Danone S.A.

Good day and thank you for standing by. Welcome to Danone 3rd Quarter 2024 Sales 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 need to press star 11 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 turn the call over to your first speaker today, Mathieu Rodier, Head of Investor Relations of Danone. Thank you. Please go ahead.

Thank you. Good morning, everyone. Thank you for being with us this morning for Danone's 2024 Q3 Results Call. I'm here with our CFO, Jürgen Esser, who will give us some quick remarks before taking your questions. And before we start, I draw your attention to the disclaimer on slide 21 of the presentation related to forward-looking statements and the definition of financial indicators that we will refer to during the presentation. And with that, let me hand it over to Jürgen.

Thank you, Mathilde, and good morning, everyone, and a very warm welcome to our Q3 sales call. I suggest we go straight into the presentation as this is a busy day for all of you. So let me start with page number two. As you will have seen already from the press release this morning, we are sharing with you today another strong set of numbers with like-for-like sales up plus 4.2% for the third quarter of this year. This represents yet another quarter of broad-based growth with consistent overall delivery, demonstrating the resilience we have built into our company over the last three years, which is giving us the ability to deliver on our commitments even within a soft consumer environment. Our Q3 performance is again supported by growth across all our geographies, with particularly strong performances in the North America as well as in the China, North Asia, and Oceania region. Before going into the details of each zone, let us turn to the next slide, slide number three, to put these results into perspective. Since the start of our Renew Danone strategy, we have been very clear about the business model we are striving for. The model which is based on competitive growth, on quality growth. And we are delivering against this ambition as the quality of our growth does indeed improve quarter by quarter. Our volume mix contribution for quarter three has reached a new height of plus 3.6%. with resilient pricing at plus 0.07%. As you can see on this slide, it is now the fifth consecutive quarter of volume mix acceleration, a testament to the effectiveness of our investment strategy. Turning to the next slide, slide number four, you will see that this quality growth is broad-based, being reflected across all our categories. Our focus on dynamic health oriented categories is paying off as we deliver once again positive volume mix as well as positive pricing across all categories from EDP to specialized nutrition and waters. EDP closed up plus 4.1% like for like sales with growth in volume mix accelerating to plus 3.8% in Q3 with particularly strong performances in North America and Japan. and a competitive performance in Europe. The dairy category is keeping its momentum, and by doing so, growing faster than the overall food and beverage market, which is offering us great growth opportunities, especially for our more differentiated portfolio. In specialized nutrition, like-for-like sales were up plus 5.2 percent, with strong growth in volume mix at plus 4.1 percent. We continue to see our premiumization strategy winning in IMF. while medical nutrition continues to perform strongly, supported by positive macro trends and enabled by capacity expansion across the network. And in waters, we see like-for-like sales growth of plus 3.2 percent, with solid volume mix up plus 2.3 percent, despite rather mixed weather conditions around the globe. The growth continues to be driven by Maison in China and our Avion brand across the regions. Let's move on to the traditional sales bridge on slide number five before we talk in more detail about our geographies. As we said, like for like sales, we're up plus 4.2 percent during Q3 and we delivered plus 3.6 percent volume mix while pricing continued to normalize with a contribution of plus 0.7 percent. Outside of the like-for-like, we had a minus 2.3% impact from currency, hyperinflation, and others, reflecting mainly the devaluation of emerging market currencies against the euro. The scope effect is still negative at minus 3.1%, yet sequentially reducing as expected. This is mainly due to a disposal of our Horizon Organic business in Q1 of this year. Altogether, this gives us net sales for quarter three of around 6.8 billion Euro, down minus 1.2 percent on a reported basis. Let's now move on to slide number six to look in more detail at our geographies. And here, let me start with Europe, where we delivered in Q3 like-for-like sales growth of plus 1.4 percent, driven by as much as plus 2.4 percent in volume increase. This volume mix growth is actually the strongest level we have seen in the region for some time, a proof point that we are becoming more competitive, that our investments into brand equity and selective price initiatives are yielding results. The volume mix growth acceleration is led by EDP, where we see a strong momentum of our functional platforms. Our high protein range performed again strongly with double-digit growth also in Q3. We have in this last quarter successfully extended its distribution to the German and Polish markets and see all across Europe strong consumer demand. In parallel, Actimel, as well as Alpro, also delivered very strong performances, going mid to high single digits. By pushing hard our existing winning platforms, we also launched a new kefir proposition under the Activia brand in countries like France and in the UK. We are very much looking forward to the impact this new range will have in the coming quarters. In parallel to EDP, we can report resilient performances in specialized nutrition, as well as in waters, despite mixed weather conditions in the quarter. And with that, let's turn to North America on slide number seven, please. In North America, we delivered what I would call a stellar performance with sales up plus 5.8%, led by another very strong quarter of volume mix growth, up plus 4.9%, and a positive pricing of plus 0.9%. Our coffee creations platform is going from strength to strength, with our core portfolio as well as our innovation selling extremely well. enabling consumers to trade down from coffeehouses, replicating the experience in the comfort of their own homes. We also see a very good performance in the fast-growing yogurt category, where our high-protein products continue to post strong double-digit growth. The rest of our yogurt portfolio is also showing an accelerated momentum, including our Activia brand, sequentially increasing its contribution to the performance of our yogurt business. Next to our dairy business, we are working hard on the acceleration plan for our plant-based portfolio, leveraging the learnings from the successful relaunch of our Alpro brand in Europe, which is now delivering superior competitive growth. And last comment on waters is our Evian brand is posting another quarter of strong growth with further market share gains. With that, let's move on to our China, North Asia, and Oceania region on slide number eight. This region delivered another very strong performance in Q3, with like-for-like sales growth of plus 8 percent, reflecting broad-based growth across the region. The growth was driven by a very strong volume-mix contribution of more than plus 10 percent. In specialized nutrition, the momentum continues as we are consistently delivering strong and competitive growth with double-digit volume mix. We are very pleased with the ongoing performance of both the IMF and medical businesses, which continue to win share in their respective segments. In IMF particularly, our strategy of premiumization is paying off, with the Aptamil brand delivering strong growth in quarter three also supported by the recent launch of our Essensys innovation platform. While we are happy with this competitive performance, we do also see first signs of growth recovery of the total IMF market, with a segment of formula for young babies called Stage 1 Formula recently returning to growth. In waters, the MyZone brand has performed well in the second half of the summer season, Despite lapping some even stronger comparables, growth is very much supported by our successful repositioning of the core, as well as by the electrolytes innovation, which makes us win market shares in this very vibrant category. And in EDP, the Oikos and Activia brands continue to grow very strongly in Japan. And moving forward, this will be supported by the new capacity coming online very soon at our local factory. Our continuous strong growth in Japan is a testament to the investment we put behind our products to make them differentiated and value-added, attracting more and more consumers to our products in this very large Japanese dairy market. On to Latin America on slide number nine now. In Latin America, we had a solid quarter of plus 2.7% like-for-like sales growth led by price of plus 3.5%. Volume mix was slightly down this quarter by minus 0.7% due to poor weather conditions impacting our large waters business in Mexico. At the same moment, we are delighted to see our specialized nutrition business continuing to grow strongly, winning market share in its category. In EDP, excluding the impact from licensing out of our Paulista milk business, we saw a good growth momentum, especially of the Danone brand and the high protein platform. Let's turn to the next slide to discuss the performance of what we call externally the rest of the world region on slide number 10. Our Asia, Middle East, and Africa business saw a strong plus 6% like-for-like sales growth with volume mix at plus 1.2% and price at plus 4.7%. In specialized nutrition, we had a strong competitive performance in both IMF and pediatric specialties with double-digit growth across Asia, India, the Middle East, and Africa. Our hero brands Aptamil and Neocate are driving most of this growth. In EDP, we are increasingly benefiting from our ongoing transformation in Africa, as the quality of our growth is sequentially improving. Let me mention here particularly our business in Morocco, which posted strong quality growth in this third quarter, driven by a more and more differentiated but also locally relevant portfolio. This is making us commercially win in the market while we are building at the same time resilience into our supply chain. We are investing here into high-impact sustainability initiatives supporting our farmers' transition to regenerative agricultural practices, which among many other benefits will secure our access to high-quality milk also in the future. And finally, on to the last slide, slide 11, to discuss our financial guidance for year 2024. We are very pleased with our performance in the first nine months of the year, with the fact that the quality of our growth is increasing from quarter to quarter. This consistent delivery makes us today confirm with confidence our guidance for year 2024, with like-for-like sales growth of between plus 3% and plus 5%, and a moderate improvement in recurring operating margins. Moving forward, we will continue to drive a business model which focuses on a science-based and consumer-centric approach. We are investing for even stronger category leadership for not only winning where we play, but also taking care of our categories, keeping our categories growing faster than the average of the food and beverage market within a soft consumer environment. Our ambition is more than ever to support our consumers and patients by addressing their needs, leveraging the relevance of our categories, our strong brand equities, as well as our increasing product superiority. And with that, let me hand it back to Mathilde to start the Q&A.