Danone S.A.

Welcome to Danone First Quarter 2025 Sales 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. And I'd like to hand the conference over to Mathilde Rorty, Donan's Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Thank you for being with us this morning for Q1 Self-Call. I'm with Jürgen Esser, our CFO, who will go through some prepared remarks before taking your questions. And before we start, I would like to draw your attention to our disclaimer on page 19 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 Jorgen.

Thank you Mathilde and good morning and a very warm welcome to everyone on the call. I hope you are well and thank you for being with us this morning to discuss our Q125 results. I propose that we go straight into it starting with page number two. As highlighted in our press release, we are pleased to report a strong start to the year with another quarter of quality growth with like-for-like sales up plus 4.3%. Our consistent performance at or above 4% for some time now underscores the strength of our execution and the relevance of our health-focused portfolio. This portfolio offers us growth opportunities consistently above the average of the food and beverage sector, fostering resilience despite these uncertain times. In Q1, we saw solid contributions from both volume mix at plus 1.9 percent, as well as from price at plus 2.4 percent. We are happy to report that the underlying demand trends remain unchanged and strong versus previous quarters. The more balanced composition between volume mix and price in this first quarter is the result of some mechanical effects, including the impact of the leap year. Overall, the strong start to the year is evident across all our regions, showcasing the robust foundations we have established within our company over recent years. Let's look at the regional summary in more detail on slide number three. In this first quarter, all regions contributed again positively to our performance, a broad-based growth trend we have seen now since some time and which we are proud of. We will go into the regions in more detail soon, but I would like to call out the continued progress we are making in Europe, particularly in functional dairy, the winning momentum of our high-protein platform in North America, and the very strong competitive and volume-led growth in China, North Asia, and Oceania. Our emerging market platforms in Latin America and Africa and Middle East Asia are also delivering solid growth, increasingly driven by our specialized nutrition business, and particularly our Aptamil platform which is going from strength to strength. Resilience during these volatile times is key and our geographic diversification is helping us to deliver on it quarter after quarter. This is particularly true with our business model which combines the power and scale of a global presence together with a highly localized supply chain and production network. Let's move on to slide number four to review the performance by category. Our like-for-like sales growth continues to be supported by positive volume mix dynamics across all categories, and this is a clear testament to our strategic focus on key platforms. The business sales illustrated here are all running at high speed, thanks to the investments we have made in product superiority, differentiation, and innovation. In essential dairy and plant-based, we delivered plus 3.7% like-for-like sales growth, including plus 1.5% volume mix. We see continued strong momentum in high-protein dairy products, which start to be amplified by the Activia kefir ranges, which are well-received by retailers and customers across Europe. The Alpro brand is also again posting significant growth, particularly our more functional beverage propositions, as well as plant-based yogurt. In specialized nutrition, we grew plus 5.3% with volume mix at plus 3.1%, and all channels, regions, and segments are contributing to this growth. Our Aptamil brand is again posting very strong growth with increasing contributions from the Essensys platform in China. In medical nutrition, the demand remains very high. Worth noting that our more recent product additions, like our plant-based enteral tube feeding, as well as our oral nutrition offers, are growing very fast, getting us in a strong position to capture the growth this exciting category is offering. And despite the slow start in some emerging countries due to poor weather conditions, the waters category remains dynamic ahead of the season, with like-for-like sales growth of plus 4.1% and volume mix of plus 1%. Growth was driven particularly by the MyZone brand in China, which continues to expand its market presence as well as Badiévian and Volvic brands. These results highlight the effectiveness of our strategic investments and the robustness of our growth model. Our diversified channel footprint becomes here also increasingly a competitive edge, well illustrated on the next page, page number five. Building on what we discussed during our full year results, we continue to see over-proportional sales growth coming from channels outside of mass retail, growing two to three times faster than our legacy retail channel. In Q1, we achieved high single-digit growth in several of these strategic channels, reflecting our investments into dedicated sales force, distribution partnerships, and digital capabilities. In the away-from-home segment, traditionally driven by our waters business, we are increasingly developing EDP formats, such as drinkable yogurts, to encourage on-the-go consumption. In pharmacies, hospitals, and home care settings, our specialized nutrition business reaches more and more consumers and patients, delivering often life-saving nutrition. And finally, in e-commerce, we continue to enhance our digital execution and distribution, particularly in China, with our infant milk formulas. While mass retail remains a very important distribution channel for us, this continued diversification of channels provide us not only with more resilience, but also with access to new consumers and new occasions. After those opening remarks, let's now turn to our traditional sales bridge on slide number six. As previously mentioned, like-for-like sales increased by plus 4.3% during Q1, with a volume mix contribution of plus 1.9 and pricing of plus 2.4. Outside of the like-for-like figures, we experienced a 0.5% negative impact from currency fluctuations, hyperinflation, and other factors, mainly due to the devaluation of emerging market currencies against the euro. The scope effect remained negative at 3%. Q1 is actually the last quarter before we annualized the disposal of the Horizon organic business. Overall, this resulted in net sales for Q1 of more than 6.8 billion euros, up 0.8% on a reported basis. Moving forward, we want to grow our company in relative and absolute terms, a critical step towards becoming a consistent value compounder. Let's now move on to slide number seven to look in more detail at our geographies. In Europe, we achieved plus 2% like-for-like sales growth in this first quarter. The European business is demonstrating consistent progress, delivering steady growth and sequentially improving like-for-like sales. The growth is driven by a volume mix increase of plus 1.9%, marking the sixth consecutive quarter of positive performance while overall pricing remains stable. We are pleased with the ongoing advancement of essential dairy and plant-based, led by functional items such as our high-protein products, which are experiencing double-digit growth. We are also expanding our fibers and kefir portfolio under the Activia brand that is performing well. In plant-based, the Alpro brand is now consistently delivering quality results, growing at good pace, driven by functional beverages as well as plant-based yogurts. Specialized nutrition has shown resilient growth, driven by medical nutrition, with the FortiMail brand reporting a strong performance. Furthermore, Waters posted robust growth ahead of the summer season, driven by the Evian, Volvic, and Gilles de Drouille brands. Now let's turn to North America on slide number eight. North America experienced solid growth in its first quarter, registering a plus 3.7% increase, with contributions from volume mix at plus 0.9% and price at plus 2.8%. The high-protein Oikospro platform led the growth, showcasing double-digit expansion with a consistent, very strong winning momentum. In coffee creations, while the category continues to grow at an attractive rate, we had a slower start, amidst an increasingly competitive environment. What did not help is that we experienced service disruptions during the quarter, resulting in temporary out-of-stock HLs. We have addressed these issues, are rebuilding distribution in this quarter, too, and should see an improved performance from now onwards. In medical nutrition, we saw very strong momentum across the portfolio, while water is growing double-digit with strong growth from both avian and harmless harvest. Moving on to slide number nine. In the China, North Asia, and Oceania region, we have reported outstanding growth of plus 9.9%, with volume mix of plus 10.4%, and price slightly negative at minus 0.5%. This represents a very strong start across all categories. In infant milk formula, we continue to gain significant market share bolstered by the strong performance of our Essensys platform. These products are positioned within the premium segment of the market, are showing great consumer pull, and are driving both positive volume and mix effects. The overall IMF category continues to improve its growth dynamics, and we are benefiting from an increased demand for what we call stage one formula for the babies of zero to six months old. Furthermore, we observed sustained strong demand in medical nutrition, particularly for our Nutrizone oral powder, where we are doubling down our presence in existing hospitals and expanding into new ones. In the waters category, MyZone achieved double-digit growth in the fast-growing functional beverage category. Our focus on execution and consumer communication is helping us to continue expanding the brand's distribution with the team preparing for the summer season. And finally, in Japan, our two functional brands, Oikos and Activia, continue to deliver further market share gains as we are building a strong position in the premium functional dairy category. Let's move on to discuss LATAM on the next slide, slide number 10. In Latin America, we posted strong like-for-like sales growth of plus 9% with price leading at 11% and volume mixed down at minus 2.1%. In this region, we have seen strong growth in specialized nutrition led by the Aptamil brand in Brazil and Argentina. Our medical nutrition portfolio also delivered another quarter of strong results. In EDP, we saw solid growth across the portfolio led by the Danone, Danet, and YoPro brands. We continue to roll out our high protein ranges in the region, an important element for our strategy offering more differentiated and value-added products to our consumers. In waters, the growth was price-led. The start of the year was soft as we faced adverse weather conditions. We pulled back some of our promotional activities to make sure that we go with the right level of stock into the season, which is beginning as we speak. And on to the last region, Africa, Middle East, Asia, on the next slide, slide number 11. In AMEA, we had a solid start to the year with like-for-like sales growth of plus 3.3%, led by price at plus 4.3%, and volume mix slightly down at minus 1%. We had a good start in EDP with all markets going well. We are pleased with the fact that also this first quarter of the year is demonstrating that we are moving in the right direction. Our business in Morocco is once again leading the table and posting competitive quality of course. Specialized nutrition is also showing solid growth, notably in the Middle East as well as in India, where we see strong demand for our premium infant formula. In parallel, our teams are continuing to do a fantastic job in delivering market share winning growth in many markets of Southeast Asia. In waters where the season has not yet started, the category was soft due to heavy rain and regional flooding, especially in Indonesia. The situation is normalizing as we speak, and the team is preparing actively to get a good start into the season. This is concluding my remarks on our regional performance, and I suggest we move on to the last page, which is page number 12 for the guidance. As I said, we are pleased to start the year 2025 with a strong performance. We can rely on several growth engines and are strategically positioned in high growth categories centered around health. In the current uncertain environment, our science-based innovations and our consumer and patient-centric approach are key differentiators and hence contribute to the resilience of our business. This gives us the confidence to confirm today the guidance for year 2025 aligned with our mid-term expectations of like-for-like sales growth between plus 3% and plus 5% and our recurring operating income growing faster than sales. Let me here pause with my prepared remarks and open for any questions you may have. Mathilde, back to you.