Danone S.A.

Good morning, everyone. Thank you for being with us this morning for our Q3 result call. I'm with Jürgen Esser, the CFO, who will go through some prepared remarks before taking your questions in the second step. Before we start, I draw your attention on our disclaimer, page 22. Please pay attention to that. And with that, let me hand it over to Jürgen.

Thank you, Mathilde, and good morning, everyone. I hope you are all well, and thank you for being with us this morning to discuss our third quarter sales. I propose that we go straight into it, starting with page number two. We have been closing this third quarter with solid results, with like-for-like sales up 6.2% compared to last year. Beyond the quantum, we are particularly pleased with the quality of the growth, as it starts to show that our initiatives are paying off, yielding results exactly in line with our expectations. Pricing reached plus 6.6 percent this quarter, sequentially decelerating from the high single-digit levels we saw in previous quarters. This normalization has been driven by all geographies with North America, unsurprisingly, the zone where prices are normalizing the fastest. Most importantly, as price contributions start to go down, we are able to sequentially improve the dynamics of our volume techniques. which are only slightly down with minus 0.3% in the first quarter, a clear improvement versus the first semester where we were down around minus 1%. This dynamic is very encouraging and is giving us confidence to further improve the trend in the last quarter of the year. In other words, and let me be very clear right away, we are confident that the fourth quarter of this year will see a positive contribution from volume and mix, a key milestone, as you know, in our Renew Done On journey. Let us look first at our performance through the lens of our categories on page number three. While we continue to deliver solid and consistent growth across EDP, specialized nutrition, and waters, with all three categories growing above 5 percent in this quarter, we are also reporting an improved underlying volume mix dynamic. This is most visible in EDP, where volume mix significantly improved, only down minus 0.8 percent this quarter. compared to around minus 3% in the first semester of this year and compared to as much as minus 6% when looking back into the second semester of last year. These results do not come by coincidence. They rather reflect the hard work of our teams over the last 18 months where we consistently executed against our strategic agenda, where we actively stepped up the performance of our portfolio, of our core assets, our underperformers and our winners, which is well illustrated on the next page, page number four. In EDP Europe, our teams have, over the last few quarters, taken bold actions to restore value creation after many years of underperformance. After having clarified the swim lanes of our brand, we refocused our ranges, which has led to the rationalization of roughly 20% of the least value-created SKUs in dairy. This first step allowed us to give more clarity to our value propositions within each brand, but also to ease what I would call the shoppability of our shelves. And combined with improved execution and higher investments, the transformation of EDP starts delivering results. As an example, in the UK, we are emerging from the transformation phase not only with a stronger portfolio, recently complemented by the rollout of our high protein range, but also with higher distribution and share of shelf levels. Those are measurable successes, and I'm convinced that this will sequentially translate into stronger growth and competitiveness. Next to EDP in Europe, they've also been active in turning around Mizone. After a deep root cause analysis, the team has been deploying the renewed Mizone proposition for the last quarter, and we are pleased with the results now that the first season is behind us. Mizone has been growing plus 13.9% since the beginning of the year, mostly driven by volume and Importantly, this growth translated into higher market share. After years of slowdown, we can say that Mizone is reconnecting with value creation, which goes well for the resilience of our model in China and for the performance of our waters category. Last but not least, you have seen us actively and intentionally boost the winners of our portfolio. This is, for example, the case of medical nutrition, a business that has been consistently growing in double digit territory. Since the beginning of the year, we have made several investments to increase production capacity in Europe, and we are in parallel actively expanding the reach of our portfolio, for example, in China in adult nutrition. There, we continue to lead the enteral nutrition space, where we are now expanding beyond hospitals, introducing our oral nutrition solutions, a key step in expanding our presence from hospitals to post-discharge modes. You remember that delivering strong and balanced growth sits at the heart of the Renew Donald business model. I will conclude this brief introduction by reiterating that the efforts of the last 18 months are starting to pay off. And as our sector is shifting away from price-led growth, we are confident at moving forward. We can demonstrate that we have categories, brands, and capabilities to deliver more balanced growth with volume, mix, and price contributing. Let me now move to page number five for our traditional sales bridge. I have already been commenting our like-for-like sales growth of plus 6.2%. On top of that, we see this quarter a negative impact from Forex of minus 7.4%, reflecting the depreciation of the majority of currencies against the Euro, while its scope was negative at minus 6.2%, mainly resulting from the deconsolidation of our EDP Russia and Waters Argentina business from our perimeter. Let's now look at the performance of our zones, moving to page number six. This quarter, again, all our geographies have been contributing to the growth. To be efficient, I would even suggest we move immediately forward to the next page, to page number seven, to look deeper into the performance of each zone, starting with Europe. Europe delivered solid growth of plus 5.1 percent in this third quarter. with all categories contributing. Pricing started to progressively normalize, yet still being up plus 9.2 percent, thanks to significant carryover from last year. At the same moment, volume mix was down minus 4.1 percent, with a weaker volume performance in our water business, where volume mix was significantly down, while EDP on the other side experienced a tangible sequential improvement as expected. On EDP, as I commented already, our teams have made good progress in the transformation of our portfolio. We are starting to deliver results with a sequential improvement in the volume mix dynamics. The quality of our delivery and our competitiveness are both improving month by month. Let this quarter by strong performances of our dairy brands like Actimel, Danone, or Yopo, all of them growing double digits, but also of our Alpro brand in plant-based, which delivered high single-digit growth. Specialized nutrition posted another quarter of resilient growth, while water registered further market share gains in a category which was, at the beginning of the quarter, penalized by very poor weather conditions. And maybe a last comment on our European performance. When looking through the lens of our distribution channels, our away-from-home business was the fastest-growing channel this quarter, benefiting from an enhanced focus on price-peck architecture across categories from dairy to plant-based and water, and supported by increased investments. Let's move now on to North America on page number eight. North America delivered plus 3.9 percent like-for-like growth in Q3, with a pricing that is normalizing in line with our expectations, up plus 4 percent. Volume mix was again very resilient this quarter, ending broadly flat. despite an elevated base driven, as you will remember, by our contribution to addressing the IMF formula shortage in the U.S. last year. The performance in North America was led by our coffee creations range that posted, again, double-digit growth this quarter. Here, let me highlight the international delight in Stoke brands that continue to drive growth and market share gains. Beyond coffee creations, our Europe business also delivered a solid quarter with our Oikos brand registering another quarter of steep WDG growth. On plant-based, we started taking corrective action to restore short-term competitiveness, which seemed to yield first results. In parallel, we are working on a more structural plan to restage our portfolio and increase its relevance to consumers. So overall, another solid quarter in North America, benefiting from a well-positioned and resilient portfolio in the zone. Moving to the next page, which is page number nine, for about China, North Asia, and Oceania zones. The zone registered plus 8.4% like-for-like sales growth in the third quarter, mainly driven by volume nicks up plus 7.3%. Starting with China and zooming into our infant nicks formula, Uptime delivered another quarter of solid growth with continued market share gains. The uniqueness of our business model in China is indeed a great asset, particularly in this moment where the category is shifting from old to newly registered recipes. We are carefully navigating this transition period, focusing on keeping tight control on inventory and price levels, while introducing in a staged manner our newly registered innovations in this space. Next to IMF, our medical nutrition portfolio posted another strong quarter, building on the strength of our anterior tube feeding business, which delivered double-digit growth. We are very pleased that we can now meaningfully expand our portfolio in the coming quarters, thanks to the recent introduction of our oral product in China, as I commented earlier in the presentation, a key milestone to strengthen our presence in this fast-growing segment. In waters, my zone is living another strong quarter of competitive growth, with the team now focusing on further enhancing our executional muscles to solidify the turnaround with the next season to come. And finally, beyond China, Our business in Japan posted again a strong WG growth led by our functional dairy range and notably the Oikos brands. Let's now move on to the LATAM zone on page number 10. LATAM registered sales growth of plus 8.2% in Q3 on a like-for-like basis. This price up plus 10 and volume mixed down minus 1.8%. The focus of this zone is to restore a resilient, profitable growth model to streamline its portfolio and to optimize its business model. Our teams are making good progress on this agenda across the different countries and categories. They've been discontinuing or resetting a number of activities, including our liquid milk business in Brazil, which is sequentially visible in the results. While doing so, the focus is to drive the winners in the zone, with brands like Yopro, Bonafont, and Atamila, all of them growing profitably also in this quarter at a very fast pace. Finally, moving on to the rest of the world zone, which is page number 11, the zone posted sales growth of plus 9.7% on a like-for-like basis this quarter with a balanced contribution of price up plus 7.7%. and volume mix up plus 1.9%. Let me here particularly highlight the continuous solid performance of our specialized nutrition category in Southeast Asia, but also in India, which has posted another quarter of double digit growth. We continue to win market shares across the region with a strong focus on our superior after meal portfolio, but also with our unique local brands like SGM in Indonesia. On EDP, we are making further progress on the portfolio transformation of our dairy business in Africa, the clear mandate to reconnect with a profitable growth algorithm in this region. Our teams are laser focused on getting into that value creation journey with results visible quarter by quarter. Let me now conclude this presentation with an update on the full year outlook, which is page number 12. Reflecting our solid delivery over the first nine months of this year and the momentum of our business across geographies and categories, we are today raising our guidance for like-for-like sales growth. We now expect like-for-like sales growth between 6% and 7%. We are at the same moment confirming our full-year guidance for recurring operating margins, delivering a moderate margin increase versus previous year. Here, more specifically, and as you already observed in the first semester of this year, We expect our full year operating margin to be led by the expansion of our gross margin while we will continue to make significant reinvestments in AMP, product security, and capabilities. And with that, let me hand it back to Mathilde to start the Q&A session.

Thank you, Jürgen. So we will now open the Q&A with the first question from Guillaume Delmas, UBS.