Slide 1: Half-Year 2020 Results: Resilience confirmed, set to emerge stronger
HALF-YEAR 2020 RESULTS Resilience confirmed Set to emerge stronger July 30th, 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: H1 2020 highlights
H1 2020 highlights Resilience confirmed; set to emerge stronger H1 2020, a mixed period: LFL sales growth -1.1%, recurring EPS -10% Solid momentum prior to COVID-19 pandemic; Q2 impacted by global lockdown Marked variations across channels and formats – EDP and SN growing +3%, Waters down -19%
Slide 4: Half-year Highlights
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Slide 5: Q2 2020 highlights
Q2 2020 highlights A quarter hit by global lockdown: the perfect storm LFL sales growth Q1 2020 Q2 2020 Pandemic expansion into new regions Europe & Noram +4.7% -3.5% Reversal of Q1 pantry loading Rest of the World +2.6% -8.2% Company +3.7% -5.7% Full effect of out-of-home closure, especially in Wat
Slide 6: Drilling down into H1 revenue performance
Drilling down into H1 revenue performance A semester of exceptional contrasts H1 LFL Sales growth… …By business …By channel …By formats – Waters only ~80% of sales ~20% Spec. Modern Traditional Out-of- Large formats Small E- stores trade trade home & Jugs Single-serve commerce Pharma +30% +3.1% +2.7
Slide 7: Drilling down into H1 extra-costs
Drilling down into H1 extra-costs Broad mitigation actions to ensure supply chain resilience amid COVID-19 Donations and bonuses ~€35m 60,000 employees continued working on frontline Extra supply costs directly linked Sanitary measures to COVID-19 ~€40m Masks, gloves, sanitizer, ~€115million tests i
Slide 8: Leading the way in creating and sharing sustainable value
Leading the way in creating and sharing sustainable value New milestones in our journey Pioneering Progressing balanced multi-stakeholder approach to value creation and sharing French ‘Entreprise à Consistent strategic frame of action Mission’ model and governance ~45% of global sales now cove
Slide 9: H1 2020 Financial Review
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Slide 10: H1 2020 sales bridge
H1 2020 sales bridge Stable volumes; negative mix from channel and format shifts Reported growth -3.6% €12,648m +0.1% +0.4% -1.3% -0.8% -2.1% €12,189m Like-for-like growth: -1.1% H1 2019 Volume Value Argentina organic Scope Currency H1 2020 contribution to growth(1) and others(2) (1) Since January 2
Slide 11: H1 2020 recurring operating margin
H1 2020 recurring operating margin Continued efficiency focus partly offsetting COVID-19 impact; sustained brand investment Scope and FX Operating performance -26 bps Incremental costs directly related to COVID-19 14.9% -27 bps +23 bps -22 bps 14.7% +47 bps Margin from Investments Overheads operatio
Slide 12: Specialized Nutrition
Specialized Nutrition Q2: underlying trends confirmed – destocking in Europe H1 2020 key figures Q2 developments Sales €3.7bn China: flat sales Like-for-like change +2.7% Sustained growth in Advanced Medical Nutrition Volume / Value +0.8% / +2.0% Early Life Nutrition performance affected by cont
Slide 13: China: strategic anchoring with local capabilities
China: strategic anchoring with local capabilities Setting Danone for further success in Specialized Nutrition Local Research and Local manufacturing Expanding Development capabilities capabilities our Medical offerings Tailored and Local offering to complement Advanced Food for Special locally-rele
Slide 14: Essential Dairy & Plant-based
Essential Dairy & Plant-based Q2: Sustained momentum in Europe & Noram, Emerging markets hit by lockdowns H1 2020 key figures Q2 developments Sales €6.6bn Europe: solid growth Like-for-like change +3.1% Sustained momentum in Core and Essentials beyond short-term stock piling Volume / Value +2.3% /
Slide 15: Europe: Dairy as a more essential and relevant category than ever
Europe: Dairy as a more essential and relevant category than ever Danone competing and winning in the marketplace EDP Europe: ~+5% LFL sales growth in H1 Category resilience confirmed Gaining market share(1) in 3 largest countries through 4 largest brands Dairy penetration in France, Spain, UK and I
Slide 16: US: Uptick in category penetration
US: Uptick in category penetration Further anchoring Danone categories and brands in daily diets EDP Noram: ~+5% LfL sales growth in H1 Plant-based beverages Dairy yogurt Segment penetration (% of households) +3% vs LY Key Danone brands Segment penetration (% of households) -1% vs LY Key Danone bran
Slide 17: Waters
Waters Q2: full effect of lockdown on out-of-home and small formats H1 2020 key figures Q2 developments Sales €1.9bn Product, format and channel performance driven by lockdown Like-for-like change -19.1% Out-of-home channels declining almost -50% Volume / Value -6.8% / -12.3% Small formats down
Slide 18: Europe: Waters penalized by small formats and aquadrinks
Europe: Waters penalized by small formats and aquadrinks At home consumption holding well, supported by format innovation Category essentiality confirmed, Polarized performance in H1: at home formats(1) growing in volume and even increasing 59% +5pts vs May 71% +11pts vs May +4% volume 35% growth on
Slide 19: EPS bridge
EPS bridge Recurring EPS -10%, Reported EPS -2% -2.2% -10.1% €1.87 €1.68 +0.5% +1.0% +0.6% €1.58 -9.8% €1.55 -2.5% €1.58 €1.68 H1 2019 H1 2019 Operational Financing Tax, associates Scope Currency H1 2020 H1 2020 Reported EPS Recurring EPS Performance and minorities and others(1) Recurring EPS Report
Slide 20: Resilient cash flow generation to support accelerated investments
Resilient cash flow generation to support accelerated investments Working capital deterioration due to inventory increase and finance ease Free Cash Flow Working Capital/Net Sales CAPEX/Net Sales H1 2019 H1 2020 €1.1bn -2.4% 2.8% 3.1% €0.9bn -3.5% H1 2019 H1 2020 H1 2019 H1 2020 I 20 I
Slide 21: Change in net debt
Change in net debt Strong balance sheet allowing increased dividend €13.5bn €12.8bn +0.2 +1.4 (0.9) Net debt FCF Dividends M&A and Net Debt 31/12/2019 Others 30/06/2020 I 21 I
Slide 22: Outlook & Priorities
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Slide 23: Limited visibility into H2
Limited visibility into H2 From mitigation actions to broader adaptation plans 2020 2021 onwards H1: Outbreak & lockdown H2: Stop & Go reopening New COVID-world Outbreak, strict lockdowns disrupting Gradual reopening, resurgence of Normalization of public policies and Macro channels, social distanci
Slide 24: We approach upcoming shifts with confidence
We approach upcoming shifts with confidence Danone growth model building on solid fundamentals The right The hottest A diverse Pushing hard categories trends portfolio on availability Health focused portfolio At home consumption For all moments of consumption eCommerce acceleration Flexita
Slide 25: €2bn investment plan confirmed, and even accelerated in some areas
€2bn investment plan confirmed, and even accelerated in some areas Serving superior sustainable profitable growth agenda The relevance of our €2bn acceleration Accelerating in Data investment plan is confirmed and eCommerce Adapted portfolio Partnerships with brick & mortars, Around €2bn in 2020-202
Slide 26: H1 2020 highlights
H1 2020 highlights Resilience confirmed; set to emerge stronger H1 2020, a mixed period: LFL sales growth -1.1%, recurring EPS -10% Solid momentum prior to COVID-19 pandemic; Q2 impacted by global lockdown Marked variations across channels and formats – EDP and SN growing +3%, Waters down -19%
Slide 27: Appendix
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Slide 28: Q2 2020 sales by reporting entity - breakdown volume/value
Q2 2020 sales by reporting entity - breakdown volume/value Essential Dairy Specialized Waters Company & Plant-based Nutrition Net sales €3,238m €1,792m €925m €5,954m Like-for-like growth +1.6% -2.2% -28.0% -5.7% Volume +1.8% -3.7% -12.0% -2.6% Value -0.2% +1.5% -16.1% -3.0% I 28 I
Slide 29: Q2 2020 sales by reporting entity and by geographical area
Q2 2020 sales by reporting entity and by geographical area Essential Dairy Specialized Waters Company & Plant-based Nutrition Europe and Noram Sales €2,274m €679m €399m €3,352m LFL growth +3.7% -10.2% -24.1% -3.5% Rest of the world Sales €964m €1,112m €526m €2,602m LFL growth -2.9% +3.2% -30.6% -8.2
Slide 30: Q2 & H1 2020 impact of currencies & scope
Q2 & H1 2020 impact of currencies & scope Q2 2020 Essential Dairy Specialized Nutrition Waters Total & Plant-based Reported sales growth (1.4%) (4.0%) (31.3%) (8.3%) Argentina organic contribution to growth +0.4% +0.4% (0.1%) +0.3% Currency and others(1) (3.2%) (2.1%) (3.1%) (2.9%) IAS 29 impact (0.
Slide 31: Changes in exchange rates
Changes in exchange rates % total H1 2020 H1 20 vs H1 19 (avg) Q2 20 vs Q2 19 (avg) United States Dollar 21.4% +2.5% +2.0% Chinese Renminbi 6.7% -1.1% -1.8% Russian Ruble 6.3% -3.9% -8.8% Indonesian Rupiah 5.7% +0.2% -2.0% British Pound 5.3% -0.1% -1.4% Mexican Peso 4.0% -9.1% -16.1% Brazilian Real
Slide 32: Recurring operating margin
Recurring operating margin Recurring operating profit H1 2019 H1 2020 Change (€m) and margin (%) €m Margin (%) €m Margin (%) Reported Like-for-like Essential Dairy & Plant-based 621 9.4% 598 9.1% -35 bps -83 bps Specialized Nutrition 934 25.3% 987 26.4% +113 bps +54 bps Waters 303 12.9% 117 6.3% -65
Slide 33: Cash bridge
Cash bridge in € million 378 574 51 170 352 381 5 1,580 1,656 929 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 variations
Slide 34: Balance sheet
Balance sheet Assets(1) Liabilities in € million 31/12/19 30/06/20 31/12/19 30/06/20 17,378 16,445 24,846 24,270 Shareholders’ equity Intangible assets 12,819 13,493 Net debt(2) 10,177 10,092 Other assets 3,825 3,830 Other liabilities Working capital 5,778 6,017 6,779 6,610 Working capital 40,801 40
Slide 35: Non-recurring items
Bridging reported and recurring performance Change H1 2019 H1 2020 2020 vs 19 Recurring net income (€m) 1,221 1,100 -9.9% Non-recurring net income (€m) (186) (86) +101 NON-RECURRING ITEMS Operating income (314) (123) +192 (314) (123) Total Financial expenses 0 0 0 Earthbound Farm(1) Transformation o