Danone S.A.

Good day and thank you for standing by. Welcome to the Danone 2023 half-year results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To answer your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mathilde Rodier, Head of Investor Relations. Please go ahead.

Good morning, everyone. Thank you for being on this call this morning for Danone's 2023 H1 results. I'm here with our CEO, Antoine de Saint-Afrique, and our CFO, Jürgen Esser. who will first go through some prepared remarks before taking your questions in a second step. But before we start, I'll draw your attention to the disclaimer on page 35 related to forward-looking statements and the definition of financial indicators that we'll refer to during the presentation. And with that, let me hand over to Antoine.

Thank you, Mathilde. Good morning, everyone, and welcome to our House Year 23 conference call. I hope you're all well and safe. Before we dive into the results, let me start with a few words on the situation in Russia. Obviously, my very first thoughts go to all our colleagues there, after our EDP business has been placed under temporary external administration of the Russian authorities. There are, of course, financial implications, which we have referenced in our press release this morning, and Juergen will come back to them. Given the sensitivity of the situation, I hope you will understand there is not much we can say at this stage other than the fact that we remain focused on people's safety and on continuity of operations. Let's now go into the results, starting with a brief introduction on slide number three. As you will have seen, we closed a solid first half of the year, further building our track record of delivery. This semester, like-for-like revenue was up 8.4%, with broad-based growth across geographies and categories. Growth was driven by pricing up plus 9.4% and resilient volume mix down minus 1.1%. Importantly, we made consistent progress on our strategic agenda in an environment that remains volatile and challenging. The combination of resilient volume mix, continued pricing where needed, and high productivity allowed us to expand our margin from operation by 93 bps compared to last year. And this increase in margin from operations give us the ability to further drive our reinvestment journey, which is at the heart of Renew Danone. These first half reinvestments were up 99 bps compared to last year. And we did all of that while delivering on our ambition to moderately improve our operating margin, which was up plus 14 bps versus last year, and securing a healthy cash flow at 1.1 billion, up by 400 million compared to last year. So I'm happy with the first half of the year, as we keep not only delivering consistently, but as importantly, as we are doing so in line with our strategy. Let me elaborate a little on this and start with our core now on page four. Speaking of the core, there is no better illustration of it than EDP in Europe. We started the transformation of the strategic activity at the back end of 22. making it clear that we were not after short-term tactical fixes, but rather aiming at structurally driving EDP back to value creation in Europe. Over the last quarters, we have focused on getting back to category leadership fundamentals. We have prioritized methodically the key demand spaces we want to play in, focusing on health, underpinned by strong functionality, indulgence, kids, and everyday nutrition. We started sharpening our portfolios again those four spaces with less overlaps between brands, rationalized and more focused portfolios. Having clearer swim lanes and more focused portfolios enables us to now start reinvesting more assertively in ANP while making sure all of this is also visible to consumers through superior shelf execution. This groundwork is starting yielding encouraging results. It shows, for example, on the ActiVR, YoPro, and Danone brands. I'll come back to that in a minute. And while we know there is still work to do, I'm now pretty confident in our ability to sequentially improve from H2 onwards and to progressively reconnect with competitive growth in Europe. We certainly have a good example of this with the Danone brand. I'm now moving to slide five. Over the last few months, we have defined a new architecture for the Danone brand, tiering and segmenting the brand by occasion, by format, price points, and channels. On the one hand, we have strengthened the core of the offering, adapting formats and price points to recover volumes and obviously operating leverage, but also, and this is important, to drive brand penetration at a time where some shoppers may start feeling the squeeze from inflation. On the other end, we started developing a range of value-added propositions in the Danone, from Skia to Greek, with the objective of further building superiority and differentiation, which ultimately drive mix and profitability. This work, which we deployed since the beginning of the year in Spain, is showing very promising results. There, monthly brand penetration has, for example, doubled since the beginning of the year. And obviously, next to Spain, we are in the process of deploying a similar approach in France. Moving now on to page six, I'd like to illustrate how we have further boosted our winners in the first half of the year. You have seen these winners several times already, and this is totally intentional. This is a clear testimony to our determination to be very consistent in driving these winning propositions further ahead building on differentiating science, strong brands, and execution. Yet again, our coffee creations, Avion, and High Protein have delivered strong and competitive performance this semester with strong double-digit growth. And again, our specialized nutrition business posted a solid and competitive growth at plus 8% in H1. We believe these platforms have more room to grow in and around the cafe category in premium waters in high-protein dairy. We will continue expanding them across channels and geographies. This is the case, for example, with our dairy high-protein portfolio as we roll it out in the UK as we speak and as we further expand into new segments such as desserts. And I would obviously be remiss not to mention specialized nutrition, where we will continue to leverage the full palette of our portfolio, from Aptamil in IMF to Neocate in pediatric specialties and Fortimel and Nutrisson in adults across geographies. Let me finish this performance overview on page seven. with a brief mention to MyZone. Last year, we told you that we would address our underperformers with method and with courage. It is exactly what we have done with MyZone. We took the time since the capital market event to do a proper root cause analysis to understand the reasons of MyZone's underperformance. On that basis, the team built a turnaround plan, leading us to dramatically simplify our portfolio, now down to four SKUs. We have also invested in the superiority of our formulation, making sure MyZone is back to being among the best functional hydration options in the market. And we have delayed our distribution system with the goal to improve in-store executions. All of this, range, product, quality of execution, higher investment, all of this is now starting to pay. Even though we are at the early stages, we see tangible signs of turnaround. My zone, as you've seen, grew by 15.9% in like-for-like in H1, driven by a strong volume recovery. And the market shares... we are positively oriented for the first time in a very long time. It is obviously not yet time to celebrate, as we have to sustain this performance in the long term, but this is certainly encouraging and something the team should be proud of. Let me finish this introduction with page eight. Since last year's capital market event, we have been consistently delivering against our strategic roadmap. These shows are in the results you've seen us publish over the several last quarters, but also in the progress we continue to make on our key battles. What we are doing systematically and with confidence. is about restoring Danone's value creation model. And we do it for the long run, not going for short-term tactical wins, but striving for sustainable long-term value creation. On ANP, we are investing more, but we are also investing better. We continue to improve the allocation of our resource across geographies, brands, and channels, improving our working versus non-working media ratio, but also progressively strengthening the quality of our advertisement. I'm sure that you have seen the Avion Live Young advertising and the Danone ads played in the waiting room of today's webcast. They are great examples of ads we can be proud of. And there is obviously more to come. Next to ANP, we continue to step change the way we leverage our cutting-edge science and technology assets at the service of patients and consumers. And it is not only about the science assets we have. It is about bringing more discipline in the way we develop and execute our innovations. There, too, we are making substantial progress from bringing a superiority imperative in our innovation to delivering fewer, bigger, better, and a creative innovation. All our categories are moving to the front foot with a clear focus on developing superior differentiated product supported by strong claims, and in some cases, clinical evidence. And as you also know, our value creation is about making the most of our ecosystem. And here we are starting to reinvent the way we work and collaborate with our partners. I'm happy to announce that Danone will host, by the end of the year, its first partner summit in a long time. This is a great opportunity for us to learn, to leverage, and to expand our reach and impact. All in all, Danone is starting to move to the next level. All the pieces of our Renew Danone framework are coming together. And despite the volatile environment, we continue to make consistent progress. Expect us to keep at it with determination and with focus. And with that, let me hand it over to Jürgen for the financial review.