Slide 1: Q3 2020 Sales: A new world: Deliver. Reshape. Review. Adapt.
Q3 2020 SALES A new world: Deliver. Reshape. Review. Adapt. October 19th, 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 ▪ Confirmation of sequential improvement of sales growth in H2 ▪ Restored full-year guidance: 14% recurring operating margin and €1.8bn free cash flow ▪ Reshaping organization for the future ▪ Update on our adaptation plans to the new COVID-world ▪ L
Slide 4: Where we are today
Where we are today Addressing simultaneously delivery, transformation, and portfolio value creation First-half 2020 Second-half 2020 2021 onwards Outbreak and lockdown Stop & Go Re-openings New “normal” Q3 : as ▪ Sequential improvement in Q3 expected ▪ Further acceleration of EDP ▪ Sustained deliver
Slide 5: The world has changed, and we need to adapt
The world has changed, and we need to adapt What we learned from the last 9 months and how we’re responding Local empowerment is king Reshaping the Need for extreme supply chain organization /customer service agility at competitive cost + Consumer-centric growth Optimized within and beyond categorie
Slide 6: Reconnecting with our 3-5% profitable growth agenda: three big decisions
Reconnecting as fast as possible with our 3-5% profitable growth agenda Three big decisions Fitter and more agile to best serve strategy & execution Reshaping the organization ▪ Two macro-regional CEOs ▪ One COO in charge of new end-to-end design to delivery function + Significant opportunities for
Slide 7: Reshaping the organization: fitter and more agile
Reshaping the organization Fitter and more agile to best serve strategy & execution Jan-2020 Effective Nov-2020 Emmanuel FABER Chairman and CEO 2 macro-regional CEOs 2 global functions Internal CFO replacement Véronique Shane Henri Nigyar Cécile Juergen Bertrand PENCHIENATI- GRANT BRUXELLES MAKHMUDO
Slide 8: Next weeks: focus on delivery, finalize adaptation plans
Next 12 weeks Focus on delivery ▪ Q4 sales to confirm improving albeit slower trend ▪ Keep market share momentum ▪ Efficiency actions and cost control measures in place ▪ Secure expected level of margin (14%) and free cash flow (€1.8bn) Finalize adaptation plans Progress strategic review agenda I 8
Slide 9: Q3 2020 Financial Review
Q3 2020 Financial Review Cécile Cabanis CFO I 9 I
Slide 10: Sequential improvement in Q3 as expected
Sequential improvement in Q3 as expected EDP now delivering >+3% growth Quarterly LFL sales growth LFL sales growth by business LFL sales growth by region 2019 2020 Q3 Q4 Q1 Q2 Q3 Europe and Noram Rest of the world Q2 Q3 Q2 Q3 Q2 Q3 Q2 Q3 Q2 Q3 +4.1% +3.7% + 3.7 % +3.0% + 1.6 % - 1.1 % - 2.5% - 2.2
Slide 11: Channel dynamics continue to impact Q3 performance
Channel dynamics continue to impact Q3 performance Marked variations across portfolio Domestic e-commerce : ~+40% company Tailwinds Jugs Grocery ~+7% Sustained at-home consumption North America — ~+8% Booming domestic e-commerce Cross-border China ~-60% Headwinds Gradual reopening not yet normalized
Slide 12: Competing effectively
Competing effectively Market share gains through largest brands in their core markets ~+100bps market share gain on average since beginning of the year for winning brands Source: Retail audits from January to most recent available data (Nielsen, IRI) I 12 I
Slide 13: Q3 2020 sales bridge
Q3 2020 sales bridge Reported sales growth impacted by change in currencies Reported growth -9.3% €6,418m -7.1% +0.2% -0.4% -2.1% €5,821m Like-for-like growth: -2.5% Q3 2019 Currency Argentina organic Volume Value Q3 2020 and others(1) contribution to growth(2) (1) Including IAS 29; (2) Since Januar
Slide 14: Essential Dairy & Plant-based: +3.7% in Q3
Essential Dairy & Plant-based: +3.7% in Q3 Significant acceleration in Q3 Q3 and 9M key figures Plant-based growing at high teens Q3 2020 9M 2020 Sales 3,108m€ 9,699m€ ▪ 3rd consecutive quarter of double-digit growth Like-for-like change +3.7% +3.3% Volume +4.0% +2.8% Continued mid-single-digit mome
Slide 15: Specialized Nutrition: -5.7% in Q3
Specialized Nutrition: -5.7% in Q3 Sharp contraction of cross-border channels in China Q3 and 9M key figures China: steep double-digit decline on a high base Q3 2020 9M 2020 ▪ Sharp contraction of cross-border channels (~-60%): continuous border closure Sales 1,698m€ 5,441m€ with Europe, Honk-Kong a
Slide 16: Waters: -13.5% in Q3
Waters: -13.5% in Q3 Sequential improvement in Europe and China amid uncertain re-opening Q3 and 9M key figures Business still heavily impacted by low mobility index vs pre-COVID levels Q3 2020 9M 2020 Sales 1,015m€ 2,864m€ Like-for-like change -13.5% -17.1% Europe: sequential improvement (~-10% vs
Slide 17: Continued efficiencies and disciplined capital allocation
Continued efficiencies and disciplined capital allocation Permanently reshaping the cost and asset base Active portfolio Efficiencies management gross savings target proceeds from for 2018-2020 full exit from exceeded Yakult I 17 I
Slide 18: Q4 and full-year outlook
Q4 and full-year outlook Q4 Full-year Sales growth to confirm sequential albeit Recurring operating margin slower improvement 14% ▪ Low visibility on pace of recovery of out of Free cash flow home consumption and proxy channels €1.8bn ▪ Continued headwind from cross-border channels on ELN China Effi
Slide 19: CEO conclusion
CEO conclusion Next 12 weeks Focus on delivery ▪ Q4 sales to confirm improving albeit slower trend ▪ Keep market share momentum ▪ Efficiency actions and cost control measures in place ▪ Secure expected level of margin (14%) and free cash flow (€1.8bn) Finalize adaptation plans Progress strategic rev
Slide 20: Appendix
he Appendix Etec that Goodness Made Greater ‘ORTI DENTRO ca. @
Slide 21: New end-to-end connected design-to-delivery global function
New end-to-end connected design-to-delivery global function A critical transformation enabler Research Innovation Procurement Manufacturing Supply Chain ▪ Unlocked value creation across an integrated value chain ▪ Enabler of growth and cost synergies, cross-categories ▪ Global expertise and support
Slide 22: Q3 2020 highlights
Q3 2020 highlights Environment driving further sales growth polarization across businesses and regions By reporting entity By geographical area Essential Dairy Specialized Europe Rest of Company Waters & Plant-based Nutrition & Noram the World Q3 net sales €5,821m €3,108m €1,698m €1,015m €3,334m €2,
Slide 23: Q3 2020 impact of currencies & scope
Q3 2020 impact of currencies & scope Q3 2020 Essential Dairy Specialized Company Waters & Plant-based Nutrition Like-for-like sales growth +3.7% -5.7% -13.5% -2.5% Argentina organic contribution to growth +0.4% +0.3% -0.4% +0.2% Currency and others(1) -8.3% -5.9% -6.0% -7.1% IAS 29 impact +0.1% -0.2
Slide 24: Q3 2020 sales by reporting entity and by geographical area
Q3 2020 sales by reporting entity and by geographical area Essential Dairy Specialized Waters Company & Plant-based Nutrition Europe and Noram Sales €2,169m €704m €460m €3,334m LFL growth +3.6% -7.7% -11.1% -1.1% Rest of the world Sales €939m €994m €554m €2,486m LFL growth +4.0% -4.4% -15.2% -4.1% C
Slide 25: Changes in exchange rates
Changes in exchange rates % total Q3 2020 Q3 20 vs Q3 19 (avg) United States Dollar 21.6% -5.1% Chinese Renminbi 7.7% -3.7% Russian Ruble 5.7% -17.3% Indonesian Rupiah 5.6% -8.4% British Pound 5.3% -0.3% Mexican Peso 3.6% -16.6% Brazilian Real 2.4% -30.2% Hong Kong Dollar 1.9% -4.3% Polish Zloty 2.6