Danone // 2020 Universal Registration Document

Business highlights in 2020 and outlook for 2021 3.1 Business highlights in 2020 DANONE UNIVERSAL REGISTRATION DOCUMENT 2020 40 Danone’s consolidated financial statements and the Notes to the conso- lidated financial statements are presented in section 4.1 Consolidated financial statements and Notes to the consolidated financial statements. Risk identification and control policy, as well as strategic, external envi- ronmental and operational risks are described in section 2.6 Risk factors. Amounts are expressed in millions of euros and rounded to the nearest million. Generally speaking, the values presented are rounded to the nearest unit. Consequently, the sum of the rounded amounts may differ, albeit to an insignificant extent, from the reported total. In addition, ratios and variances are calculated based on the underlying amounts and not on the rounded amounts. Danone reports on financial indicators not defined by IFRS, internally (among indicators used by the chief operating decision makers) and externally. These indicators are defined in section 3.6 Financial indi- cators not defined in IFRS: • like-for-like changes on sales, recurring operating income, recurring operating margin; • recurring operating income; • recurring operating margin; • recurring tax rate; • recurring net income; • recurring EPS; • free cash flow; • net financial debt. Danone also uses references that are defined in section 1.2 Information about the Registration Document related to References and definitions. 3.1 BUSINESS HIGHLIGHTS IN 2020 HIGHLIGHTS OF 2020 (HIGHLIGHTS WERE DETAILED IN THE MAIN PRESS RELEASES ISSUED BY DANONE DURING 2020) • onMarch5, 2020,Danone’swaterbrands launched“WeActForWater” to pioneer a new way to do business; • on March 11, 2020, Danone launched a successful €800 million bond issue. It enables Danone to extend the maturity of its debt and to optimize its cost, taking advantage of current market window favoring quality bond issues; • on April 3, 2020, given the exceptional circumstances created by the Covid-19 outbreak that led French government to take strict lockdown measures, the Board of Directors of Danone has decided to postpone the Annual General Meeting initially convened for Tuesday April 28, 2020 to a later date. The payment date of the dividend for the 2019 financial year has therefore also been postponed; • on April 21, 2020 Danone withdrew its guidance on recurring EPS growth, like-for-like sales growth and recurring operatingmargin for 2020. The lack of consensus around how the pandemic was going to develop, its mid-term macroeconomic consequences, and its impact on people’s behaviors and income, had added further complexity to the prediction of the business; • on May 5, 2020, Danone announced that Shane GRANT will join Danone as Executive Vice President and CEO Danone North America, with effect fromMay 11, 2020, to lead the EDP business in that market; • on June 3, 2020, Danone launched a new €800 million bond issue. Following a previous €800 million successful issuance on March 11, it enables Danone to further take advantage of market windows to enhance its funding flexibility, extend the maturity of its debt and optimize its cost; • on June 26, 2020, following its 2020 Annual General Meeting, Danone became the first listed company to adopt the “Entreprise à Mission” model, with the support of more than 99% of its shareholders. The Shareholders’ Meeting has approved all other resolutions submitted to a vote, including the dividend for the 2019 fiscal year set at €2.10 per share in line with original Board’s recommendation; • on July 16, 2020, Danone announced a series of investments to strengthen the local market capabilities, support and commitment of its Specialized Nutrition business in China. Totaling around 100 million euros (RMB 790 million), these investments include the opening of an open-science research center based in Shanghai, the acquisition of local infant milk formula capabilities, and the expansion of capacity to further develop offerings in FSMP (Food for Special Medical Purposes). Danone also announced that its early life nutrition business unit in the country has achieved B Corp TM certification, meaning that Danone becomes the biggest B Corp™ company in Asia; • on September 3, 2020, Francisco CAMACHO, Executive Vice President, Essential Dairy and Plant-Based International, and a member of Danone’s Executive Committee, left Danone to explore new horizons; • on October 6, 2020, in accordance with its continued focus on capital allocation discipline and balance sheet strength, Danone launched the sale via an accelerated bookbuilding process of its remaining 6.61%stake in Yakult. The transaction resulted in a total gross consideration of JPY58 billion, representing c. €470million; • on October 19, 2020, Danone announced to target for the full- year 14% recurring operating margin and the delivery of €1.8bn free cash flow thanks to efficiency, cost control and tight cash management actions that have been put in place; • on November 23, 2020, Danone hosted an Investor update focused on providing additional details on how shifting to a local-first organization would unlock future growth and drive margin ex- pansion in a post-Covid world. While reconfirming its mid-term ambition of achieving 3% to 5% profitable like-for-like revenue growth, Danone updated its mid-term recurring operating margin target to mid-to-high teen levels, with the first miles- tone to be above 15% in 2022, taking into account a new €1bn cost savings plan (including €300 million from reduced cost of goods sold and €700 million related to efficiencies on general and administrative costs). Total one-off costs related to the new organization initiatives are expected to be around €1.4 billion for the 2021-2023 period;