Full Year 2023 Danone SA Earnings Call

Operator: Thank you. Good day, and thank you for standing by. Welcome to the Danone 2023 Annual Results Conference. At this time, all participants are in a listen-only mode.

Okay.

Yeah.

Good day, and thank you for standing by and welcome to the Danang 2023 annual results conference call. At this time, all participants are in a listen only mode.

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Here, an automated message advising your hand is Reyes. Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Mathilde Rodi head of Investor Relations. Please go ahead.

Operator: Please be advised that today's conference is being recorded. And now I'd like to hand the conference over to your speaker today, Mathilde Rodin, head of investor relations. Please go ahead.

Mathilde Rodin: Good morning, everyone. Thank you for being with us this morning for Danone's 2023 review. I'm here with our CEO, Antoine de Saint-Patrick, and our CFO, Juergen Esser. We'll first go through some prepared remarks before taking your questions. But before we start, I draw your attention to the disclaimer on page 41 related to forward-looking statements and the definition of financial indicators that we'll refer to during the presentation. And with that, I will hand over to Antoine.

Good morning, everyone. Thank you for being with US This morning for <unk> 2023 results.

Here with our CEO I'm trying just fantastic.

So you're going to.

We will first go through some prepared remarks before taking your question and the second step.

But before we start I draw your attention to the disclaimer on page 41 related to forward looking statements and the definition of financial indicators.

And with that let me hand over to offline. Thanks.

Antoine de Saint-Patrick: Thank you, Mathilde, and good morning, everyone. A warm welcome to our Full Year 23 conference call. Together with Jurgen, we are delighted to be with you today to share what is a strong set of results. Almost two years after the start of Renew Danone, you know, you are once again marked by significant external challenges and volatility. We have kept transforming the company at pace and with discipline, making it step-by-step stronger. And for that, I want to start with a big, big thank you to all Danoneurs. They made it happen.

Thanks <unk>.

Good morning, everyone.

A warm welcome to our full year 23 conference call.

Together with sugar, we are delighted to be with you today to share what is a strong set of results.

Almost two years after the start of renew Dino.

Once again marked by significant external challenges and volatility.

We have kept transforming the company at space and with discipline makes.

Making it step by step stronger.

And for this I want to start with a big Thank you to all that owners.

Maybe it's happened.

Antoine de Saint-Patrick: Now, let's go straight to the results, starting with page 3. We close a year of strong growth at plus seven percent on a like-for-like basis. As I just said, we made good progress on our strategic agenda, and it is starting to yield consistent results. Firstly...

Now, let's go straight into the results starting with page three.

We closed a year of strong growth at plus 7% on a like for like basis.

As just said we made good progress on our strategic agenda and it is starting to yield consistent results.

Firstly.

Antoine de Saint-Patrick: It shows in our volume mix dynamics, which is sequentially improving and turned positive in Q4 at plus 0.8% versus last year. Importantly, improving the quality of our growth enables us to connect with a profitable growth algorithm, better quality growth, combined with record productivity on COGS. They are forecasting from operations to increase by 142 basis points in 2020. And, as we said we would do.

You chose resolved volume mixed dynamic, which is sequentially, improving and turn positive in quarter four.

Plus zero, 8% versus last year.

Importantly.

Improving the quality of our growth enables us to connect with a profitable growth algorithm.

Better quality growth combined with record productivity on Cogs.

Our margin for all operations to increase by 142 basis points in 'twenty three.

And as we said we would do we.

Antoine de Saint-Patrick: We kept addressing some of the competitiveness gaps we had by reinvesting back into our business to the tune of 97 basis points. We stepped up our investment in advertising and promotion, in product superiority, and in capabilities, which as you will see later, is better than it was, but the reinvestment journey to be truly competitive is far from over, and we made sure we not only reinvest but also kept improving the quality of our execution in-store, online, on-premise, or wherever the consumer has an opportunity to meet our products. We need all of that while growing our recurring EPS by plus 3.4%, building on a faulty basis point increase in recurring operating margin, an increase I would certainly not qualify as moderate. Another source of pride for the company is the 2.6 billion euros of free cash flow we generated in 2020.

We kept addressing some of the competitiveness gaps we had by reinvesting back in our business.

To the tune of 97 basis points.

We stepped up our investments in advertising and promotion.

While the shipyard.

And in capabilities as you will see later.

It is better than it was.

The investment journey to be truly competitive is far from over.

And we made sure we do not totally reinvest but also kept improving the quality of our execution in store online on premise or wherever the consumer as an opportunity to meet our products.

We did all of that while growing our recurring EPS by plus three 4%.

Using on a 40 basis points increase in <unk> operating margin.

An increase I would certainly not qualify at moderates.

Another source of product for the company.

Is the $2 6 billion euro of free cash flow, we generated in 2003.

Antoine de Saint-Patrick: Besides being a record level, it is a testament to our renewed focus on cash and disciplined cash allocation as a driver of long-term value creation. Last on this page, we have just received our AAA rating from CDI for the fifth year in a row. Only 10 out of 21,000 companies got an AAA this year, and even fewer get an AAA rating five years in a row.

Besides being yohe code level.

As a testimony to our renewed focus on cash and disciplined cash allocation as a driver of long term value creation.

Last on this stage, we've just received a AAA rating from CDP.

For the fifth year.

Only 10 out of 21000 companies got a AAA this year.

And even fewer receive a AAA ratings five years in a row.

Antoine de Saint-Patrick: This is a good illustration that performance and sustainability can feed one another when you treat sustainability as a strategic stake. So, to summarize. Good progress was made in 2023, consistent delivery on Renew Danone, and a good set of results. Let me now share with you some concrete examples of the progress we made, moving to page 4. First, as you know, we have been focusing on restoring the fundamentals across the portfolio, starting with our dairy business. Here, we have deeply transformed our portfolios over the past years, first in Norma, then in Europe. We have defined clear streamlines. We have sharpened our ranges and clarified the role of each of our breaths. We have, until last year, significantly streamlined ISKUs and refocused our innovation, and then He worked the shelves with the retailers.

This is a good illustration that performance and sustainability.

Feed one another when you take sustainability as a strategic stake.

So to summarize.

Good progress made in 2003.

Our consistent delivery of renew that on and a good set of results.

Let me now share with you. Some concrete example of the progress we made moving to page four.

First as you know we have been focusing on restoring the fundamentals across the portfolio.

Starting result dairy business.

Here, we have deeply transformed our portfolio over the past years.

Interim Zen in Europe.

We have defined clear swim lanes.

We have sharpened our ranges.

Further all of each of our brands.

We have until less last year.

Significantly streamlined our skus and refocused our innovation.

And then.

Work their shelves with retailers and once the portfolio of the shelves.

Antoine de Saint-Patrick: And once the portfolio on the shelves was ready, we started reinvesting. There we see encouraging results. In 23, Noam posted another year of solid growth with resilience in volume mix led by coffee creamers and Greek yogurt in Europe.

We started reinvesting.

There, we see encouraging results in 'twenty three.

<unk> posted another year of solid growth resilience, our volume mix led by coffee Creamers and Greek yogurts.

In Europe.

Antoine de Saint-Patrick: After years of underperformance, performance is sequentially improving, with the zone ultimately reaching a positive volume mix in Q4. We are happy with the progress, but we are very clear that this is only the start of our journey toward sustained recovery.

After years of underperformance, we perform.

Sequentially improving.

Ultimately, reaching a positive volume mix in quarter four.

We are happy with the progress.

We are very clear that this is only the start of our journey toward sustained recovery.

Antoine de Saint-Patrick: So, better and more focused portfolios as there shows. We have also renewed our focus on science and on leveraging science with consumers. Our infant milk formula range is a great illustration of that.

So betsy.

More focused portfolios as the ratios. We also renewed focus on science and on leveraging science with consumer.

Our infant Formula Ranch is a great illustration of that.

Antoine de Saint-Patrick: We performed well in IMF in 23, and importantly, we delivered competitive growth by leveraging our science to consistently deliver superior products. And by being uncompromising on perfect execution, we posted good market share gains in IMF across the globe for the year 2020. And last but not least... We kept broadening the way we reach out to consumers by further expanding our channel reach, in a way from home, notably, while occasionally stepping up in marketing. Let me give you some examples, without proof.

We performed well in IMAX in 'twenty, three and importantly, we delivered competitive growth.

By leveraging our science to consistently deliver superior product and by being early compromising on perfect execution, we posted good market share gains in IMF across the globe for the year 2000.

And last but not least we kept broadening the way we reach out to consumers by further expanding our channel reach.

Either way from notably while stepping up occasionally marketing, let me give you some examples.

Without pro.

Antoine de Saint-Patrick: That's all for today. Thank you. We will now clearly focus on breakfast and coffee occasions. We partner with leading brands in these fields, like Kellogg's and Ealing, and doing so are driving category penetration, in parallel. We kept expanding, as I just said, in the Away From Home channel. Alpro is now in all the big coffee chains in the UK, and our premium waters are growing strongly out of Rome as well.

We now clearly focused on breakfast and coffee occasion.

We partnered with leading brands in these fields like Kellogg's annually and.

And doing so all driving category penetration.

In parallel we kept expanding as I just said in the away from home channel.

Alcohol is now in all the big coffee chains in the U K.

In our premium waters are growing strongly also evolve as well.

<unk> was the fastest growing channel in 2003.

Antoine de Saint-Patrick: Away From Home was the fastest growing channel at Danone in 23, which reflects our focus on enlarging our footprint and strengthening our resilience. So restoring the fundamentals has been, and will continue to be, a clear focus as there is more mileage we can get out of it. But next to this,

Which reflects our focus on lodging office and.

And strengthening our resilience.

So restoring the fundamentals has been and will continue to be.

Clear focus as there is more mileage, we can get out of it.

Brooks next to this we keep adding shoe to a few fires.

Now moving to page five.

Antoine de Saint-Patrick: We keep adding fuel to a few fires. I'm now moving to page 5. Talking about places where we drive accelerated growth, I thought we could highlight three platforms, medical nutrition, coffee creation, and high protein, which are, at the same time, very different but also very similar in many ways. They all address long-term consumer and patient trends. They are all based on genuine consumer interest. Strong, Paul O'Keefe, and Yorke differentiate technology. First, let me say a word on medical nutrition. In 23.

Talking about places, where we drive accelerated growth are slow to recruit highlight three platforms medical nutrition.

Coffee creation and high protein.

Which are at the same time very difference, but also very similar in many ways.

We'll address long term consumer patient trends.

All based on genuine consumer insights.

Strong product superiority and differentiating technology.

First let me say a word on medical nutrition in 'twenty three.

We grew high single digits on a like for like basis reasonable pediatrics and adults ranges contributing.

There, we leverage strong brands.

During their field.

Antoine de Saint-Patrick: We grew high single digits on a like-for-like basis with both pediatrics and adult rangers contributing. There, we leverage strong brands that are leaders in their field. We are differentiated through superior science.

We are differentiated through CJR science, all claims are clear backed by popular science.

And at the center of.

Of how we engage with health care professionals.

We're also anticipating the growth of two more.

We invest in future science and claim.

Antoine de Saint-Patrick: Our claims are clear, backed by proprietary science, and at the center of how we engage with health care professionals. We're also anticipating the growth of two more. We invest in future science and claims. We're also in capacity, like we announced recently at our Opole and Stanford factories.

Also capacity like we announced recently in our <unk> and Central Factoids.

We also invest in new business models.

Expanding the G&A and post hospital discharge as we do in China, We do nutrition powder and overall proposition.

In our concentrations.

We are building a sizable profitable and fast growing platform in Europe. We grew strong double digits again in 'twenty, three and gained shares with our leading international delight and store brands as.

Antoine de Saint-Patrick: We also invest in new business models, expanding the journey in post-hospital discharge, as we do in China with the nutrition powder and oral proposition in our coffee creation. We are building a sizable, profitable, and fast-growing platform in NORA. We grow strong double-digit again in 2020 and Gain Shares, which are leading international LDLite and stock brands. Here as well, we have invested to boost capacity in Jacksonville, Florida, and for those who, and I know there were many of you who followed the Super Bowl, we had one of the coolest advertising out there featuring Sir Anthony Hopkins.

As well, we have invested to boost capacity in.

In Jacksonville in the U S and for those that I know many of you who followed the Super Bowl, we had one of the coolest advertising out there featuring Sir Anthony Hopkins, we are starting to do some great advertising again.

Last our high protein platform is a great illustration of how we become much more disciplined at rolling out and at scaling our winning proposition.

In 2003, we launched new formats.

New channels new occasions.

<unk> expanded in new countries as those of US based in our UK crude hopefully see everybody.

Sure.

Antoine de Saint-Patrick: We are starting to do some great advertising again. Last, our high-protein platform is a great illustration of how we have become much more disciplined at rolling out and at scaling up our winning proposition. In 23, we launched a new format, new channels, new occasions, and expanded into new countries, as those of you based in the UK could hopefully see everywhere. And the outcome is material, another year of strong double digits and highly competitive growth worldwide. And with these three mixes, and as with many others, there's still a lot we can improve.

And the outcome is material another year of strong double digits and highly competitive growth worldwide.

And with this premixes and as with many of those there is still a lot we can improve.

So we have not yet reached our maximum potential.

Moving to page six.

And speaking of work in progress.

We kept meta equally addressing our underperforming assets.

Starting with my zone, we are confident that we are turning around the business.

We didn't only deliver in 'twenty, three very strong growth at plus 14%.

But more importantly, our growth was competitive for the first time in a long time.

Antoine de Saint-Patrick: So we have not yet reached our maximum potential. Moving to page six, and speaking of work in progress. We kept methodically addressing our underperforming assets. Starting with my zone, we are confident that we are turning around the business. We didn't only deliver on 23, a very strong growth of plus 14%. But more importantly, our growth was competitive for the first time in a long time. We posted Market Shagging, and all the work done to refocus the range, regain control of distribution, restyle the brand, and refocus on meaningful innovation starts paying off. Indeed, a first good year. But we obviously need to repeat that.

We posted market share gains.

All of the work done to refocus the orange to regain control of distribution to restage the brands to refocus on meaningful innovation starts paying off.

Indeed, our first Goodyear.

Which we obviously need to repeat it we are looking at all of the 24 high season with ambition to deliver again.

In Brazil and Africa.

We are progressing on fixing the business models.

And are transforming the portfolio depth.

In a very systematic fashion.

In Brazil.

We discontinued our water business and we licensed out our low value milk business.

In parallel we focused on value, creating proposition for instance, we are successfully developing our high protein platform with you Paul.

In Africa, we.

We have been cutting dilutive of Skus.

Antoine de Saint-Patrick: We are looking at the 24th high season with the ambition to deliver again. In Brazil and Africa, we are progressing on fixing business models and transforming the portfolio in depth, in a very systematic fashion. In Brazil, we discontinued our water business, and we licensed out our low-value milk business.

Enforcing our key brands reshaping, our business model and our grading our execution.

In both cases, the key priority is to restore profitability step by step.

Made a first good step in 'twenty three.

We are clear that there.

There is more.

In our plant based in the U S. We see the first benefit of the corrective action that we took last year to restore competitiveness, reflecting on our market shares, which we are not yet where we want to be.

Antoine de Saint-Patrick: In parallel, we focused on value-creating propositions. For instance, we are successfully developing a high-protein platform with Yopro in Africa. We have been cutting dilutive SKUs, reinforcing our key brands, reshaping our business model, and upgrading our execution. In both cases, the clear priority is to restore profitability step by step. We made our first good step at 23. But we are clear that there, too, there is more to it.

We have reward tell positioning and translated it.

Those are great advertising, you might've seen around the Chicago.

We have further improved our product quality.

But also the way, we execute with clear focus on key consumption moments and on category penetration.

So overall good progress some results already visible and obviously as always more to do.

One thing is clear.

Antoine de Saint-Patrick: In our plan based in the US, we see the first benefit of the corrective action we took last year to restore competitiveness, reflected in market shares, but we are not yet where we want to be. We have reworked our positioning and translated it into another great advertising campaign you might have seen around the Super Bowl. We have further improved our product quality but also the way we execute, with a much clearer focus on key consumption moments and on category penetration. So, overall, good progress. Some results are already visible, and obviously, as always, more to come. One thing is clear, and it probably speaks to the cultural change in the company. We will, as every company does, keep having challenges. This is normal business life. But we now face them; we go to the bottom of them.

Our published speaks to the cultural change in the company.

We will as every company does it have.

Challenges.

<unk> business slides.

But we now face to them we go to the bottom of that we tried to address the root cause rather than rush into.

Temporary fixes.

This is key as we got really improve the hesitance of our model.

And the consistency of our delivery.

Okay.

Finally, let me conclude this introduction on page seven.

How we have been actively rotating our portfolio over the past three years.

As you can see on the left hand part of the charts.

Having such a meaningful part of our portfolio, which didn't fit our strategy.

And where we didn't see a credible path for value creation within dental.

We signed an agreement to sell our horizon organic two months ago.

Read the consolidated <unk> Shaw in July last year, we.

We disposed of Michelin and Bridgestone we.

Antoine de Saint-Patrick: We try to address the root cause, rather than rush into quick, easy, and often temporary solutions. This is key as we gradually improve the resilience of our model and the consistency of our delivery. Finally, let me conclude this introduction on page 7 by explaining how we have been actively managing our portfolio over the past three years, as you can see on the left-hand part of the chart. We have exited a meaningful part of our portfolio that didn't fit our strategy and where we didn't see a credible path for value creation within Danone. We signed an agreement to sell Horizon Organic two months ago. We deconsolidated EDP Russia in July last year. We disposed of Michel and Augustin.

We built our value creative partnership for <unk>.

In parallel we've made a few investments as you can see on the right hand part of the chart.

We acquired medical Netherlands medical nutrition business in Poland.

<unk> in the Homecare services, which is a very dynamic and profitable channel.

Vested in our several science based startup that are developing new breakthrough technologies.

In cell based dairy.

Or in precision segmentation.

We are step by step improving the quality of the portfolio is a greater focus on value, adding products products that are often differentiated through science, albeit Vanessa that's helped us broaden our footprint.

Our geographic footprint our channel footprint.

And there too this is only the start of the journey let.

Antoine de Saint-Patrick: We built a value-creative partnership for Argentina Water. In parallel, we've made a few investments, as you can see on the right-hand part of the chart. We acquired an adult medical nutrition business in Poland, specialized in home care services, which is a very dynamic and profitable channel. We invested in several science-based startups that are developing new breakthrough technologies, such as beach in a shell-based dairy or precision fermentation. We are step-by-step improving the quality of the portfolio with a greater focus on value-adding products, products that are often differentiated through science, all businesses that help us broaden our footprint, be it our geographic footprint or our channel footprint. And there, too, this is only the start of the journey. Let me now hand it over to Jurgen for the financial review. Jurgen, it's over to you.

Let me now hand, it over to our yoga for the financial review.

Thank you Antoine and good morning also from my side to all of you.

Let's start the financial review with page number nine looking at the safety.

<unk> of the fourth quarter, we closed the year 2023 was another quarter of solid growth up plus five 1% like for like led by all of our geographies and all of our categories.

Before diving into each geography in more detail, let me comment on the performance by category.

Starting with GDP.

Edp delivered plus four 5% like for like growth in Q4 led by Europe, where the work done on the transformation of our portfolio starts bearing fruits, but also led by North America posted another resilient quarter of growth.

In particular, our key brands like <unk>.

Oil cost and international delight, all posted double digit growth this quarter, while I pull delivered a good performance up mid single digit in Q4.

We are particularly pleased with the quality of the GDP growth in the fourth quarter is not only price, but also volume mix contributed to the positive plus 2% to it.

Juergen Esser: Thank you, Antoine, and good morning also from my side to all of you. Let's start the financial review on page 9, looking at the sales performance of the fourth quarter. We close the year 2023 with another quarter of solid growth, up plus 5.1%, like for like, led by all our geographies and all our categories. Before delving into each geography in more detail, let me comment on the performance by category, starting with EDT.

Specialized nutrition was up plus four 7% driven by a solid performance of IMF, notably in China, and Southeast Asia, while medical nutrition delivered another quarter of strong growth at <unk>.

They both distribution and pediatric specialties across all geographies.

And finally waters waters posted plus eight 5% like for like growth in the quarter, driven notably by the strong performance of the <unk> brand in Europe minus one in China, and Vodafone in Mexico to name a few.

Juergen Esser: EDP delivered plus 4.5% like-for-like growth in Q4, led by Europe, where the work done on the transformation of our portfolio starts bearing fruit, but also led by North America, where we posted another resilient quarter of 2020. In particular, our key brands like Actimel, Jopro, Oikos, and International Delight all posted double-digit growth this quarter, while Alpro delivered a good performance up mid single-digit in Q4. We are particularly pleased with the quality of the EDP growth in this fourth quarter, as not only price but also volume mix contributed to a positive plus 2% growth. Specialized Nutrition was up plus 4.7 percent, driven by a solid performance by the IMF, notably in China and Southeast Asia, while Medical Nutrition delivered another quarter of strong growth led by both Adult Nutrition and Pediatric Specialties across all geo-relations. And finally, Waters.

Let's move on to the Q4 sales bridge on page number 10.

San Fran mentioned delivering balanced growth is at the heart of our renewed unknown business model.

And for US It was therefore very important to close this last quarter of the year with positive volume mix concretely up plus 8% versus year ago.

At the same moment the price effect continued to normalize reaching plus four 3% in Q4 down from plus six 6% in Q3 2023.

We are hence, leaving this last quarter 23, with an encouraging dynamic something you want to bid on as we get into year 2024.

Outside of the like for like products and other had a negative effect of minus four 3%, reflecting notably the depreciation of most currencies against the euro.

Scoop also had a negative impact at minus five 8%, mainly resulting from the deconsolidation of our edp business and water Argentina businesses.

As a result.

Reported net sales at the end of the period totaled $6 7 billion.

And I think I said edp business, but obviously I spoke about Edp, Russia.

Let's now have a look at the performance.

Of each zone in more detail starting with Europe on page 11.

Europe delivered a solid quarter with like for like sales growth at plus 6%, while pricing continued to normalized progressively volume mix was back to positive territory up plus three.

3%.

This was largely driven by ADP.

Start to see the expected benefits from the transformation, which we kicked off in the second semester of 2022.

The team has made great progress in upgrading our portfolio has been discontinuing a number of non competitive echo hughs defined clear swim lanes for our brands is a focus on segments like functionality indigent, Keith and everyday nutrition.

Juergen Esser: Waters posted 8.5% like-for-like growth in the quarter, driven notably by the strong performance of the Evio brand in Europe, Maison in China, and Bonafont in Mexico, to name a few. Let's move on to the Q4 sales bridge on page 10. As Antoine mentioned, delivering balanced growth is at the heart of our Renew Danone business model. And for us, it was therefore very important to close this last quarter of the year with a positive volume mix, concretely up plus 0.8% versus year-to-date. And at the same moment, the price effect continued to normalize, reaching plus 4.3% in Q4, down from plus 6.6% in Q3. We are hence leaving this last quarter 23 with an encouraging dynamic, something we want to build on as we get into the year 2020. Outside of the like-for-like comparison, Forex and others had a negative effect of minus 4.3%, reflecting notably the depreciation of most currencies against the euro.

This fourth quarter, we are particularly pleased with the performance of a number of our key brands, including <unk> Europe.

Yieldco and the Diamond brands, having said that we obviously just at the start of this strategic turnaround and they remain still a lot to be done to fully leverage the power of our brands and products.

Therefore, our focus will remain on executing our brand plan for reinvesting behind our initiatives to make our recent growth dynamics, both stronger and sustainable.

Our water category in Europe delivered a strong quarter led by our global brands.

<unk>, both strong growth coupled with further market share gains.

As well as by the good performance of several of our local brands such as <unk> in Poland or Harrow gate in the UK.

Finally specialized nutrition that delivered a solid performance this quarter IMF posted a resilient performance in the category that remains momentarily soft while our medical nutrition portfolio posted strong growth, notably different by our intuition and enteric cube fitting solutions.

All in oil looking at the full year, you will posted like for like sales growth of plus 9% and the recurring operating margin of 11, 5% down minus 75 bps versus last year important to note that the profit margins in the second semester as expected recovering from their low.

Juergen Esser: The Group also had a negative impact at minus 5.8%, mainly resulting from the deconsolidation of our EDP business and Waters Argentina business. As a result, reported net sales at the end of the period stood at 6.7 billion euros. And I think I said EDP business, but obviously, I spoke about EDP Russia. Let's now have a look at the performance of each zone in more detail, starting with Europe on page 11. Europe delivered a solid quarter with like for like sales growth at plus 6% while pricing continued to normalize gradually, and volume mix was back to positive territory, up plus 0.3%. This was largely driven by EDP, where we start to see the expected benefits from the transformation which we kicked off in the second semester of year 2022. The team has made great progress in upgrading our portfolio, has been discontinuing a number of non-competitive SKUs, and has defined clear swim lanes for our brands, with a focus on segments like functionality, indulgence, kits, and everyday nutrition. In this fourth quarter, we are particularly pleased with the performance of a number of our key brands, including Actimel, Yopro, and Danone.

Point end of the first semester. Despite the fact that we are accelerating our investment efforts.

Moving on to North America on page number.

North America delivered a solid quarter up plus three 1% on a like for like basis led by volume mix up plus two 8% by pricing remained positive at.

<unk> plus <unk>, 3% growth was led by Kofi creations, where our flagship brands International delight in Stoke which is another quarter of stellar growth.

Coupled with market share gains.

In yogurt Iqos continued its strong momentum, especially for its high protein propositions, driven by expenditures space and sustained high velocities in.

In plant based we launched initiatives to restore our short term competitiveness.

Some encouraging signs of the last weeks of 2023.

So we are still far from where we want to be in parallel to those plants. We started taking action to sharpen our proposition in the category as mentioned bands brands, which make us confident in the future of this segment.

Looking at the full year, North America delivered plus five 8% like for like growth was positive volume mix at plus 2%.

Operating margin stood at 10, 1% flat versus last year in the context, where we accelerated the investments behind our brands.

Moving on to China, and North Asia, and Oceania on page number 13 level.

This is all posted strong like for like growth of plus seven 4% in Q4 with volume mix up plus four eight in.

In China specialized nutrition pursued its competitive momentum in IMF upturn it posted another quarter of solid growth and continued to gain market share.

Juergen Esser: Having said that, we are obviously just at the start of this strategic turnaround, and there remains a lot to be done to fully leverage the power of our brands and products. Therefore, our focus will remain on executing our brand plan, and reinvesting in our initiatives to make our recent growth dynamics both stronger and sustainable. Our water category in Europe delivered a strong quarter, led by our global brands Evian and Volvic, which registered both strong growth coupled with further market share gains, as well as the good performance of several of our local brands, such as Gilets Drues in Poland or Harrogate in the UK.

Thanks to our local team that is running a tight control on our inventory and our pricing levels. While the market is still transitioning from old to newly registered the recipes.

Our medical portfolio registered double digit growth driven by both diagnosed vision and pediatric specialties in.

In waters milestone delivered another quarter of double digit growth led by volumes and market share gain confirming the progress we are making in turning it around.

Outside China, our Edp business in Japan posted another quarter of double digit growth led by a functional dairy range and in particular by our TV and <unk> brands.

Looking at the full year 2023 was a strong year for the zone with like for like growth up plus 10, 1% and the stable recurring operating margin at around 30%.

Moving on to Latin America on the next page the zone logistic plus eight 1% like for like growth in the fourth quarter, mainly driven by price up plus nine 4%. The performance of the quarter was driven by all geographies and categories and Mexico, our water brands Butterfield posted high single digit growth next to that.

Juergen Esser: Finally, Specialized Nutrition delivered a solid performance this quarter. IMF posted a resilient performance in a category that remains momentarily soft, while our Medical Nutrition Portfolio posted strong growth, notably driven by oral nutrition and anterior tube feeding solutions. All in all, looking at the full year, Europe posted like for like sales growth of plus 5.9% and a recurring operating margin of 11.5%, down minus 75 bps versus last year. It is important to note that the profit margins in the second semester were, as expected, recovering from their low point at the end of the first semester despite the fact that we are accelerating our reinvestment effort. Moving on to North America on page 12,

Iqos drove the performance of our dairy portfolio in the country.

In Brazil, we progress on the transformation of our business model towards more value added part of the portfolio.

Prioritizing less competitive segments and ranges.

Growth was driven by the more premium part of the portfolio and here, especially by the <unk> brand, which has been growing deep double digit in this quarter.

As a direct result of all the work done in this region, we strongly improved our recurring operating margin in 2023 up plus 247 bps.

And the encouraging first step towards a profitable business model in Latin America.

And finally on page 15, the rest of the zone.

Posted plus three 5% like for like growth in Q4.

The growth was led by price up plus six 4% by volume mix decreased by minus two 9%.

Juergen Esser: North America delivered a solid quarter, up plus 3.1% on a like-for-like basis, led by volume mix up plus 2.8%, while pricing remained positive, at plus 0.3%. Growth was led by Coffee Creations, where our flagship brands, International Delight and Stoke, registered another quarter of stellar growth. Caput is my pitcher again.

The loan performance was notably driven by the sustained momentum in specialized nutrition, especially in Asia and middle East in Indonesia, It's worth mentioning the continued strong performance of our SDN brands again up double digits in Q4 with strong market share gains during the year.

And as mentioned by Antoine <unk> made good progress in strengthening our business model in Africa bidding more structural resilience with a focused stronger and more predictable profit and cash contributions.

The good momentum in this region in both specialized nutrition, but also in our dairy platform enabled us to improve the profitability in the zone and we closed the year 2023 with the recurring operating margin up plus 155.

Juergen Esser: In yoghurt, oil costs continued their strong momentum, especially for its high-protein propositions, driven by expanded shelf space and sustained high velocity. In plant-based foods, we launched initiatives to restore our short-term competitiveness, some encouraging signs in the last weeks of 2023, although we are still far from where we want to be. In parallel to those plans, we started taking action to sharpen our proposition in the category, as mentioned by Antoine, which makes us confident in the future of this sector. Looking at the full year, North America delivered plus 5.8% like-for-like growth with positive volume mix at plus 0.2%. Recurring operating margins stood at 10.1%, flat versus last year, in a context where we accelerated the reinvestment behind our brand. Moving on to China, North Asia, and Oceania on page 13,

This last year.

Let's now move onto the margin bridge on page number 16.

Recurring operating margin stood at.

The 12, 6% in 2023, an improvement of plus 40 bps versus last year.

This strong improvement was firstly driven by our margin from operations, which increased by as much as plus 142 bps compared to 2022.

After several years of your.

It resulted from an improved quality of top line growth as well as for the delivery of the new record level of productivity.

Enabling us to offset the cost inflation, we continued to experience last year.

Leveraging the strong expansion of our margin from operations, we invested as much as 97 bps back into our business.

We invested for example in product superiority and differentiation across the different categories. As we strive to offer the best value proposition is it from a quality taste benefit sustainability all value for money standpoint.

However, the bulk of the reinvestment went into A&P to support of our brands visibility in distribution.

The new campaigns of course, stork, our cig, which as I mentioned, we just launched in U S for the Super Bowl, which are really great illustrations.

What is going on yet.

Moving onto the EPS bridge on slide number 17.

Juergen Esser: The Zone posted strong like-for-like growth of plus 7.4% in Q4, with volume mixed up by plus 4.8%. In China, specialized nutrition maintained its competitive momentum. In IMF, Uptime Meals posted another quarter of solid growth and continued to gain market shares, thanks to our local team that is running tight control on our inventory and our pricing levels, while the market is still transitioning from old to newly registered recipes. Our medical portfolio registered double-digit growth, proven by both diet and nutrition and pediatric specialists. In Waters, MyZone delivered another quarter of double-digit growth, led by volumes and market share gains, confirming the progress we are making in turning it around. And outside China, our EDP business in Japan delivered another quarter of double-digit growth, led by our functional dairy range, and in particular, by our Activia and Oikos brands.

Our recurring EPS reached three <unk> 54 in 2023, which represent plus three.

The increase compared to last year.

The main contributor of recurring EPS growth was the operational performance, we just been through at plus eight 3%. This strong operational performance was potential.

Actually offset by a negative scope effect of minus four 5%, mainly resulting from the deconsolidation of our edp business in Russia.

Currency and others had a slightly positive impact.

We opened 9% and I'm, particularly pleased with our continued progress on deleveraging allowed us to largely mitigate the impact of higher interest rates that already had an impact.

Negative minus 0.4%.

Moving onto the next page.

As Antoine said previously.

Focus on cash generation is starting to pay off in 2023, we've registered an all time record of free cash flow, reaching $2 6 billion. It represents more than $500 million of increased compared to last year on the back of a disciplined.

Oriented capital allocation, coupled with strong improvement in working capital ratios.

Our NYSE stood at nine 5% further improving from the eight 9% of last year and while we continue to not be satisfied with that level of returns. It shows that we are moving into the right direction with commitment and financial rigor.

As a result of the strong financial performance of 2023, we are proposing to our shareholders a dividend of <unk> 10 per share.

Juergen Esser: Looking at the full year, 2023 was a strong year for the zone with like-for-like growth up plus 10.1% and a stable recurring operating margin at around 30%. Moving on to Latin America, the zone registered plus 8.1% like-for-like growth in the fourth quarter, mainly driven by price, up plus 9.4%. The performance of the quarter was driven by all geographies and categories.

Which represents a 5% increase compared to last year.

And so finally, let's now move on to the next page to discuss about this year year 'twenty 'twenty for the guidance for 2020 for which we are issuing today is fully consistent with the midterm ambition we shared during our March.

March 2022, and is about delivering like for like sales growth between three and 5%.

While improving moderately our recurring operating margin compared to the previous year two.

2024 is an important year for us and we started with confidence in our renewal strategy and we continue to focus on consistent execution and delivery.

Juergen Esser: In Mexico, our water brand Bonafont posted high single-digit growth. Next to that, Oikos drove the performance of our dairy portfolio in the country. In Brazil, we progressed on the transformation of our business model towards a more value-added part of the portfolio, deprioritizing less competitive segments and ranges; growth was driven by the more premium part of the portfolio and here, especially by the JUPRO brand, which has been growing steep double digits this quarter. As a direct result of all the work done in this region, we strongly improved our recurring operating margin in 2023 to plus And finally, on page 15, the rest of the world zone.

In line with our midterm ambition, we will make the next milestone to connect with our desired business model, we have balanced growth between volume mix and price as well as disciplined capital allocation are fundamental for long term value creation.

And with that let me hand, it back to Antoine for the conclusion.

Thank you.

Youre doing and moving straight to page or 'twenty one.

Chart I saw it would be of interest to you give you a sense of the magnitude of the transformation, we have been going through over the past two years and of the breadth of.

The topic, we started addressing to make danone future approved.

I'll go through each and every one of the points, but let me pick a few.

On the governance front, we now have a generally strong board of directors truly international reserves.

With the majority of Skus or excuse, bringing us the right balance of support expertise and of course challenge.

As al mentioned earlier.

We have started changing some aspects of the culture of the company.

Pointing a world leading talent at Comex, putting long term value creation at the center of the incentive schemes changing the ways of working for <unk>.

We are implementing a culture of performance our culture of accountability culture, where we put the problems on the table and we sold them together, a culture, where we consistently raise the bar.

Juergen Esser: Posted +3.5% like for like growth in Q4. The growth was led by price up + 6.4% while the volume mix decreased by minus 2.9%. The zone performance was notably driven by the sustained momentum in specialized nutrition, especially in Asia and the Middle East. In Indonesia, it's worth mentioning the continued strong performance of our SGM brand, again up double digits in Q4, with strong market share gains during the year. And, as mentioned by Antoine, we made good progress in strengthening our business model in Africa, building more structural resilience with a focus on stronger and more predictable profits and cash contributions. The good momentum in this region in both specialized nutrition and our dairy platform enabled us to improve profitability in the zone. And we closed the year 2023 with a recurring operating margin of plus 155 versus last year. Let's now move on to the margin bridge on page 16.

And stop playing to win.

As promised two years ago, we started reinvesting in key capabilities.

In science and technology as you could see with the opening of our <unk> Center, which a number of you have visited.

Better leveraging our partners and suppliers to co develop breakthrough products and technologies.

In the progressive upgrades of our industrial network as you have recently seen with the opening of our plant based facility and vehicle Tau.

All the investments in our medical nutrition facility in hopefully.

And obviously in marketing.

Although re basing of Argentine network also the strengthening.

Our category capabilities.

Last as we discussed in the introduction, we kept evolving our portfolio to make it better position to deliver long term value creation.

So quite a bit of progress, but obviously still a lot to do.

Moving on now to page 22.

You might remember the pages on the screen from our capital markets event in March 'twenty two.

At the time through these three pages, we did three things.

Juergen Esser: Recurring operating margins stood at 12.6% in 2023, an improvement of plus 40 bps versus last year. This strong improvement was firstly driven by our margin from operations, which increased by as much as + 142 bits compared to 2022. After several years of Euro, it resulted from an improved quality of top-line growth, as well as from the delivery of a new record level of product, enabling us to offset the COX inflation we continued to experience last year. Leveraging the strong expansion of our margin from operations, we reinvested as much as 97 bips back into our business. We invested, for example, in product superiority and differentiation across the different categories as we strive to offer the best value proposition, either from a quality, taste, benefits, sustainability, or value-for-money standpoint. However, the bulk of the reinvestment went into A&P to support our brand's visibility and distribution. The new campaigns of Oikos, Stoke, or Silk, which Antoine mentioned, were just launched in the US for the Super Bowl, which are really great illustrations of what is going on now. Moving on to the EPS bridge on slide number 17.

We've confronted with ADT pulse Farnsworth.

We laid out a clear strategy.

And we laid out our new business model.

By calling out the winners.

Performance in the core.

We are very clear and very differentiated jobs to be done to each and everyone in the organization.

And we are looking to targets resource and capital more precisely and more efficiently.

By calling out four strategic pillars, and four capabilities, we provided clarity to everyone.

And we as clarity comes focus and accountability.

And last but not least we committed to a different business model.

One that is conducive of long term consistent and predictable value creation.

We now look for quality growth with volume mix components.

<unk> four operating leverage.

And creates the space for increased investments behind our brands and our capabilities.

All of that.

While improving moderately.

Insistently.

<unk> operating margin and we put value creation and our ROI at the heart of business decision.

The strong set of results with <unk>.

<unk> progress over the last quarters.

Direct translation overs are consistently delivering of danone.

Let me now move to the final page of this presentation.

While a lot has been done and it shows in the results. There is much more we can do.

Our new denim journey is far from over and as said long term consistency is the name of the game.

Juergen Esser: Recurring EPS reached €3.54 in 2023, which represents a plus 3.4% increase compared to last. The main contributor to recurring EPS growth was the operational performance we just went through at plus 8.3%. This strong operational performance was partially offset by a negative scope effect of minus 4.5%, mainly resulting from the deconsolidation of our EDP business in Russia. Currency and others had a slightly positive impact, up plus 0.9%, and I'm particularly pleased that our continued progress on deleveraging allowed us to largely mitigate the impact of higher interest rates, so that it only had an impact of negative minus 0.4%.

<unk> just told you we expect 24.

Another year of progress in.

In line with our midterm ambition.

24 is about delivering on the strategic agenda.

We start also projecting ourselves beyond 24 in the next chapter of renewable.

We are getting ready to share with you how we will keep progressing where it is.

The same <unk> and.

<unk> was the same discipline.

Okay.

While further strengthening and future proofing dialogue.

To that effect, we are happy to invite you to our next capital markets event in June and we will obviously communicate all the details in due course.

With that let me hand, this over to <unk> for the Q&A materials over to you. Thank you very much. So we are opening the Q&A session.

<unk> UBS.

The first one is on your pricing outlook, because I think negotiations with retailers in Europe are now coming to a close.

Juergen Esser: Moving on to the next page, as Antoine said previously, the focus on cash generation is starting to pay off. In 2023, we registered an all-time record of free cash flow, reaching 2.6 billion euros. It represents more than 500 million euros of increase compared to last year, on the back of a disciplined, return-oriented capital allocation, coupled with a strong improvement in the working capital ratio. Our ROIC stood at 9.5 percent, further improving from the 8.9 percent of last year. And while we continue to not be satisfied with that level of returns, it shows that we are moving into the right direction with commitment and financial rigor. As a result of the strong financial performance of 2023, we are proposing to our shareholders a dividend of €2.10 per share, which represents a 5% increase compared to last. And so, finally, let's now move on to the next page to discuss this year, 2024.

So I wonder if you could provide a bit of granularity on the price growth youre anticipating for 2024.

And in particular, if you expect the implementation of <unk>.

Additional price increases or Conversely, if some rollback or may be step up in from our activities.

More likely and I guess tied to all of this what kind of level of inflation or potentially deflation are you expecting for your cost of goods sold.

In 2024.

And then my second question is on Europe.

Investments.

2023.

The second consecutive year marked pickups and reinvestments from just some of it.

Poor trend will continue in 2024.

So my question is.

What are the key areas, where you significantly stepping up your efforts.

What returns are you already getting on this incremental investments.

And I guess, which metric.

Should we be looking at going forward to assess the degree of success.

Reinvestment so any color on that would be helpful. Thank you.

Juergen Esser: The guidance for 2024, which we are issuing today, is fully consistent with the midterm ambition we shared during our CME in March 2022 and is about delivering like-for-like sales growth between 3 and 5 percent while improving moderately our recurring operating margin compared to the previous year. 2024 is an important year for us, and we started with confidence in our renewal strategy. We will continue to focus on consistent execution and delivery in line with our mid-term ambition. We will make it the next milestone to connect with our desired business model, where balanced growth between volume, mix, and price, as well as disciplined capital allocation, are fundamental for long-term value creation. And with that, I will hand it back to Antoine for the conclusion. Thank you, Jurgen.

Good morning, Joe.

The address with zero drawn on.

On both question I'm sure.

On pricing.

Be clear I mean, the first thing is there is no such thing as deflation I mean, there is decent.

<unk> in the market, meaning are the or increase of prices have moderated.

But there is still inflation I mean, there is inflation on our salary inflation still.

<unk>.

A number of raw materials. There is also quite a bit of volatility some of it is linked to our two geopolitical even so we expect to off price.

Price components into our into our growth obviously, the price component differs region by region. Because you don't have the same dynamics in each.

Each.

Every all of the regions.

But we are not in the world of deflation, we are in the world of slowing down or slowing down inflation.

Yogurt anything.

Maybe two or three elements first good morning beyond the first inflation as you saw came down quarter by quarter exactly as the exit.

Antoine de Saint-Patrick: Moving straight to page 21, and a chart I thought would be of interest to you. It gives a sense of the magnitude of the transformation we have been going through over the past two years and of the breadth of the topics we started addressing to make Danone future-proofed. I won't go through each and every one of the points, but let me pick a few.

And we expect inflation to further normalize in 2024, but as Antoine said, David inflation, what is driving inflation as a few elements.

Is the element like transport and everybody talks about what's happening in terms of what you see.

Oil prices Baker.

80 $485.

It will be a driver and one was talking about cost of labor, but obviously also the forex is playing a role, especially in the emerging market and last but not least let me mention.

Antoine de Saint-Patrick: On the governance front, we now have a genuinely strong board of directors, truly international, with a majority of CEOs or ex-CEOs, bringing us the right balance of support, expertise, and, of course, challenge. As mentioned earlier, we have started changing some aspects of the culture of the company, appointing world-leading talent at COMEX, putting long-term value creation at the center of the incentive scheme.

Very high prices today in the market paid for sugar.

And should perhaps.

This is driving inflation also in year 2024, which means yes, David do you need to be pricing it will be much more selective pricing, depending on the category and depending on the region, but pricing will stay positive overall for year 2020.

On your on your second question on the investments as we said.

Investing fundamentally in three buckets, we are investing behind that.

Antoine de Saint-Patrick: We are implementing a culture of performance, a culture of accountability, a culture where we put the problems on the table and we solve them together, a culture where we consistently raise the bar and start playing to win. As promised two years ago, we started reinvesting in TPAC capabilities, in science and technology, as you could see with the opening of our SACLE Center, which a number of you have visited, in better leveraging of partners and suppliers, to co-develop breakthrough products and technology, in the progressive upgrades of our industrial network, as you have recently seen with the opening of our plant-based facility in Villecontal, or the investment in our medical nutrition facility in Opoly, and obviously in marketing, with the rebasing of our JNC network, but also the strengthening, of our category, capability.

Quality of our products.

We're investing behind the visibility of our brands.

Yes.

Capex.

I would say.

The first two.

When we look at it.

Obviously, our step by step by step.

Product shipped Iot.

Which is all of us.

Translation.

Our competency to your competitiveness of Omics zebra in the marketplace. So we are seeing a step by step by step our progress in our market share performance and Youre seeing some China, which we are not.

Well I want to I want to be at the same applies are in some ways through our advertising so advertising are progressively.

Restoring our ratios of shell those show a market we start much more consistently.

Delivering on all supporting our innovation in the long run I mean, we either install.

Antoine de Saint-Patrick: Law... As we discussed in the introduction, we kept evolving our portfolio to make it better positioned to deliver long-term value creation. So quite a bit of progress, but obviously still a lot. Moving on now to page 22. You might remember these three pages on the screen from our Capital Markets event in March 2020. At the time, through these three pages, we did three things.

<unk>.

She bought team with robust advertising when we launched and then not following or.

Following through in year, two and year, three you've seen something changing.

Things start to argue also internally we look at our product superiority, we look at advertising should value Iot, we keep talking obviously market share, which Richard touching our our bond liquidity and we are step by step by step stepping up.

Both the way we look at generation much more selective I mean, we've reduced organization by 30% this year, while delivering our growth and quality growth.

Antoine de Saint-Patrick: We confronted the reality in a transparent way. We laid out a clear strategy, and we laid out our new business model by calling out the winners, the underperformers, and the core. We have very clear and very differentiated jobs to be done for each and everyone in the organization, and we are looking to target, resource, and capital more precisely and more efficiently.

Of launchers should be much more selective on what we launch so that the return on investments on what relaunch is at much better we do the same when it comes through advertising better qualifying investing for longer or changing our balance between all working or not working.

The investments we are making some capabilities are you will see in the longer term.

When you invest structurally science or to create.

Antoine de Saint-Patrick: By calling out four strategic pillars and four capabilities, we provided clarity to everyone, and with clarity comes focus and accountability. And, last but not least, we committed to a different business model, one that is conducive to long-term consistent and predictable value creation. We now look for quality growth with the volume mix component, which allows for operating leverage and creates the space for increased investments beyond our brands and our capabilities. All that, while improving moderately but consistently, are recurring operating margin. And we put value creation and ROIC at the heart of business decisions. The strong set of results we share today but also the continuous progress over the last quarter is a direct translation. All of us are consistently delivering on Renew Danone.

To create long term competitive advantage in medical nutrition.

The IMF thats not something that <unk>.

Our songs that are.

Some may talk we published more.

We put more IP on the market.

But that's harder to I mean, that's harder to track except for us so much more discipline.

Less launches of better quality.

If anything our competitiveness when it comes to the quantum of our advertising investment.

Using differentiating capabilities for the long term when it come to sites.

Thank you very much.

Yes.

Thank you.

The next question.

Jon Cox.

Kidney.

Yes.

Okay.

Hi, John.

Yes, Hi, I'm sorry.

Just your interest.

Morning, guys. Congrats on the on the figures a couple of questions.

Just on the free cash flow, obviously, we cant really power side working capital movements were can you just talk us through the improvement and where the working capital improvements will be ongoing.

Antoine de Saint-Patrick: Let me now move to the final page of this presentation. While a lot has been done, and it shows in the results, there is much more we can do. The Renew Danone journey is far from over, and as I said, long-term consistency is the name of the game. As Jurgen just told you, we expect 2024 to be another year of progress, in line with our midterm ambitions. If 24 is about delivering on the strategic agenda, we start also projecting ourselves beyond 24 in the next chapter of Renew.

You have negative working capital already how much how much farther that whole process can go and maybe.

Talk somewhat about the incentives managers have to ensure that strong cash flow generation continues and then maybe second question just on the capital market event and it's great you keep going back to.

Some of the slides, we saw a couple of years ago.

But clearly and I.

Antoine de Saint-Patrick: We are getting ready to share with you how we will keep progressing with the same regularity and, may I say, with the same discipline all over the long run while further strengthening and future-proofing Danone. To that end, we are happy to invite you to our next Capital Markets event in June, and we will obviously communicate all the details in due course. And with that, I will hand it over to Mathilde for the Q&A. Mathilde, it is over to you. Thank you very much.

I think you said last year.

Event, we had that Youll now growing in line with your cat degrees.

Should we expect you to be on the next step of the staircase as it were in terms of growth dynamics and assume that all of that sort of things will be unveiled at the capital market events, namely an increase in that 3% to 5% growth and also potentially youll margin improvement is going to be more lumpy.

Going forward given the fact of all the divestments you've done and.

The reshaping the portfolio. Thank you.

Mathilde Rodin: So we are opening the Q&A session with a question from Guillaume Delmas, from UBS. The first question is on your pricing outlook, because I think negotiations with retailers in Europe are now coming to a close. So I wonder if you could provide a bit of granularity on the price growth you are anticipating for 2024. And, in particular, if you expect the implementation of additional price increases, or conversely, if some rollback or maybe step up in promotional activities are more likely, and I guess tied to all of this, what kind of level of inflation or potentially deflation are you expecting for your cost of goods sold in 2024?

So there are two will do a let me maybe just thoughts for us.

CME and are in yogurt, and we will take the other two questions well first we will give you that <unk> was maybe that the CME. So I'm not going to I'm not going to anticipate on that I think the important points are John is one of consistency and discipline.

So, it's all being able and Thats the model Thats, all we have shared with the market.

Lots of value in the long run.

Being extraordinarily consistent in the delivery and the <unk>.

College of offshore delivery and making sure that all you can repeat again and again and again over the long run that quality and consistency of delivery so more on that.

Guillaume Delmas: And then my second question is on your reinvestment, because 2023 was the second consecutive year of a marked pickup in reinvestment, and from the sound of it, the upward trend will continue in 2024. So my question is:

At the CME, but it's a message of consistency solid productivity over time.

And good morning, John.

The cash flow as you say that's an element.

Going to the next level in the end there are three key drivers. The first driver is that the cash flow.

Operating activities has been nicely increasing as a result of the combination of our growth and margin improvement, but as important as that is debt.

Antoine de Saint-Patrick: What are the key areas where you're significantly stepping up your effort? What returns are you already getting on this incremental investment? And, I guess, which metric should we be looking at going forward to assess the degree of success of these reinvestments? So any comment on that would be helpful. Thank you. Good morning, Guillaume. We'll do a duet with Juergen on both questions, I'm sure.

Capital expenditure.

Below $1 billion Johansson allocating debt capex and the very disciplined return oriented manner.

A lot of it going into by the way capacity expansion in <unk> was mentioning before in the U S.

Paul in Turkey on pathetic.

And last but not least further expanding our working capital which has been already by the end of last night negative.

<unk> been improving it by another 150 bps.

A lot of I would say rigorous focus on the different elements and we believe this fall.

Antoine de Saint-Patrick: On pricing, let's be, I mean, let's be clear. The first thing is, there is no such thing as deflation. I mean, there is disinflation in the market, meaning the increase in prices has moderated. But there is still inflation. I mean, there is inflation on our salaries; there is still inflation on a number of raw materials.

So qep's heal.

Obviously, all saw the results of.

Enhanced focus of the whole organization on cash flow and then as I mentioned in the prepared remarks.

Holistic value creation is now on the agenda of all our executives and so with cash flow and this is definitely a building it's a.

Material part of.

It's a very material part of the incentive of our.

Antoine de Saint-Patrick: There is also quite a bit of volatility, some of it linked to our geopolitical events. So we expect to have a price component in our growth. Obviously, the price component differs region by region because you don't have the same dynamics in each and every one of the regions.

Everybody in the organization.

Okay.

Im sorry.

Sorry, just on the back to the CME event, you said at the start of the.

Today's event.

Not regard 40 basis points as moderate and obviously youre guiding through 2023 is moderate and you came at 10 bps better than the street.

Antoine de Saint-Patrick: But we are not in a world of deflation. We are in a world of slowing down inflation. Are you doing anything, Guillaume? Yeah, maybe two elements.

This is what I'm looking at in terms of should we expect a few years with potentially.

More than <unk> could moderate.

Improvement just because of what you've done with the portfolio reshaping the shift too.

Juergen Esser: First, good morning, Guillaume. First, inflation, as you saw, came down quarter by quarter exactly as we expected. And we expect inflation to further normalize in 2024. But, as Antoine said, there will still be inflation. What is driving inflation are a few elements, an element like transport, and everybody talks about what's happening in terms of sea transport.

Higher value added products.

Should we expect you to just keep continuing to keep pumping money into A&P and advertising to drive the top line growth.

John also gives us staying just.

<unk> is what we said when we were together in March 2022, we said the period of 'twenty to 'twenty four.

We are going for 3% to 5% like for like growth and moderate margin improvements and this is what we are sticking forward. So for this year 2024, it will be composed of further gross margin expansion.

Juergen Esser: You see oil prices back around $84, $85 to be a driver. Antoine was talking about the cost of labor, but obviously, the forex is also playing a role, especially in emerging markets. And last but not least, let me mention the very high prices today in the market paid for sugar and food capital. This is driving inflation also in the year 2024, which means, yes, there will be a need to introduce prices. It will be much more selective pricing, depending on the category and depending on the region, but pricing will stay positive overall for the year 2024. On your second question on reinvestment, as we said, I mean, we are investing fundamentally in three buckets. We are investing in the quality of our product.

With balanced.

Mix and price contribution sustained level of productivity.

And the reinvestment because we need to continue investing in order to make this dynamic we are leaving with 2024 to make it truly sustainable that is.

Very important for us.

The 2020 for volume mix positive cannot be run off we will not go into something which is truly sustainable and competitive from a value creation standpoint, and reinvestment is important so yes, if it sticks to moderate margin improvement and any good news you will get in during the year, even as we invest into the sustainability of all.

Yes.

Thanks very much.

Thank you Jim.

The next question from Warren Ackerman.

Yes. Good morning, Good morning, everybody can you hear me okay, yes.

Yes, hi, good morning, good morning onto ammonia then three from me as well. So first one on China can you maybe dive into what you're seeing on the ground in China infant formula.

Well, we on the entry into ultra premium are you kind of behind the plan on <unk> with the segmentation.

Juergen Esser: We are investing in the visibility of our brands, and we are investing in our capabilities. I think on the first two, the way we look at it is obviously step by step, by step we are driving product superiority, which is progressively translating into the competitiveness of our mixes in the marketplace. So, seeing our step-by-step-by-step progress in our market share performance, and you see some trends in it, but we are not there where I want to be. And the same applies in some ways to advertising.

I know you increasing investments in the first half.

Tourists coming can you, maybe just update us on what youre seeing in the quarter volume.

Rice mix have those local Chinese pay is being kicked out of the market or are they still with that.

That would be useful maybe any color on.

And true clinical as well, where we are on new product registrations under the new regulation for special medical purposes will be it will be helpful. And then second one just on Edp maybe.

Antoine de Saint-Patrick: So advertising, we are progressively restoring our ratios of share of voice, and share of market. We start much more consistently, and are delivering on or supporting our innovation in the long run. I mean, we had a nice story of supporting our innovation with a burst of advertising when we launched and then not following up or following through in year two and year three.

Maybe one for Don just can we dive into that mix number for Q4 that 3%.

Help us if you can break that down.

Europe U S and Latam and maybe.

Talk about what you're seeing in Edp by channel.

Antoine de Saint-Patrick: You've seen something changing in things like Yopro. So internally, we look at product superiority. We look at advertising superiority. We keep track, obviously, market share. We keep tracking our brand equity, and we are, step by step, by step, stepping up the way we look at innovation, being much more selective. I mean, we've reduced our innovation by 30% this year while delivering growth and quality growth and number of launches. So we are much more selective on what we launch so that the return on investment on what we launch is much better. We do the same when it comes to advertising, better qualifying, investing for longer, and changing our balance between working or not working.

Our in home versus out of home.

And on Pompe I used it sounds like you're pretty happy with our progress.

In Europe, but I didn't hear much comment on silk in the U S. So yes, one on China, one on ADP vol mix. Thanks.

Well, let me start with China.

Obviously, we are we are happy with the quality as much as the quantity of growth.

In China.

Keep being extraordinary.

Extraordinary strong although your question is on <unk>.

Ethane outcome I'll come back towards and enrollment.

Consistent turnaround of what we have also as module is really is really encouraging so getting back to.

To your question on SM three sides, we have launched in quarter three our essentials.

Which is the first additional layer.

Antoine de Saint-Patrick: The investment we are making in some capabilities will pay off in the longer term. I mean, when you invest structurally in science to create a long-term competitive advantage in medical nutrition, in IMF, that's not something that you turn from one day to the other. There are signs that some may track.

Premium portfolio.

Our first indications of really are encouraging.

As you know nurture ish.

Is coming although towards the end of this year.

What Christian has a couple of things I mean, the first thing is as we said last time I think.

Sure.

We got all the registration.

We are looking for and we are in a position where we come out of.

Antoine de Saint-Patrick: We publish more, we put more IP on the market, but that's harder to track except for us. So, much more discipline, fewer launches of better quality, rebuilding our competitiveness when it comes to quantum or advertising investment, building differentiating capabilities for the long term when it comes to science. Thank you very much.

Our portfolio, which we believe is our.

Stronger.

The second point that is probably important in China when it comes to IMS and often precede it as well is we still we still have opportunities of penetration in.

In tier three and tier four cities.

Sure.

We have opportunities as all the new legislation is coming to bear.

Mathilde Rodin: Thank you, Guillaume. So the next question is from Jon Cox. Yeah, hi, sorry, I missed your intro.

With consolidation of the market to some people and jets.

Jon Cox: Good morning, guys. Congratulations on the figures. A couple of questions for you. Just on the free cash flow, obviously, we can't really tell out what the working capital movements were. Can you just talk us through the improvement and whether working capital improvements will be ongoing, i.e., you have negative working capital already, you know, how much further that whole process can go, and maybe talk somewhat about the incentives managers have to ensure that strong cash flow generation continues? And then maybe a second question just on the capital market event. And it's great you keep going back to, you know, some of the slides we saw a couple of years ago.

<unk> question. So it is going to be on infant formula.

Multi pronged.

<unk>.

Well, we drive our innovation.

Sure.

I mean, we drive our penetration.

Sure.

Distribution.

We leverage.

We leverage the consolidation of the market, it's not going to be by the way a linear our G&A, you'll remember that our last year, our Shanghai was closed.

We offered so all we had very strong starts to the year, so theres going to be a veto.

Normalization, there, but the overall direction is on.

On the adults are we keep our drawing from strength to strength, we have as you know our tomo license there.

We are extremely strong.

<unk> I think what is interesting and we said it would.

Mark you saw we are all working on more and more on the post hospital discharge.

Our wisdom nutrition powder, which a number of our <unk>.

Antoine de Saint-Patrick: But clearly, and I think you said last year at the event we had that you're now growing in line with your categories. You know, should we expect you then to be on the next step of the staircase, as it were, in terms of growth dynamics, and assume that all of that sort of things will be unveiled at the capital market event, namely an increase in that three to five percent midterm growth goal? And also, potentially, your margin improvement is going to be more lumpy going forward, given the fact that you have all the divestments you've done and the reshape of the portfolio. Thank you. So there are two we'll do.

In order to further.

Expand our.

The journey.

And having actually innocent are in China, three legs really.

Which is the adult medical the pediatrics and what we have in IMF with similar type of.

Similar type of profitability is.

He is actually <unk>.

Helping us further.

The resilience of the.

Of the business so.

We keep we keep moving in in China, we keep strengthening our business.

Methodical methodical way being very disciplined on what is international which is local but very disciplined by the way on our inventories our level.

Antoine de Saint-Patrick: Let me maybe start with the CME, and Jurgen will take the other two questions. Well, first, we will leave it at the CME once we leave it at the CME. So I'm not gonna anticipate on that.

To make sure that we keep.

<unk>.

Business.

And maybe a good morning, Ron just one one element to complement on the China.

One of the discussions are above was about margin levels you saw margin levels remain.

In the year 2023, we had.

Juergen Esser: I think the important point, Jon, is one of consistency and discipline. So it's being able to, and that's the model that we have shared with the market. You create lots of value in the long run by being extraordinarily consistent in delivery and the quality of your delivery and making sure that you can repeat that quality and consistency of delivery over the long run. So more on that at the CME, but it's a message of consistency, solidity, and predictability of delivery. And on the cash flow, as you say, that's an element of pride going to the next level. In the end, there are three drivers.

Investment in the first methanol to support the transformation of our portfolio in IMF.

Second semester margin.

<unk>.

Think that something Thats, so which gives us confidence in the interim.

The Chinese the value creation moving forward and it comes to your question on Edp, you asked me right.

We're very pleased with the last quarter on the category performance for 5% growth two 5% comprised 2% from volume mix.

Almost entirely driven by Europe, and North America, and as a consequence of the.

Reset of the platform.

<unk>.

Paul.

During the year.

In the U S, particularly coffee creamers.

Platform really continue to outperform the market and this is an area of <unk>.

<unk>, we have been very intentionally investing behind it.

In Europe.

Juergen Esser: The first driver is that the cash flow from operating activities has been nicely increasing as a result of the combination of our growth and margin improvement. But as important as that is that capital expenditure remains below 1 billion euros, and we are allocating that capex in a very disciplined, return-oriented manner. A lot of it going into, by the way, capacity expansion Antoine was mentioning before in the U.S., in Poland, and in Turkey on strategic assets. And last but not least, further expanding our working capital, which was already quite negative at the end of last year. We have been improving it by another 150 bits.

Many of the fundamental powder metals are going up and so our volume mix for <unk> in Europe, and you look at the shelf share when you look at the location on the shelf.

All of this is contributing to take that market share has been sequentially stabilizing in Europe as it has been ultimately contribute to the expected DSO Edp Epo has been contributing to this good picture of the Edp category overall, when you look at it through the lens of channels.

We see positive contribution of volume mix across the channels, but you are right to say that on premise.

Contributing do most steep double digit.

Across the geographies, which is for North America, which is true for Europe and is a result of the focus of the team on this journey, which offers great opportunities and this is true for our yogurt platform.

For our plant based portfolio, especially.

Juergen Esser: There's a lot of, I would say, rigorous focus on the different elements, and we believe there are further opportunities here. That's obviously also the result of an enhanced focus of the whole organization on cash flow. And Antoine mentioned in his prepared remarks that holistic value creation is now on the agenda of all our executives, and so is cash flow, and this is definitely bearing its fruits. It's a material part of the, it's a very material part of the incentive of everybody in the organization. Okay, I wonder if I could just ask, yeah, sorry, just on the back to the CME event, or you said at the start of today's event, you would not regard 40 basis points as moderate. And obviously, your guiding for 2023 is moderate, and you came out 10 bibs better than the street.

In Europe, where we have been focusing on that.

Definitely paying.

Maybe two small additional points of to your question on our suite as I said in the prepared remarks, we see the first positive impact.

<unk> are the adjustments and the investments we've made that was a stabilization of op shares is there more to do yes. There is more to do which is why we've relaunched.

Both the advertising platform.

<unk> seen towards something that is much more occasion based and our and benefits are based so the journey is on offer signs are encouraging.

G&A as a wholesaler.

The other thing also that you have the one moving part is in the rest of the world actually with an extraordinary shops in our getting back to profitability touching.

What wasn't trucking so you'll remember that in places like molecule.

Move from 17 brands too.

Below 10 priority that was on volume mix priority there was to restore the integration of the <unk>.

Jon Cox: This is what I'm looking at in terms of should we expect a few years of potentially more than the so-called moderate margin improvement just because of what you've done with the portfolio reshape and the shift to higher value-added products, or should we expect you to just keep continuing to keep pumping money into A&P and advertising to drive top-line growth? Jon, also here, we are staying just consistent with what we said when we were together at the CME in March 2022. We said for the period of 2022-2024, what we are going for is 3-5% like-for-like growth and moderate margin improvement, and this is what we are aiming for also this year, 2024. It will be composed of further gross margin expansion, with a balanced volume mix and price contribution, sustained level of productivity, and reinvestment, because we need to continue reinvesting in order to make this dynamic we are living with in 2024 truly sustainable. Obrehtian, Luis Rojas, Angela Umber, and Thanks very much.

The P&L and step by step by step art mentioned units.

More profitable so it gives you a bit of a sense of.

The various moving parts.

Okay. Thank you guys.

Thank you Aaron next question from Pascal balance.

Thanks.

My first would be on the gross margin should we expect in 2024 kind of a step up increase or because you've faced some tailwind on the raw mat side or should we look more for a gradual recovery in 2024, and then also thereafter.

And then.

Mike.

Second question is I mean.

Sponsor of the Olympics games.

That will be a significant amount you spend on that what is your expectation that we will have an impact on the different divisions and also from a geographical point of view. Thank you.

Okay Pascal.

The address on actually probably on both let me let me start with the Olympic games before we go to the gross margin all into games, obviously is very much centered on France, we are.

We are small in France of the Olympic games.

It is being leveraged in.

Other countries through some local agreements supporting the.

Mathilde Rodin: So next question from Warren Ackerman. Yeah, morning. Morning, everybody. Can you hear me okay?

Local Olympic.

<unk> team.

Everything we do we try to do it.

On return on investments.

Warren Ackerman: Yeah, hi Warren. Hi, morning. Morning, Anton. Morning, Jürgen. Yeah, two for me as well.

So we do it.

Yes.

Yes.

Wait.

I think it will help.

Certainly I hope the cells in law in France.

Warren Ackerman: So the first one on China, can you maybe dive into what you're seeing on the ground in China for infant formula? Where are we on the entry into ultra premium? Are you kind of behind the plan on Aptamil with the segmentation? You know, I know you were increasing investments in the first half, you got Nutris coming. Can you maybe just update us on what you're seeing in the quarter volume price mix? Have those local Chinese players been kicked out of the market? Are they still there?

And we have quite a bit of vibes in France, or we are doing things jointly with all the sponsors large are like careful.

It will help the brand acreage.

Are you might have heard of.

Our <unk> products are we developed for the athletes.

Developed in <unk> produced and failure on the table all of the $13 million or people that we will have our.

Niels our resolve product so.

Good business altogether, good business for our brand equity are in France.

Antoine de Saint-Patrick: That would be useful. And maybe any color on enteral clinical as well, where we are on new product registrations under the new regulation, food for special medical purposes, would be helpful. And then the second one, just on EDP, maybe one for Juergen, just can we dive into that volume mix number for Q4, that 2%, and maybe help us, if you can, break that down by Europe, US, and LATAM and maybe..., hope you enjoyed it. Okay, well, let me start with China, Warren. Well, obviously, we are happy with the quality as much as the quantity of growth in China. I mean, business keeps being extremely strong. Although your question is on SN, I'll come back to it in a moment. I mean, the consistent turnaround of what we have with my zone is really encouraging.

And overall are positive.

Do I expect it to be an absolute game changer.

All in all overall.

Dynamic it's an important building block it will help our equity which will help our business in the in France.

Doug with return on investments in.

In mind so.

Happy with the way it is being managed.

Disciplined.

Not overdoing it as well.

On our gross margin in allergy shot to our true yoga and the name of the game again.

Step by step by step.

Progression driven partly by mix, partly by doing a good good job in our productivity, partly by our conveying are translating into price, what we cannot absorb through our through productivity. So.

We are much improvement.

Boost approach we are in a regular argued.

Antoine de Saint-Patrick: Getting back to your question on SN3, slightly, we launched SNCs in Q3, which is the first additional layer in a premium portfolio. The first indications are really encouraging. As you know, new tourists are coming rather later this year. What we see is a couple of things.

I do apologize.

The only element to it.

<unk> margin I mean, two years ago, what we said is that the financial algorithm. We are aiming for is a valid one.

Price mix growth to drive operating leverage to a local reinvestment, while expanding our margins and I think 2024 and the ways exactly on that.

Antoine de Saint-Patrick: I mean, the first thing is, as we said last time, I think we got all the registrations we were looking for, and we are in a position where we come out with a portfolio which we believe is stronger. The second point that is probably important in China when it comes to the IMF, and I think we said it as well, is that we still have opportunities for penetration in Tier 3 and Tier 4 cities. We have opportunities as the new registration is coming to bear with consolidation of the market because some people didn't get their registration. So it's going to be our own infant formula, a multi-pronged effort where we drive our innovation, we drive our penetration and our distribution, and we leverage the consolidation of the market. It's not going to be, by the way, a linear journey.

On that approach I think a good example of how operating leverage can work on gross margin. In 2003 is when you look at our waters division and the margin of the water category, which had been responding very well on an improved volume mix quality.

And this is exactly what we want to drive in 2020 for the totality of the portfolio.

Thanks.

Okay. Thank you got it.

Next question.

Dane.

Hi, good morning, Antoine and yoga.

You reiterated the 3% to 5% organic growth for 2024, now clearly the level of heightened inflation contribution materially stepped up in quarter, four and is nearly 3% higher than it was when you issued the medium term guidance, so when you're making that 3% to 5% that must be an underlying assumption of how much heightened in place.

It will contribute to that for 2024 could you just comment on that and then the second thing is juergen you made it quite clear that when we're talking about improved.

Antoine de Saint-Patrick: You remember that last year Shanghai was closed and reopened, so we had a very strong start to the year. There's going to be a bit of normalization there, but the overall direction is very clear. On adults, we keep growing from strength to strength. I mean, we have, as you know, a pharma license there. We are extremely strong in tube feeding.

Cash flow generation and free cash flow generation Big step up in 2023, when I look at your slide 37 is that a very big contribution about six to 700 million euros from other components of net income with no cash impact, which seems to be the Russia deconsolidation.

Antoine de Saint-Patrick: I think what is interesting, and we said it in the previous remark, is that we are working more and more on the post-hospital discharge with nutrition powder and a number of products, in order to further expand the journey. And actually, in China, we have three legs, really, which are the adult medical, the pediatrics, and what we have in IMF. We see that type of profitability is actually helping us further build the resilience of the business. So we keep moving in China. We keep strengthening our business in a very methodical way, being very disciplined about what is international and what is local, being very disciplined, by the way, on our inventory levels to make sure that we keep a very healthy business. And maybe, Warren, just one element to compliment China on.

Russia Deconsolidation gives you such a big cash back.

Balance sheet impact can you really still claim then the cash flow generation is up year on year have you sort of take out the funny accounting under the complex accounting around Russia. Thank you.

Good morning.

Look.

And your last question.

What we have been doing on Russia with a deconsolidation in July is to empower the totality of yes, as we head into the balance sheet on the 700 million. This has obviously zero cash impact.

There is absolutely no connection between the impairment we needed to do on the Russian ASIC and the great reside on cash delivery of $2 6 billion.

One 6 billion.

As a result of element which is delivery.

The operational growth.

Growth and profit margin increase.

Opex, which is under very good control return oriented and very good expansion of our working capital, which is driving this cash flow and these are very good base to build on for the year.

When it comes to hyperinflation Im not sure what is the source of the 3% you are quoting that there are three elements which are impossible.

Juergen Esser: One of the discussions was about margin levels. As you saw, margin levels remained stable in the year 2023. We had a strong investment in the first semester in order to support the transformation of our portfolio and IMF. In the second semester, margin bounced back. And I think that's something also which gives us confidence about Chinese value creation moving forward. When it comes to your question on EDP, you asked me, right, we're very pleased with the last quarter's category performance, 4.5% growth, the whole thing. We have been very intentionally reinvesting behind it. In Europe, many of the fundamental parameters are going up, and so is the volume mix for EDP in Europe. When you look at the share of shares, when you look at the rotation on the shares, all of this is contributing to the fact that market shares have been sequentially stabilizing in Europe, and it has ultimately contributed to the fact that EDP Europe has been contributing to this good picture of the EDP category overall.

The accounting for hyperinflation outside of the like for like which is aligned to market expect decision exactly what our peers are doing but what is more important is that the way we look at value creation moving forward in the way. They are impacting the guidance is to look at a good combination between volume mix and price.

This is going to drive gross margin and profit margin and ultimately cash which is the metrics. We are we are looking for.

Thank you.

Thank you next question Shaun.

Thanks Bill.

And John maybe I can help you there as well I was wondering if you could comment on North America.

In Q4, and specifically just the pricing decelerating to 3% kind of.

Behind that particularly when you put it in context at the North American margin 10, 1%.

Investment in H, two and could you maybe just high level comment on the health that you see at the North American consumer we have had quite a few negative messages coming out.

Last month, let's say.

Thank you.

Hey, Charlie.

Same story with you a direct result.

You probably remember that.

North America was the first place, where we took very steep price increase or the market is much more activity <unk> registration started at a higher level. This is where we took the first price increase. This is also the place where we see the.

The fastest normalization so interesting to me what you see is.

Juergen Esser: When you look at it through the lens of channels, we see a positive contribution of volume mix across the channels, but you are right to say that on-premise has been contributing the most, steep double digits across the geographies, which is true for North America, which is true for Europe, and is the result of the focus of the team on this channel, which offers great opportunities. And this is true for our yogurt platform, but this is also true for our plant-based platform, especially Alpro in Europe, where we have been focusing on that channel. This is definitely paying back as we, Maybe two small additional points to your question on Silk. As I said in my prepared remark, we see the first positive impact of the adjustment and the reinvestment we've made with the stabilization of shares. Is there more to do?

Any inflation that she is going down in quarter, and then make of the growth that <unk> are actually shifting.

From something that was mainly our cros are driven to something that is much more balanced between volume mix and.

Which frankly speaking is the rights are is the right question back to what yogurt was saying.

A minute to go on.

I mean, the leverage then you can get out of your <unk> assets.

If you look at.

The price.

The sentiment of the consumer in.

In North America.

In some ways.

The first thing is is.

North America has two quite dialing detector the upland geofence happening there.

Plenty of things happening in the market potential of innovation happening.

So it remains surprisingly resilient and vibrant market.

I think the second thing which is actually.

Antoine de Saint-Patrick: Yes, there is more to do, which is why we've relaunched both the advertising platform and the product. We are pivoting towards something that is much more occasion-based and benefits-based. So the journey is on.

Not only North America, but.

Quite junior ASO is consumers are making active tradeoffs.

It's the same consumer.

Antoine de Saint-Patrick: Our first signs are encouraging, but the journey is not over. I think the other thing, so that you have the whole moving part, is that in the rest of the world, actually, we've been extraordinarily sharp in getting back to profitability, cutting what wasn't working. So you remember that in places like Morocco, we moved from 17 brands to below 10. Priority there was not volume mix.

We will buy an iPhone <unk>.

So very very high price and we will go on things that are where they don't see value.

To the lowest possible price. So the name of the game for Us and Thats why we are investing to the brands. That's why we entered in listening to science. That's why we are investing into innovation the name of the game.

The value and use.

This perception of our mixes so that whenever they do a trade off they do a trade off because we make a real difference and this is where when you are in foods.

Antoine de Saint-Patrick: Priority there was to restore the integrity of the P&L and step by step by step make it more profitable. So it gives you a bit of a sense of the various moving parts. Okay, thank you both. Thank you, Warren. So next question from Pascal Boll: Kersh, and I'm John Kersh, and I'm John Grothmark.

Each of your brands I mean whats delivers.

Our perception standpoint, we're pretty diverse from an experience standpoint.

Good taste signature.

Personal experience to small treats is giving you is making.

<unk> are a huge difference so a market to market is to quote dynamic consumers are much more actively trading off between what they like and what they don't like that is that.

Pascal Boll: What did we expect? Moore, a step-up increase, or because you face some tailwinds on the roadmap side, or look more for a gradual recovery. Fore, and then also thereafter, then my as a sponsor of the Olympic Games, will be a significant amount you spend on that. What is your expectation? That will have an impact on the different divisions and also from Hey Pascal, we'll do a duet on actually probably both. Let me start with the Olympic Games before we go to the Gross Margin. The Olympic Games are obviously very much centered on France, we are the sponsor in France of the Olympic Games, and it's being leveraged in other countries through some local agreements so supporting the local Olympic team.

Got it.

In term of inflation is definitely going down although they are still.

A bit of inflation.

Because this is where it started the earliest would slow down the fastest makeup our growth.

As change.

But within that context.

The balance we are happy with it and I would say when you look at the overall P&L and algorithm plus two 8% volume mix growth is very good FICO.

It is also translating into.

Operating leverage gross margin is obviously reacting on the very good number is not yet translating into margins underlying margins because we are investing for growth to set the right platform for 2020.

Okay. Thank you very much.

Thank you the next question.

T J P Morgan.

Thank you Matt good morning, everyone.

Antoine de Saint-Patrick: As with everything we do, we try to do it with an eye on return on investments, so we do it in a very, very positive way. I think it will help. Certainly, I hope the sales in France, and we have quite a bit of a buzz in France. We are doing things jointly with other sponsors like Carrefour. It will help the brand equity, and you might have heard of the protein products we developed for athletes, developed in Saclay, produced in Ferriere, on the table of the 13 million people that will have meals with our products.

Good morning, Antoine and you again.

My first question is on the portfolio changes.

Okay.

Occasion.

You mentioned I think in your introduction that program.

In terms of.

Turning around the portfolio. We are taking you said are you happy where you are and is it more about investing in Q U.

M&A.

Ghansham.

Thank you for the question of Westlake.

Net debt coming down and I presume there will be questions from disposals. So could you talk about.

Your priority in terms of.

Keep your tenant vacation and then my second question is on specialized nutrition.

Antoine de Saint-Patrick: Good business altogether, good business for brand equity in France, and an overall positive vibe. But do I expect it to be an absolute game-changer in our overall dynamic? No.

<unk> been quite careful with time.

For the quarter and between.

Good evening, ladies and then pricing can you talk about the outlook for that.

That division in 2004.

Antoine de Saint-Patrick: It's an important building block, it will help our equity, and it will help our business in France. It's being done with return on investment in mind, so I'm happy with the way it's being managed. Disciplined, not overdoing it as well, on Gross Margin, and I'll defer to Jorgen. The name of the game is, again..., step-by-step-by-step progression driven partly by mix, partly by doing a good job in our productivity, partly by our conveying or translating into price what we cannot absorb through our productivity.

In the light of potential price was back thank you.

Good morning, Phil and I'll take the I'll take the first one and Youre done will take the.

We'll take the second one so yes, I mean, yes, indeed, all we have to on the one end very very good focus on on cash flow and deleveraging the company.

The overall.

We have been doing.

I mean, a very disciplined job at all teaching our assets.

Sure.

Such John they are never over so I mean, we are going now more into <unk>.

Just keeping optimizing.

As we go I mean, do we have more degrees of freedom, where we are today.

Juergen Esser: We are not in a boom and bust approach; we are in regular, regular, regular progress. Yeah, the only element to add to the cost margin is that two years ago, what we said was that the financial algorithm we were aiming for was a balanced volume-price-mix growth to drive operating leverage, to allow for reinvestment while expanding our margins. And I think 2024, in a way, is exactly that.

Yes, we have or could we be.

A bit more parties and looking out towards our es.

Keeping in mind, and making sure that our leverage remains very healthy that we have a clear focus on our license. So that we remain very fiscally responsible.

And I think on the <unk> I believe when you look at the full year of S. M.

Growing <unk>.

6% this positive volume mix I think it just.

Okay.

Any of the strength and resilience of that category you cannot look at it quarter by quarter, because that's the business, we're going to look more on the mid <unk> on a midterm trend, but when you look at it from a competitive standpoint, we are very pleased.

Pascal Boll: I think a good example of how operating leverage can work on gross margin in 2023 is when you look at our waters division and the margin of the waters category, which has been responding very well to improved volume mix quality. It is exactly what we want to drive in 2024 for the totality of the portfolio. Thank you, Pascal.

Winning shell cost.

Digital fees within the IMF into different buckets.

Also in medical where we had another stellar performance this year and Tom mentioned it in the prepared remarks are growing high single digit with a very very positive outlook in front of us. So we are very pleased overall.

You will see margins also coming back in the second semester of the year traveling nicely above 20%, which I think can give us confidence in the positive contribution of that category also for 2024.

Bruno Monteyne: So, next question from Bruno Monteyne, James Targett. Hi, good morning, Antoine and Juergen. You reiterated the 3% to 5% organic growth for now. Clearly, the level of hyperinflation contribution has materially stepped up. Quarterford is nearly 3% and a lot higher than it was when you issued the medium-term guidance. So, when you're making that 3% to 5%, there must be an underlying assumption of how much hyperinflation will contribute to that for 2024. Could you just comment on that?

Thank you Cindy.

Next question.

Eight.

Great.

Okay.

Good morning, My name then apologies.

So three questions from me.

I missed some of this I missed the beginning of the call, but firstly on SKU rationalization update and then secondly on Whatsapp.

Ladies and compliance so on the first one SKU rationalization.

We can confirm that.

The SKU optimization reconfiguration of portfolio ADP wide, you've done in Europe, and the U S is still ongoing in the fourth quarter.

In rest of world.

As you move into the beginning of 2024 based on bi.

Juergen Esser: Then the second thing is, Jurgen, you made it quite clear that, you know, when we're talking about the improvement in cash flow generation and free cash flow generation, a big step up. When I look at your slide 37, you see a very big contribution, about 600-700 million euros, from other components of net income with no cash impact, which seems to be the Russian deconsolidation. Now if Russia deconsolidating gives you such a big cash and balance sheet impact, can you really still claim then that the cash flow generation is up year on year if you sort of take out the funny accounting or the complex accounting around Russia? Good morning, Bruno.

Please go ahead.

Good summary.

The SKU configuration.

So at this stage I don't know.

There are more.

Regulation compliance we've seen one of your peers.

Some issues around their practices with that also offer in France, they've announced today.

But they got a wider review as practices our water.

Yes.

Compliance cost.

The other markets I'm, just wondering whether you can.

So from your perspective.

On that that you feel comfortable that there is no such risks.

Chapter.

You'd be approachable.

Our production process moving forward. Thank you so much.

Hey, David on water I mean, obviously I won't comment on competition. There are very strict regulation, we are very sweet.

Paul we are being our control so they are.

Not really focusing on that on the SKU rationalization.

Juergen Esser: Look, on your last question, what we have been doing in Russia with the deconsolidation in July is to impair the totality of the assets we had in the balance sheet, around 700 million euros. This obviously has zero cash impact, so there's absolutely no connection between the impairments we needed to do on the Russian asset and the great result in cash delivery of 2.6 billion euros. 2.6 billion euros are really the result of three elements, which are delivery, operational delivery through growth and profit margin increase, a capex, which is under very good control, return-oriented, and a very good expansion of our working capital, which is thriving on this cash flow, and this is a very good base to build on for the years to come. When it comes to hyperinflation, I'm not sure what the source of the 3% you are quoting is, but there are three elements which are important.

We have done the bulk of the work.

Now we are getting into.

I'll get into just making sure that we doomed rollback issue, making sure that we are.

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I think we are we did do it we entered the bulk of the work our in Europe towards.

The end of 'twenty three.

We did.

Quite a bit of the work also in <unk>.

<unk>, our market is probably a bit of a tail in our in rest of the world, but the bulk of the work is done now you changed about getting back into the discipline, where are we don't see Polish.

In some ways I mean, their SKU complexity Doc has I mean, you need to you need to treat them on a regular basis otherwise the are they go naturally.

Juergen Esser: First, we are accounting for hyperinflation outside of the like-for-like, which is aligned to market practices and is exactly what our peers are doing. But what is more important is that the way we look at value creation moving forward and the way we have been setting the guidance is to look at a good combination between volume, mix, and price because this is going to drive gross margin and profit margin and, ultimately, cash, which is the matrix we are looking for. Thank you. Thank you, Bruno. So next question from Charlie Higgs. Oh, hey, Antoine.

Thank you very much with that.

The Q&A for today and as some of you have some more questions.

All along the data to answer any other question you might have thank you very much.

Thanks.

Alright.

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

Yes.

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Charlie Higgs: Hey, again, hope you're both well. Please comment on North America; the performance, specifically just the pricing decelerated. The North American margin is 10.1%. It looks like there's quite a lot of reinvestment in H2, and can you maybe just make a high-level comment on the health of the North American consumer? We've heard quite a few negative messages coming out from peers over the last month or so. You probably remember that North America was the first place where we took a very steep price increase.

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Antoine de Saint-Patrick: The market is much more active. This is where inflation started at a higher level. This is where we experienced the first price increase. This is also the place where we see the fastest normalization.

Yes.

Yes.

Antoine de Saint-Patrick: So interestingly, what you see is inflation that is going down in quantitity and a rate of growth that is actually shifting from something that was mainly price-driven to something that is much more balanced between volume mix and price, which, frankly speaking, is the right equation, back to what Jürgen was saying a minute ago on the leverage you can get out of your asset. If you look at the price or the sentiment of the consumer in... in North America, in some ways, I mean, the first thing is that North America is still quite dynamic, actually. There are plenty of things happening there, plenty of things happening in the market, and plenty of innovation happening. So it remains a surprisingly resilient and vibrant market. I think the second thing, which is actually not only North American but is quite universal, is that our consumers are making active trade-offs. So it's the same consumer that will buy an iPhone 15 at a very, very high price and will go on things where they don't see value at the lowest possible price.

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Antoine de Saint-Patrick: So the name of the game for us, and that's why we are investing in brands, that's why we're investing in science, that's why we're investing in innovation. The name of the game is to Drive the Value and Uniqueness Perception of Our Mixed So that's whenever they do a trade-off. They do a trade-off because we make a real difference. And this is where, when you're in food.

Yes.

Yes.

Okay.

[music].

Juergen Esser: The quality of your brand, what it delivers from a perception standpoint, what it delivers from an experience standpoint, the taste signature, the personal experience, the small treat is giving you, is making a huge difference. So the market is still quite dynamic. Consumers are much more actively trading off between what they like and what they don't like. That is very clear. The quantum of inflation is definitely going down, although there is still a bit of inflation.

Yes.

Juergen Esser: And because this is where it started the earliest but slowed down the fastest, the nature of our growth has changed. But within that context, I mean, the balance, we are happy with it. Yeah.

Okay.

Charlie Higgs: And I would say when you look at the overall P&L and the algorithm, plus 2.8% volume mixed growth is a very good figure. Obviously, this is also translating into operating leverage. So gross margin is obviously reacting to this very good number. But it's not yet translating into margins, underlying margins, because we are investing for growth to set the right platform for 2020. Thank you very much.

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Yes.

Celine Pannuti: So the next question is from Celine Pannuti, J.P. Morgan. Thank you. Good morning, everyone.

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Celine Pannuti: Good morning, Antoine and Juergen. My first question is about the portfolio changes and... So Antoine, you mentioned in your introduction the progress that has been made, turning around the portfolio, rotating it. Are you happy now where you are?

Okay.

Okay.

Yes.

Yes.

Okay.

Antoine de Saint-Patrick: And is it more about investing in new potential? M&A potential. And I think, you know, free cash flow was quite good. We see that net debt through BDA is coming down, and I presume there, as well as the cash inflow from these products. So could you talk about your priority in terms of capital allocation? And then my second question is about specialized nutrition.

Yes.

Yes.

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Juergen Esser: There's been quite a volatile quarter by quarter between Volume, positive, negative, and then pricing. Can you talk about the outlook for that division in 24, especially in the light of potential price rollbacks? Good morning, Celine. I'll take the first one, and Juergen will take the second one.

Okay.

Yes.

Yes.

Antoine de Saint-Patrick: So yes, I mean, yes, indeed, we have had, on the one hand, a very, very good focus on cash flow and deleveraging the company. On the other, we have been doing a very disciplined job at rotating our assets. Such journeys are never over. So I mean, we are going now more into just keeping optimizing as we go. I mean, do we have more degrees of freedom where we are today?

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Yes.

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Antoine de Saint-Patrick: Yes, we have. But could we be a bit more proactive in looking outwards? Yes, we will keep in mind and make sure that our leverage remains very healthy, that we have a clear focus on ROIC, so that we remain very fiscally responsible. And I think on S&N. I believe when you look at the full year of S&N, growing around 6% with a positive volume mix, I think it's just another testimony of the strength and resilience of that catch with us. You cannot look at it quarter by quarter because that's the business where you need to look more at the mid-term trend.

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Juergen Esser: But when you look at it from a competitive standpoint, we are very pleased. We are winning share across the geographies within the IMF and the different markets. Also, in medical, where we had another stellar performance this year, I mentioned it in the prepared remarks, growing high single-digits with a very, very positive outlook in front of us. So we are very pleased overall. You see margins also coming back in the second semester of the year, traveling nicely above 20%, which I think can give us confidence in the positive contribution of that category also for 2021. Thank you, Celine. Next question from David Hayes: Carefree.

Yes.

Yes.

Okay.

Yes.

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Yes.

David Hayes: Hello. Good morning. If I didn't hear your name, then apologies.

David Hayes: So, I have two questions for you. I apologize. I've missed some of this. I missed the beginning of the call.

Yes.

David Hayes: But first, on skew rationalization update, and then secondly, on water regulation compliance. So, on the first one, skew rationalization, just so we can confirm, it feels like the skew rationalization, reconfiguration of the portfolio, EDP-wise, is done in Europe and the US, while it's still ongoing in the fourth quarter in the rest of the world.

Yes.

Yes.

Thanks.

Antoine de Saint-Patrick: And that continues into the beginning of 2024, but it's done by, let's say, halfway through this year. Is that a good summary of where the skew configuration is at this stage? And the second area, on water regulation compliance. We've seen one of your peers have some issues around their practices with their water offer in France. They've announced today that they're going to have a wider review of practices on water compliance across other markets. I just wonder whether you have looked at that at all from your perspective, whether you've done an audit on that area, and whether you feel confident that there's no such risk for you to have to assess how you've been approaching the water production process moving forward. Thank you so much. Hey David,

Yes.

Yes.

Yes.

Yes.

Thanks.

Yes.

Antoine de Saint-Patrick: On water, I mean, on water, obviously, I want to comment on competition, they have very strict regulations, we have very strict controls, we are being controlled. So, there, I mean, I am not really focusing on that. On the SKU rationalization, we have done the bulk of the work, and now we are getting into just making sure that we don't grow back SKUs, making sure that we just launch and remove SKUs, so maintain the right level of discipline. I think we ended the bulk of the work in Europe towards the end of 2003. We did quite a bit of the work also in emerging markets. There's probably a bit of a tail in the rest of the world, but the bulk of the work is done. Now it is about getting back into a discipline where we don't re-proliferate. In some ways, I mean, SKU complexities are like hairs. You need to cut them on a regular basis, otherwise, they grow naturally.

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David Hayes: Thank you very much. And with that, we'll end the Q&A for today. I know some of you have some more questions, but the team and I are available all along the day to answer any other question you might have. Thank you very much. Bye-bye. This concludes today's conference call. Thank you for participating. You may now. Andreas Arx, Guillaume Delmas, Jon Cox, Martin Deboo, Bruno Monteyne, Tom Sykes, James Jones, Guillaume Delmas, Danone Andreas Arx, Guillaume Delmas, Jon Cox, Martin Deboo, Bruno Monteyne, Tom Sykes, James Jones, Guillaume Delmas, Danone, , , , , , ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Andreas Arx, Martin Deboo, Bruno Monteyne, Tom Sykes, James Jones, Guillaume Delmas, Guillaume Delmas, Martin Deboo, Bruno Monteyne, Tom Sykes, James Jones, Guillaume Delmas, ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? Andreas Arx, Martin Deboo, Bruno Monteyne, Tom Sykes, James Jones, Guillaume Delmas, Andreas Arx, Martin Deboo, Bruno Monteyne, Tom Sykes, James Jones, Guillaume Delmas, Andreas Arx, Martin Deboo, Bruno Monteyne, Tom Sykes, James Jones, Guillaume Delmas, Guillaume Delmas, Martin Deboo, Bruno Monteyne, Tom Sykes, James Jones, Guillaume Delmas, Andreas Arx, Martin Deboo, Bruno Monteyne, Tom Sykes, James Jones, Guillaume Delmas, Guillaume Delmas, Martin Deboo, Bruno Monteyne, Tom Sykes, James Jones, Guillaume Delmas, Guillaume Delmas, Martin Deboo, Bruno Monteyne, Tom Sykes, James Jones, Guillaume Delmas, Guillaume Delmas, Martin Deboo, Bruno Monteyne, Tom Sykes, James Jones, Guillaume Delmas,

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