Slide 1: Full-Year 2019 Results
FULL-YEAR 2019 RESULTS February 26, 2020 Emmanuel Faber Cécile Cabanis 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: CEO introduction: what you will hear from us today
CEO introduction What you will hear from us today We… ▪ made strong progress in 2019 with the execution of our strategic priorities despite headwinds ▪ close a 5-year cycle with a strong strategic and financial track record ▪ start a new cycle towards our 2030 goals ▪ massively accelerate our invest
Slide 4: Highlights
Highlights Emmanuel Faber Chairman and CEO I 4 I
Slide 5: 2019 performance aligned to our business, brand and trust model
2019 performance aligned to our business, brand and trust model Committed to responsible value creation Our business model Our brand model Our trust model Recognized superior Earnings Unlocking environmental delivery people power performance + 8.3 % AAA > 86 %(1) recurring EPS growth CDP ranking Str
Slide 6: Strong progress in 2019
Strong progress in 2019 Step change Record Strong balance Broad-based All-time high in recurring recurring sheet, one year LFL sales growth cash conversion operating margin EPS level ahead of plan +2.6% 15.2% 3.85€ 9.9% 2.8x €25.3bn +76bps +8.3% FCF / net sales Net debt / EBITDA I 6 I
Slide 7: Recurring EPS growth in 5 years
Closing 2019 with strong financial track record Strong recurring EPS growth delivery €3.85 €2.57 €2.62 ~+ 50 % Recurring EPS growth in 5 years 2009 2014 2019 I 7 I
Slide 8: Climate, Forests, Water
CLIMATE FORESTS WATER eae pa gee - > baad x. =e aitie a. — —_ po Asa company we're —" building ; a climate- safe, water-secure 5 & deforestation- free future . © DANONE We PLANET. ONE HEALTH
Slide 9: Leading the battle against climate change
Leading the battle against climate change Pioneering and taking bold commitments to transition to low-carbon economy 2017 2019 2020 2025 2030 2050 Carbon emissions Signature of Carbon Peak full -50% reduction Carbon reduction targets Business neutrality scope in carbon neutrality officially recogniz
Slide 10: Peak full scope carbon emissions reached in 2019
Leading the battle against climate change Peak full scope carbon emissions reached in 2019 Peak full scope carbon emissions reached in 2019 5 years ahead of plan 95% ~ 60% 27mT -9.4% emissions related to emissions from absolute emissions in in carbon scope 3 activities agriculture full-scope (1, 2,
Slide 11: Providing visibility into the cost of carbon emissions
Leading the battle against climate change Providing visibility into the cost of carbon emissions to our earnings Pre-carbon peak: making carbon trajectory visible in 2018 and 2019 results Recurring EPS: +8% ‘Carbon- cost of carbon/share(1) adjusted’ EPS +2% growing faster than EPS in 2019 ‘carbon-ad
Slide 12: Cost of carbon emissions: post-carbon peak
Leading the battle against climate change Providing visibility into the cost of carbon emissions to our earnings Post-carbon peak: 2020 onwards Recurring EPS: +X% Starting 2020, ‘carbon- cost of carbon/share(1) adjusted’ net income set to -Y% grow faster than recurring net income as carbon ‘carbon-a
Slide 13: Entrusting Danone people to create new futures
Entrusting Danone people to create new futures One Person, One Voice, One Share April 2019 an AGM like no other Inform Danone Day Updated company agenda Listen One Voice May 2019 each employee is granted one Danone share Discuss Shape Board of Directors Strategic Plan and paid €78 dividend-sharing s
Slide 14: Financial review
Financial review Cécile Cabanis Chief Financial Officer I 14 I
Slide 15: A year of progress
A year of progress Strategic priorities 2019 highlights ▪ All businesses growing 1 Sales growth acceleration ▪ Acceleration throughout the year despite headwinds in H2 ▪ Exited the year at 4%+ rate ▪ Gross margin improvement after 2 years decline 2 Efficiency maximization ▪ Continued record producti
Slide 16: 2019 financial review
2019 financial review Net Recurring Recurring Free Balance sales operating margin EPS cash flow sheet +2.6%(1) 15.2% 3.85€ 9.9% 2.8x €25.3bn +76bps +8.3% FCF / net sales Net debt / EBITDA (1) Like-for-like growth I 16 I
Slide 17: Q4 LFL sales growth > +4%
Q4 LFL sales growth > +4% Improved volumes driving growth acceleration Reported growth +3.9% +0.5% €6,241 m -1.4% +0.7% +4.2% €6,009 m -0.1% Like-for-like growth: +4.1% Q4 2018 Volume Value Argentina organic Scope Currency Q4 2019 contribution to growth(1) and others(2) (1) As a reminder, starting f
Slide 18: Gallia
Gallia Calisma DANK APTAMIL PROSYNEO HA 2 (FUR DEN FRUHLING
Slide 19: Specialized Nutrition: +10.2% in Q4
Specialized Nutrition: +10.2% in Q4 Another year of strong sales growth with record-high profitability FY2019 key figures Sales €7.6bn Advanced Medical Nutrition: steady mid-single digit growth Like-for-like change +5.8% Volume / Value -0.1% / +6.0% Recurring operating margin 25.3% Early Life Nutrit
Slide 20: —— POSSIBLY —~
—— POSSIBLY —~ THE BEST YOGURT IN THE WORLD DANONE AUX FRUITS Dic Le yaourt aux bons fruits de aS ) crowine 7 YEARS Danone Danone fra ca did nat caer frais d ees = —
Slide 21: Essential Dairy & Plant-based: +1.5% in Q4
Essential Dairy & Plant-based: +1.5% in Q4 Strong Plant-based, Essential Dairy flat FY2019 key figures Sales €13.2bn Europe: 3rd consecutive quarter of growth Like-for-like change +1.1% Volume / Value -2.2% / +3.3% North America improving to slightly positive growth in Q4 Recurring operating margin
Slide 22: 100% hecha de botellas
100% hecha de botellas
Slide 23: Waters: +1.4% in Q4
Waters: +1.4% in Q4 Solid growth in emerging markets and large formats FY2019 key figures Sales €4.6bn Europe Like-for-like change +1.5% ▪ Return to growth driven by Spain and Poland Volume / Value -0.4% / +1.8% Recurring operating margin 13.0% Change +219bps Asia ▪ Consistent strong growth in Indon
Slide 24: 2019 financial review
2019 financial review Net Recurring Recurring Free Balance sales operating margin EPS cash flow sheet +2.6% (1) 15.2% 3.85€ 9.9% 2.8x €25.3bn +76bps +8.3% FCF / net sales Net debt / EBITDA (1) Like-for-like growth I 24 I
Slide 25: Overall ~€900m sustainable gross savings in 2019
Overall ~€900m sustainable gross savings in 2019 Accelerating in second half of the year Protein program: ahead of plan ~€400m gross savings in 2019 ~€700m cumulated savings since program launch From SG&A reduction to more efficient operations Over-delivery in Waters FY2019 efficiency delivery Produ
Slide 26: Very strong margin improvement despite raw materials inflation
Very strong margin improvement despite raw materials inflation Margin from operations up after 2 years of decline +76 bps -3 bps -22 bps 15.21% +96 bps +6 bps 14.45% -21 bps +20 bps Like-for-like: +71 bps • >6% inflation • Portfolio valorization and efficiencies FY 2018 Scope Currency Argentina orga
Slide 27: 2019 financial review
2019 financial review Net Recurring Recurring Free Balance sales operating margin EPS cash flow sheet +2.6% (1) 15.2% 3.85€ 9.9% 2.8x €25.3bn +76bps +8.3% FCF / net sales Net debt / EBITDA (1) Like-for-like growth I 27 I
Slide 28: Recurring EPS bridge
Recurring EPS bridge Operational performance driving strong recurring EPS growth +8.3% €3.85 +0.2% +0.6% +0.5% +0.6% +6.4% €3.56 FY 2018 Operational Financing Tax, associates Scope Currency FY 2019 Recurring EPS Performance and minorities and others(1) Recurring EPS (1) Including IAS 29 impact I 28
Slide 29: Bridging reported and recurring performance
Bridging reported and recurring performance Earthbound Farm divestiture and SN integration driving non-recurring expenses Change 2018 2019 2019 vs 18 Recurring net income (m€) 2,304 2,516 +9.2% Non-recurring net income (€m) 46 (586) (632) (821) (609) NON-RECURRING ITEMS Operating income (821) (609)
Slide 30: 2019 financial review
2019 financial review Net Recurring Recurring Free Balance sales operating margin EPS cash flow sheet +2.6% (1) 15.2% 3.85€ 9.9% 2.8x €25.3bn +76bps +8.3% FCF / net sales Net debt / EBITDA (1) Like-for-like growth I 30 I
Slide 31: Another year of cash conversion increase
Another year of cash conversion increase Driven by earnings growth €2.5bn 2,500 2,000 1,500 1,000 500 Free cash flow in € million 2014 2015 2016 2017 2018 2019 Free cash flow /net sales (%) 6.0% 6.6% 8.0% 8.4% 9.1% 9.9% I 31 I
Slide 32: 2019 financial review
2019 financial review Net Recurring Recurring Free Balance sales operating margin EPS cash flow sheet +2.6% (1) 15.2% 3.85€ 9.9% 2.8x €25.3bn +76bps +8.3% FCF / net sales Net debt / EBITDA (1) Like-for-like growth I 32 I
Slide 33: Change in net debt
Change in net debt Reaching net debt/EBITDA < 3x, one year ahead of plan Reported net debt/ 2.8x EBITDA -€0.6 bn +0.7 +0.6 (2.5) +1.3 13.4 12.7 12.8 Net debt IFRS16 Net debt FCF Dividends Others Net debt 31/12/2018 restated 31/12/2019 01/01/2019 Note: data in € billion I 33 I
Slide 34: Raising dividend by +8%
Raising dividend by +8% Reflecting confidence and resilience €2.10 dividend per share in cash to be proposed at next AGM on April 28 th 2020 €2.10 €1.90 €1.94 €1.70 €1.60 €1.50 €1.45 €1.45 €1.39 €1.30 €1.20 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 I 34 I
Slide 35: Strategic Priorities
Strategic Priorities Investment to accelerate climate action of our brands and strengthen our growth model Emmanuel Faber Chairman and CEO I 35 I
Slide 36: Transformation in motion
Transformation in motion Adapting to quickly changing behavior and social norms 2014 -19 2020 2025 Adapting to Climate Staying anticipate accelerating ahead the food industry of the curve revolution disruption I 36 I
Slide 37: Transformation acceleration required in 2020 to stay ahead of the curve
Transformation acceleration required in 2020 to stay ahead of the curve 2015-19 2020 2020-25 Priority level Status vs new normal Pace of investment in strategy Trust, inside and outside Efficiency and discipline Planetary diets Natural, local Packaging Omni-channel End-to-end value-chain Digital and
Slide 38: We invest to act now: climate-efficient business model
We invest to act now Leveraging climate action to generate resilient growth models for our brands Brand model Sourcing model Operating model Technology and Data Joining people’s fight Putting climate- Unlocking growth, Climate-efficient for the planet with the efficiency and resilience efficiency an
Slide 39: Doubling-down on our climate-impact investments
We invest to act now Doubling-down on our climate-impact investments Fueling a superior Faster pace of transformation Growth model through Superior Innovation 2020-2022 next frontiers Categories around Brands activist €2bn Sourcing climate-efficient Value propositions accelerated Packaging End-to-en
Slide 40: We invest to act now
We invest to act now Diets and Packaging Digital agriculture circularity End to end I 40 I
Slide 41: Diets and agriculture
We invest to act now Diets and Packaging Digital agriculture circularity End to end I 41 I
Slide 42: Regenerative agriculture as a key driver for climate resiliency
We invest to act now Regenerative agriculture as a key driver for climate resiliency of food supply Eroding soils from carbon extraction: carbon c. 60% of the soil organic matter content Use of pesticides, carbon-intensive and polluting, expensive intrants Water availability and erosion dependent on
Slide 43: Support regenerative agriculture for climate-efficient sourcing
We invest to act now Support regenerative agriculture for preferred and climate-efficient sourcing Peak reached for Accelerate full scope carbon • regenerative agriculture emissions in 2019 • local provenance ~60% of carbon • biodiversity and diversity emissions from of ingredients agriculture • tra
Slide 44: Pivot large brands to biodiversity protection
We invest to act now Pivot large brands to biodiversity protection and climate-efficient sourcing, driving preference Promoting regenerative Accelerating towards agriculture since 2018 biodiversity protection invested €40 m since 2018: ~60% conversion to regenerative agriculture Regenerative and Org
Slide 45: Packaging circularity
We invest to act now Diets and Packaging Digital agriculture circularity End to end I 45 I
Slide 46: Renewed materials are driving consumer preference
Renewed materials are driving consumer preference in and out of home Purchase intent of rPET significantly above PET At home Out of home rPET (1,5L) PET (1,5L) rPET (50cl) PET (50cl) 6,8 6,2 6,7 5,7 6,5 5,9 6,5 5,4 6,9 6,5 6,7 5,7 Purchase Intent (/10) Purchase Intent (/10) Source: proprietary quant
Slide 47: 100% rPET in Europe by 2025
Packaging circularity 100% rPET in Europe by 2025, starting with France, UK and Germany in 2020 Starting April 2020 all small and XXL formats full range 100% rPET all on the go formats End-to-end climate neutral through reduction of climate emissions, watershed, wetlands and ecosystems protection pr
Slide 48: Innovating beyond plastic and beyond single-use
Packaging circularity Innovating beyond plastic and beyond single-use Glass, metal and carton Home and new on-the-go models I 48 I
Slide 49: Zero PS by 2025, Europe by 2024
Packaging circularity Zero PS by 2025, Europe by 2024 PET and rPET PLA in 2020 Paper I 49 I
Slide 50: Zero PS by 2025, Europe by 2024
Packaging circularity Zero PS by 2025, Europe by 2024 2020 PET and rPET Recycled Terracycle First reusable Clear labelling cardboard partnership glass pot I 50 I
Slide 51: Zero PS by 2025, Alpro by 2021
Packaging circularity Zero PS by 2025, Alpro by 2021 Paper-cup Plant-based drinks rPET bottles cartons Increasing share of renewable and sustainable components in cartons (e.g. plant-based plastic) I 51 I
Slide 52: Nearly €1bn packaging acceleration plan
Packaging circularity Our nearly €1bn packaging acceleration plan for brand superiority Zero PS worldwide by 2025 25bn cups Zero PS in Europe by 2024 100% rPET in Europe by 2025 5bn bottles Outside Europe, 60% volumes sold in reusable packaging in 2020 I 52 I
Slide 53: Packaging acceleration plan targets for 2025
Packaging circularity Our nearly €1bn packaging acceleration plan for brand superiority Plastic packaging(1): 0.7mT Total packaging(1): 1.6 mT (around 50% of total) 2019 2025 2025 Recyclable Recyclable content 60% 95% content 95% Recycled Recycled content <10% >50% content >50% Carbon Global -30% Fo
Slide 54: Invest in innovative companies, new materials and models
We invest to act now Invest in innovative companies, new materials and models Next generation of Future growth businesses materials & models €200 m to be PACKAGING TRANSFORMATION € 200m to be invested by 2025 ACCELERATOR invested by 2025 Innovative [reusable, refillable] NEW MODELS solutions and bus
Slide 55: Digital End to end
We invest to act now Diets and Packaging Digital agriculture circularity End to end I 55 I
Slide 56: Strengthen execution through end-to-end connected value chain
Strengthen execution through end-to-end connected value chain Better serve people needs, anytime and anywhere, in a cost and climate efficient way Increasing flexibility of EDP Operations to seize Data, tech & agile transformation growth opportunities End to end transparency & traceability Hybrid da
Slide 57: Investing in a data, tech and agile enabled execution
Investing in a “data, tech and agile” enabled execution Unlocking growth and efficiency, enabling sustainability: concrete proof points Opole: People powered Evian: End-to-end flows unlocking and data enabled factory growth & productivity 8,000 +12% -10% hours of supply chain additional training cos
Slide 58: Towards an organization fit for the future
Towards an organization fit for the future Shifting ways to work, live, engage with company strategy Entrust Danone’s people to Collective ▪ Create new futures volunteers working ▪ Accelerate company within yearly transformation “OPOVOS” routine ▪ Boost performance and resilience Collaborative and L
Slide 59: Outlook and guidance
Outlook and guidance Cécile Cabanis Chief Financial Officer I 59 I
Slide 60: Starting a new cycle towards our 2030 goals
Starting a new cycle towards our 2030 goals Scale investment to embed climate change at the heart of our growth model 2020 2022 Innovation Advanced 2020-2022 next frontiers commitments Brands around activist €2bn Sourcing climate-efficient accelerated Packaging investment responsible of which ~€900m
Slide 61: Accelerating our investments
Accelerating our investments on brands, climate and agriculture, packaging and digitalization Recurring costs Capex 2020 One-Off around ~€600m ~€1bn ~€500m €2bn ▪ ~€200m costs in 2020 ▪ Connected end-to- ▪ Fixed costs ▪ Innovation support end value chain ▪ Operations over 2020-22 ▪ Activist brands ▪
Slide 62: Renewed long-term financial priorities
2020: starting a new cycle towards our 2030 goals Renewed long-term financial priorities ▪ Pre-empt and effectively respond to people’s trends and concerns Accelerate 1 growth ▪ Execute local competitive plans ▪ Plant-based acceleration towards €5 bn ambition in 2025 Continue ▪ Increase agility and
Slide 63: Focus on COVID-19 outbreak
Focus on COVID-19 outbreak Status to date Danone in China Status to date ▪ 2nd largest market of Danone Waters (Mizone) ▪ Operations: production resumed since Feb 17th except Wuhan ▪ 10% of company sales in 2019 factory in Hubei, affected distribution across supply chain ▪ ~8,200 people ▪ Market dem
Slide 64: 2020 outlook and guidance
2020 outlook and guidance Combination of strategic choices and external factors Recurring EPS growth Mid-single digit Sales growth set to accelerate as the year progresses LFL sales growth ▪ Strong innovation pipeline; plant-based expansion 2% - 4% ▪ Coronavirus outbreak impact – current estimate: ~
Slide 65: Mid-term financial objectives
Mid-term financial objectives Targeting consistent strong recurring EPS growth Mid-term objectives Mid-to-high Recurring EPS growth single digit LFL sales growth 3% - 5% Net debt / EBITDA 2.5x – 3.0x range I 65 I
Slide 66: Appendix
SS Ge DANONE AUX FRUITS DIC!
Slide 67: Q4 2019 sales by reporting entity - breakdown volume/value
Q4 2019 sales by reporting entity - breakdown volume/value Essential Dairy Specialized Waters Company & Plant-based Nutrition Net sales €3,335m €1,943m €962 €6,241m Like-for-like growth +1.5% +10.2% +1.4% +4.1% Volume -0.9% +0.9% +0.9% -0.1% Value +2.4% +9.3% +0.5% +4.2% I 67 I
Slide 68: Q4 2019 sales by reporting entity and by geographical area
Q4 2019 sales by reporting entity and by geographical area Essential Dairy Specialized Waters Company & Plant-based Nutrition Europe and Noram Sales €2,186m €794m €427m €3,408m LFL growth +0.7% -1.2% +3.2% +0.6% Rest of the world Sales €1,149m €1,149m €535m €2,833m LFL growth +3.0% +20.1% -0.1% +9.0
Slide 69: Q4 & FY 2019 impact of currencies & scope
Q4 & FY 2019 impact of currencies & scope Q4 2019 Essential Dairy Specialized Nutrition Waters Total & Plant-based Reported sales growth +0.6% +10.8% +2.5% +3.9% Argentina organic contribution to growth +0.6% +0.5% +0.2% +0.5% Currency and others(1) +1.2% +0.2% +0.6% +0.8% IAS 29 impact -0.1% -0.0%
Slide 70: Changes in exchange rates
Changes in exchange rates % total FY 2019 FY 19 vs FY 18 (avg) Q4 19 vs Q4 18 (avg) United States Dollar 20.4% +5.5% +5.0% Chinese Renminbi 7.0% +0.9% +1.4% Russian Ruble 6.4% +2.2% +8.0% Indonesian Rupiah 5.9% +6.1% +9.1% British Pound 5.1% +0.8% +3.7% Mexican Peso 4.6% +5.3% +3.4% Brazilian Real 3
Slide 71: Recurring operating margin
Recurring operating margin Recurring operating profit FY 2018 FY 2019 Change (€m) and margin (%) €m Margin (%) €m Margin (%) Reported Like-for-like Essential Dairy & Plant-based 1,317 10.09% 1,345 10.22% +13 bps -7 bps Specialized Nutrition 1,762 24.77% 1,908 25.26% +49 bps +94 bps Waters 483 10.79%
Slide 72: Cash bridge
Cash bridge in € million 793 1,386 370 294 311 951 17 3,755 3,237 2,510 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 vari
Slide 73: Balance sheet
Balance sheet Assets(1) Liabilities in € million 31/12/18 31/12/19(3) 31/12/18 31/12/19(3) 17,378 24,846 16,475 Shareholders’ equity Intangible assets 24,445 12,819 12,744 Net debt(2) 10,177 Other assets 9,331 3,825 3,395 Other liabilities Working capital 5,256 5,778 6,418 6,779 Working capital 39,0
Slide 74: Tax rate development
Tax rate development € mln 2018 2019 Total income tax (reported) (716) (793) Reported tax rate 29.9% 27.7% Non-current income tax(1) 179 163 Current income tax (895) (956) Underlying tax rate 27.9% 27.5% (1) Tax related to non-current items I 74 I
Slide 75: Cash-flow statement
Cash-flow statement 2018 2019 Operating income 3,562 3,846 Financial income (350) (370) Income tax on operating and financial income (895) (956) Non-current income net of tax (640) (446) Depreciation and amortization 1 601 1 386 Net change in provisions / Deferred taxes (122) 151 Dividend received f
Slide 76: Cash-flow statement
Cash-flow statement 2018 2019 Cash flow provided by operating activities, excluding changes in net working capital 3,170 3,755 Change in working capital (59) (311) Cash flow from operations 3,111 3,444 Capital expenditure (941) (951) Proceeds from the sale of industrial assets 22 16 Business acquisi
Slide 77: Cash-flow statement
Cash-flow statement 2018 2019 Cash flow used in investing activities and disposals 326 (1,008) Increase in capital and additional paid-in capital 47 55 Purchases of treasury stock (net of disposal) - - Perpetual subordinated notes issued or repaid during the period (14) (22) Dividends paid to Danone
Slide 78: EBITDA calculation
EBITDA calculation 2018 2019 Operating income 2,741 3,237 Depreciation, amortization and impairment of property, plant and equipment and intangible assets 1,601 1,386 EBITDA 4,342 4,623 I 78 I