Slide 1: Half-Year Results 2018
HALF-YEAR RESULTS 2018 July 27, 2018 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,” “fores
Slide 3: Highlights
Highlights I 3 I
Slide 4: H1 2018 highlights: strong set of results
H1 2018 highlights Strong set of results Recurring EPS at constant FX excl. Yakult Transaction Impact +13.4% € 1.76 Recurring Net Sales Free Cash Flow Operating Margin +4.0% (1) +51bps (1) +20.0% € 12.5 bn 14.27% € 1.1 bn (1) Like-for-like New Danone I 4 I
Slide 5: WhiteWave, one year after closing
WhiteWave, one year after closing High-quality asset, accretive to Danone’s model #1 #2 #1 #1 High-growth categories Successful integration ~ 75% of former WhiteWave sales Synergies delivery on track growing > 5 % in H1 2018 Innovation momentum Distribution expansion I 5 I
Slide 6: Major step-up in innovation - more, faster, better
Major step-up in innovation - more, faster, better Robust innovation engine I 6 I
Slide 7: Rebalanced growth profile: Q2 2018 performance by reporting entity
Rebalanced growth profile Q2 2018 performance by reporting entity Specialized EDP EDP Europe & Rest of Nutrition Noram International Waters Noram the World Net sales €1.8 bn €1.2 bn €2.0 bn €1.3 bn €3.5 bn €3.0 bn -2.4% LFL growth (1) +10.6% +1.4% excl. Morocco: +4.8% -1.7% +9.4% +0.4% Volume +4.0%
Slide 8: Protein efficiency program underway
Protein efficiency program underway On track for €1bn gross savings in 2020 € 75m gross savings delivered in H1 2018 € 200m gross savings target for the full-year Sales Professional Manufacturing Logistics & Marketing services I 8 I
Slide 9: Challenging H1 macro headwinds
Challenging H1 macro headwinds Navigating market volatility Crude oil US freight Transportation increase costs strikes 120 74$ 52$ 100 H1 2017 H2 2017 H1 2018 H1 2017 H2 2017 H1 2018 Source: US Energy Information Administration Source: RMOC Freight Rate Index H1 Impact PET cost inflation US freight
Slide 10: Update on Morocco
Update on Morocco Committed to rebuilding trust with consumers Unforeseen boycott Significant impact Commitment to Complex situation, Q2 sales down 40% change fresh milk extending beyond H1 recurring operating model business income down €25m Greater transparency €661m non-cash and co
Slide 11: Delivering consistent recurring earnings growth
Delivering consistent recurring earnings growth Focus on long-term value creation Recurring EPS growth at constant exchange rate +14.2% +12.8% +10.8% +8.4% 2015 2016 2017 H1 2018 I 11 I
Slide 12: Financial Review
Financial Review I 12 I
Slide 13: H1 2018 Highlights: strong set of results
H1 2018 Highlights Strong set of results RECURRING NET SALES RECURRING EPS FREE CASH FLOW OPERATING MARGIN +4.0% +51bps +13.4% +20.0% (1) (1) (2) (3) € 12.5 bn 14.27% € 1.76 € 1.1 bn (1) Like-for-like New Danone (2) At constant exchange rates; excl. Yakult Transaction Impact (3) on a reported basis
Slide 14: Q2 2018 sales bridge: +3.3% like-for-like growth
Q2 2018 sales bridge: +3.3% like-for-like(1) growth Strong headwinds from FX and Morocco boycott €6,707 m +1.3% -1.4% LFL New Danone(3): +3.3% €6,414 m -7.6% +3.8% -0.5% +4.3% excluding Morocco with +1.3% in volumes Q2 2017 WhiteWave Scope Currency Volume Value Q2 2018 Restated(1) base effect(2) Rep
Slide 15: H1 2018 key figures
H1 2018 key figures Sales €3.6bn Change (1) +12.5% Volume / Price Mix +4.8% / +7.7% Recurring operating margin 25.53% Change (1) +121bps (1) Like-for-like New Danone I 15 I
Slide 16: Specialized Nutrition: +10.6% in Q2
Specialized Nutrition: +10.6% in Q2 Early Life and Medical Nutrition both contributing to highly profitable growth Quarterly LFL sales growth Advanced Medical Nutrition: mid to high-single digit growth Solid growth in Europe, very strong in Rest of the World +17.8% +14.5% Early Life Nutrition: dou
Slide 17: H1 2018 key figures
H1 2018 key figures Sales €2.4bn Change (1) +0.6% Volume / Price Mix +2.3% / -1.7% Recurring operating margin 9.96% Change (1) -43bps (1) Like-for-like New Danone I 17 I
Slide 18: EDP Noram: +1.4% in Q2
EDP Noram: +1.4% in Q2 Plant-based and yogurt leading return to growth Quarterly LFL sales growth Yogurt: slightly positive growth +1.4% Probiotics: Activia growing thanks to Dailies -0.4% -0.2% Kids: activation (Danimals Incredibles)and innovations Plant-based: portfolio and distribution expa
Slide 19: H1 2018 key figures
H1 2018 key figures Sales €4.1bn Change (1) -0.8% Volume / Price Mix -5.6% / +4.8% Recurring operating margin 8.44% Change (1) +26bps (1) Like-for-like New Danone I 19 I
Slide 20: EDP International: +0.4% in Q2 excluding Morocco
EDP International: +0.4% in Q2 excluding Morocco Back to profitable growth excluding impact of Morocco boycott Quarterly LFL sales growth Europe: slightly negative; back to solid growth in some countries UK and Nordics growing in both dairy and plant-based +0.8 % +0.4% France & Spain still chall
Slide 21: H1 2018 key figures
H1 2018 key figures Sales €2.3bn Change (1) +4.5% Volume / Price Mix +2.6% / +1.9% Recurring operating margin 11.45% Change (1) -96bps (1) Like-for-like New Danone I 21 I
Slide 22: Waters: +4.8% in Q2
Waters: +4.8% in Q2 Another quarter of strong growth; PET inflation weighing on margin Quarterly LFL sales growth Continued good momentum in all regions and categories Europe: solid growth Valorized innovations acceleration +10.3% +7.6% Good weather conditions in Northern Europe +4.2% +4.8% Nora
Slide 23: H1 2018 Highlights: strong set of results
H1 2018 Highlights Strong set of results RECURRING NET SALES RECURRING EPS FREE CASH FLOW OPERATING MARGIN +4.0% +51bps +13.4% +20.0% (1) (1) (2) (3) € 12.5 bn 14.27% € 1.76 € 1.1 bn (1) Like-for-like New Danone (2) At constant exchange rates; excl. Yakult Transaction Impact (3) on a reported basis
Slide 24: Strong improvement in recurring operating margin
Strong improvement in recurring operating margin Mix and efficiencies offsetting strong headwinds LFL New Danone(3): +51 bps 14.27% 14.07% +27 bps +9 bps +8 bps +48 bps -24 bps -49 bps • COGS inflation ~ -330bps • Protein • Mix ~ +160bps • WhiteWave synergies • Efficiencies ~ +150bps • Resource allo
Slide 25: H1 2018 Highlights: strong set of results
H1 2018 Highlights Strong set of results RECURRING NET SALES RECURRING EPS FREE CASH FLOW OPERATING MARGIN +4.0% +51bps +13.4% +20.0% (1) (1) (2) (3) € 12.5 bn 14.27% € 1.76 € 1.1 bn (1) Like-for-like New Danone (2) At constant exchange rates; excl. Yakult Transaction Impact (3) on a reported basis
Slide 26: EPS bridge
EPS bridge Double-digit growth at constant exchange rate excl. Yakult Transaction Impact +4.6% Total +1.0% +1.6% -0.6% +3.9% -8.2% € 1.76 +4.0% € 1.68 +3.5% -0.6% +13.4% At constant FX, excl. Yakult Transaction Impact H1 2017 Yakult WhiteWave Net Sales Margin Financing Tax & Scope Currency H1 2018 R
Slide 27: From Recurring operating income to Net income
From Recurring operating income to Net income H1 2017 H1 2018 H1 2018 Total € million recurring recurring Non-recurring items H1 2018 Recurring operating income 1,717 1,784 - 1,784 Other operating income and expenses - - (695) (695) Operating income 1,717 1,784 (695) 1,089 Total Financial expenses (
Slide 28: H1 2018 Highlights: strong set of results
H1 2018 Highlights Strong set of results RECURRING NET SALES OPERATING MARGIN RECURRING EPS FREE CASH FLOW +4.0% +51bps +13.4% +20.0% (1) (1) (2) (3) € 12.5 bn 14.27% € 1.76 € 1.1 bn (1) Like-for-like New Danone (2) At constant exchange rates; excl. Yakult Transaction Impact (3) on a reported basis
Slide 29: Accelerated cash delivery: +20.0%
Accelerated cash delivery: +20.0% Solid cash conversion Free Cash Flow (€m) 1104 920 FCF FCF H1 2017 H1 2018 Working Capital / Net Sales (%) Capex / Net Sales (%) H1 2017 H1 2018 H1 2017 H1 2018 (5.0)% (4.5)% -4.5% 3.0% -5.0% 2.9% +3.0% +2.9% I 29 I
Slide 30: Change in net debt
Change in net debt Accelerated pace of deleverage € -4.5 bn in € billion € -1.7 bn (1.1) 18.2 15.4 (1.2) +0.2 +0.5 13.7 Net debt Net debt FCF M&A Dividends Others Net debt 30/06/2017 31/12/2017 Puts 30/06/2018 I 30 I
Slide 31: FY2018 guidance confirmed
FY2018 guidance confirmed 2017 2018 2020 2018 objective DOUBLE-DIGIT RECURRING EPS GROWTH at constant exchange rate excluding Yakult Transaction Impact Based on: Accelerated LFL sales growth vs. FY2017 Recurring operating margin improvement LFL I 31 I
Slide 32: Appendix
Appendix I 32 I
Slide 33: Q2 & H1 2018 impact of currencies & scope
Q2 & H1 2018 impact of currencies & scope Q2 2018 EDP International EDP Noram Specialized Nutrition Waters Total Reported sales growth (11.1%) (6.1%) +4.3% (2.7)% (4.4)% Currency (9.5)% (7.6)% (5.7)% (7.0)% (7.6)% WhiteWave base effect +0.4% +5.9% +0.0% 0.0% +1.3% Scope of consolidation +0.4% (5.8%)
Slide 34: Changes in exchange rates
Changes in exchange rates % total H1 2018 H1 18 vs H1 17 (avg) Q2 18 vs Q2 17 (avg) US Dollar 19.8% -10.5% -9.0% Chinese Renminbi 7.9% -3.3% -1.8% Russian Ruble 6.6% -12.7% -12.3% British Pound 5.3% -2.2% -2.2% Indonesian Rupiah 4.9% -13.5% -12.2% Mexican Peso 4.3% -8.8% -11.4% Argentine Peso 3.2% -
Slide 35: Recurring operating margin by geographical area
Recurring operating margin by geographical area H1 2017 H1 2018 Like-for-like change(1) EDP International 8.15% 8.44% +26 bps EDP Noram 11.69% 9.96% -43 bps Specialized Nutrition 24.32% 25.53% +121 bps Waters 12.15% 11.45% -96 bps Europe & Noram 15.31% 12.98% -126 bps Rest of the world 12.77% 15.80%
Slide 36: Cash bridge
Cash bridge in € million 420 475 175 20 106 363 41 1,784 1,533 1,104 Recurring Depreciation/ Taxes Financial Others Cash from W cap var Capex Sales of Free Operating Amort results operating assets and cash-flow income activities(1) transaction Fees (1) Excluding working capital variations I 36 I
Slide 37: Balance sheet
Balance sheet Assets(1) Liabilities in € million 31/12/17 30/06/18 31/12/17 30/06/18 Restated(3) Restated(3) Intangible assets 14,529 Shareholders’ equity 15,252 24,945 24,361 Net debt(2) 15,372 13,663 Other assets 9,161 Other liabilities 9,679 3,554 3,476 Working capital 5,499 5,924 6,668 7,055 Wor