Slide 1: Half-Year Results 2019: On track to deliver guidance
HALF-YEAR RESULTS 2019 On track to deliver guidance July 25, 2019 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”, “guida
Slide 3: Q2 and H1 2019 highlights: Solid progress on growth and efficiency
Q2 and H1 2019 highlights Solid progress on growth and efficiency Like-for-like Sales Growth Recurring Operating Margin Rebound in Q2 confirming acceleration 7th consecutive semester of improvement +2.5% 14.69% €6.5 bn +42 bps Accelerating Maximizing Growth Efficiencies Recurring EPS +6.3% €1.87 I 3
Slide 4: Q2 and H1 2019 highlights: Good execution, full-year guidance confirmed
Q2 and H1 2019 highlights Good execution, full-year guidance confirmed Like-for-like sales growth rebound in Q2 ▪ All businesses growing >2% ▪ Strong innovation momentum: ~30% of sales 1 ▪ EDP growing in all regions, including in Europe 2019 full-year ▪ Return to growth in ELN China guidance confirm
Slide 5: Q2 and H1 2019 performance by business
Q2 and H1 2019 performance by business Sustainable profitable growth across portfolio Total Essential Dairy Specialized Waters Company & Plant-based Nutrition Q2 net sales €6.5 bn €3.3 bn €1.9 bn €1.3 bn Like-for-like growth +2.5% +2.2% +3.2% +2.1% Volume -1.0% -1.2% -1.3% -0.4% Value +3.5% +3.4% +4
Slide 6: Q2 and H1 2019 highlights: Solid progress on growth and efficiency
Q2 and H1 2019 highlights Solid progress on growth and efficiency Like-for-like Sales Growth Recurring Operating Margin Rebound in Q2 confirming acceleration 7th consecutive semester of improvement +2.5% 14.69% €6.5 bn +42 bps Accelerating Maximizing Growth Efficiencies Recurring EPS +6.3% €1.87 I 6
Slide 7: Q2 2019 sales bridge
Q2 2019 sales bridge Improved volume trend and higher net sales/kg driving growth acceleration Reported growth +1.3% Like-for-like growth: +2.5% €6,496 m €6,414 m -1.4% +3.5% +0.3% -0.1% -1.0% Q2 2018 Scope Currency Argentina organic Volume Value Q2 2019 and others(1) contribution to growth (1) Incl
Slide 8: H1 2019 key figures
H1 2019 key figures Sales €3.7 bn Like-for-like change +1.8% Volume / Value -1.1% / +2.9% Recurring operating margin 25.3% Like-for-like change +55 bps I 8 I
Slide 9: Specialized Nutrition: +3.2% in Q2
Specialized Nutrition: +3.2% in Q2 Early Life Nutrition back to growth Quarterly LFL sales growth(1) Advanced Medical Nutrition: mid-single digit growth ▪ Positive growth in Europe ▪ Double-digit growth in China +13.9% +10.3% +3.2% Early Life Nutrition: moderate growth +0.8% +0.4% ▪ Total China: sli
Slide 10: ELN China acceleration
ELN China acceleration Solid execution of growth plans Expansion into lower tier cities Accelerated investment for innovations Mum&Baby Stores in Hong Kong and sourcing countries Market Danone’s IMF China (offline) presence Key National and ~85% ~60% Regional A/B weighted Key Accounts Cities distrib
Slide 11: H1 2019 key figures
H1 2019 key figures Sales €6.6 bn Like-for-like change +1.2% Volume / Value -2.5% / +3.7% Recurring operating margin 9.4% Like-for-like change +58 bps I 11 I
Slide 12: Essential Dairy & Plant-based: +2.2% in Q2
Essential Dairy & Plant-based: +2.2% in Q2 All regions growing; dairy stabilized, strong plant-based Quarterly LFL sales growth(1) ▪ Europe: slightly positive growth ▪ France and Spain stabilization ▪ Alpro: double-digit growth +2.2% +1.5% ▪ North America: moderate growth +0.8% -0.4% +0.2% ▪ Yogurt:
Slide 13: Morocco: growth around 10% in Q2, regained leadership
Morocco: growth around 10% in Q2, regained leadership More than half of market share loss recovered Unique consumer Milk portfolio engagement process adaptation Fresh Milk Market Share 40 % Accelerated Transparency innovation in action Competitor 1 20 % Mar-18 Apr-18 Sep-18 Sep-18 Mar-19 Apr-19 Sour
Slide 14: H1 2019 key figures
H1 2019 key figures Sales €2.4 bn Like-for-like change +2.8% Volume / Value +0.2% / +2.6% Recurring operating margin 12.9% Like-for-like change +110 bps I 14 I
Slide 15: Waters: +2.1% in Q2
Waters: +2.1% in Q2 13% recurring operating margin from valorization and efficiencies Quarterly LFL sales growth(1) Europe: slightly negative growth ▪ Weather conditions in May driving sharp category decrease +6.9% ▪ Aquadrinks innovation continued strong performance +4.9% +3.9% +4.2% +3.9% +2.1% As
Slide 16: Step-up of circular packaging
Step-up of circular packaging Concrete actions in H1 2019 to offer and promote sustainable packaging choices Accelerated Wimbledon launch “I recycle” of new activation sustainable packaging offerings Offering alternatives beyond single use with evian (re)new I 16 I
Slide 17: Q2 and H1 2019 highlights: Solid progress on growth and efficiency
Q2 and H1 2019 highlights Solid progress on growth and efficiency Like-for-like Sales Growth Recurring Operating Margin Rebound in Q2 confirming acceleration 7th consecutive semester of improvement +2.5% 14.69% €6.5 bn +42 bps Accelerating Maximizing Growth Efficiencies Recurring EPS +6.3% €1.87 I 1
Slide 18: Protein: on track to deliver 1 billion euros cumulative gross savings by 2020
Protein: on track to deliver 1 billion euros cumulative gross savings by 2020 From SG&A reduction to more efficient operations Spare parts 3D printing ~€150m gross savings delivery in H1 Truck fill rate with > 60% from operations optimization cross-categories Confirming full-year 2019 target In-hous
Slide 19: Strong improvement in recurring operating margin
Strong improvement in recurring operating margin Driven by increase in margin from operations +42 bps 14.69% +8 bps +26 bps 14.27% +10 bps -9 bps +34 bps -27 bps Like-for-like: +68 bps H1 2018 Scope Currency Argentina organic Margin from Sales and Overheads H1 2019 Recurring and others(1) contributi
Slide 20: Q2 and H1 2019 highlights: Solid progress on growth and efficiency
Q2 and H1 2019 highlights Solid progress on growth and efficiency Like-for-like Sales Growth Recurring Operating Margin Rebound in Q2 confirming acceleration 7th consecutive semester of improvement +2.5% 14.69% €6.5 bn +42 bps Accelerating Maximizing Growth Efficiencies Recurring EPS +6.3% €1.87 I 2
Slide 21: EPS bridge
EPS bridge Strong growth driven by operational performance +6.3% -0.0% +4.3% -3.0% €1.87 +0.2% +4.8% €1.76 H1 2018 Operational Financing Tax & Scope Currency H1 2019 Recurring EPS Performance others and others(1) Recurring EPS (1) Including IAS 29 impact I 21 I
Slide 22: From recurring operating income to net income
From recurring operating income to net income Non-recurring costs from sale of Earthbound Farm and restructuring H1 2018 H1 2019 in € millions except if stated otherwise Recurring Non-recurring Total Recurring Non recurring Total Operating income 1,784 (695) 1,089 1,858 (314) 1,543 Net financial res
Slide 23: Over €1bn free cash flow in H1 2019
Over €1bn free cash flow in H1 2019 Sustained cash delivery Free cash flow (in € million) H1 2019 developments ▪ Strong NOPAT (1) delivery 1,104 1,083 ▪ Restructuring costs impact 921 731 545 ▪ Increased inventories - Brexit risk management H1 2015 H1 2016 H1 2017 H1 2018 H1 2019 - PET pre-buying op
Slide 24: Change in net debt
Change in net debt in € billion € +1.2 bn +0.9 (1.1) 0.1 +1.3 13.9 12.7 Net debt FCF M&A Dividends Others Net debt 31/12/2018 Puts incl. IFRS16 30/06/2019 I 24 I
Slide 25: 2019 guidance confirmed; 2020 objectives reaffirmed
2019 guidance confirmed; 2020 objectives reaffirmed H2 priorities to drive growth and margin acceleration Accelerate like-for-like sales growth ▪ Pursue dairy stabilization 1 ▪ Push plant-based expansion 2019 full-year guidance ▪ Accelerate presence in fast-growing channels ▪ Capture premiumization
Slide 26: On track to accelerate the plant-based opportunity
On track to accelerate the plant-based opportunity Solid execution of our growth plans Grow the core Expand Robust innovation pipeline Battle for leadership into new territories Adjacencies, new brands Q1 2019 Launch Activia Q3 2018 plant-based in Europe Q1 2019 Q1 2018 Boost ready-to-drink coffee Q
Slide 27: Driving long-term transformation for a unique investment proposition
Driving long-term transformation for a unique investment proposition Lead the way to create and share sustainable value I 27 I
Slide 28: Appendix
7) \ DANONEG ONE PLANET. ONE HEALTH Appendix
Slide 29: Q2 2019 sales by reporting entity and by geographical area
Q2 2019 sales by reporting entity and by geographical area Essential Dairy Specialized Waters Company & Plant-based Nutrition Europe and Noram Sales €2,180m €764m €527m €3,471m LFL growth +1.7% +0.8% -1.3% +1.1% Rest of the world Sales €1,103m €1,102m €819m €3,025m LFL growth +3.2% +4.9% +4.5% +4.2%
Slide 30: Q2 & H1 2019 impact of currencies & scope
Q2 & H1 2019 impact of currencies & scope Q2 2019 Essential Dairy Specialized Nutrition Waters Total & Plant-based Reported sales growth +0.8% +1.9% +1.6% +1.3% Argentina organic +0.4% +0.3% +0.0% +0.3% contribution to growth Currency and others(1) +0.7% -1.6% -0.6% -0.2% IAS 29 impact +0.1% +0.0% +
Slide 31: Changes in exchange rates
Changes in exchange rates % total H1 2019 H1 19 vs H1 18 (avg) Q2 19 vs Q2 18 (avg) United States Dollar 20.6% 7.2% +6.1% Chinese Renminbi 7.3% +0.5% -1.0% Russian Ruble 6.4% -2.4% +2.0% Indonesian Rupiah 5.7% +3.9% +3.8% British Pound 5.1% +0.7% +0.1% Mexican Peso 4.7% +6.6% +7.6% Brazilian Real 2.
Slide 32: Recurring operating margin
Recurring operating margin H1 2018 H1 2019 Like-for-like change Essential Dairy & Plant-based 9.00% 9.41% +58 bps Specialized Nutrition 25.53% 25.28% +55 bps Waters 11.45% 12.87% +110 bps Europe & Noram 12.98% 13.75% +102 bps Rest of the world 15.80% 15.79% +15 bps Total 14.27% 14.69% +68 bps I 32 I
Slide 33: Cash bridge
Cash bridge in € million (327) 668 (182) 130 398 359 8 1,833 1,543 1,083 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 var
Slide 34: Balance sheet
Balance sheet Assets(1) Liabilities in € million 31/12/18 30/06/19 31/12/18 30/06/19 16,353 Shareholders’ equity 16,475 24,598 Intangible assets 24,445 13,920 Net debt(2) 12,744 10,225 Other assets 9,331 Other liabilities 3,395 3,685 Working capital 5,256 6,102 6,418 6,967 Working capital 39,032 40,