Danone S.A.

Good day and thank you for standing by. Welcome to Danone first quarter 2024 sales conference call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask questions during the session, you need to press star 11 on your telephone. You'll then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I'd now like to hand the call over to Mathieu Rodier, Head of Investor Relations. Thank you. Please go ahead.

Thank you. Good morning, everyone. Thank you for being with us this morning for our Q1 result call. I'm with Jürgen Esser, the CFO, who will go through some prepared remarks before taking your questions in a second step. And before we start, I draw your attention on our disclaimer, page 17. 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 well, and thank you for being with us this morning to discuss our first quarter 2024 results. I propose we go straight into it, starting with page number two. As you could see from our press release earlier today, we had a good start to the year, with Q1 net sales up plus 4.1% versus last year on the like-for-like base, with all our geographies and all our categories contributing. We are particularly pleased with the fact that this growth was again supported by a positive volume mix up plus 1.2% compared to last year. This means the second consecutive quarter of positive volume mix, which, as you know, is fundamental to our objective to deliver more balanced growth algorithm from this year, 2024 onwards. Before we delve into the performance of each zone, let me share a few category highlights EDP closed the quarter up 3% on a like-for-like basis, supported by another resilient delivery of our North American platform, an increasingly good competitive performance in Europe, and a solid delivery of our businesses in emerging markets. Importantly, we made progress in rebuilding the competitiveness of our EDP category. As a testimony to the effectiveness of the portfolio revamping executed last year, this Q1 performance was largely driven by our key brands, including Actimel, Danone, International Delight, Oikos, Upro, and Alpro. Next to EDP, Specialized Nutrition grew plus 3.8% versus last year on a like-for-like basis, delivering what I would qualify as a strong start to the year, given the very high basis of comparison from last year. This performance reflects continued strong dynamics in medical nutrition, but also the resilient and competitive performance of our infant nutrition business across all geographies. And finally, waters, that was up plus 8.1% versus lactic on an electrolyte basis, stellar performance that was largely driven by myosin in China, up more than 27%. Here we are particularly satisfied by the start of the year, which bodes well for the upcoming season. Beyond my zone, we had also a good start in our water category in Europe, thanks to further market share gains, the testimony to the continued success of our premiumization and channel diversification strategy. Moving to the next page, page number three, and taking a step back from the numbers, The key highlight of this publication is in the progress we made this quarter in further building resilience into the performance across the portfolio. You will remember from the conversations over the last two years, one of the key features of the target business model we strive for is to deliver balanced growth with a positive volume contribution. In that context, we are pleased with the quality of our quarter one delivery, not only at company level with volume mix up plus 1.2%, but also within each of our categories. With volume mix for EDP up plus 0.8%, as well as for specialized nutrition up plus 0.3%, despite the high base. The standout performance of the product comes from water, where volume mix was up plus 3.9%, reflecting, as mentioned, the performance of Mizone in China and of our premium brands in Europe. And while putting a lot of focus on this increasingly balanced growth algorithm, we are also improving the structural resilience of our company by making further progress on the rotation of our portfolio. This quarter we closed the disposal of two underperforming non-core assets, U.S. Organic Dairy and Michelin Rusa. These are important steps in making our portfolio fit for performance and value creation, but also in enabling us to look going forward at portfolio rotation in a more balanced way. Let me now move to page number four to review our traditional sales bridge. As discussed Already, like-for-like sales were up plus 4.1% this quarter, driven by volume mix up plus 1.2%, while pricing further normalized with a contribution of plus 2.9%. Outside of the like-for-like, currencies, hyperinflation, and others had a negative contribution of minus 1.6%, reflecting the devaluation of most emerging market currencies against the euro. Last but not least, scope was negative this quarter at minus 5%, reflecting the impact of the deconsolidation of our EDP Russia business from the perimeter since July 2020. Let's now have a look at the performance of each zone in more detail, starting with Europe on page number five. Europe delivered a solid start to the year, with like-for-like revenues growing plus 2.8%. In an environment that remains challenging, we have managed to deliver not only a resilient performance across categories, but also continue to improve our competitive position. This starts obviously with EDP, where the portfolio transformation we initiated continues to deliver results. We see many fundamental KPIs going into the right direction, which is translating since several months into our market shares expanding. We are particularly happy with the performance of brand platforms like Hyprotein as well as Actimel, but see also increasingly good traction on big brands like Activia and Elfo. The good underlying performance is not entirely reflected into our net sales numbers, as we were exposed over the last weeks of the quarter to some shipment disruptions in the frame of our price negotiations with retailers. It was important for us to stay firm in those conversations to build sound base for the remainder of the year, even if this has cost us a few basis points of market shares in the month of March and April. As of today, the majority of those situations are solved. Negotiations are mostly done, and we are, as we speak, going back to business as usual, continuing our journey of solidifying the promising dynamics we see in this category. Next to EDP, water has delivered a very strong performance this quarter, with sales up around driven by the continued good growth dynamics of Evian and Volvic across the continent. Confirming the effectiveness of the brand reinvestment, we started a few quarters ago. And finally, Specialized Nutrition has delivered solid growth up 2.5% on the high base of last year. This quarter, again, performance remained competitive across all segments, from infant milk formula to medical nutrition. So overall, a solid start into the year for our European business, which bodes well for the quarters to come. Moving on to the next page, page number six with North America. North America delivered a solid first quarter with sales up plus 2.5%. This quarter, again, our growth was led by volume mix up plus 1.5%. Performance of North America was primarily driven by our coffee creations and high-protein yogurt businesses, both in the U.S. and in Canada. Our coffee creations platform registered another quarter of double-digit growth, led by our flagship brands International Delight and Stokes, with both of them winning market share in their respective segments. In yogurt, our high-protein proposition Oikos Black continues to grow strong double-digits, driven by further expansion of shelf space, strong consumer demand, notably supported by our successful Super Bowl campaign. In Q1, we also launched a number of exciting innovations into this space, including what we call the Remix Spec Format, which you see on the picture on the bottom right of this page, an innovation for which we registered an encouraging start. And as we are overall working on making the Europe category sustainably more attractive to a science and benefit-centered strategy. It bodes well that the FDA has recently approved certain claims on the benefits of yogurt consumption to reduce the risk of diabetes type 2. Moving to plant-based, you remember that this was one of the areas reflected underperforming a few weeks ago. While the performance is not yet where we want it to be, we start to see some encouraging signs with market shares sequentially stabilizing. Very resilient performance of our North American platform, making us confident in the continued delivery over the coming quarters. Moving on to the next page, slide number seven, and our China, North Asia, and Oceania zone. Here we delivered a strong start to the year with like-for-like sales up as much as plus 8.9%, mostly driven by volume mix up plus 6.9%. We are carefully navigating the end of the transition period from oils to new recipes and are progressing in line with our plans. In parallel, our waters brand Maison delivered a stellar performance this quarter, bringing more than 27% building on the great work done by the team over the last two years. And even if Q1 is traditionally a small quarter for my zone, this performance allows us to look at the upcoming high season with confidence. And I could not close this idea of this zone without a word on our EDP platform in Japan that delivered another quarter of strong double-digit growth up to a plus 16% versus last year. Our Japanese team continues to drive its dairy business to an efficient mix of functionality, differentiation, and superior execution. Moving now on to the next page, page number eight, on Latin America. We closed a good first quarter in the region, with like-for-like sales up plus 4.1%. Growth was this quarter, again, driven by pricing, up plus 6.8%. The volume mixed negative at minus 2.6%. Performance of this quarter was particularly driven by the Bonafont brand in waters, with a strong performance across the different product ranges. EDP posted solid gains in the quarter, supported by our value-added ranges that performed well across the zone, notably driven by the Danone and also the Upro brands. It's worth noting that a very large part of the negative volume mix of the zone this quarter was driven by the impact of the licensing out of our Paulista milk brand in Brazil. This is a deliberate choice we made that will impact our volume mix for most of year 2024, but clearly participate to our effort in restoring a resilient and profitable growth model for our Latin American zone. Let's finish the financial review with the rest of the world zone. On the next page, page number nine, where our growth was up 6%. This Q1 performance was supported by a Let me here highlight the resilient and continuously competitive performance of our specialized nutrition platform across the region, from Southeast Asia to the Middle East, on a steep double-digit growth base of Q1 last year. We continue to win market shares across the region with a strong focus on our superior apps on the portfolio, as well as with local brands like SGM, In parallel, the teams are making good progress on stepping up the value creation contribution of our dairy platform in Africa, with a focus on a profitable growth model start to drive up gross margins as well as competitiveness. To close these prepared remarks with the support of the next page, page number 10. As you could see, we are starting well into the year 2024, which combined with the progress we make on our strategic agenda, It makes us confident in the delivery of our commitments. We confirmed, therefore, our guidance for the year. Like I said, it was expected in the 3% to 5% corridor, and operating margin expected to improve moderately. With inflationary assumptions remaining unchanged, we are continuing to reinvest into our key business drivers to solidify the quality and predictability of our profitable growth model. We have the occasion, as you know, to share more with you in granularity about the progress we make on our strategic priorities during our upcoming capital market event, which we will host on the 19th and 20th of June in our offices in Amsterdam. We are very much looking forward to meeting many of you there. More details will follow soon, so please stay tuned. And with that, let me hand it over to Mathilde to launch the Q&A session.