Q3 2022 Danone SA Corporate Sales Call

October 27, 2022

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Okay.

Good day and thank you for standing by welcome to the gone on third quarter 2022 sales conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on one on you'll tell us.

You will then have an automated message advisors hundreds Reyes. Please be advised that today's conference is being recorded I would now like turn the conference over to speak of today My tooth larger head of Investor Relations. Please go ahead.

Eight.

Excuse me good evening.

Can you hear me.

Loud and clear.

Okay.

Good evening, everyone. Thank you for being with US on the Q3 call Tonight, I'm with Yoga and Michel CFO will go through some prepared remarks before taking your questions in a second step.

And before we start I'd draw your attention on the disclaimer on page two related to forward looking statements and the definition of financial indicators.

He felt to during the presentation and.

And with that let me hand, it over to yoga.

Thank you Beth and good afternoon to all of you I hope, you're all well and thank you for joining us today for Q3 results call.

Sure you all had a long and busy day, so let's jump.

Right into it.

Before we go through the financial highlights of the quarter. Let me just start by a few remarks introduction starting this page number four.

As you have seen from the press release, our Q3 like for like net sales growth reached plus nine 5%.

Supported by a sequential acceleration of pricing across geographies.

In this context volumes continue to hold well remaining broadly flat at minus <unk>, 2% compared to last year, when excluding Russian Edp platform.

Going a little bit deeper into the performance you will note that we posted broad based growth across the zones and categories.

Lets focus for a minute on the <unk>.

The bike category.

Edp delivered plus six 3% growth in the quarter supported by continued strong dynamics in North America, but also Mexico and Japan.

Well performance remains resilient, but contrasted in Europe .

Dairy and plant based each of them delivered mid single digit growth in the quarter driven by key brands, such as Sig and I approve on plant based.

As well as Iqos international delight active or your core on the dairy side.

Specialized nutrition delivered another stellar quarter, Gwen plus 12, 2% importantly, this growth is competitive and balanced across our three segments.

From ULA pediatric specialties and documentation.

Our portfolio is consistently gaining share since the beginning of the year is testimony to the relevance of our innovations the strength of our brands and the quality of our execution.

And last but not least waters.

<unk> delivered another strong quarter of growth at plus 14, 4% versus last year.

The performance here also broad based across geographies and brands.

In particular bond fund in Mexico, and are quite Indonesia delivered very strong double digit growth over the quarter.

So all in all the closed a strong quarter of execution and delivery, but not only.

Second turning to the next page page number five I believe yes, you will also see that we continue to progress our venue delaune agenda we.

We have made progress in the active management of our portfolio first by boosting the winning platforms with a number of global and local brands, which you see are displayed on the chart.

But also with a very strong competitive performance, especially in geographies like U S, Canada, Indonesia, Mexico and Japan.

This quarter has also been a quarter of progress in the management of our Underperformers organically like for my role.

We believe that we have no credible path towards value creation.

Despite challenging operating conditions, we see.

Measles performance improved sequentially and market shares are stabilizing.

<unk> also seen US act on the inorganic front with the announcement of our plan to transfer the effective control of our Edp, Russia business.

Actual which we expect to be accredited to like for like sales growth as well as for margins.

Once the transaction has closed over the course of next year.

We have at the same moment also been progressing on the management of our core portfolio and here I would like to focus for a moment with you on our dairy platform in Europe , which.

Which you would turn to the next page page number six.

Our starting point here is that we fundamentally believe that we can grow and create value in the category.

No category is more relevant when it comes to daily health and wellness, especially in a likely more efficient every environment.

I want to insist our drop in Europe is not about short term fixes its really about reversing a multiyear decline trend that.

It was mostly self inflicted as we discussed during our capital market day in Israel.

And we are committed to making this transformation a reality over the next quarters.

The transformation, we are engaging into articulate around five pillars, which you'll see on the screen.

And while it's true that the starting point is different from one country to another and the playbook remains the same broadly following the one we executed to turnaround our north American dairy platform over.

Over the last few quarters.

First it's about making conscious portfolio choices refocusing our efforts on key benefit less basis, especially on functionality on indulgence kits and firmly nutrition.

Second is about focusing on fewer brands assigning them clear got worse, and therefore, avoiding overlaps and cannibalization.

Thanks to this you will optimize or optimize our offerings from the price points and product execution perspective.

While driving complementarity.

Third pillar is about Reinvestments.

With clear swim lanes, our brands will express their superiority and differentiation through more effective renovation of their call.

Parted by fewer but bigger and more relevant innovations. We also progressing on our A&P investment journey with a focus on our venous and our call.

First pillar is about a significant step up in the quality of our execution we must.

And we will drive better shelf clarity for the consumer, making our top skus available everywhere and.

And truly superior to competition simply further news about acting as a category leader.

And last but not least considering the context, we operate in today.

We have started and will continue making our portfolio recession ready, notably leveraging all of the revenue growth management levels.

Turning to page number seven let me briefly walk you through how we are leveraging our superiority agenda to further build resilience in our specialized nutrition business.

By maximizing growth and competitiveness on infant milk formula, which as you know represents 60% of our revenues.

Further specialize and segment our portfolio in line with specific growth opportunities. Our objective is to continue delivering competitive growth here.

And for this if we keep building on the unique equity of the <unk> brand as.

As well as on the quality of our scientific evidence to make a real difference to the parents and babies reserve.

In parallel in parallel.

Continue to double down on the pediatric care specialties and that nutrition segments.

Which together represented around.

40% of revenues for both segments category dynamics and future prospects are strong.

Even by the increasing prevalence of allergies and development related conditions among babies.

But also by the growing incidents of conditions, such as heart disease or cancer.

Our focus here is on further leveraging our competitive advantages based on science evidence Mehdi.

Medical expertise and market access.

The last element I want to highlight before we enter into the financial section is on is displayed on the next page page number eight.

And this is about innovation and here, let me be very short and clear in line with what we said in March at the capital markets event, it's about driving scale and game changing innovation across our categories.

And rolling them out fast into our geographies.

And we put here on the screen the IPO not make up semi poker tour and Youll pool, which we believe are excellent examples where you will see the impact in our business moving forward.

Yes.

Let's now move on to the financial overview on page number 10.

Starting with the like for like sales bridge for Q3.

We delivered as I mentioned, plus nine 5% growth on a like for like basis, which includes the minus 0.5% impact from Edp, Russia.

Looking at the figures, excluding Edp, Russia like for like was up 10%.

Growth continued to be led by accelerated price up plus 10, 2%, while volume and mix remained broadly flat at minus 0.2% driven by resilient volumes, especially in more developed markets.

Outside of the like for like the main driver is <unk> <unk>.

<unk> continued to benefit this quarter from a strong positive impact.

Reaching plus seven 6%, mainly thanks to the appreciation of the U S dollar against the Euro.

In total reported growth reached a stellar plus 19, 1% for the quarter, bringing our quarterly net sales 273 billion.

Up from $6 2 billion in Q3.

Yes.

Let's now have a look at the performance of each zone in more detail starting with Europe on the next page page number 11.

Europe posted another good quarter.

<unk> plus 6% in Q3 with price up plus 8% by volume and mix declined by minus 2%.

The latter being mostly a result of active portfolio management as well as some delivery suspensions something I will come back to in a second.

From a category perspective growth in Q3 was again led by specialized nutrition and waters specialized nutrition benefited from another strong competitive performance of our <unk> brand.

As well as from very strong growth also in our pediatric specialties.

Our new case and <unk> brands.

What us waters posted broad based growth across brands from <unk> to Budwah in the fall.

I'm, a few benefiting notably from a from a pretty hot summer periods.

And talking about Edp.

The EP performance sequentially improved in Q3, compared to Q1, and Q2 Green plus two 2% compared to last year. The picture continues to be a contrasted with growth led by France reference by Germany, Belgium has been penalized by what I would call temporary delivery suspension with some of our retailers.

Bottler.

<unk> been negotiating price increases, especially at the beginning of the third quarter.

Important to note that we have at the same time started to actively prune our edp portfolio to refocus our efforts on the more differentiated and more profitable paths. This portfolio optimization is an essential part of our transformation agenda in the European region, and we expect that to last.

Well into next year.

Moving on to North America on page number.

Yes, where we posted scale our like for like growth of plus 11, 2% gross was well balanced and competitive driven by another step up in price at plus 10, 2%.

Our revenue growth management, and disciplined execution supported volume and mix.

It remained positive at plus 1%.

This quarter again, our yogurt platform.

In North America delivered strong growth led by brands like Activision.

Yes.

Two goods or Denny minutes, all of them growing double digit.

Here, we clearly benefit from the work we realized over the last few quarters, which helped us to focus our brands on clear, though is more differentiated spaces.

In the coffee space International delight in Stoke delivered again strong growth well into the double digits maximizing the call, while innovating with purpose and impact.

Our cloud based platform delivered good and sustained growth, we see growing high single digit in the quarter.

And finally specialized nutrition.

That delivered another quarter of strong growth yet as we know on a relatively low base.

Performance was led by our new Kay brands.

While also the upcoming brand started to appear on the shelf in the U S.

As you know wireless remains non material for our company. We are very proud to have further stepped up our effort to help address the baby formula shortages in the U S.

Moving on to the next page page number 13 until our China, and North Asia and Oceania.

Here like for like growth plus six 8% in the quarter driven by a very dynamic volume mix at plus five 2%.

Let me first focus on the performance of China.

Here infant milk formula posted competitive low single digit growth on the high base as you may recall.

And within a category, which remains under volume pressure.

Our performance was again led by our ophthalmic brands, which continued to gain market share.

On the channel front, our growth was again driven by what we call our <unk> channels.

While our revenue exposure to the uncontrolled Chinese continues to decrease now reaching all time lows of mid teens level.

This quarter was also a quarter, where we continued to build the resilience in our <unk> and China platform.

Both our pediatric specialties and that nutrition, plus transfer going well into the double digits.

Benefiting from an outstanding momentum of our new Kate <unk> and <unk> brands.

Besides that we can report that milestone was back to growth in Q3 with stable market shares in an operating environment that remains obviously challenging.

And beyond China.

Worth, noting that the Japan posted again double digit growth led by a functional dairy propositions.

Gaining broad based market share.

Finally, moving on to the rest of the World Zone on page number four.

Uh huh.

The rest of the world reduced sales.

Sales growth of plus 13, 6% in Q3 on a like for like basis.

Driven by a strong price up of plus 19, 5% by volume mix declined by minus five 9%.

The worth noting that the volume mix, excluding the Edp, Russia platform was only down minus one 7% in.

In addition to that also worth noting that our platforms in Turkey, and Brazil continued to face a tough macroeconomic context.

<unk>.

With volumes down double digits also in those two countries.

In Asia the overhead.

Our Indonesian platform <unk>.

Well into double digits in both water and specialized nutrition.

And with positive volume contributions benefiting from strong strong competitive dynamics of the acquired brands as well as of the GM brand in.

In Latin America, let me highlight particularly the strong and competitive performance of our Mexican business.

Which has also been growing well into double digits, driven by price and to conclude.

Africa Africa posted a price led to mid to high single digit growth.

With specialized nutrition, leading this dynamic.

Let me then wrap it up with the full year outlook for this year 2022 on page number 16.

Taking stock of our strong performance over the first nine months of this year year to date upgrading our guidance for year 2022 to like for like net sales growth between seven and 8%.

At the same moment, confirming our full year guidance for recurring operating margin at above 12%.

Here, let me just insist on the fact that we are committed to our investment strategy.

We are executing along the plants, which we shared with you during the capital market events.

And at the occasion of the full year results presentation, which you could share with you early next year, you will see a tangible proof points of those reinvestments in our second semester P&A.

And with that.

Let me hand, it over back to Martin to start the Q&A session.

Thank you. So we have the first question from Mike Alan Bartlett.

Yeah.

Okay.

Barclays can you hear me okay.

Yes, okay perfect. Okay. So far.

First one is.

So just on Edp in Europe can you maybe dive into that a little bit more I think you said edp.

In Q3, three two led by France, and Germany, Obviously, we know about the de listings.

Intel as in Belgium, and Germany, you talked about the active.

Yes, I know.

Well as youre back on shelf and hours reading.

Can you maybe kind of isolate.

The impact that the listings had in Belgium and in Germany.

Just so we can try and get an underlying the same thing on the SKU rationalization.

<unk>.

Trying to understand what the kind of underlying edp number might have looked like ex that the listings and kind of ex the skus.

And then just Skus will go into next year, but just to try and give us a feel for what youre seeing underlying.

In dairy maybe switching between cloud base in the core would be would be super.

And then the same question on North America.

It looks like very strong volume.

So a very strong strong.

Price pricing, but volume mix was only 1%.

In the quarter.

Can you maybe just elaborate a little bit what you will see in.

In North America within the core brands.

How much is supply chain challenges still there maybe you can elaborate or are we still seeing weaker base trends on volume mix.

And it looks like it's.

There's quite a big slowdown underlying.

In North America is it just elasticity or is there something else going on thank you.

Yes, good afternoon volume So let me let.

Let me go with the different questions and sub questions first on the on your volume or.

I do appreciate that the leading is a bit complex.

This is why I mentioned that on one side, we are pretty happy with what we are seeing.

In France in terms of performance in terms of market share performance. When you look at the U K on the underlying performance.

Exactly the same the reading of Germany is extremely complex and I will come back to that as for Belgium, and in Spain. We are seeing basically the same dynamics as we have been seeing that in Q2.

Overall.

Overall, what we have seen in Q3 as underlying performance and consumer demand, we did not see any significant change of consumer behavior. When it comes to buying our products. The leading is a bit more complex for a few reasons first.

It's true that.

We are consciously refocusing our edp portfolio in line with what they basically said they're doing.

Strategic days and that has led us to de prioritize and sometimes through discontinued some product changes, but it's also true that use an essential part of the transformation of our portfolio in this very particular region.

We expect that and you can expect it to last well into next year I'll give you an example.

Plant based growth in Europe in Q3 has been a low single digit.

<unk> said that the <unk> brands was growing very competitively mid single digit.

As we have depolarizing stopped some niche brands, we are having some product ranges, which are neither competitive not profitable.

The second element.

Worth to keep in mind, indeed is that.

Especially at the beginning of Q3, we had some.

Temporary delivery suspensions you were mentioning.

Hugh and is just because some of the negotiation on price increases took a bit longer but year over year.

Restates firm as we said from the beginning.

Because this is very critical for our future financial algorithm and as we speak most of those situations have been has been resolved.

And then there is the third element and it's true this is.

But what I would call a volume or demand elasticity is and here we have not seen any significant shift vis vis what we have observed in the <unk>.

At the beginning of the year in Q1, and Q2, and we usually talk to you about Spain, but as you know that has a more I would say structural.

These are.

Obviously.

We are very conscious that that consumer wallets, maybe tightening moving forward and we are actively preparing for that.

When it comes to North America.

A little bit.

A different subject first we are pretty happy with the performance of North America I think is a quiet.

It's a quite a stellar performance, which which we are seeing us.

GDP.

Posted overall broad based growth it is true across dairy and plant based.

And this is true for the U S as well as for Canada, when we look a little bit deeper.

In the area, we see that all our segments are growing.

Double digit growth.

What we call the functionality segment in U S.

Theyre Activia in Iqos are playing both brands growing double digits.

There is call on cost on the <unk> ranges.

Coffee creations, we see international delight and stock continues to go very fast in Stoke is a.

Just posting very very good numbers.

Behind distribution gains and flotation gains under.

On the kids segment strong double digit growth with Dennis and same comment on what we call the low sugar segment vis a vis two good. So overall really there is in a very I would say sound dynamic and year obvious Cvs.

Playing the feel of whats the caveat you other fruit.

The full level, which is about the volume mix and price than it is plant based.

Seek posted high single digit growth in the quarter.

Very good performance of Ireland, but it's also true of the more important even debt owed is catching up very fast.

Really a stellar performance in beverages or the Restaging, we did is starting to deliver results.

But also we see strong performance in yogurt and adjacency. So we are pretty happy I would say with the quality of the growth in North America, and it's true of Europe , I would say the overall resilience yet the picture is a bit more competitive.

Okay. Thank you.

Thank you. The next question is from Citi.

From Jpmorgan.

Okay.

And Matt Kenseth, Thank you for taking my questions.

<unk>.

First question maybe for <unk>.

We are keen on that.

Jamie.

Just wanted to understand I mean prices.

Accelerated and you were mentioning that.

What's the cause of some of the negotiation you have to do.

How is the overall cost environment for you as you look into next year I think you did mentioned that margin.

Rachel take the guidance on margins for this year just want to know whether we should expect further pricing as we look into next year and you can talk about.

Early view on direction I need the cost still because we've seen that dairy prices in Europe have been quite elevated.

So how you would.

Yes, if you could give us any indication on that.

My second question is on.

The impact on them.

Coming back on Edp.

Can you talk about.

Hum.

Probably the more value add on top of it.

The ranch.

Are you seeing how how bulletproof.

<unk> effectively as you said there is a tightening of the wallets going forward.

And can you guys will explain why.

<unk> seen some private label is gaining share are you, saying its more.

Okay from Spain as opposed to the rest of the countries. Thank you.

Good afternoon, Celine So let me start with the overall cost environment.

That mix, we are seeing there.

It's true that when we look at this year.

Theres not a lot of news vis vis what we told you three months ago, which is a <unk>.

We expect global inflation on our portfolio to be around mid.

Teens levels.

Is the market is extremely volatile that don't need to remind you on that and what we are seeing is indeed that some of the global commodity indexes are plateauing or even going down that is good news, but it's also true in you made the point that that positive impact is.

To some extent washed out by the fact that we see increased pressure from Mig, but not on <unk>.

From a cost of energy and gas and you have seen the very significant volatility over the last couple of days.

And this statement is true for.

When you look at the global situation as well as for the European situation when you look.

Looking into 2023 is extremely difficult as of today.

I think I mentioned the cost of gas over the last days, which is a perfect illustration on how volatile the market is.

Look at the British pound.

And the impact as you know currency has an impact on us.

There has also been very significant volatility, having said that what seems to be clear as of today is that we will see continued pressure.

Some inflation on our input cost.

And key drivers, maybe beyond I would say transport being Mick energy and cost of labor cost of labor, we have not seen yet so much impacting.

Our equation, but I think we need.

Definitely we expect that to start impacting it from early next year.

I believe that.

To be more precise.

Potentially covered all of our cost inflation next year, probably we need to talk again early next year the occasion of the three.

Of the full year.

Whatever the inflation 2023 will be.

We will continue to focus on our internal that we say playbook.

Productivity is and will remain extremely important let me remind one thing which is that when you look at the inflation of this year.

We basically only transfer.

Of this inflation.

So the retail.

The reality is that one third of the inflation, we are able to compensate in.

Internally by our record levels of productivity and this is what we want to leverage also moving forward and this is obviously, becoming an even colo weapon in the moment inflation with cattle.

Even go down you asked about price.

If and when we need to do more price in order to.

Protect and develop our financial algorithm for the future, which we ambition to do more price.

And here, we will continue to do it in a manner. We will continue to do it in a responsible manner and you could do it even if it may cost us.

Very short term a little bit of.

And then last but not least what I would mention here is that we are.

Continued to actively manage our portfolio and this is towards a four degree in Europe .

Having our product and <unk>, which are not rotating retailer profitability, which are not competitive and boosting whatsoever.

Okay.

Yes. This is exactly what works very fast today.

You look at.

You look at <unk>, which continues to perform very well.

You can see you look at Europe .

The hypothesis in ranges, which continued to grow very rare you look at even on plant based you look at the innovations have been launching this this is not big on the ipod, which is among the highest rotating skus on the shelf, where we have been launching it. So we are pretty I would say that that seems to be.

Work that strategy working on focusing on the most differentiated part of the portfolio. So it is a long answer, but maybe last word on private label.

Because it's true that private label is.

<unk> been winning over the last weeks has been recovering.

What.

That's probably been lost during Covid times when people stayed more at home, but it's also true that private label has been following on price increase over the last weeks and sometimes they have been doing higher price increases than the branded products and here, we need to observe what it means we have been obviously.

Extremely careful and conscious I would say intention in the way we have been doing price increases on the hour on those portfolio ranges, which compete head to head to low price competition in order to make sure that we don't take too much volume elasticity.

Thank you Sir the next question is from.

Matt <unk> UBS.

Good evening.

Two questions from me please.

The first one is on specialized nutrition.

Europe .

Because growth has remained very strong.

In the quarter.

So wondering if you could provide some granularity on this business. It's now been three consecutive quarters of high single digit like for like.

And historically, we've been more used to a flattish to slightly up like for like development there.

Is it just a temporary pickup and we should look at this in the context of very strong pricing.

Some favorable basis of comparison or is there more to it than that and then my second question going back to plant based.

What are you hearing quite contrasted if not construct contradictory messages on this segment at the moment.

I would be curious to hear what you're seeing in plant based both from a category penetration standpoint, but also from a down trading standpoint. Thank you.

Yeah.

Yes, hi.

Good evening look.

On the specialized nutrition front in in Europe .

What we have observed since the beginning of the year.

Is that.

The category has been coming back because category has been soft last year than what we had been sequentially.

Coming back across all the other countries, but more importantly than that is that all the renovation and repositioning of our portfolio on the IMF front with uptime ULA.

Has been playing very very fast so we have been winning share basically in all European markets.

And.

What I, what I assure that during the presentation and you'll see there is a picture of and I talked about specialized nutrition, but we have been doing is that we have been really growing from what we had in the past, which wasn't ingredients less portfolio to something which we are now.

Positioning around new states reinstate of parents and babies and so this is.

The key driver of the very good performance, we see on the IMS side and that obviously, a competitive performance with behind which we are investing.

Because our ambition is obviously to sustained at very good performance on the other side, what we do see is that.

The medical part of the portfolio is also doing.

Well.

This is true for the one which is addressing a specific need for babies, but also for the year diet nutrition, but and this is about neo Cade and <unk> in here would do the same remark which is that.

Our competitiveness has sequentially improved and year same same message. We did this is definitely some of the focus points of our investments moving forward.

When you talk about plant based.

Okay.

Sure.

That's a bit of a controversial topic.

Having said that when you deep dive a little bit what we are seeing is that.

Penetration of that category and this is true by the way for Europe .

For the U S.

Penetration has been steadily growing.

It's also true that the frequency of consumption came under pressure when people have returned.

Two two offices and this is was has explained the slowdown of the category, which you saw especially I would say back end of last year at the beginning of this year.

We have seen a few encouraging results is too early to celebrate but the good news is that the penetration is very robust.

Our goal is.

As one of the category leader is to make sure that we are getting more people to the shares.

Exactly why we do not only want to focus on catching up the game on <unk>, which is the hot ingredient.

But by launching <unk>.

<unk> innovation, which is attracting new consumers to the shelf and deceleration, namely is this is not mig and under IPO.

Because this is something which goes beyond I would say the traditional ingredients are segmented.

Sure. This is working very fast I mean, they've been start we have launched data I think like two to three quarters ago in Germany first it became very fast the best rotating SKU on the shelf and we see that this is collecting new consumers to the shelf and younger consumers to the shelf and it's exactly what we want to push moving forward.

Thank you Jim our next question from Jenny Goldman Sachs.

Very much for taking the question.

So my first question goes back to the topic of inflation into 2023 I wondered if you could talk about your net revenue management plans outside of gross pricing.

Into next year, so I'm, particularly interested on your comments in regards to trade spend and how that trended this year and 2022 and whether you still have flexibility too.

<unk>.

Is it revenue management tool into 2023.

And then my second question is on the topic of pediatrics.

It was very interesting that you talked about a growing prevalence of allergy cases I just wondered if you had any statistics you could share with us in terms of the.

I used the analogy cases, amongst infants and whether there are any differences or interesting differences by country that you could share that would be helpful. Thank you.

Yes.

Good evening, yes, so on the inflation front as you as you said that we have different levels, which we do.

Using today in which we will be using moving forward and beyond what I said on productivity mix and let's say list price is.

As you said the way, we manage trade spend but probably more importantly.

Promotions to the consumer.

Yes.

We have been when you remember at the beginning of the year, saying that <unk> been reducing promotional spend as I would say a temporary solution because of the time gap.

Look us to increased price list.

As price lists have been increasing over the last couple of months we.

We have been very intentional again, using our promotions and in some segments and some countries have been increasing promotional activities.

In order to make sure that we have the right level of traffic into our shares.

Which is also which is not only our interest with the interest of the retailer. So moving forward, we will indeed managed very well.

Actually these two levels between re price list increases and promotional activities.

Say that because.

The way we want to do.

The way, we manage price points.

Architecture of our product ranges is of the essence, when you have a product which used to be promoted at <unk> hundred 99 is the list price, which is 250 and vehicles down to $2 90, you may want to remain at $1 99 for your promotional activities that exactly the way we are.

Moving forward.

What is important.

Important is that.

We have Luca first which gives us savings not only this year, but we should also give us savings next year and when he talked about reinvestment Reinvestments. We go obviously in brand A&P.

Obviously, when and where we think it's needed and we'll have good returns.

You got to go and promotional activities.

When it goes to <unk>.

Specialty plastics, yes, I mean, I think there's definitely.

Trends, which are the prospects of those segments are very good and this is true for babies and needs and it is true for dice. Our idle units I don't have statistics at hand, but we can certainly provide offline.

A number of I would say key key points.

Which will underline that this statement, which I think is probably something which are which is an obvious statement.

Okay.

Thank you very much.

Thank you.

Thank you John next question is from Guillaume <unk> from Bernstein.

I'm just trying to think about the timing and the time it takes for the European Edp turnaround.

<unk> seen the success in U S GDP business put a few years.

Antoine has been in the business already for a year and even early you said, we would see sort of an edp 10 at all in the next few quarters. So it makes me things are taking a hell of a long while to see improvement in Edp Europe is it still on track. It is growing as fast as you initially plan or do you feel there is a delay and related to that.

I know you want to invest more in A&P and innovation that is the business in Europe already sufficiently restructured in terms of price in the range of architecture to be able to do that increased A&P and innovation investments. Thank you.

Yes, good evening.

Look the reality and this is what I said before the reality is different.

Market by market.

So other solutions.

We can certainly say that a lot of the playbook.

Implemented North America isn't the way as applicable.

Sometimes the solution or acquire more structural changes in Spain is a good example of that and sometimes it's more about the re installing an obsession about execution and investing behind our brand equities and marketing mixes, which work, but which has been totally under leveraged in the past.

And that will obviously also make that in some instances it will take us longer and in some instances you will see our results coming.

Earlier.

In that sense for us.

And we're saying it internally nevertheless, never waste a crisis I mean, what's happening around us. The fact that we are adapting our edp portfolio, probably not faster than what we initially planned can be a boost to our plans, but we wont really I mean this is this is a I.

I would say a challenge, which is a bit self inflicted.

And which has been a change.

Change for us not only over the last couple of quarters, but for a number of years now and if you take the time it takes to sort of it but this is the right level of a sense of.

J C.

And net net are probably what im saying is that we will move fast and the current context makes that we move even faster.

Thank you next question from David <unk>.

Okay.

Thank you.

So two questions maybe one on U S nutrition and the second one on the on the outlook or expectations.

Just on U S nutrition, it looks like there's about a $30 million benefit from the disruptive competitor.

And in the prepared remarks, I'm, just trying to get understanding of whether that is a very one off dynamic or whether this is kind of open the door to developing through into into next year, whether you think those numbers will.

Be hold and might be even evolve.

Upward.

And then the second question on the outlook just sorry, if you mentioned this but just to clarify.

The new outlook with or without Russia in that number and if you did exclude Russia would that have any kind of effect on.

Both the topline and or the margin or is it relatively neutral with or without thank you. So much.

Yeah, Hi, David Good afternoon, maybe a quick word on.

The outlook the outlook is relevant with and without the Edp Russia.

Platform.

So with.

The intention is absolutely not to play to that.

But to be very clear.

This is related in any case.

When it comes to the U S nutrition situation as we had when you look at the sequence.

In Q3, the first stepped up our exports of our new Kate specialized formula.

And that impacted the numbers at the beginning of the quarter.

Since we got the especially the authorization of the special permission from the FDA also the <unk>.

Ophthalmic products reach the shelves at retailers at the back end of the quarter.

And it's rare that resided in whats you are what you call the boost in our numbers, but it's also true that this contribution is not really material in the results of our company so far.

Small really debt.

Uh huh.

Element of price for what the teams have accomplished in a very very short period of time, what does it mean moving forward.

You have probably seen the FDA has not yet determined the process by which formula can apply for for permission to stay on the market permanently.

Over the next weeks, we of course actively monitoring the situation.

But without the expecting major news to come over the next weeks while on the other side.

<unk> for which we have an established presence in the market.

Costs, we want to be able to be ambitious.

Moving forward so.

Which basically means that the Q4 figures in the ratio normalize.

As our peers.

The situation of our peers is also normalizing sequentially.

Yeah.

Thank you David the next question is from marking the Groupon Jeffrey.

Thank you.

Yes.

I don't know.

Yes, Hello, I just had my questions have been answer thank you.

Okay. Thank you Marty and I think now we have gone from Morgan Stanley .

Two the first one is quite similar to brew Nelson and I apologize for it but at.

At the March Sanjay I believe you pointed to improving volumes and therefore capacity utilization as a key tool to improve margins I. Appreciate a lot has changed since then.

How are you thinking about this right now is 23 likely to be another year of transition for Danone before volumes start improving again.

And the second one is on pricing given the deliveries of Sanchez you highlighted how confident are you that the non will prevail and be able to land further price increases in Europe . Thank you.

Yes, good evening.

Luke on the volumes.

Our strategy.

The outlined at the capital market event as a more relevant than ever because the strategy is a broad rebuilding or.

<unk> business model, which.

Creates sustainable value.

And the balance between volume mix and price VB of ESN and it's true that in the current context growing volumes is not easy at the same moment what is important for US is that we are growing volumes, where it's strategic for us.

Strategic fill out I think there is very strategic because we have a competitive edge.

<unk>, because we have a superior proposition and this is exactly the way we are going to be.

We have been basically handing it over the last couple of weeks and this is what we are going to accelerate over the next weeks so that as we.

Finish the transformation of our portfolio, we are ready for global volume growth.

When it comes to price increases.

I think we are very clear on that.

<unk> position, which is that if it needs to go into further price increases we are going to do it and.

<unk> state so I'm on it.

If this is costing us a little bit of volume temporarily.

Except if we continue to do it at the same moment in a responsible manner and you and as you see I mean, the inflation of cost is quite transparent to the market is transparent to the retailer is transparent to the consumer so they try to find win win situations also moving forward, but we don't see the diarrhea Dell in case, we need.

To do more pricing.

Okay.

Thanks.

Thank you next question is from Pascal Blessed.

Yes.

The first question is on.

What would have been the ball.

Pete.

Russia on Edp.

Question on a group level can you shed some more light on the volume versus mix.

Quarter, maybe excluding Russia and Dan.

Standard product.

<unk> already found solutions.

Problems or do you expect an effect also lasting into Q4.

Question for you Pascal.

But.

I didn't catch your last question, sorry can you repeat sorry, yes, sure so on suspend product.

Hugh.

<unk> already solution for all disputes or do you expect an impactful so last Q4.

And then my final question on <unk>.

It seems from your prepared remarks that.

Progress is going well.

It's also due to the re launch you finally deep or.

You'll get to come and what.

You on the business now also regarding the potential sale. Thank you.

Yes, so on the let me start in the reverse order on the first on my zone.

We are seeing encouraging signs and we are seeing encouraging signs obviously in a complex environment.

The reality is that overall our market shares are now stable.

We are seeing that is that we are very competitive where we can measure and we can measure in those cities and regions, where there has been new lockdowns.

And so that makes us confident that we have no credible path.

For sustainable value creation vis vis my zone, and so we will invest.

Behind making that.

Success when it comes to the suspension you were saying.

Look I mean.

That has been a topic for us, especially at the beginning of Q3, because it too.

Took us a moment longer to agree with our retail partners.

On the price increases.

Eventually most of those situations have been reserved in a win win I would say a mindset.

Can I exclude debt that will not happen anymore in the quarters to come no, but obviously.

Doing everything to avoid these kind of situations.

What is important for us as that.

We are reserving those situations fast and in the moment, all our brands and products are getting back to the share that we are activating.

It's to make sure that we have the best possible rotations, but it is important for us and I want to insist into it because only when we are getting the price increases it allows us to reinvest sustainable sustainably into our brands and this is what we are going for.

Where it goes.

Edp of volume mix and.

And the reality is that.

You have obviously, Russia, which has been.

Has the plaza, which has been a drag on volume.

In that sense and you'll see that also I think in the appendix of the.

Of the of the press release.

But what I would like to highlight also is that in the majority of our countries. This is quite a resilient volumes.

But the leading is a bit distorted by what we are seeing.

Turkey, and Brazil, which has been which has been double digit down.

So in that sense overall, I would say on an encouraging sign that we are extremely monitoring these patients very closely and activating the playbook I was talking about.

Okay.

Okay. So last question from Jon Cox Kepler.

<unk> for the print just a couple of questions on my side just in terms of the phase <unk>.

You're talking about.

In terms of Skus, particularly in dairy could you give us any sense of the size of that we're going to see over the next 12 months 12 months or so how much.

One or two points of group.

Sales just just for example, and I'm wondering.

A lot of people I talked to have been waiting for you to do sort of like big disposals.

Given the whole portfolio review I'm, just wondering if within that or is it just slow complex to try and characterize some of the.

It may be.

No not so growing.

Less productive brands that it's pretty pretty difficult to actually do.

Disposal was wondering if you can just sort of talk about that in the thoughts of the company.

On that.

And then just to sort of a couple of follow ups one on the.

The abandonment of disposal of the water business.

In Scandinavia, what are your plans for those.

Those brands what are your thoughts on it.

And then just to sort of like.

Last question on Russia, you de consolidate effectively I guess from next year.

Trying to deconsolidation already in your accounts from this year just for our modeling as we try and strip by Russia from our models. Thanks very much.

Hi, good evening.

Look.

When it comes to portfolio management, we are really.

In a very disciplined manner working on the two I would say a dimension. The first dimension is.

With the organic pruning of the portfolio and you mentioned that especially on very on the <unk> side.

<unk> is a product.

Product ranges in specific channels, it's about the small brands and this we have started to accelerate in Q3.

We will see.

That accelerating as we go in the next very few quarters in front of us that we probably lost for some three four quarters and then I think we will have the majority of that behind us, but what is important because you talk about the strong integration, we have and the business model. There is that at the same moment.

So.

Clearly looking for inorganic portfolio pruning and rotation, what we have been announcing in Russia has been the result of the portfolio you know that our Russian Edp platform was part of the 25% underperform us.

We have declared in margin. So here, we are walking toward after a very thorough annualize.

On Russia, it's safe.

We have decided to transfer the effective control of that asset.

Board of directors.

That we have initiated the process for as long as we do not have concluded.

A transaction signed.

<unk>, we continue to make it visible and they make it visible in our like for like but we are isolating it so that you have.

Perfect visibility and in the moment that we would apply our phase five.

You are right you know.

And then last but not least on the corridor suite, we had agreed to sell our stake in that.

Water business in Denmark.

But it's also true that the Danish competition and consumer authority.

It did not grant the necessary approvals to complete that transaction, it's relatively small business.

Well, we do not feel lots of synergies with the rest of the loan portfolio and we've issued debt.

The best way to create long term value is to put it on the to put it under strategic review and so it remains under strategic review also after the announcement of this week.

Thank you John so with that we hand, the call Tonight. Thank you for your attention.

Thank you.

Thank you very much everybody have a nice evening.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

The conference will begin shortly to raise Johan during Q&A, you can dial star one one.

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