period, with like-for-like sales growth of just 0.7%. The region’s full-year recurring operating profit margin compressed 39 basis points to 11%.

CEO Antoine de Saint-Affrique stated that, aside from continuing to maintain double-digit growth in high-protein products, “the rest of the yogurt portfolio is still improving,” and coffee creamer is “gradually regaining competitiveness.”

In the full year, like-for-like sales in China, North Asia, and Oceania grew 11.7%, more than five times the 2.3% growth rate in Europe.

The region’s 29.2% recurring operating profit margin is more than double the group average of 13.4%, highlighting its significant contribution to overall profitability.

Free cash flow declined 6.8% to €2.8 billion, compared to a record €3 billion in 2024, mainly due to increased capital expenditures of €1.32 billion to €1.06 billion. Working capital contribution was €276 million, about half of the €534 million in the previous year.

Net debt slightly decreased from €8.6 billion to €8.43 billion, with net debt to EBITDA ratio at 2 times, up from 1.9 times in 2024.

The Danone Board proposed a dividend of €2.25 per share, up 4.7%, subject to approval at the annual shareholders’ meeting on April 23.

For 2026, the company expects like-for-like sales growth of 3% to 5%, with recurring operating income expected to grow faster than sales.

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