Danone // 2020 Universal Registration Document

DANONE UNIVERSAL REGISTRATION DOCUMENT 2020 74 4.1 Consolidated financial statements and notes to the consolidated financial statements Note 5. Associates Note 5.6. Disposal of the Group’s residual interest in Yakult (EDP, Japan) Background to this equity interest Danone had an interest in the Yakult group (6.61% after the disposal, in 2018, of 14.7%), was its main shareholder with two representa- tives on its board of directors. The collaboration between the two companies began in 2004 through their strategic alliance, which aim was to strengthen their global leadership in probiotics and accelerate their growth in the functional food market. Disposal of the Group’s residual interest In accordance with its continued focus on capital allocation and balance sheet strength, on October 6, Danone sold its remaining 6.61% stake in Yakult via an accelerated book building process. The sale generated sales proceeds of JPY 58 billion (around €470million) and a gain, after selling expenses, of €220 million, presented within Share of profit of associates in 2020. Following the announcement of this sale, the companies reconfir- med their commitment to their long-term strategic collaboration to promote probiotics. Existing commercial partnerships, including joint-ventures in India and Vietnam, remain in place. Note 5.7. Mengniu (EDP, China) and Yashili (Specialized Nutrition, China) Background to the acquisition of these equity interests In 2013, Danone, COFCO and Mengniu announced the signing of agreements to accelerate the development of fresh dairy products in China. Under the terms of these agreements, Danone became a strategic shareholder in Mengniu and a joint venture for the produc- tion and sale of fresh dairy products in China was established by the pooling of the respective assets of the two companies. Danone owns 20% and Mengniu 80% of the new joint venture. In 2014, Danone, Mengniu and Yashili decided to extend their strategic alliance into infant milk formula in China. This enabled Danone to hold a 25% stake in Yashili and become its second-largest shareholder behind Mengniu, which owns a 51% stake. Lastly, in 2016, the Dumex activity in China was merged with Yashili, thereby building a local infant milk formula brand platform. Mengniu (EDP, China) Accounting treatment of the investment This investment is recognized under Investments in associates, since the Group has significant influence over the financial and operating policies of theMengniu group due to (i) its role as a strategic sharehol- der in the Mengniu group pursuant to the agreements with COFCO, (ii) its participation in Mengniu’s governance, and (iii) the Group’s operating involvement in Mengniu’s fresh dairy products activities. Project of disposal of the investment As a result of its assets review, Danone has decided to sell its 9.8% stake in Mengniu. In order for its interest to be sold, it will have to be converted from an indirect shareholding to a direct shareholding in Mengniu shares, which can then be sold. As of December 31, 2020, the Mengniu shares were classified as assets held for sale in accordance with the criteria of IFRS 5 Non- current assets held for sale and discontinued operations . This resulted in the reclassification in the balance sheet of the carrying amount (€851 million) from Investments in associates to Assets held for sale. This had no impact on the 2020 income statement. The sale is expected to take place in 2021, once the regulatory process has been completed, in particular approval by the Chinese authorities. Main financial information 2019 2020 (in € millions) Interim financial statements as of June 30 Financial statements for the year ended December 31 Interim financial statements as of June 30 Non-current assets (a) 4,148 5,248 5,506 Current assets (a) 5,296 4,792 5,233 Equity (a) 4,056 4,263 4,264 Non-current liabilities (a) 908 1,720 2,357 Current liabilities (a) 4,481 4,057 4,118 Sales (a) 5,199 10,217 4,841 Net income (a) 282 555 146 Other comprehensive income (a) (9) 22 (23) (a) Published financial statements prepared in accordance with IFRS. Income statement items have been translated into euros at the average exchange rate for the reporting period. Balance sheet items have been translated into euros at the exchange rate in effect at the end of the reporting period. Impairment review as of December 31, 2020 The Group has not noted any indications of impairment. In particular, the stock price of the Mengniu group is still higher than the average purchase price of its shares. Impairment review as of December 31, 2019 The Group had not noted any indications of impairment. Yashili (Specialized Nutrition, China) Accounting treatment of the investment As of December 31, 2020, Danone held 25% of Yashili’s share capital, had significant influence over its operating policies and was invol- ved in its governance, in particular through its right to appoint two members of the board of directors. Consequently, its shareholding is recognized within Investments in associates.