Danone(DANOY) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a like-for-like growth of 1.6% for H1 2021, with Q2 showing a strong recovery at 6.6% growth [7][48] - The recurring operating margin for H1 2021 was 13.1%, down 86 basis points from the previous year, primarily due to negative category mix and inflationary pressures [40][70] - Net sales for Q2 reached approximately €6.2 billion, up from €6 billion in the previous year, reflecting a reported growth of 3.6% [50] Performance by Business Line - The Essential Dairy and Plant-based (EDP) division grew by 3.2% in H1, with Q2 growth accelerating to 4.8% [59][60] - Specialized Nutrition saw a decline of 2.6% in H1 but returned to growth in Q2 at 2.8% [51][52] - The Waters division reported a 4.5% increase in H1, with Q2 growth at 19.5% [65][67] Market Data and Key Metrics Changes - In Europe, the EDP division delivered around 4% growth, with significant contributions from Alpro and Probiotics [61] - North America saw a return to growth in the yogurt business, particularly in Greek and Probiotics segments [62] - Emerging markets, particularly in Latin America and Indonesia, contributed to growth but remained impacted by COVID-related restrictions [14][69] Company Strategy and Development Direction - The company is focusing on three strategic priorities: strengthening core business, executing successful innovations, and selective investment in growth platforms [16][22] - The "Local First" reorganization aims to enhance local market responsiveness and operational efficiency, with a target of €700 million in gross savings by 2023 [41][42] - Continued emphasis on sustainability and innovation in product offerings, particularly in the Plant-based segment [25][28] Management's Comments on Operating Environment and Future Outlook - Management acknowledged significant inflationary pressures, reaching nearly 7% in H1, and expects further acceleration in the second half [36][85] - The company remains committed to maintaining strategic investments despite inflation, aiming for profitable growth in H2 [86] - Management expressed confidence in the recovery of the Waters division and overall positive momentum across categories [69][86] Other Important Information - The company plans to initiate a share buyback program of up to €800 million following the disposal of its stake in Mengniu [80] - Free cash flow for H1 2021 reached €1 billion, indicating improved cash conversion [78] Q&A Session Summary Question: Plant-based growth specifics and Greek yogurt recovery - Management highlighted a 12% growth in Plant-based products, driven by strong performance in Europe and North America, with specific plans to address the oat segment [90][91] - The recovery in Greek yogurt is attributed to the successful restaging of the Oikos brand and new product launches [94] Question: A&P spend and cost savings - A&P investments were focused on strategic brands, with plans for continued reinvestment in the second half [96] - Cost savings reached nearly 5% in H1, with expectations for further savings in H2 [98] Question: Specialized Nutrition in China - Management indicated a positive outlook for the domestic channel in China, with expectations for margin progression in the second half [110][111] - The Aptamil brand continues to gain market share, supported by strong performance in e-commerce [112]