Danone S.A.

Good day and thank you for standing by. Welcome to the Danone third quarter 2025 sales conference call and webcast. At this time all participants are in a listen-only mode. After speaker's presentation there will be a question and answer session. To ask a question during the session please press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 1 and 1 again. Please note that today's conference is being recorded. I would now like to have the conference over to your speaker, Mathilde Rodier, Head of Investor Relations of Danone. Please go ahead.

Good morning, everyone. Mathilde Rodier speaking. Thank you for being with us this morning for Danone's 2025 Q3 Sales Call. I'm here with our CFO, Jorgen Esser, who will go through some prepared 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'll refer to during the presentation. And with that, let me hand it over to Jürgen.

Thank you, Mathilde, and good morning. Thank you all for joining our Q3 call. A great occasion to share with you our latest sales performance and to discuss the progress on our midterm ambition. So let's begin by looking at our headline results for the quarter, starting with slide number two. As highlighted in our press release this morning, we are announcing a strong set of numbers with like-for-like sales growth of as much as plus 4.8%, a growth that is driven mainly by volume mix of plus 3.2%. Building on the momentum from the first six months of this year, this represents another quarter of consistent quality growth. In what remains a volatile and uncertain environment, our portfolio continues to deliver with resilience. We are increasingly leveraging two important elements. First, a unique portfolio focused on health and well-being, rooted in categories that grow faster than the average of the food and beverage industry. And secondly, a quality of execution that is progressively increasing, even if we have still areas of improvement. Let's break down this performance by region on the next slide, slide number three. The strong momentum we see in Q3 reflects broad-based growth across the regions. Europe continued its consistent path of step-by-step improvement with a solid delivery across all categories. In fact, Europe has now delivered eight consecutive quarters of positive volume mix, a testament to the effectiveness of the ongoing transformation. In North America, we saw this quarter a mixed performance with, on one hand, high protein yogurts continuing to outperform in a very dynamic growth space and despite major capacity constraints. While coffee creamers are progressively rebuilding its distribution, we have more work to do to bring plant-based break back to sustainable growth. The standout also in this Q3 is the China, North Asia and Oceania zone. The team around Bruno delivered again exceptional growth in this part of the world, with all sub-regions contributing strongly from China to Japan to Oceania. And in the emerging markets of Latin America, as well as Asia, Middle East, and Africa, we saw strong growth overall with our dairy and specialized nutrition portfolio being the key drivers. Having discussed the regional picture, let's now turn to our performance by category on slide number four. Our like-for-like sales performance reflects quality growth with a solid contribution from volume mix and positive price, actually in each of our categories, demonstrating the underlying demand for our science-based and value-added portfolio. In EDP, we delivered like-for-like sales growth of plus 3.5%, with volume mix up plus 1.7% and price of plus 1.8%. Our global high-protein platform with brands like Oikos and Yopro continues to grow strong double-digit with no sign of any slowdown. We are constantly fueling this growth by rolling out what has proven to work, but also by launching next-generation innovations into this dynamic space. In parallel, we see increasingly strong demand for other functional dairy innovations, for example, kefir or skier. In plant-based, Alpro continues to thrive, whilst we know that we have more to do in the U.S. with our silk breads. In specialized nutrition, we posted like-for-like sales growth of plus 8.3%, with volume mix up plus 6.5% and price of plus 1.8%. This comes on the back of a strong Q2 and reflects not only the exceptional demand in China, but also in other geographies. Our premium uptime platform grew at global level, again double digit, winning broad-based market shares. Demand for our medical nutrition segment remained also very high across all geographies, with brands such as Fortimel and Neocate achieving again double-digit growth. In waters, sales were up plus 2.3%, with volume mix up plus 1.3% and price of plus 0.9%. We saw solid execution and delivery across Europe, with strong demand for our recently launched vitamin water under the Volk brand, and continued solid performance of our Evian brand, including in the US. At the same moment, we are continuing to post very solid performance for our MyZone brand in China, completing another successful summer season. To put those like-for-like numbers into context, I suggest we review now our sales pitch for the quarter on slide number five. In addition to the plus 4.8% like-for-like growth previously discussed, we experienced an adverse currency impact of minus 5.1%, resulting from the appreciation of the euro against most currencies over the past six months. Importantly, though, for the first time since long, we report a positive scope effect, which contributed to this plus 0.7% in Q3. This is reflecting primarily the recent acquisition of Kate Farms, the first contribution to our compounding ambition. This ambition means to grow our company not only in like-for-like, but also in Euro terms after an initial period of portfolio pruning and divestments. For Q3, it resides into a reported growth of our net sales of plus 0.7%, with sales in absolute reaching 6.9 billion euros. Now let's take a closer look at each of our regions and their contribution to the like-for-like performance, starting with Europe on slide number six. Europe delivered solid like-for-like sales growth of plus 2.6% in this quarter, driven by a plus 2.1% contribution from volume mix and a positive contribution from price. As you can see from the chart on the bottom left, this means a further step up in the performance, that Pablo and the European team delivered since the journey started some three years ago. In EDP, we are seeing double-digit growth in Yopro, our high-protein platform, but also in our newly launched innovations such as Activia Kefir and Danone Skia. This is an encouraging sign for our future growth ambitions, knowing that we have still many regional white spaces for rolling those successful innovations out. Our Alpro plant-based products, particularly yogurts, continue to win share in the market. The brand is now consistently posting quality growth in an overall category that is back on track. In specialized nutrition, let me highlight particularly our medical nutrition platform that delivered, again, a strong performance with 40 male growing double digit, expanding progressively its reach to patients across Europe. And in waters, we posted solid growth, notably driven by the Evian, Volvic, and Badwa brands. So overall, another strong quarter in Europe, supported by all categories. Let me suggest that we move on to North America on slide number seven. In North America, we saw like-for-like growth of plus 1.5%, with a 0.3% volume mix and a plus 1.2% price contribution. In EDP we saw continued strong demand for our high protein range with the Oikos brand going from strength to strength. Innovation in this space continues and in Q3 we launched Oikos Fusion, a high protein product enriched with probiotic fibers very suitable for those consumers looking to manage their weight or taking GLP-1 like medication. As you know we are, like all the industry, managing a saturated production capacity for the yogurt category and Q3 has been particularly tense. We will benefit over the coming quarters from more capacity coming online, which will release some of the current supply constraints. In some other areas of the EDP portfolio, the performance is not where we want it to be. We have been progressively recovering distribution in coffee creamers, and this is obviously a journey which takes time, as the space we left on the shelf has been taken over by competitors. Beyond the distribution rebuild, you will leverage the moment to further innovate in this category, addressing the emerging trend of naturalness and clean label. The US team is actively working on solutions to bring this business back to where it belongs. And lastly, on EDP, we are progressing with our ambient protein shake exploration. We are encouraged by the early results and, as we speak, selectively expanding its distribution. We are hence continuing with this soft launch approach and are awaiting robust data on repeat purchase in order to decide on the level of acceleration and investment allocation for year 2026. Next to EDP, we saw satisfactory performance in specialized nutrition driven by our medical nutrition platform. Worth here to mention that outside of the like-for-like performance, we see a strong double-digit growth momentum of the Kate Farms Company, which we are currently combining with our existing US medical platform. Let's now move on to the CNRO zone on slide number eight. Q3 is another outstanding quarter in the China, North Asia, and Oceania region, with like-for-like sales growth of plus 13.8%, driven entirely by plus 15% volume and mix. This reflects both strong underlying demand for all categories where we operate, together with a further step up in competitiveness. In EDP in Japan, both Activia and Oikos are continuing their stellar performance, illustrating our strategy in action, bringing added value propositions into one of the largest dairy markets in the world that allows us to premiumize and win market share through functional differentiation. In specialized nutrition, the Chinese business was again firing on all cylinders. Demand for our infant milk formula and medical portfolio remains very strong. In IMF, the category is in a solid dynamic, growing particularly in the online and social media channels. We are continuing to win market share thanks to our superior digital business model, as well as thanks to our Aptamil Essences innovation, launched some two years ago, with further expansion opportunities in front of us. Beyond China and Japan, let me highlight the strong performance of our specialized nutrition portfolio in Oceania. We are reporting an increasingly meaningful contribution to the zone performance with growth across the segments. Worth mentioning here especially the great momentum of the Souvenet brand, addressing symptoms of mild memory and cognitive impairment. And finally, in waters, Mizone has successfully delivered also the 2025 summer season, expanding its reach with the fastest growing segment of the category, namely the healthy hydration segment. Moving on to Latin America on slide number nine. In Latin America, we delivered like-for-like sales growth of plus 4.3% in quarter three with volume mix of minus 2.3 and price of plus 6.6%. We have a solid momentum in EDP, where we are winning with Oikos, YoPro and the Danone brand, as the market moves increasingly towards value-added dairy products. In specialized nutrition, we continue to win shares with Aptamil, which is growing double-digit. We are expanding in parallel our medical nutrition reach across our pediatric and adult ranges. And in waters, the beverage market remains challenging due to weather and adverse economic conditions, especially in Mexico, And here, especially in the away-from-home segment. And finally, looking at the Africa, Middle East, and Asia zone on slide number 10. The AMEA zone saw a clear acceleration in Q3 with sales growth of plus 6.8%, with a solid contribution from volume mix at plus 2.6% and price at plus 4.2%. In EDP, we continue to report strong growth, particularly in Africa, with both the Danone and Activia brands. In specialized nutrition, the region continues to deliver strong competitive growth, underpinned by our focus on science-led innovation and market execution. In particular, we continue to see a strong growth momentum of the Aptamil brand in expansion markets, such as Vietnam, India, and the Middle East. Beyond Aptamil, we are pleased with the successful rollout of our patented iron biotics enzyme in regional early life nutrition-brand platforms. And finally, in waters, we are reporting a solid performance, including in Indonesia, in a very competitive market environment. Let me here conclude the regional review, a review which proves the breadth and resilience of our portfolio in delivering on our ambition. Let's move on to slide number 11. recapping our key takeaways and priorities as we look ahead. We have delivered over those first nine months of the year a strong performance with consistent quality growth led by volume mix. This reflects continued demand for our products across a well-balanced geographical footprint. We have several platforms delivering exceptional growth across the different categories, and at the same time, there are some areas that require further progress which we will translate into future growth opportunities. As you did certainly expect, we reconfirm today with confidence our guidance of plus 3% to plus 5% like-for-like sales growth and recurring operating income growing faster than sales. That's probably a good moment to stop and hold. Thank you once again for listening. Looking forward to your questions. And with that, Mathilde, back to you.