Danone(DANOY) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a strong start to Q1 2023 with a like-for-like net sales growth of 10.5%, driven by contributions from all geographies [3][12] - Reported growth reached 11.6% for the quarter, with quarterly net sales amounting to €6.9 billion, up from €6.2 billion in Q1 2022 [12] - Price increased by 10.3%, while volume/mix was up by 0.2% [11] Performance by Business Lines - The EDP platform achieved a net sales growth of 9.3%, with double-digit growth in high protein and coffee creation platforms [4] - Specialized Nutrition category sustained strong growth momentum at 12%, with competitive growth across most geographies [5] - Waters category delivered broad-based growth of 12%, driven by strong performance of Evian and Volvic brands in Europe and Mizone brand in China [5] Performance by Market - Europe experienced solid growth of 6.2%, with price up by 10.2% and volume/mix down by 4% [13] - North America posted strong like-for-like growth of 11.8%, driven by price increase of 11% and positive volume/mix of 0.8% [16] - China, North Asia, and Oceania zone achieved a like-for-like growth of 16%, with strong volume/mix growth of 14.3% [18] - Latin America registered sales growth of 12.6% on a like-for-like basis, with price up by 12.7% [21] - The Rest of the World zone posted sales growth of 11.7% on a like-for-like basis, with price up by 12.9% [24] Company Strategy and Industry Competition - The company is focused on executing its Renew Danone agenda, emphasizing higher investments and agile resource allocation to drive sustainable value creation [6][10] - Progress is being made in transforming the EDP portfolio in Europe, with expectations for improved volume dynamics in the second semester [8] - The company is investing in R&D and innovation capabilities, including acquisitions and minority investments in food technologies [9][10] Management's Comments on Operating Environment and Future Outlook - Management upgraded the like-for-like guidance for 2023 to net sales growth between 4% and 6%, while confirming guidance for a moderate increase in recurring operating margin [26] - The company anticipates some normalization in Q2 due to calendar effects and is focused on transforming the EDP portfolio [34] - Management noted that pricing dynamics in Europe are expected to normalize gradually, with continued investments in brand initiatives [50][53] Other Important Information - The company is experiencing commodity inflation, particularly in labor and liquid milk, but expects inflation to decrease as the year progresses [74] - The company is redeeming a €750 million hybrid bond, which is part of a disciplined deleverage approach [92] Q&A Session Summary Question: Impact of Ramadan and IMF refill on Q1 performance - Management acknowledged that Q1 benefited from the Ramadan effect and inventory normalization, but expects normalization in Q2 [28][30] Question: Guidance for the rest of the year - Management confirmed that the guidance remains consistent with mid-term expectations, despite a strong start in Q1 [32][34] Question: Market share performance - Management indicated consistent market share gains in North America and China, while EDP Europe is undergoing transformation [40][42] Question: Pricing dynamics in Europe - Management noted that pricing increases were implemented without significant disruptions, and they are planning for promotional activities to support volume recovery [51][53] Question: Plant-based growth specifics - Management reported mid-single-digit growth in plant-based categories, with a focus on profitable growth models [64] Question: Medical nutrition growth specifics - Management confirmed strong performance in both adult and pediatric nutrition segments, with a focus on superior product offerings [67] Question: SKU rationalization impact - Management stated that SKU rationalization is expected to be margin accretive and will continue to refine the portfolio [79][80]