Danone S.A.

Good day and thank you for standing by. Welcome to Denman's third quarter 2026 sales call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be question and answer session. To ask a question during the session, you will need to 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 be advised that today's conference is being recorded. And now I'd like to hand the conference over to Mathilde Rodie, Danone's Head of Investor Relations. Please go ahead.

Thank you. Good morning, everyone. Mathilde Rodie speaking, Head of Investor Relations. Thank you for being with us this morning for Danone's 2026 Q3 Sales Call. I'm here with our CFO, Juergen 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 23 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 Juergen.

Thank you Mathilde, and good morning everyone. Thank you for joining us for our Q3 sales presentation. Given the busy day ahead, I suggest we go straight into it, starting with slide number 2. And here let me start with the key messages of today's release. Most important, with a strong plus 4% like-for-like sales growth in Q3, we delivered another quarter of broad-based growth across categories and geographies, proving once again the relevance of our health-focused portfolio. Price contribution to our growth is obviously increasing to more than 3% in the quarter, reflecting the decisive pricing actions that we have taken during the quarter. This has been critical in the current inflationary context. We are at the same moment continuing to post positive volume mix growth, which means all ingredients are here to support our long-term value creation model. Having said that, these good numbers in Q3 are not taking away our attention from the areas that are not yet delivering to our expectations. This is particularly the case for EDP in North America, where focused actions have been taken to step up execution and restore performance, All in all, our Q3 performance gives us a lot of confidence to continue delivering on our guidance, which we confirmed today. Let's go to slide number three to dive deeper into each of those soils. As I said, the solid like-for-like growth of just 4% we delivered in Q3 was well-balanced across our three regions and across our three categories. Each of them performing within our target corridor of between 3 and 5%. While we will dive into regional details shortly, let us focus first on the category performance. And here, it's great to see that our specialized nutrition category is again leading the growth for our company, an important element for our profitable growth algorithm, as you know. Equally important, the growth in each of the categories is driven by multiple business engines, which is probably best displayed on the next slide, which is slide number four. And here starting with EDP. Our dairy and plant-based business delivered another solid quarter of plus 3.6% like-for-like growth with our main European markets like France, Spain, and the UK outperforming. This is a great achievement when you remember where we were only two to three years ago. In Spain, for instance, we have been transforming the whole portfolio in record time, retaking visible leadership and stepping up execution to market-leading levels. Beyond Europe, we continue to see double-digit growth in Japan, where our business is becoming now a 500 million euro platform, as well as strong momentum in Mexico, as well as in Brazil. Moving to specialized nutrition, debt delivered a very strong plus 4.7% like-for-like growth in the quarter. Our most important business in this category is, as you all know, in China, and we are pleased to see that our Chinese business is contributing over-proportionately to the global category results. It's also great to have North America increasingly contributing, as our medical nutrition business is delivering double-digit growth in Q3, amplified by the CAIT funds integration. Beyond China and North America, We are also seeing very strong growth in emerging markets across many regions, including in Brazil, Indonesia and India, as well as in the Middle East, with massive headroom for growth in those geographies. And finally, the waters category that posted solid growth of plus 3.6%. This performance was driven in particular by a strong season across our main European markets, as well as double-digit growth in Indonesia, Mexico and North America. So as you can see, our growth stays broad-based with multiple engines outperforming within each of our three categories. Let's now move on to slide number five and the underlying growth drivers over time. As you know, positive volume mix growth is fundamental to our strategy. In Q3, volume mix contributed plus 0.4% to our like-for-like sales growth. Important to note that this number was distorted in the quarter by around one point of negative impact from the volume decline of Myzone in China, something that I will get back later to. Excluding Myzone, volume mix for the group would therefore be broadly in line with the level we delivered in H1. Price contributed plus 3.6% in Q3. In the inflationary environment we are operating in, with oil prices and its related indexes staying elevated, we have taken proactive and deliberate pricing actions during the quarter. Building on the experience of the previous inflationary cycles, we have acted early and decisively rather than delaying action to avoid more significant price increases later on. We have implemented these actions selectively and with discipline, category by category and market by market, Always keeping consumers at the center of our decision-making. As demand stays our North Star, we continue to carefully balance affordability, competitiveness, and sustainable value creation. Let me now turn to a few Zooms on some specific businesses, starting with one of the key satisfactions that I would like to highlight, EDP Europe, on slide number 6. We are very pleased with the steady performance of our EDP business in Europe, which outperformed in Q3 the category at group level. Importantly, our dairy portfolio is increasingly aligned with evolving consumer preferences, with high protein, gut health, and the most functional segments being today the fastest growing product groups. At the same time, our more recent platforms, such as Skia and Kefir, continue to gain traction with consumers, both growing strong double-digit in Q3, and we continue to expand them across markets. K4 in particular is now a 100 million euro platform on a full-year basis, only 18 months after initial launch. Together with our fiber-enriched offering, it contributes to repositioning the Activia brand as the gut health expert. And this is translating into renewed momentum for the brand, with Activia delivering now the fourth consecutive quarter of growth in Europe. It's worth to mention here also the Danone brands that delivered double-digit growth in Q3, driven by strong consumer demand for our skier offering and the progressive rollout of our new Greek proposition. And finally, Alpro in plant-based that delivered also double-digit growth with innovation continuing to play a key role. Our protein-enriched ranges performed particularly well while we continued to progressively roll out recent launches across Europe, including a meal-to-go Our matcha coconut ready-to-drink offering and our Greek style plant-based yogurt. Let's now move on to slide number seven for a dedicated focus on our North American EDP business. We deliver low single-digit growth in Q3 in EDP North America. We are obviously not satisfied with this performance in light of a market which is growing faster. Let me provide some context on what is behind the numbers, and more importantly, the decisive actions we have taken to restore stronger momentum in our yogurt business. As we have discussed over the past few quarters, capacity has been a constraint to our growth. Over the past nine months, we have rolled out eight capacity expansion projects across four of our 13 existing factories. These capacity installations focused on high-protein products are on track. While we keep adding new lines in the near future, capacity is at the end of Q3 no longer a limiting factor to our growth. What has prevented us from fully leveraging these new capacities in the short term is execution related. We did encounter issues in the third quarter in starting up those lines and resynchronizing the end-to-end planning operations. This has led short term to service levels for our customers below our standards and hence impacting our sales over the last weeks of the quarter. We took strong actions that have started to improve our service level already visible in October. Teams are working hard to get back to a satisfactory level with high sense of urgency as this is a prerequisite to return with our usual levels of in-store activation and promotional activities. Beyond elevated focus on execution, we are very active in regaining innovation leadership. We will be entering into year 2027 with an unprecedented quality of innovation pipelines. This includes the launch of kefir products, the expansion into fiber-enriched products, and our entry into the natural Greek segment. The latter one is important, as we have so far focused our efforts on what we call the segment of high-protein Greek, and we will now attack the everyday Greek segment, a multi-billion dollar sub-segment where we have so far not really been playing in. Net-net, capacity is not an issue anymore, all hands on deck to fix quality of execution, to then leverage an exciting innovation pipeline. We will up our game to bring our business where it belongs. In that context, we have, among many other things, decided to change the leadership of our U.S. business with immediate effect as we now enter a more offensive phase. Moving now to slide eight for a focus on our former CNRO region. Our performance in CNAO in the third quarter was very polarized. Our specialized nutrition business, which represents around 70% of sales in the region, continued to deliver strong mid-single-digit growth in Q3 across both IMF and medical nutrition. In IMF, our aptamil brand continued to perform well, with a very strong sell-in for the W11 sales festival, a good indicator of underlying demand. The Essensys platform remains the single largest contributor to growth and we see significant opportunities ahead of us. In medical nutrition, demand remains strong, supported by favorable underlying trends. EDP delivered again double-digit growth, driven by Oikos and Activia, with continued market share gains in the Japanese market, which goes well for the coming quarters. In waters, more precisely mile zone in China, the quarter has been difficult. Weather conditions remain very unfavorable throughout the summer, resulting in a poor season for the beverage market overall. This is especially relevant for mile zone, given that the vast majority of its sales are generated away from home channels. Against this backdrop, the competitive environment has been highly promotional, and we chose to remain disciplined. As we are approaching the end of the season, we have decided to bring inventory levels down to make sure we end the year in a healthy position. As mentioned already, my zone had a significant negative impact of one point of sales at company level. We are entering now the fourth quarter of the year, which is traditionally a very small quarter for my zone, hence the impact will not replicate with such a magnitude in Q4. With that, let me now turn to slide number 9, our traditional sales reach for the first quarter. Reported sales growth reached plus 5.2% in Q3, exceeding like-for-like growth again this quarter. Next to the already discussed like-for-like growth performance, we had minus 0.5% scope effect, reflecting the deep consolidation of our dairy business in Argentina since August. partly offset by the consolidation of the Huey Company since September, as well as the consolidation of our joint venture with Saputo Dairy Australia. At the same time, currencies had a positive impact of plus 1.5%, reflecting the appreciation of several currencies against the euro, notably the Chinese renminbi, the Mexican peso, and the US dollar. Taking all these effects into account, the profit set reached 7.2 billion euros in the third quarter. Let's now take a closer look at the performance of each region. I will probably be a little bit briefer than usual as we have already covered some of the key topics at sub-region level. Starting with Europe, Middle East and Africa on slide number 10. NER delivered plus 3.9% like-for-like growth in Q3 with volume mix at minus 0.4% and price at plus 4.3%. Volume mix was positive in EDP and in waters but negative in S&P. I have already discussed the strong performance in EDP and Waters on the previous slides, so let me focus here on S.N. and give you a bit more context, notably on the performance of our IMF business in the region. In the Middle East, our IMF business bounced back very quickly in Q2. We are now back to strong but more normal trends for the region. In Europe, as we have said earlier, the recovery is more progressive and the overall category dynamics remain soft. We are recovering well on stage 1 formula, which confirms our scenario of normalization as new babies and parents enter the category. Our focus stays very much on rebuilding trust in the category and our brands, and we are investing as we speak into a dedicated international marketing campaign for Aptamil. Let's now move on to the Americas region on slide number 11. The Americas region delivered plus 4.4% like-for-like sales growth, stepping up its contribution quarter by quarter. On a comparable scope, the like-for-like growth of the region was negatively impacted by the deep consultation of dairy business in Argentina, which was not totally offset yet by the first-time like-for-like contribution from Cate Farms. We discussed already the NORAM-EDP performance, so let me here only highlight the strong momentum in EDP Brazil as well as in Mexico, with both countries successfully expanding their high-protein Greek low-cost ranges. Next to EDP, we saw the specialized nutrition category delivering an outstanding plus 12% like-for-like growth, driven by Aptamil in Latin America, Neo-Cade across the region, and Cade Farms in the US. The Waters business also delivered a strong plus 11.1%, supported by a solid performance from Evian in North America, and improved momentum for Bonafont in Mexico. Turning now to our Asia-Pacific region on slide number 12. APAC delivered plus 3.6% like-for-like growth, with a balanced contribution from volume mixed at plus 1.7% and price at plus 1.9%. Beyond what I have already covered on the previous slides regarding our performance in China and Japan, let me briefly touch here on two key contributors to the regional growth, Indonesia and India. In Indonesia, our business has been accelerating over the last quarters. The Aqua brand is performing strongly also in Q3, driven by increased velocities and distribution gains. We also delivered a very good quarter in our early life nutrition business in Indonesia with good performances across our SGM, Babylac and Aptamil brands. In India, we are aiming to scale fast our early life nutrition business as we are co-leading the premium segment which is still relatively young but very vibrant. We are pleased to report very strong growth also in this third quarter supported by dynamic category and strong competitive demand for our Aptamil brands. As we are raising the game in this strategic country, our priority number one remains to expand our distribution reach while further elevating the after-meal superiority credentials. Those remarks conclude the original review and I suggest we move now on to the last slide of today's presentation on slide number 13. Despite the challenging environment, we delivered a very solid performance in the first nine months of the year, reflecting the strength of our portfolio and the resilience of our well-balanced geographical footprint. As you have seen throughout this presentation, we have many winning platforms delivering strong growth across all categories and all geographies. This is giving us lots of confidence as we enter the final part of the year. We confirmed today our 2026 financial guidance. Thank you once again for listening. I look forward to your questions. And with that, Mathilde, back to you.