Danone Sa · EURONEXT:BN
Danone Sa — Q3 2005 Earnings Presentation
38 slides from Danone Sa's earnings presentation, Oct 19, 2005
Slide 1: Forward-looking statements
This presentation contains forward-looking statements that reflect Danone's current views and estimates. These statements are based on many factors and assumptions. Changes in such factors or assumptions could produce significantly different results.
Slide 2: Analyst meeting, Paris, October 19, 2005
Analyst meeting Paris October 19, 2005 IR : Nadine COULM : 33.1.44.35.20.73 nadine.coulm@danone.com
Slide 3: Basis of presentation: IFRS figures
• All figures are under IFRS • 2004 and 2005 figures from Net sales to Operating income exclude the Sauce business • The net income of the Sauce business is reported on a separate line of the P&L, namely “Net income from discontinued operations“
Slide 4: Q3 2005 Sales
Q3 2005 SALES
Slide 5: Like-for-like sales growth by quarter
+9.8% +8.5% +7.9% +7.6% +7.1% +6.7% +5.5% +5.3% Q1 ‘04 Q2 ‘04 Q3 ‘04 Q4 ‘04 Q1 ‘05 Q2 ‘05 Q3 ‘05 9M ‘05 2004 figures are under French Gaap and include Sauces 2005 figures are under IFRS and exlude Sauces
Slide 6: Performance in line with historical track record
A performance to date in line with historical track-record: +6.6% CAGR 99-04 – organic sales growth Q3: no change in growth patterns vs H1 France continues to weigh on top line growth: -3% sales growth (9 months to date) Good performance of Europe excl. France: over +7% (9 months), driven by Eastern
Slide 7: Sales growth breakdown
/ 0 $( & $. /0 + -.) "!# 1!# "! 1# $ ! %# ! "# !# &' &( & ) &! $ !# $ !# $ ! *# '& + , + -.) !# "! *# %!#
Slide 8: Currency exposure of Group sales
! "! % total 9M Q3 ‘04 vs Q3 ‘05 9M ‘04 vs 9M ‘05 sales (average) average (average) Chinese Yuan 10% +1% -3% US Dollar 7% +0% -3% Mexican Peso 4% +5% +0% Indonesian Rupee 2% -8% -10% Polish Zloty 2% +10% +14% Brazilian Real 1% +23% +15% 52% of total Group sales are denominated in Euro (9M 2005)
Slide 9: Changes in scope of consolidation
# ! ! ! $ As of Jacob’s (UK) & September 2004 Irish Biscuits (Ireland) August 2004 Biscuits Latin America January 2005 (Brazil & Argentina) (1) Italaquae January 2005 + Al Safi (2) July 2005 * Fully integrated cies (1) In associates as from January 2005 (2) previously in associates / est. FY sales:
Slide 10: Volume and value growth by quarter
% & % +7.6% +7.1% +6.7% +1.4% +1.4% +5.3% +1.4% +1.2% +6.2% +5.7% +4.1% +5.3% Q1 2005 Q2 2005 Q3 2005 9M 2005 VOLUME VALUE
Slide 11: Sales growth by category
& ! Fresh Dairy Products Beverages IFRS IFRS +12.8% +10.4% +11.0% +10.7% +9.6% +9.5%+10.1% +9.5% +8.5% +8.0% +7.4% +5.7% +6.4% +1.3% Q1 ‘04 Q2 ‘04 Q3 ‘04 Q4 ‘04 Q1 ‘05 Q2 ‘05 Q3 ‘05 Q1 ‘04 Q2 ‘04 Q3 ‘04 Q4 ‘04 Q1 ‘05 Q2 ‘05 Q3 ‘05 Biscuits & Cereal Products IFRS +4.3% +4.9% +3.1% +3.3% +1.3% +1.3% +
Slide 12: Sales growth by region
& ! +15.6% Asia IFRS Europe IFRS +13.2% +12.6% +12.1% +12.0% +8.3% +6.8% +7.5% +5.0% +5.7% + 3.8% +3.5% +1.1% +1.9% Q1 ‘04 Q2 ‘04 Q3 ‘04 Q4 ‘04 Q1 ‘05 Q2 ‘05 Q3 ‘05 Q1 ‘04 Q2 ‘04 Q3 ‘04 Q4 ‘04 Q1 ‘05 Q2 ‘05 Q3 ‘05 Rest of World +21.3% IFRS +18.9% +21.1% +17.3% +13.8% +15.0% +15.3% Q1 ‘04 Q2 ‘04 Q3 ‘
Slide 13: Fresh Dairy Products
' ! ( ) Top line excluding France continues to grow low double digit as in H1 Europe (excluding France) growing over +7% (Q3 and 9 M) driven by Northern Europe (mainly UK: over +20% and Germany: c. +10%) and Eastern and Central Europe: c. +15% in Q3 (Russia and Turkey as major growth drivers) Very s
Slide 14: Fresh Dairy innovations and roll-outs
! ! % ' ! Actimel: Recent roll-outs in Romania and Slovenia Activia: • Recent roll-outs: Poland, Turkey, Morocco and Argentina • New formats: Activia tea drinkable in Portugal… Danonino: Danimals (USA) : VPI* product at Walmart Taillefine renovation « double zero » - no fat – no added sugar Milkuat:
Slide 15: Beverages
* % ! ( ) A very solid growth driven by Asia +14%, with China +13% and Indonesia +20%, and Latin America, especially Mexico c. +40% Slowdown in Europe (excluding France) after a very strong H1, as a result of poor weather conditions in Northern Europe and product shortage - YTD like-for-like sales g
Slide 16: Beverage launches
! ! % * % % + * % Smako Lyk in Poland • Launched in Q2’05 • Flavoured still water • Accounts for 50% of total cy Volvic Thé sales growth • Launched in Q2 05 as the fisrt « Health and Naturality » - low Taillefine Fiz in France sugar content • Launched in Q2 05, targeting • 2nd brand behind Lipton wo
Slide 17: Biscuits and Cereal Products
* ! ! ( ) Top line growth driven by Asia, with Indonesia close to +30%, high single digit growth in India, China and Malaysia around +10% Steady sales in Europe with a very good performance of Spain (c. +10%), France flat despite a challenging environment and thanks to a sustained product activity (
Slide 18: Biscuit innovations
! ! % * ! ! & Spain • Launched in 2005 France • Marie LU Choc: roll-out of "Lu petit Déj " low sugar from France • LU France accounted for 60% of new products market wise (YTD 05) • Principe Estrellas: New product targeting children •Top 4 Innovation 2005 = 40% of sales generated from innovation Pri
Slide 19: France
, ! Household consumption remains very soft, with trade-offs against food categories 9-month sales: down -3% Very limited market share erosion in Fresh Dairy and Beverages, gain in Biscuits and Baby Food Innovation remains critical to top line growth expansion
Slide 20: France marketing campaign
' ! -, . - ! / & 8,500 billboards TV - 5 commercials film Brochure "Seul Danone" Danoé (1,700,000 units) In stores (300,000 units) Internet site All information on the campaign : www.seuldanone.com
Slide 21: Key growth countries
0 5 countries representing over 25% of total sales Growing on average in the high teens (9M: +17%) c.+30% +23% c.+30% +13% +14% Mexico Indonesia Russia China Dairy USA
Slide 22: Capex focused on growth countries
0 accounting for 40% of our Capex FY 05 (e), or 100% of the increase vs FY 04 (in M€) Dairy in Russia: increasing industrial capacity threefold in 2 years Wahaha in China: building 4 new hot-fill lines Dairy Mexico: building 2 new lines in Hirapuato factory (drink / yogurt) Dairy US: new lines for M
Slide 23: Nine-month operating margin
12 Reported Ebit margin up +21 bp to 13.3% Changes in the scope of consolidation contributed positively up to +48 bp Marginal impact of currency translation Like-for-like margin down -25 bp a severe hit from Input costs, mainly plastics: -75 bp (net) on Group margin / -200 bp (net) on Beverages and
Slide 24: Margin outlook for H2
1 ! Change in scope of consolidation to contribute positively again Full-year impact : c. +40 bp (est.) Input cost to impact less negatively in H2 Full-year net impact expected to be at least as high as 2004 Country mix to remain a drag, and France to remain under pressure Contribution from innovati
Slide 25: Full-year 2005 guidance
Sales like-for-like +6%toto+7% +6% +7% Trading operating margin at least +20 bp Underlying EPS* at least +10% * From continuing activities
Slide 26: Net debt and equity
! 2004 2004 2005 June 30 Dec. 31 June 30 € Million Net debt 5,203 5,203 4,538 4,538 4,830 4,830 Of which Put options granted to minority interests 2,018 2,440 2,334 Equity 4,772 4,506 4,273 incl. minorities 4,772 4,506 4,273
Slide 27: Divestment proceeds and share buyback
! Cash proceeds from divestments HP Foods: c. 680 M€ (completed in August) Mahou: c. 600 M€ (to be completed in December) Share buyback YTD: c. 580 M€ ( or 7.1 million shares) net of stock option exercise * An increased financial flexibility Reinvestment of cash in the business remains top priority
Slide 28: Expansion in North Africa and Middle East
3 ' 0 4 ! # 5 Biscuits Tunisia: increase of stake in Sotubi from 20% to 49% Entry into Biscuits market in Algeria: Through a partnership agreement with Sotubi Creation of a JV, 51% held by Danone, and fully managed by Danone A plant to be built in 2006 Entry into Fresh Dairy market in Egypt: By acqu
Slide 29: Region's consumer potential
0 4 ! # 5 6 Around 300 million of potential consumers Population is growing fast (+1.7% per year)… … and is very young (1/3 < 15 years old) Per Capita Consumption in our categories is still low Fresh Dairy : 4.5 kg/capita vs 22 kg in Western Europe Biscuits : 2 kg/capita vs 7 kg in Western Europe
Slide 30: Market positions in the region
0 4 ! # 5 Turkey Tunisia Morocco 25% 70% 17%* 60% 70% Israel 48% 50% Algeria Egypt # 40% Saudi Arabia 38% Total sales in the Region: c. 1.1 billion € in 2005 with # 1 market position -0 + -0 + -0 + Danone ) 2- / )2- / 2- / MarketInShare ) valuein value -/ 3/) / + -+ * (Bottled only )
Slide 31: Approach to the region
0 4 ! # 5 Develop products to suit local needs Assiri (Morocco), Mamzouj (Tunisia) Ensure product affordability Optimal price points / downsizing Adapt Danone success model to the local context Petit Danone, Danette, Danao, Dan’up, Activia, Tiger Increase product availability Increase numeric distri
Slide 32: Business model delivering performance
7 ! Danone business model delivering best-in-class performance despite challenging environment: consumption softness in home market, surge in input costs A very focused platform in terms of categories and geographies a worldwide leadership in our 3 categories built on the sum of local #1 positions (
Slide 33: Health and Nutrition positioning
7 ! A genuine and undisputed Health & Nutrition positioning part of the Group’s DNA, backed by leading-edge R&D expertise and outstanding product achievements (e.g. Probiotics), and deeply associated with our flagship brand name. Our ambition is to bring Health through Food and Beverage to the large
Slide 34: Back-up
BACK-UP
Slide 35: Group Q3 sales by category and region
/ & & 8 ! Like-for- € Millions Q3 2004 Q3 2005 like growth Fresh Dairy Products 1,642 1,838 +7.4% Beverages 888 966 +10.7% Biscuits & Cereal Products 668 612 +1.1% Europe 2,076 2,088 +3.5% Asia 553 626 +12.1% Rest of World 569 702 +15.0% GROUP 3,198 3,416 +7.1%
Slide 36: Sales growth by category and region
9 ) 2 -/ 4 &, + ) +7.2% 1! %# 1!# 3 5 -6 ) +8.6% ! 1# !# 3/ ) / +)7 -.4 &, + ) +1.3% !# !# &' +2.9% !# !# ) /- +10.8% !# !# ) +&( & . , +16.4% !# !# 84 "!# 1!# "! 1#
Slide 37: Group Q3 like-for-like, volume and value
/ * % :% Like-for-like Volume Value Total Fresh Dairy Products +6.2% +1.2% +7.4% Beverages +7.7% +3.0% +10.7% Biscuits & Cereal Products +1.8% -0.7% +1.1% Europe +2.8% +0.7% +3.5% Asia +9.8% +2.3% +12.1% Rest of World +12.3% +2.7% +15.0% GROUP +5.7% +1.4% +7.1%
Slide 38: Group 9-month like-for-like, volume and value
# / * % :% Like-for-like Volume Value Total Fresh Dairy Products +6.0% +1.3% +7.3% Beverages +6.9% +2.4% +9.3% Biscuits & Cereal Products +1.3% -0.1% +1.2% Europe +2.0% +1.1% +3.1% Asia +9.8% +1.5% +11.3% Rest of World +13.7% +2.2% +15.9% GROUP +5.3% +1.4% +6.7%