Results H1 2012 July 27th, 2012
Disclaimer
This document contains certain forward-looking statements concerning DANONE. Although DANONE believes its expectations are based on reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those anticipated in these forward-looking statements. For a detailed description of these risks and uncertainties, please refer to the section “Risk Factors” in DANONE’s Annual Report (which is available on www.danone.com). DANONE undertakes no obligation to publicly update or revise any of these forward-looking statements. This document does not constitute an offer to sell, or a solicitation of an offer to buy, Danone shares.
2
H1 Highlights
3
H1 2012 Highlights
H1 2012
Sales growth (1)
+5.9%
Trading operating margin
13.85% -61 bps Like-for-like(1)
Free cash flow (2)
â‚Ź 890 mln
(1) Like-for-like : Based on constant scope of consolidation and constant exchange rates (2) Free cash flow: Cash flow from operations less capital expenditure (net of disposals) and excluding business combinations fees
4
2012 Parameters evolving – Managing with same Priorities
H1 inflation above expectations
higher productivities INFLATION
EUROPE
EMERGING
Deterioration in Southern Europe
Continued strong growth & operational leverage
Specific Support & Adjustments
No compromise vs LT building Investment maintained 5
Dual dynamics Group Sales breakdown
H1 2012
Sales
H1 2011
Margin
Rest of the World 62%
Western Europe 35%
Western Europe 38%
Rest of the World 65%
+3 pts
Sales Margin
6
Southern Europe deteriorating Focus on Spain Unemployment rate in Spain (%)
Dairy Spain - Like-for-like sales growth (%)
Indicador de confianza consumidor Instituto Nacional Estadistica
Jun Dic Ene Feb Mar Abr May Jun 2011 2011 2012 2012 2012 2012 2012 2012 74.9 71.0 68.3 58.0 63.7 50.3 50.5 50.6
FY 2011
Q1 2012
Q2 2012
7
Dairy Spain requiring specific response
Support and differentiate
Increase competitiveness
Innovate
Continued productivity
8
Continued double-digit growth outside Europe CIS
NORAM
AME
APAC
LATAM
9
Danone becomes majority shareholder of Centrale Laitière in Morocco Dairy – Value Market shares*
2011 Sales : ca. € 600 mln Competitor 2 5%
Others 12%
2011 EBITDA Margin : 16.9% Tanger
Competitor1 20%
Kenitra Salé Rabat Casa / Mly Slimane El jadida
63%
Safi
Tetoua n Fes
Oujd a
Meknes FBS
Mararkech Agadir
Ouarzazate
Laâyoune
* Company data - 2011
10
India : Wockhardt Nutrition acquisition completed 2nd PLAYER IN A FAST GROWING BABY FOOD MARKET (1) Competitor 5 3%
Competitor 4 3% Competitor 3 3%
Competitor 2 6%
NATIONAL DISTRIBUTION WITH LOCAL PRODUCTION FACILITY
Factory
o
25 million baby born/year
o
15% annual growth for the baby food market
Wockhardt 7%
o
1 factory located in Punjab
o
National sales coverage
o
More that 30,000 HCPs / doctors coverage
Competitor 1 78%
CREDIBLE BRANDS IN BABY AND NUTRITION Baby brands
Nutrition brand
H1 2012 Sales
+22%
(2)
(1) 2011 Value market shares – company data (2) Wockhardt data
11
Sustainability in the core of our mission Nature
Sourcing Milk Business Academy: education program for Russian dairy farmers Objective: ensure high quality and long-term supply of milk to DanoneUnimilk; increase productivity Purpose: a teaching farm to provide practical trainings and agricultural education
Danone ranks 9 out of 50 global brands
Carbon Footprint measurement Target: December 2012, cover ca. 70% of total sales and over 35,000 products
Rewarded by
12
H1 2012 results
13
KEY FIGURES – H1 12
Sales Sales
€ 10,475 mln
+5.9% like-for-like (1) +7.7% reported
Trading operating income
€ 1,451 mln
+1.4% like-for-like +3.1% reported
13.85%
Trading operating margin
-61 bps like-for-like -62 bps reported
(1)
€ 911 mln
+2.1% like-for-like +4.3% reported
(1,2)
Underlying EPS (fully diluted)
€ 1.51
+2.5% like-for-like +4.7% reported
(1,2)
Free cash flow (3)
€ 890 mln
Underlying net income
(1)
(1)
-3.8% reported
Like-for-like : Based on constant scope of consolidation and constant exchange rates
(2) Excluding exceptionals (3) Free Cash Flow: Cash flow from operations less capital expenditure (net of disposals) and excluding business combinations fees
14
Sales growth analysis – H1 2012 +5.9% Like-for-like
3.7% +7.7%
(0.2)%
2.2%
Scope
Volume
Reported
€ 10,475 mln
2.0%
€ 9,728 mln
H1 2011
Currency
Value
H1 2012 15
Sales growth analysis – Q2 12 +5.0% Like-for-like
2.9% 0.0%
+7.8%
2.1%
Reported
€ 5,359 mln
2.8%
€ 4,970 mln
Q2 2011
Currency
Scope
Volume
Value
Q2 2012 16
Total Group : Q2 sales, as expected, at the bottom end of the full-year guidance Like-for-like sales growth
8.7%
8.5%
8.8% 7.8% 6.9%
5.9%
5.9% 5.0%
H1 2011
H1 2012
Q1 11
Q2 11
Q3 11
Q4 11
Q1 12
Q2 12
Good H1 sales, well into the 5-7% range, providing a good idea of overall underlying trends A dual picture: Western Europe sales declining, and rest of world growing double digit Waters the main game changer in Q2 vs Q1: high 2011 comps and poor weather in Q2 2012 in Western Europe
17
Total Group : resilient volume growth Like-for-like sales growth
Volume growth Price/mix growth
3.5%
4.7%
5.7% 5.6% 3.7%
4.4%
2.9%
5.0%
4.0%
3.1%
2.2% H1 2011
4.7%
H1 2012
Q1 11
Q2 11
1.5%
2.2%
2.2%
2.1%
Q3 11
Q4 11
Q1 12
Q2 12
Resilient volume, 2011 price increases lapsing gradually
18
Sales performance by division
19
FRESH DAIRY PRODUCTS Soft Q2, impacted by Southern Europe Like-for-like sales growth
6.5%
6.0%
5.5%
3.5% 2.9%
3.8% 3.0% 2.1%
H1 2011
H1 2012
Q1 11
Q2 11
Q3 11
Q4 11
Q1 12
Q2 12
Q2 not benefiting from the leap day of Q1, impacted by Southern Europe deterioration Continued outperformance in Latam, AME, Asia CIS and North America on track with their plans 20
FRESH DAIRY PRODUCTS – Volume stabilized Volume and price/mix growth Volume growth Price/mix growth
3.6% 4.6% 5.7%
5.0% 4.7%
3.1%
2.9%
3.9% 2.4%
1.4% (0.2%) H1 2011
H1 2012
Q1 11
(0.2%)
(1.5%)
(1.7%)
(0.1%)
(0.3%)
Q2 11
Q3 11
Q4 11
Q1 12
Q2 12
2011 price increases lapsing CIS volume recovery offset by Spain deterioration 21
Fresh Dairy CIS Continued strong performance of Unimilk key brands
2012 agenda: Activating the key brands
Danone-Unimilk CIS % volume growth
Q1 11
Q2 11
Q3 11
Q4 11
Q1 12
Q2 12
Volume growth gradually improving while pricing not material any more
22
Fresh Dairy CIS – Prostokvashino - New Brand Identity in Q2 2012
H1 12 like-for-like growth - Russia
+11%
23
Fresh Dairy US Continued share gains globally and on the Greek segment
x 2.2
Oikos* $ sales
H1 11
H1 12
32.9 Total Danone* Competitor 1 24.6
US Value Market shares
Competitor 2
Source : IRI Grocery
15.7 7.3
* Dannon + Stonyfield
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Oikos*
24
Fresh Dairy US – Entering Q3 with strong plans and additional capacities, in a very competitive market Oikos - Multipack
Greek – Light & Fit
Activia Breakfast
25
FRESH DAIRY PRODUCTS – Selected innovations Yolado (Spain)
Greek segment Oikos “best new product award” (Canada)
Griego Light (Spain)
Oykos (UK)
Activia Toppers for Breakfast (Czech)
26
WATERS – Soft Q2 +4.6% on the back of high comps Like-for-like sales growth 23.3% 16.6%
18.9% 16.4% 13.3% 9.6% 7.9% 4.6%
H1 2011
H1 2012
Q1 11
Q2 11
Q3 11
Q4 11
Q1 12
Q2 12
Strong H1 growth Q2 hit by high 2011 comps (earthquake in Japan and favorable weather in WE & Latam) and poor Western European weather Continued strong underlying category dynamics Continued outperformance of Aquadrinks
27
WATERS – Balanced growth Volume and Price/mix growth
Volume growth Price/mix growth
13.2% 8.9%
6.2%
8.7%
2.6% 4.4% 10.4%
10.7%
3.0% 10.0%
5.2% H1 2011
H1 2012
10.1%
7.7%
4.9% Q1 11
Q2 11
Q3 11
1.5% 3.1%
Q4 11
Q1 12
Q2 12
Positive mix brought by Aquadrinks, and still carry over effect of price increases taken from Q2 2011 Partly offset by negative geographical mix 28
WATERS – Selected innovations Volvic Sparkling (Germany)
Villa del Sur Levite Limonada (Argentina)
FontVella (Spain) New image & TV campaign
Evian Masters to become a Major (France)
29
BABY NUTRITION – Excellent performance, pulled by Asia Like-for-like sales growth
13.6% 10.4%
11.3%
11.2% 9.6%
H1 2011
H1 2012
Q1 11
Q2 11
10.5%
11.4% 9.0%
Q3 11
Q4 11
Q1 12
Q2 12
Continued great performance across the board, boosted by Asia China : gaining market shares and renovating Dumex Positive mix from Milk outperformance vs Food decline
30
BABY NUTRITION – Selected innovations Dumex renovation (China)
Blédina du jour – Chilled food range (France)
STAGE ENHANCED NUTRITION
PRODUCTS
PROGRAM
Optimized “1000Days Growth Program”
31
MEDICAL NUTRITION – Similar trend to Q1 Like-for-like sales growth
9.3%
9.0%
9.8%
9.8%
8.7%
6.6%
H1 2011
H1 2012
Q1 11
Q2 11
Q3 11
Q4 11
6.4%
6.7%
Q1 12
Q2 12
Continued adverse market conditions in Southern Europe and Noram China, Turkey, Brazil outperforming
32
MEDICAL NUTRITION – Selected innovations Compact protein (6 more countries) Presenting Souvenir II trials results
Journal of Alzheimer’s Disease Issue : Volume 31, Number 1, July 2012
Neocate LCP upgrade (All Markets)
Alzheimer's Association International Conference
Infatrini Peptisorb (UK)
33
Dual geographical dynamics Like-for-like sales growth by region 3.7%
4.2% 0.1%
EUROPE
1.5%
0.9% -1.0%
Q1 11
Q2 11
Q3 11
20.8%
19.6%
18.0%
Q4 11 22.0%
Q1 12
19.4%
Q2 12
17.2%
ASIA Q1 11
14.8%
Q2 11
Q3 11
12.6%
11.5%
Q2 11
Q3 11
Q4 11
14.4%
Q1 12
12.7%
Q2 12
10.7%
REST OF THE WORLD Q1 11
Q4 11
Q1 12
Q2 12
34
Trading operating income and margin
â‚Ź mln
Trading operating income Other operating items Operating income Trading operating margin
H1 2011
H1 2011
H1 2012
Reported
Restated(1)
1,396
1,407
1,451
(4)
(4)
(40)
1,392
1,403
1,411
14.35%
14.47%
13.85%
(1) 2010 restatement performed on 31 Dec 2011 : related to change of IAS 19 option (employee benefits) and Unimilk final purchase price allocation. See Note 2 of consolidated financial statements at June 30, 2012, concerning restatement of consolidated accounts published on June 30, 2011
35
Margin bridge Like-for-like
- 61 Bps
- 17 Bps
+ 147 Bps
- 144 Bps
+ 58 Bps - 105 Bps
Net of +243 bps productivity (â‚Ź246 mln)
Margin S1 2011
Leverage & Others
Pricing & Mix
Input costs
Other COGS
A&P
Margin S1 2012
36
H1 Inflation higher than expected Input cost inflation vs. last year (in %)
Whey & Milk Proteins: > 20%
Productivity 2008-2012 (â‚Ź mln)
> 500
Packaging: mid-single digit 470
Milk: very low cream resale price
516
528
324
Fruits & sugar: > 10%
2008
2009
2010
H1
H1 12
246
246
2011
2012
37
Keeping on fueling the topline : A&P, SalesForce and R&D A&P, sales force and R&D costs (â‚Źmln) R&D
STRATEGIC JOINT BUSINESS PLAN WITH KEY INTEGRATOR
Sales force Promotions & other marketing costs
Ambition
Build and leverage digital advantage in multi-touchpoint dialogue with consumers
Adverstising H1 2011
H2 2011
Priority 1
Priority 2
Priority 3
Optimize media mix through digital
Innovate (media, sales)
Build digital capabilities
H1 2012
A&P spends stable vs. last year, digital media spends keep growing - Advertising slightly up, keeping high brand visibility - Promotion down SalesForce and R&D spends growing double-digit 38
Trading operating margin by business line & geographical area Reported H1 2011
H1 2012
Like-for-like change
Fresh Dairy
12.17%
11.23%
(85) bps
Waters
14.02%
13.67%
(35) bps
Baby Nutrition
19.86%
19.97%
(9) bps
Medical Nutrition
21.44%
18.70%
(252) bps
Europe
14.16%
11.93%
(201) bps
Asia
20.64%
22.57%
+168 bps
Rest of World
12.00%
12.36%
+36 bps
Total
14.47%
13.85%
(1)
(1) Restated
(61) bps 39
From operating income to net income
â‚Ź mln
Trading operating income Other operating items Operating income
H1 2011 Underlying* (restated)
1,407 1,407
H1 2012 Underlying
Non current items
H12012
1,451
-
1,451
-
(40)
1,451
(40)
1,411
(40)
Total financial expenses
(133)
(138)
(6)
(144)
Income tax
(331)
(351)
10
(341)
23
39
-
39
966
1,001
(36)
965
92
90
(6)
84
874
911
(30)
881
Net income of affiliates Net income Attributable to minority interests Attributable to the parent
40
Tax rate development
â‚Ź mln
Total income tax (reported) Reported tax rate Non current income tax (2)
Current income tax Underlying tax rate
(1) Refers to 2011 restatement (2) Tax related to non current items
H1 2011 (restated) (1)
H1 2012
(333)
(341)
26.3%
26.9%
(2)
10
(331)
(351)
26.0%
26.7%
41
Underlying EPS
H1 2011 (1)
H1 2012
(restated)
Underlying net income
€ million
874
911
Fully diluted number of shares
million
606
603
€ 1.44
€ 1.51
Fully diluted underlying EPS
(1) Refers to 2011 restatement
42
Analysis of underlying fully diluted EPS growth FY 11
Reported growth + 4,7%
+ 2,1%
+ 0,1%
+ 2,5%
â‚Ź 1,44
Underlying EPS H1 2011 (restated) (1)
(1) Refers to 2011 restatement
â‚Ź 1,51
Currency
Scope
Like-for-like growth
Underlying EPS H1 2012
43
Cash bridge
337
(351) (138)
23
(67) (416)
1,451
51
1,322 890
Trading Depreciation operating income
(1) Underlying
(1)
Taxes
Financial results (1)
Others
Cash from operating activities
W cap var
Capex
Sales of Free assets Cash Flow & Business comb. fees
44
Consistent cash-flow excellence Free cash flow (€ mln)
925
949
890
H1 11
H2 11
H1 12
9.5%
% of sales
9.9%
Working Capital (€ mln) H1 11
8.5%
Capital expenditures (€ mln)
H1 12
-958
548
-1,156
416
337
H1 11 % of sales
- 5.2%
- 5.8%
% of sales
3.5%
H2 11
5.7%
H1 12
4.0% 45
FCF to net debt change
(51)
890 (1,003)
Free Cash Flow
M&A
Dividends
(4)
(46)
Share Buy back
Other
48
(166)
Non cash items, Total change in scope & Forex net debt 46
Synthetic Balance Sheet Assets(1) â‚Ź mln
June 11 June 12
Intangible assets
Liabilities(2) Liabilities
June 11 June 12
11,045
12,293
Shareholders’ equity
16,227 15,607
7,526 Other assets
Working capital
5,858
4,059
Net debt(2)
6,147 1,937 4,317
25,524(1) 26,691(1) (1) (2)
6,798
5,016
2,128 5,472
Other liabilities Working capital
25,524(2) 26,691(2)
Excluding assets included in net debt Net of cash, cash equivalents, marketable securities, other short term investments and financial instrument assets
47
Debt profile Gross Debt profile June 30 2011
June 30 2012 Others Com. Paper 13%
Others Put options 39%
Com. Paper 22%
Put options 37%
Inaugural “Yankee” bond issue
Bonds 39%
Bonds 27%
Successful launch of a $850 million 10-year bond on May 29, 2012
Gross Debt maturity profile as of June 30 2012 (€ bn)
carried out by way of a private placement to institutional investors
CP
Bond
1 604
only to diversify geographically its sources of financing and extend the maturity of its debt at favorable
1 316
CP
293
618
603
2013
2014
2015
market conditions.
710
2016
>2016 48
Danone Spain minority shareholding evolution 30 june 2012
31 december 2011 Danone Spain Put Options in group net debt
Danone Spain Put Options in group net debt
%Shareholding In Danone Spain
Non-current
€ 1,693 mln
32.4%
Current
€ 461 mln
8.6%
€ 2,153 mln
26 july 2012 • •
Agreement : 2 shareholders selling their 8.6% stake to Danone Transaction : €91.5mln cash + 6,110,039 Treasury shares
•
Financed by debt : share buy back programs for the same quantity of shares => no dilution for Group shareholders => positive impact on net debt €81 mln(1) => accretive on EPS
(1) Based on an average price of €47,15 per Danone share, corresponding to the opening price on July 26, 2012.
49
2012 OUTLOOK
50
New 2012 targets confirmed
Objectives 2012
Sales growth (1)
5-7%
Trading operating margin(1)
-50 bps
Free cash flow (2)
â‚Ź 2 bn
(1) Like-for-like : Based on constant scope of consolidation and constant exchange rates (2) Free cash flow: Cash flow from operations less capital expenditure (net of disposals) and excluding business combinations fees
51
APPENDIX
52
2012 Share price & Shareholding Danone Share price evolution
Danone YTD June 2012 stock performance
115
Absolute
+0.9%
Relative vs. CAC 40
-0.3%
Relative vs. Eurostoxx 50
+3.2%
110 105 100 95 90 déc.-11
janv.-12
févr.-12
mars-12
avr.-12
mai-12
Shareholding by investor (1)
juin-12
Institutional Shareholding by geography (1)
Institutional shareholders 79%
US 29%
Rest of the World 7%
France 32%
Rest of Europe 11% Others 2%
(1)
Company related 9%
Retail Investors 10%
The company conducted a survey of the Company’s identifiable shareholders as of August 2011
UK 12% Germany 5%
Switzerland 4%
53
Impact of currencies and scope – Q2 12
Dairy Reported sales growth
+4.4%
Waters +6.9%
Baby Nutrition
Medical Nutrition
Total
+18.6%
+10.3%
+7.8%
Currency
+2.3%
+2,4%
+4.8%
Scope of consolidation
0.0%
(0.1)%
+0.2%
+0.9%
0.0%
+13.6%
+6.7%
+5.0%
Like-for-like sales growth
+2.1%
+4.6%
+2.7%
+2.8%
54
Impact of currencies and scope – H1 12
Dairy
Waters
Including Unimilk
Reported sales growth Currency
+4.1% +1.4%
Scope of consolidation
(0.2)%
Like-for-like sales growth
+2.9%
+11.3%
Baby Nutrition +15.0%
Medical Nutrition
Total
+9.3%
+7.7%
+3.7%
(0.2)%
0.0%
+0.8%
(0.2)%
+11.3%
+6.6%
+5.9%
+9.6%
+1.9%
2.0%
+1.9%
55
Sales by business & geographical area – Q2 12 Like-for-like sales growth
Q2 2011
Q2 2012
2,821
2,946
+2.1%
Waters
949
1,014
+4.6%
Baby Nutrition
907
1,076
+13.6%
Medical Nutrition
293
323
+6.7%
2,845
2,839
(1.0)%
734
933
+17.2%
Rest of World
1,391
1,587
+10.7%
Total
4,970
5,359
+5.0%
€ mln
Fresh Dairy
Europe Asia
56
Sales by business & geographical area – H1 12 Like-for-like sales growth
H1 2011
H1 2012
Fresh Dairy
5,672
5,906
+2.9%
Waters
1,667
1,855
+9.6%
Baby Nutrition
1,818
2,090
+11.3%
571
624
+6.6%
Europe
5,543
5,548
(0.1)%
Asia
1,395
1,762
+18.2%
Rest of World
2,790
3,165
+11.7%
10,475
+5.9%
â‚Ź mln
Medical Nutrition
Total
9,728
57
Like-for-like sales growth – Q2 12 Breakdown volume/value
Like-for-like
Volume
Price/mix
Total
Fresh Dairy
(0.3)%
2.4%
+2.1%
Waters
+3.1%
1.5%
+4.6%
Baby Nutrition
+7.0%
+6,6%
+13.6%
Medical Nutrition
+7.1%
(0.4)%
+6.7%
Europe
(2.8)%
+1.8%
(1.0)%
+13.8%
+3.4%
+17.2%
Rest of World
+3.9%
+6.8%
+10.7%
Total
+2.1%
2.9%
+5.0%
Asia
58
Like-for-like sales growth – H1 12 Breakdown volume/value
Like-for-like
Volume
Price/mix
Total
Fresh Dairy
(0.2)%
+3.1%
+2.9%
Waters
+5.2%
+4.4%
+9.6%
Baby Nutrition
+5.4%
+5.9%
+11.3%
Medical Nutrition
+7.1%
(0.5)%
+6.6%
Europe
(2.6)%
+2.5%
(0.1)%
Asia
+14.2%
+4.0%
+18.2%
Rest of World
+4.1%
+7.6%
+11.7%
Total
+2.2%
+3.7%
+5.9% 59
Changes in exchange rates 31% of sales denominated in â‚Ź % total H1 12 sales
H1 12 vs H1 11 (avg)
Q2 12 vs Q2 11 (avg)
10%
+ 5%
+ 1%
US dollar
9%
+ 10%
+ 12%
Indonesian rupee
6%
+ 2%
+ 4%
Mexican peso
6%
+ 3%
- 3%
Chinese yuan
6%
+ 8%
+ 15%
British pound
5%
+ 8%
+ 9%
Argentinian peso
5%
+ 16%
+ 3%
Brazilian real
4%
- 1%
- 9%
Polish zloty
3%
- 3%
- 7%
Canadian dollar
2%
+ 5%
+ 8%
Turkish lira
2%
+ 1%
- 3%
Russian ruble
60