Danone S.A.

Good day, and thank you for standing by. Welcome to the Danone 2023 Annual 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. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mathilde Rodi, Head of Investor Relations. Please go ahead.

Good morning, everyone. Thank you for being with us this morning for Danone's 2023 results. I'm here with our CEO, Antoine de Saint-Afrique, and our CFO, Jürgen Esser. We'll first go through some prepared remarks before taking your questions in the second steps. But before we start, I draw your attention to the disclaimer on page 41 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, and good morning, everyone. A warm welcome to our full year 23 conference call. Together with Jurgen, we are delighted to be with you today to share what is a strong set of results. Almost two years after the start of Renew Danone, in a year once again marked by significant external challenges and volatility, we have kept transforming the company at pace and with discipline, making it step by step stronger. And for this, I want to start with a big, big thank you to all Danoners. They made it happen. Now, let's go straight into the results, starting with page three. We close a year of strong growth at plus 7% on a like-for-like basis. As just said, we made good progress on our strategic agenda, and it is starting to yield consistent results. Firstly, it shows with our volume mix dynamic. which is sequentially improving and turned positive in quarter four at plus 0.8% versus last year. Importantly, improving the quality of our growth enables us to connect with a profitable growth algorithm. Better quality growth combined with record productivity on COGS led our margin from operations to increase by 142 basis points in 23. And as we said we would do, we kept addressing some of the competitiveness gaps we had by reinvesting back in our business to the tune of 97 basis points. We stepped up our investment in advertising and promotion, in product superiority, and in capabilities, as you will see later. It is better than it was. But the reinvestment journey to be truly competitive is far from over. And we made sure we do not only reinvest, but also kept improving the quality of our execution in-store, online, on-premise, or wherever the consumer has an opportunity to meet our products. We did all of that while growing our recurring EPS by plus 3.4%. building on a 40 basis point increase in a recurring operating margin, an increase I would certainly not qualify at moderate. Another source of pride for the company is the 2.6 billion euro of free cash flow we generated in 23. Besides being a record level, it is a testimony to our renewed focus on cash and disciplined cash allocation as a driver of long-term value creation. Last on this page, we have just received a AAA rating from CDP for the fifth year in a row. Only 10 out of 21,000 companies got a AAA this year, and even fewer received AAA ratings five years in a row. This is a good illustration that performance and sustainability can feed one another when you take sustainability as a strategic stake. So to summarize, good progress made in 23, a consistent delivery on Renew Danone, and a good set of results. Let me now share with you some concrete example of the progress we made moving to page four. First, as you know, we have been focusing on restoring the fundamentals across the portfolio. starting with our dairy business. Here, we have deeply transformed our portfolios over the past years, first in Norham, then in Europe. We have defined clear swim lanes, we have sharpened our ranges, and clarified the role of each of our brands. We have, until last year, significantly streamlined our SKUs and refocused our innovation, and then reworked the shelves with the retailers. And once the portfolio and the shelves were ready, we started reinvesting. There we see encouraging results. In 23, Noram posted another year of solid growth with resilience of volume mix, led by coffee creamers and Greek yogurts. In Europe, after years of underperformance, the performance is sequentially improving. with a zone ultimately reaching a positive volume mix in quarter four. We are happy with the progress, but we are very clear that this is only the start of our journey toward sustained recovery. So better and more focused portfolios as Derry shows, but also renewed focus on science and on leveraging science with consumer. Our infant formula range is a great illustration of that. We performed well in IMF in 23, and importantly, we delivered competitive growth. By leveraging our science to consistently deliver superior products, and by being uncompromising on perfect execution, we posted good market share gains in IMF across the globe for the year 23. And last but not least, we kept broadening the way we reach out to consumers by further expanding our channel reach. in Away From Home notably, while stepping up occasion-led marketing. Let me give you some examples. Without Pro, we now clearly focus on breakfast and coffee occasion. We partner with leading brands in these fields, like Kellogg's and Ely, and doing so are driving category penetration. In parallel, we kept expanding, as I just said, in the Away From Home channel. Alpro is now in all the big coffee chains in the UK and our premium waters are growing strongly out of home as well. Away from home was the fastest growing channel at Danone in 23, which reflects our focus on enlarging our footprint and strengthening our resilience. So restoring the fundamentals has been and will continue to be a clear focus as there is more mileage we can get out of it. But next to this, we keep adding fuel to a few fires. I'm now moving to page five. Talking about places where we drive accelerated growth, I thought we could highlight three platforms, medical nutrition, coffee creation, and high protein, which are at the same time very different but also very similar in many ways. They all address long-term consumer and patient trends. They are all based on genuine consumer insight, strong product superiority, and differentiating technology. First, let me say a word on medical nutrition. In 23, we grew a high single-digit on a like-for-like basis with both pediatrics and adult ranges contributing. There, we leverage strong brands, leaders in their field. We are differentiated through superior science. Our claims are clear, backed by proprietary science, and at the center of how we engage with healthcare professionals. We're also anticipating the growth of Tumor. We invest in future science and claim. We're also in capacity, like we announced recently in our Opoli and Stanford factories. We also invest in new business models, expanding the journey in post-hospital discharge, as we do in China with the nutrition powder and oral proposition. In our coffee creations, we are building a sizable, profitable, and fast-growing platform in Noram. We grew strong double-digit again in 23 and gained shares with our leading international delight and stock brands. Here as well, we have invested to boost capacity in Jacksonville in the U.S. And for those, and I know many of you who followed the Super Bowl, we had one of the coolest advertising out there featuring Sir Anthony Hopkins. We are starting to do some great advertising again. Last, our high-protein platform is a great illustration of how we become much more disciplined at rolling out and at scaling up our winning proposition. In 23, we launched new formats, new channels, new occasions, and expanded in new countries, as those of you based in the UK could hopefully see everywhere. And the outcome is material, another year of strong double digits and highly competitive growth worldwide. And with these three mixes, and as with many others, there is still a lot we can improve. So we have not yet reached our maximum potential. Moving to page six and speaking of work in progress. We kept methodically addressing our underperforming assets. Starting with my zone, we are confident that we are turning around the business. We didn't only deliver on 23 a very strong growth at plus 14%, but more importantly, our growth was competitive for the first time in a long time. We posted market share gains. All the work done to refocus the range to regain control on distribution, to restage the brand, to refocus on meaningful innovation starts paying off. Indeed, a first good year, but we obviously need to repeat it. We are looking at the 24 high season with ambition to deliver again. In Brazil and Africa, we are progressing on fixing the business models and transforming the portfolio in depth in a very systematic fashion. In Brazil, we discontinued our water business and we licensed out our low-value milk business. In parallel, we focused on value-creating propositions. For instance, we are successfully developing our high-protein platform with Yopro. In Africa, we have been cutting dilutive SKUs, reinforcing our key brands, reshaping our business model, and upgrading our execution. In both cases, the clear priority is to restore profitability step by step. We made our first good step in 23, but we are clear that there is more to do. In our plan based in the US, we see the first benefit of the corrective action we took last year to restore competitiveness reflecting on our market shares. But we are not yet where we want to be. We've reworked our positioning and translated it into another great advertising you might have seen around the Super Bowl. We have further improved our product quality, but also the way we execute with a much clearer focus on key consumption moments and on category penetration. So overall, good progress. Some results already are visible, and obviously, as always, more to do. One thing is clear and probably speaks to the cultural change in the company. We will, as every company does, keep having challenges. This is normal business life. But we now face to them. We go to the bottom of them. We try to address the root cause rather than rush into quick, easy, and often temporary fixes. This is key as we gradually improve the resilience of our model and the consistency of our delivery. Finally, let me conclude this introduction on page 7 on how we have been actively rotating our portfolio over the past two years. As you can see on the left-hand part of the chart, We have exited meaningful parts of our portfolio which didn't fit our strategy and where we didn't see a credible path for value creation within Danone. We signed an agreement to sell Horizon Organic two months ago. We deconsolidated EDP Russia in July last year. We disposed of Michelin and Augustin. We built a value-creative partnership for Argentine waters. In parallel, we've made a few investments, as you can see on the right-hand part of the chart. We acquired an adult medical nutrition business in Poland, specialized in home care services, which is a very dynamic and profitable channel. We invested in several science-based startups that are developing new breakthrough technologies, be it in cell-based dairy or in precision fermentation. We are step-by-step improving the quality of the portfolio with a greater focus on value-adding products, products that are often differentiated through science, or businesses that help us broaden our footprints. be it our geographic footprint or our channel footprint. And there too, this is only the start of the journey. Let me now hand it over to Jürgen for the financial review.