Slide 1: Full Year Results 2018
FULL YEAR RESULTS 2018 February 19, 2019 Emmanuel Faber, Chairman and CEO Cécile Cabanis, CFO I 1 I
Slide 2: Disclaimer
Disclaimer • This presentation contains certain forward-looking statements concerning Danone. In some cases, you can identify these forward- looking statements by forward-looking words, such as “estimate”, “expect”, “anticipate”, “project”, “plan”, “intend”, “objective”, “believe”, “forecast”, “guid
Slide 3: 2018: another year of delivery and transformation
2018: another year of delivery and transformation Emmanuel Faber Chairman and CEO I 3 I
Slide 4: 2018 performance aligned to long term goals
2018 performance aligned to long term goals Leading the way to create and share sustainable value I 4 I
Slide 5: 2018: a year of delivery
2018: a year of delivery Very strong recurring EPS growth at constant FX 2018 2018 GUIDANCE RESULTS Recurring EPS DOUBLE-DIGIT ✓ excluding Yakult Transaction Impact at constant FX (1) RECURRING EPS GROWTH at constant exchange rate(1) +12.8% excluding Yakult Transaction Impact excluding Yakult Transa
Slide 6: 2018 performance aligned to business, brand and trust model
2018 performance aligned to business, brand and trust model Targeting superior sustainable profitable growth as a B Corp OUR BUSINESS MODEL OUR BRAND MODEL OUR TRUST MODEL Earnings delivery Brand transformation Promoting diversity + 12.8 % 20 % 50 % recurring EPS growth of net sales in 2018 women in
Slide 7: Balanced sales growth and profitability
Balanced sales growth and profitability Further progress towards 2020 targets Net Recurring sales growth operating margin 2018 Actuals(1) +2.9% +51bps excluding Morocco boycott +3.6% +58bps Accelerating Maximizing Growth Efficiencies (1) Like-for-like New Danone. I 7 I
Slide 8: +2.9% like-for-like sales growth in 2018
+2.9% like-for-like sales growth in 2018 All reporting lines contributing to broad-based growth €7.1bn €8.0bn €5.0bn €4.5bn +5.9% +0.1% +1.5% +5.3% +2.1% excl. Morocco boycott Like-for-like New Danone I 8 I
Slide 9: Developing strategic categories in 2018
Developing strategic categories in 2018 Targeted investment in higher-return categories Organic Plant-based Probiotics Reduced sugar 8 flagship brands ~ 15% of EDP sales ~ 1/3 of probiotics 87% of volumes in line with 2020 targets(1) with new organic offering from plant-based products sales from inn
Slide 10: A new innovation model for a new world
A new innovation model for a new world Targeted innovation at speed and scale to enhance value MORE INNOVATIONS ~1/4 of net sales in 2018(1) +25% vs 2017 FASTER TIME TO MARKET 40% faster on recent innovations DRIVING VALUE + 50% higher net sales/liter in Waters(2) + 25% higher net sales/kg in EDP (2
Slide 11: Investing in future growth businesses
Investing in future growth businesses Expanding our start-up portfolio in 2018 Urban farming Purified & Personalized Invest Support Cross-fertilize mineral content home water — — — in innovative them to their Danone with an companies next stage of entrepreneurial development mindset Direct-to-consum
Slide 12: 2018 performance supported by successful digital activations
2018 performance supported by successful digital activations Building lifestyle brands with strong consumer connections 20 times > 50 million Higher engagement consumers impacted 63 million > 30 million impressions Views on YouTube I 12 I
Slide 13: Driving returns from highest-growth channels
Driving returns from highest-growth channels Accelerating in 2018 impulse and e-commerce, outperforming market E-commerce Impulse channels(1) €1bn sales in 2018 ~2/3 of EDP growth + 40% vs 2017 in 2018 (1) Defined as Small stores, on-the-go and on-premise I 13 I
Slide 14: WhiteWave delivering synergies and creating value
Incremental growth and profit drivers WhiteWave delivering synergies and creating value 75% of former ACCRETIVE WhiteWave SALES GROWTH >+ 5% growth Cumulative SYNERGIES TO DATE > $180m(1) (1) Impact at recurring operating profit level since closing I 14 I
Slide 15: Strategic transformation of Essential Dairy and Plant-based in Europe
Strategic transformation of Essential Dairy and Plant-based in Europe Stabilized and poised for growth in 2019 Local relevancy Successful innovations Net sales LFL growth Improving execution FY 17 H1 18 Q3 18 Q4 18 I 15 I
Slide 16: Activia winning through self-disruption
Activia winning through self-disruption Back to growth in 2018 Activia net sales Like-for-like growth FY13 FY14 FY15 FY16 FY17 Q1’18 Q2’18 Q3’18 Q4’18 I 16 I
Slide 17: Successful first year of Protein program
Successful first year of Protein program 2018 efficiencies ahead of plan 2018 2020 1 st year of delivery Full delivery ~€300m delivered €1bn objective ▪ Cross-category logistic network ▪ Operations ~50% ▪ Integrated facility management ▪ Professional services ~25% ▪ Digital remote energy management
Slide 18: Continuing to adapt and transform the organization
Continuing to adapt and transform the organization Enhancing Danone’s agility and resilience Operating model: One common Business services: From 4 to 3 businesses Regional footprint: Next generation 13 regions SYNERGIES AGILITY EFFICIENCY — — — further integrate AMN and ELN into more locally-grounde
Slide 19: Entrust Danone's people to create new futures
Entrust Danone’s people to create new futures An innovative governance model Oct-2018: Apr-2019: digital consultation shareholders’ meeting Sharing voices to Fostering an shape the future ownership mindset >75,000 participants One share granted to every Danoner 35,000 volunteers — Employee 360,000 v
Slide 20: Entering a new routine with One Person. One Voice. One Share
Entering a new routine with One Person. One Voice. One Share Strat plan up One voice Dec Jan Strat plan One Voice Nov Feb One Voice @Board Oct Mar Sep Apr One Voice @ Board Shareholders’ meeting Danone Day Aug May Strat Plan Jul Jun down I 20 I
Slide 21: Transformation and delivery towards 2030
Transformation and delivery towards 2030 Confirming 2020 objectives 4-5% Like-for-like sales growth Like-for-like 2.9% sales growth >16% Recurring operating margin 14.5% Recurring operating <3x margin Net debt/Ebitda ~12% ROIC 2018 2020 2022 2030 Goals I 21 I
Slide 22: 2018 financial review
2018 financial review Cécile Cabanis CFO I 22 I
Slide 23: Guidance delivered, despite unexpected events
Guidance delivered, despite unexpected events Another year strengthening our operating model 2018 2018 OBJECTIVE RESULTS Recurring EPS ✓ DOUBLE-DIGIT excluding Yakult Transaction Impact at constant FX (1) RECURRING EPS GROWTH at constant exchange rate(1) +12.8% excluding Yakult Transaction Impact ex
Slide 24: Reinforcing resilience of earnings model
Reinforcing resilience of earnings model Navigating a volatile environment in 2018 Input costs inflation Consumer boycott Currencies Centrale Danone market share PET cost Source : Nielsen 50% 1-year evolution vs EUR > +20% Logistic costs in the US -43% -11% -27% ~+20% Jan 2018 June 2018 Dec 2018 Rec
Slide 25: 2018: delivery against our priorities
2018: delivery against our priorities Solid progress towards 2020 ▪ Invested in strategic categories 1 ACCELERATE GROWTH ▪ Step-changed innovation ▪ Outperformed e-commerce and impulse channels ▪ Overall efficiencies above €900m 2 MAXIMIZE EFFICIENCIES ▪ Protein delivery ahead of plan (~€300m) ▪ €12
Slide 26: A solid performance
A solid performance Another year of strengthening our operating model Recurring Net sales Recurring EPS Free cash flow Operating margin +2.9% +51bps +12.8% +7.1% (1) (1) (3) (2) € 24.7 bn 14.45% € 3.56 € 2.2 bn (1) Like-for-like New Danone (2) On a reported basis (3) at constant exchange rate, exclu
Slide 27: Q4 2018 sales bridge: +2.4% like-for-like growth
Q4 2018 sales bridge: +2.4% like-for-like growth Valorization driving sales growth Like-for-like growth: €6,140 m +2.4% €6,009 m -4.4% +3.8% -0.1% -1.4% excluding Morocco boycott: +3.2% with volumes +0.2% Q4 2017 Currency(2) Scope and Volume Value Q4 2018 Restated(1) Others Reported (1) Q4 2017 sale
Slide 28: FY 2018 key figures
FY 2018 key figures Sales €4.5bn Change (1) +5.3% Volume / Price Mix +2.1% / +3.2% Recurring operating margin 10.8% Change (1) -82bps (1) Like-for-like New Danone I 28 I
Slide 29: Waters: +5.6% in Q4
Waters: +5.6% in Q4 Consistent strong growth Quarterly LFL sales growth Europe: moderate growth ▪ Successful activation campaigns for evian ▪ Very strong growth of local brands, notably Zywiec Zdroj +6.4% Noram: growth > 20% +5.6% +5.3% +4.7% +4.2% +4.8% ▪ Early benefits of new distribution agreemen
Slide 30: FY 2018 key figures
FY 2018 key figures Sales €7.1bn Change (1) +5.9% Volume / Price Mix +1.2% / +4.7% Recurring operating margin 24.8% Change (1) +139bps (1) Like-for-like New Danone I 30 I
Slide 31: Specialized Nutrition: +1.1% in Q4
Specialized Nutrition: +1.1% in Q4 Broad-based profitable growth outside ELN China Quarterly LFL sales growth Advanced Medical Nutrition: high-single digit growth ▪ Solid growth in Europe ▪ Double-digit growth in China, led by allergy treatments +14.5% +10.6% +9.3% +5.9% Early Life Nutrition: slight
Slide 32: China Early Life Nutrition
China Early Life Nutrition Strong underlying delivery beyond quarterly volatility 2016-18 CAGR ~+25% China ELN quarterly net sales (m€) 2016 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Back to positive growth in H2 2019 as base of comps unwinds I 32 I
Slide 33: FY 2018 key figures
FY 2018 key figures Sales €5.0bn Change (1) +1.5% Volume / Price Mix +2.5% / -1.0% Recurring operating margin 11.7% Change (1) +25bps (1) Like-for-like New Danone I 33 I
Slide 34: EDP Noram: +2.2% in Q4
EDP Noram: +2.2% in Q4 Confirming solid performance Quarterly LFL sales growth Yogurt: moderate growth ▪ Supported by probiotics and plant-based offering +2.7% Plant-based: solid growth +2.2% +1.4% +1.5% ▪ Focus on value-added innovations and nut-based -0.2% Coffee creamers: continued strong growth
Slide 35: FY 2018 key figures
FY 2018 key figures Sales €8.0bn Change (1) +0.1% Volume / Price Mix -5.5% / +5.6% Recurring operating margin 9.1% Change (1) +29bps (1) Like-for-like New Danone I 35 I
Slide 36: EDP International: +2.0% in Q4
EDP International: +2.0% in Q4 Strong quarter: +4.5% excluding Morocco boycott Quarterly LFL sales growth Europe: stabilized, poised for growth in 2019 ▪ Activia stabilized Excl. Morocco boycott(1) ▪ Danone brand growing +4.5% ▪ Double-digit growth of Alpro +2.6% +2.0% +2.1% CIS: consistent strong g
Slide 37: A solid performance
A solid performance Another year of strengthening our operating model Recurring Net sales Recurring EPS Free cash flow Operating margin +2.9% +51bps +12.8% +7.1% (1) (1) (3) (2) € 24.7 bn 14.45% € 3.56 € 2.2 bn (1) Like-for-like New Danone (2) On a reported basis (3) at constant exchange rate, exclu
Slide 38: Strong like-for-like improvement in recurring operating margin
Strong like-for-like improvement in recurring operating margin Portfolio valorization and efficiencies offsetting strong headwinds Like-for-like New Danone: +51 bps +58 bps excl. Morocco boycott 14.45% 14.26% +45 bps -28 bps +6 bps -10 bps +79 bps -72 bps • ~7% inflation • Portfolio valorization and
Slide 39: Step change in efficiencies
Step change in efficiencies More than €900m savings delivered in 2018 Productivity Protein program Whitewave synergies ~€500m ~€300m ~€120m ▪ Procurement organization ▪ Professional Services ▪ Shared services ▪ Product re-engineering ▪ Operations ▪ Sales force ▪ Supply-chain optimization ▪ Sales&mar
Slide 40: A solid performance
A solid performance Another year of strengthening our operating model Recurring Net sales Recurring EPS Free cash flow Operating margin +2.9% +51bps +12.8% +7.1% (1) (1) (3) (2) € 24.7 bn 14.45% € 3.56 € 2.2 bn (1) Like-for-like New Danone (2) On a reported basis (3) at constant exchange rate, exclu
Slide 41: EPS bridge
EPS bridge Double-digit growth at constant exchange rate +2.2% Total -0.3% +4.3% +1.1% -9.2% +6.7% €3.56 €3.48 -1.5% +1.0% +12.8% At constant FX, excl. Yakult Transaction Impact FY 2017 Yakult WhiteWave Operational Financing Tax & Scope Currency(3) FY 2018 Restated (1) Transation base effect(2) Perf
Slide 42: From Recurring operating income to Net income
From Recurring operating income to Net income in € millions except if stated otherwise 2017 recurring 2018 recurring 2018 Non-recurring items Total FY 2018 Recurring operating income 3,537 3,562 - 3,562 Other operating income and expenses - - (821) (821) Operating income 3,537 3,562 (821) 2,741 Tota
Slide 43: A solid performance
A solid performance Another year of strengthening our operating model Recurring Net sales Recurring EPS Free cash flow Operating margin +2.9% +51bps +12.8% +7.1% (1) (1) (3) (2) € 24.7 bn 14.45% € 3.56 € 2.2 bn (1) Like-for-like New Danone (2) On a reported basis (3) at constant exchange rate, exclu
Slide 44: Accelerated cash delivery: +7%
Accelerated cash delivery: +7% Solid cash conversion Free Cash Flow (€m) FCF / Net Sales (%) 8.4% 9.1% 2,232 2,083 Working Capital / Net Sales (%) 2017 2018 CAPEX / Net Sales (%) 2017 2018 2017 2018 (5.0)% (4.5)% 3.0% -4.5% 2.9% -4.7% +3.9% +3.8% I 44 I
Slide 45: Change in net debt
Change in net debt Accelerated pace of deleverage € -2.6 bn in € billion (2.2) +0.3 (1.2) 15.4 +0.5 12.7 Net debt FCF M&A Dividends Others Net debt 31/12/2017 Puts 31/12/2018 3.9 x Net Debt/ EBITDA excl. one-off items (1) Net Debt/ Reported EBITDA 3.3 x 2.9 x Net debt/EBITDA Net debt/EBITDA 31/12/20
Slide 46: 2018 dividend: €1.94 in cash
2018 dividend: €1.94 in cash Growing in line with recurring EPS Dividend proposed at the next AGM on April 25, 2019 €1.94 per share (+4 cts vs. 2017) €1.90 €1.94 €1.70 €1.60 €1.50 €1.45 €1.45 €1.39 €1.30 €1.20 €1.20 €1.10 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 I 46 I
Slide 47: Allocating capital with discipline
Allocating capital with discipline Commitment to delivering long-term shareholder value Deleverage ▪ FCF improvement ▪ Continued active portfolio management ▪ M&A focused on DMV investments and targeted bolt-on acquisitions Invest for organic growth and efficiency ▪ Sustained level of capex: targeti
Slide 48: Strong financial track record since 2014
Strong financial track record since 2014 Consistently delivering against our agenda of strong sustainable profitable growth Reported sales Recurring operating margin Free cash flow +4% +190 bps +15% 2014-18 CAGR 2014-18 2014-18 CAGR €2.2 bn €24.7bn 14.5% €1.3 bn €21.1bn 12.6% 2014 2018 2014 2018 201
Slide 49: 2019 context
2019 context Navigating a volatile environment Raw materials Boycott lapped ELN base of comps Brexit volatility and inflation on April 20th I 49 I
Slide 50: 2019 priorities
2019 priorities Growth and margin set to accelerate as base of comps unwinds Accelerate growth ▪ Accelerate innovation pipeline Low start to the year 1 ▪ Push plant-based opportunity to the max ▪ Accelerate presence in fast-growing channels Exiting 2019 with a Q4 consistent with 2020 objectives Maxi
Slide 51: Guidance
Guidance A key milestone towards 2020 2018 2019 2020 2019 guidance Like-for-like sales growth around 3% Recurring operating margin >15% I 51 I
Slide 52: Transformation and delivery towards 2030
Transformation and delivery towards 2030 Confirming 2020 objectives 4-5% Like-for-like sales growth Like-for-like ~3% sales growth >16% Recurring operating margin >15% Recurring margin operating <3x Net debt/Ebitda ~12% ROIC 2019 2020 2022 2030 Goals Consistent recurring EPS growth I 52 I
Slide 53: Appendix
\ » DANONEG ONE PLANET. ONE HEALTH Appendix
Slide 54: Q4 & FY 2018 impact of currencies & scope
Q4 & FY 2018 impact of currencies & scope Q4 2018 EDP International EDP Noram Specialized Nutrition Waters Total Reported sales growth (5.7%) +5.1% (2.1%) (3.7%) (2.1%) Currency (7.8%) +2.8% (3.2%) (8.2%) (4.4%) IAS 29 impact +0.2% - +0.1% (0.5%) +0.0% Scope and Others (0.2%) +0.1% (0.0%) (0.6%) (0.
Slide 55: Changes in exchange rates
Changes in exchange rates % total FY 2018 FY 18 vs FY 17 (avg) Q4 18 vs Q4 17 (avg) United States Dollar 20.9% -4.3% +3.1% Chinese Renminbi 7.1% -2.2% -1.3% Russian Ruble 6.5% -10.9% -9.4% Indonesian Rupiah 5.3% -10.0% -5.6% British Pound 5.2% -0.9% +0.1% Mexican Peso 4.3% -6.0% -1.3% Brazilian Real
Slide 56: Recurring operating margin
Recurring operating margin FY 2017 FY 2018 Like-for-like change(1) EDP International 8.81% 9.06% +29 bps EDP Noram 12.31% 11.71% +25 bps Specialized Nutrition 23.82% 24.77% +139 bps Waters 11.66% 10.79% -82 bps Europe & Noram 15.45% 14.12% -55 bps Rest of the world 12.90% 14.86% +182 bps Total 14.26
Slide 57: Reported sales and margin with combined EDP
Reported sales and margin with combined EDP Net Sales (m€) Q1 2018 Q2 2018 H1 2018 Q3 2018(1) Q4 2018(1) FY 2018(1) EDP 3 296 3 257 6 554 3 214 3 316 13 056 Waters 976 1 325 2 301 1 248 939 4 480 Specialized Nutrition 1 812 1 831 3 644 1 723 1 754 7 115 Total 6 085 6 414 12 498 6 186 6 009 24 651 Re
Slide 58: Like-for-like sales growth & margin improvement with combined EDP
Like-for-like sales growth & margin improvement with combined EDP and excluding Argentina Like-for-like Q1 2018 Q2 2018 H1 2018 Q3 2018 Q4 2018 FY 2018 sales growth (%) EDP -0.4% -1.3% -0.8% 0.8% 1.5% 0.1% Waters 3.9% 4.9% 4.5% 6.9% 4.2% 5.1% Specialized Nutrition 13.9% 10.3% 12.1% -1.7% 0.8% 5.5% T
Slide 59: Cash bridge
Cash bridge in € million 716 1,601 348 108 59 941 61 3,170 2,741 2,232 Operating Depreciation/ Taxes Financial Others Cash from Working Capex Sale of Free income Amort results operating capital assets and cash-flow activities(1) variation transaction Reported Fees (1) Excluding working capital varia
Slide 60: Balance sheet
Balance sheet Assets(1) Liabilities in € million 31/12/17 31/12/18 31/12/17 31/12/18 Restated(3) Restated(3) 14,529 16,475 Shareholders’ equity Intangible assets 24,945 24,445 15,372 12,744 Net debt(2) Other assets 9,679 9,331 3,554 3,395 Other liabilities Working capital 5,499 5,256 6,668 6,418 Wor
Slide 61: Tax rate development
Tax rate development € mln 2017 2018 Restated(1) Total income tax (reported) (842) (716) Reported tax rate 25.6% 29.9% Non-current income tax(2) 111 179 Current income tax (953) (895) Underlying tax rate 30.4% 27.9% (1) FY 2017 figures have been restated for IFRS 15 (2) Tax related to non-current it
Slide 62: Cash-flow statement
Cash-flow statement 2017 2018 Restated(1) Operating income 3,539 3,562 Financial income (400) (350) Income tax on operating and financial income (953) (895) Non-current income net of tax 264 (640) Depreciation and amortization 974 1 601 Net change in provisions / Deferred taxes (200) (122) Dividend
Slide 63: Cash-flow statement
Cash-flow statement 2017 2018 Restated(1) Cash flow provided by operating activities, excluding changes in net working capital 3,081 3,170 Change in working capital (123) (59) Cash flow from operations 2,958 3,111 Capital expenditure (969) (941) Proceeds from the sale of industrial assets 45 22 Busi
Slide 64: Cash-flow statement
Cash-flow statement 2017 2018 Restated(1) Cash flow used in investing activities and disposals (11,437) 326 Increase in capital and additional paid-in capital 47 47 Purchases of treasury stock (net of disposal) 13 - Perpetual subordinated notes issued or repaid during the period 1,245 (14) Dividends
Slide 65: EBITDA calculation
EBITDA calculation 2017 2018 Operating income 3,729 2,741 Depreciation, amortization and impairment of property, plant and equipment and intangible assets 974 1,601 EBITDA 4,703 4,342 I 65 I