Cold shower on the stock exchange for Renault, Danone and Fnac Darty. The three values dropped respectively 11.48%, 8.42% and 14.02% this Friday, October 18, when the CAC 40 index declined only 0.65%. Of course, the companies did not present a blazing outlook for the year after the publication of their sales or earnings down in the third quarter. But there is an investor overreaction that deserves to be explained. And that goes beyond the uncertainties of the world situation.
By Alain-Gabriel Verdevoye, Jean-François Arnaud, Claire Bouleau
• Renault: the profit warning that does not pass
When the Renault share was down two digits, those recorded by Peugeot (-0.79%), Michelin (0.00%) or Valeo (-0.76%) in its wake were limited. A week after the brutal dismissal of its managing director Thierry Bolloré, Renault (shareholder of Challenges) alerted Thursday night on its results. The diamond firm warned that the turnover would be down 3% to 4% over the year, with an operating margin of about 5%. Against an earlier forecast of 6%.
The operational cash flow of the automotive business should certainly “be positive in the second half of the year,” according to the group's press release. But this, “without guaranteeing that it will be for the year”. The former Régie previously counted on a positive flow. In addition, Renault said Thursday that the new management team will reassess the objectives of the medium-term plan “Drive the Future”. Many unknowns in sight, therefore.
Analysts did not appreciate this downward revision of the forecast results. “The expected decline in turnover will cost 200 million euros in operating profit, but we are talking about a profit down 700 million.There is clearly 500 million resulting from cost inflation. “, summarizes one of the best experts in the Paris market, who suspects the diamond company to have taken time to confess and does not understand this” enormous degradation “. With a big risk for 2020. The environment will be harder, especially with the costly pressure on CO2. And Renault may not take structural decisions for a few months until a new CEO is really operational. This is why the stock market has punished the former Régie.
• Danone: the revision throws doubt on Faber's strategy
There are two ways to look at Danone's quarterly. Some see the bottle of Evian half full, for others it is half empty. The agri-food group announced for the third quarter of 2019, a turnover of 6.4 billion euros, up 3.7% as reported and 3% like-for-like. This is a good progression but the consensus was 3.8%, some analysts like those of Oddo were hoping even 4.2%.
Even more worrying for investors, Danone revised its revenue growth for the year 2019 to between 2.5% and 3% on a like-for-like basis, compared to 3% previously announced. The gap is not so great but this revision sows doubt about the strategy of Emmanuel Faber and causes the fall of the course. The CEO of Danone, insists on the efforts made to transform his group into a world champion of organic products with a high proportion of vegetable ingredients in his portfolio and sustained growth in sales. “Our model continues to show resilience,” insists Emmanuel Faber, “Many of our initiatives (…) continue to bear fruit with our customers.”
If these efforts are crowned with success in the Specialty Nutrition division (+ 9.8% in the third quarter and + 10% for infant nutrition), the situation is different in bottled water (-0.9%) and dairy and vegetable products (+ 0.7%). In a more uncertain geopolitical and macroeconomic context, with an explosion of raw materials and packaging costs, Danone suddenly seems fragile.
As for its model, more bio and vegetable, supposed to prepare the new requirements of consumers in rich countries, the stock market, by sanctioning the title on Friday, October 18, does not seem to be convinced. The bottled water business, a heavy consumer of oil, for packaging and transport, has lost its appeal. The disastrous image of the plastic bottles that pollute the oceans is forcing the industry to reinvent itself, otherwise it will disappear. This activity, which has been built for the last 50 years around the blowing and filling of PET bottles and truck logistics, can no longer exist in this form, especially in a group with very high environmental ambitions.
Another major challenge, water resources becoming weaker and weaker, it will become very difficult for the multinational to continue to capture water in regions often affected by water deficits, in the Alps and in Auvergne, in France. competition with local agricultural uses in particular, to sell it at the other end of the planet.
On the side of fresh dairy and vegetable products, the picture is hardly more pleasing. By betting on desserts and fresh drinks with almond milk, soy, etc., rather than on its traditional cow's milk yogurts, Danone has decided to move from a mass market to niche markets. While waiting for Alpro soy yogurts to reach Activia sales, hoping that this will happen someday, growth is breaking down. While the group continues to offer traditional dairy products, it invests primarily in alternative trends that do not yet appeal to large consumer battalions. It would be better if it did not take too long.
• Fnac Darty: pressure on margins puts investors “on edge”
Fnac Darty was the red lantern of the Paris Stock Exchange this Friday, despite the rise in sales announced by the group of electronic products, appliances and cultural third quarter. The distributor reported revenue up 3.7% on a reported basis and 1.7% like-for-like in the third quarter, at € 1.816 billion, driven by better online sales and good sales. performance in all its countries. “There is no big subject on sales and growth. On the other hand, the group stated that the gross margin follows the same trend as the first half of the year. It is again down 70 basis points in the third quarter, whereas it had already fallen in the first half “, note Clément Genelot, an analyst with Bryan Garnier, who sees several explanations for the fact that the margin of Fnac Darty nose.
“There is the dilutive impact of the franchise, and the commercial partnership with Wehkamp, there is also pressure on the margins of small household appliances in France.But it is not new.What is new is that there is no improvement in the margins on the insurance service.But they have changed partners.The real bad surprise is that the share of packaged sales with insurance does not increase, while in the minds of the group and investors, she had to go back up. ”
In short, a cold shower for investors. “The drop in the price takes that into account, and there is a mistrust of the stock. Some investors are not expecting anything before the annuals in February “, says Clement Genelot. According to him, moreover, the investors are “notch”: “We are at the end of the cycle, growth is slowing down in Europe, the United States, the least disappointment no longer forgives. “A view shared by Nicolas Champ, Barclays analyst.The markets are a little nervous, where we feel that there are a lot of political risks, the Brexit, the ads of the United States, there are negative factors that revolve around the market, it may prompt to overreact to the first pretext . “
However, analysts keep some hopes. “TheThe fact of integrating Nature and Discoveries will partly make up for this, because they have a gross margin higher than that of Fnac Darty “, bet Clement Genelot.I do not think it really calls into question the company's long-term strategy and goals “, adds Nicolas Champ.
By Alain-Gabriel Verdevoye, Jean-François Arnaud, Claire Bouleau