DANONE : 2014 First-Half Results

July 25, 2014

[1] Net sales

[2] Like-for-like: see pages 9-11 for details on calculation of financial indicators not defined in IFRS [3] See pages 9-11 for details on calculation of financial indicators not defined in IFRS

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Corporate Communications: +33 1 44 35 20 75 / Investor Relations: +33 1 44 35 20 76

Danone: 17, boulevard Haussmann, 75009 Paris, France

"The first half of the year was particularly eventful, and had all of our teams 100% mobilized. First, we responded to record milk prices with key initiatives in various fields -pricing, mix, cost-cutting measures-, all designed to rebuild margins that had come under serious pressure in the first quarter. And these efforts paid off. We also continued to roll out products with high added-value in all our regional markets and continued to build our strategic business platforms, finalizing our partnership with Mengniu and continuing to grow in Africa, most recently through our tie-up with Brookside. As a result, the first half of 2014 saw a host of achievements, and Danone's results at the end of June are right where we expected-at a necessary transition point on our way to meeting our targets for the year.
We operate in a global environment that is still subject to risks and upheavals, and it presents us with challenges every day. But it holds an equal number of hidden opportunities. This is the mindset that has guided us so far, and it will continue to inspire us. Our agenda for the second half of the year is exactly the same: we will stay focused on reaching our 2014 targets and continue to build strong, profitable, sustainable growth."

[1] Net sales

[2] Like-for-like: see pages 9-11 for details on calculation of financial indicators not defined in IFRS [3] See pages 9-11 for details on calculation of financial indicators not defined in IFRS

[4] As reported

Our presentation to analysts and investors, chaired by CFO Pierre-André Térisse, will be broadcast live from 9.30 a.m. (Paris time) on Friday, July 25, 2014.

Related slides will be available on our website (www.finance.danone.com)

from 7.30 a.m. (Paris time) today.

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For more information:

Corporate Communications: +33 1 44 35 20 75 / Investor Relations: +33 1 44 35 20 76

Danone: 17, boulevard Haussmann, 75009 Paris, France

[1] Like-for-like: see pages 9-11 for details on calculation of financial indicators not defined in IFRS [2] North America = United States and Canada

[3] ALMA = Asia-Pacific / Latin America / Middle-East / Africa

[4] Due to rounding, the sum of values presented may differ from totals as reported. Such differences are not material. See Methodology note on page 11.

Consolidated sales fell back -5.3% in the first half of 2014 to €10,467 million. Excluding the impact of changes in the basis for comparison, which include exchange rates and scope of consolidation, sales were up +2.2%. This organic growth reflects a -3.0% decline in sales volume and a +5.2% increase due to the price/mix effect.
The -8.3% exchange-rate effect reflects unfavorable trends in currencies including the Argentine peso, the Russian ruble and the Indonesian rupiah. The +0.8% impact of the change in scope of consolidation results in large part from full consolidation of Centrale Laitière (Morocco) starting in March 2013.

Consolidated sales declined -5.5% to total €5,406 million in the second quarter of 2014. Excluding the impact of changes in the basis for comparison, which include exchange rates and scope of consolidation, sales were up +2.3%. This organic growth reflects a -3.9% decrease in sales volume and a +6.2% rise in value.
The -7.8% exchange-rate effect reflects unfavorable trends in currencies including the Argentine peso, the Russian ruble and the Indonesian rupiah.

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Corporate Communications: +33 1 44 35 20 75 / Investor Relations: +33 1 44 35 20 76

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Fresh Dairy Products division sales were up +2.4% like-for-like in the second quarter of 2014, reflecting a steep +9.8% rise in value offset by a -7.4% decline in sales volume.
The CIS region is the largest contributor to division growth, reporting another rise in sales of more than 10%. This reflects the enhanced value of the product portfolio achieved by both price increases in previous quarters and a positive price/mix effect linked to the strong volume performance of value-added brands. As anticipated, total volumes fell more sharply than in the first quarter, primarily in low value-added segments.
In the United States, where sales slowed in the second quarter, in particular for Greek yogurt, the division nonetheless held onto its market share and continued to expand, with growth driven by its multi-brand Greek yogurt range.
As expected, sales in Europe continued to decline. Europe now shows a positive price/mix effect, reflecting efforts to enhance the value of brands and price increases designed to offset rising commodity prices in some countries. This policy has come hand in hand with a volume decline of over -5% for the region as a whole, reflecting contrasts from one country to the next. Sales have stabilized in Iberia (Spain and Portugal), while both Germany and Italy are still difficult markets.
The ALMA[1] area remained dynamic on the whole despite volatile conditions in some markets and inflationary pressures, notably in Argentina.

[1] ALMA = Asia-Pacific / Latin America / Middle-East / Africa

The Waters division turned in an excellent performance this quarter, with sales up +13.1% like-for- like compared with Q2 2013. Growth is balanced with volumes up +7.0% and a price/mix effect contributing +6.1%.
The division did very well in Europe this quarter in a dynamic market that saw Danone market shares stable or rising, driven by the success of aquadrinks Volvic Juicy and Font Vella Levité in particular. Strong growth in emerging markets remains the division's prime driver, especially in Asia with gains by the Mizone brand and a very strong showing by Aqua.
Growth in value was +6.1% and was once again due largely to the positive price/mix effect generated by aquadrinks.

The Early Life Nutrition division reported quarterly sales down -9.2% (-7.9% in volume), reflecting once again the unfavorable basis for comparison linked to the false safety alert triggered by Fonterra in August 2013.
In China, the market most affected by the alert, the division has pursued actions designed to get sales back on track with a multi-brand approach to optimize cover of different distribution channels and different price segments. The Nutrilon brand achieved rapid growth in the ultra-premium segment, while initial results for Dumex fell slightly short of projections. Overall results are in line with expectations.
In Europe, Q2 2014 growth was moderate, while division business remained buoyant in the rest of the world, with double-digit growth in Latin America and in the Africa/Middle East region.

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The Medical Nutrition division reported Q2 growth of +7.3% like-for-like, driven by a +6.2% rise in sales volume.
Main contributors to growth were Brazil, Turkey, China and the United Kingdom, with growth visible across all categories and a stronger contribution from the pediatric care brands.

H1 2013 H1 2014 Change [1]

Like-for-like

Fresh Dairy Products 9.91% 7.81% -168 bps Waters 13.18% 12.50% +38 bps Early Life Nutrition 20.49% 17.42% -270 bps Medical Nutrition 19.31% 17.56% -92 bps

Europe excluding CIS 14.28% 14.56% +60 bps

CIS & North America [2] 9.36% 7.23% -121 bps

ALMA [3] 14.56% 10.09% -401 bps

[1] Like-for-like: see pages 9-11 for details on calculation of financial indicators not defined in IFRS [2] North America = United States and Canada

[3] ALMA = Asia-Pacific / Latin America / Middle-East / Africa

As anticipated, Danone's trading operating margin fell sharply in the first half, down -159 bps like- for-like[1] to stand at 11.27%. This decline reflects comparison with the very high figure reported in the first half of 2013, before the Group was hit by the steep rise in milk prices and fallout from Fonterra's false safety alert.
Therefore, the first half of 2014 was adversely affected by strong inflation in milk prices observed since summer 2013 in all markets. This was particularly true in Russia, where inflation was especially strong. However, in most regions prices headed down at the end of the first half. Part of this inflation was offset by price increases, notably in emerging countries and more specifically in Russia.
Ongoing efforts to optimize raw material, production and logistic costs led to continued productivity gains Group-wide, in line with past years. Moreover, deployment of the Group's cost-cutting program in Europe continued, generating the expected savings.
The Group continued to invest in its growth drivers. Apart from its Chinese subsidiary Dumex, hit hard by Fonterra's false safety alert, the Group's H1 spending on marketing, sales and R&D altogether were identical[2] to those made last year.
Trading operating margin in H1 2014 was also hit by adverse exchange-rate trends (-12 bps) and the change in scope of consolidation (-35 bps), due in particular to the integration of Centrale Laitière in Morocco, Sirma in Turkey and YoCrunch in the United States.

[1] Like-for-like: see pages 9-11 for details on calculation of financial indicators not defined in IFRS [2] Like-for-like

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Corporate Communications: +33 1 44 35 20 75 / Investor Relations: +33 1 44 35 20 76

Danone: 17, boulevard Haussmann, 75009 Paris, France

[1] See pages 9-11 for details on calculation of financial indicators not defined in IFRS

[2] Due to rounding, the sum of values presented may differ from totals as reported. Such differences are not material. See Methodology note on page 11.

Other operating items stood at -€96 million, impacet d primarily by the portion of costs related to the Group's cost-reduction and organizational adaptation plan in Europe that were booked in the first half of 2014 (-€98 million).
The change in other financial income and expense resulted primarily from the very high figure reported in the first half of 2013, which was linked to non-current items[1] recorded over that period: in H1 2013, Danone booked a capital gain on the sale of its interest in SNI in its move to increase its shareholding in Centrale Laitière.
The underlying tax rate for the first half of 2014 was 29.6%, very slightly lower than the rate projected for the full year.
The sharp change in net income of affiliated companies resulted primarily from last year's very high figure, linked to non-current items recorded in the first half of 2013, when the value of Danone's historic 29.2% equity interest in Centrale Laitière was recognized at €226 million following the Group's acquisition of the company.
Underlying net income[1] came to €683 million in the first half of 2014, down -11.5% like-for-like[1]
and down -21.9% as reported when compared with 2013. Underlying fully diluted EPS totaled
€1.16, down -11.1% like-for-like[1] and down -21.5% as reported compared with the first half of
2013.

[1] See pages 9-11 for details on calculation of financial indicators not defined in IFRS

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Corporate Communications: +33 1 44 35 20 75 / Investor Relations: +33 1 44 35 20 76

Danone: 17, boulevard Haussmann, 75009 Paris, France

Free cash-flow[1] stood at €207 million in H1 2014, including €79 mllioi n in outlays linked to the
Group's cost-reduction and organizational adaptation plan in Europe.
Free cash-flow excluding exceptional items[1] came to €286 million, down a steep 60% or so from H1 2013. In addition to the impact of reduced trading operating margin[1], this decline reflects a very unfavorable mix effect on the Group's working capital, resulting from the drop in business at Dumex, its Chinese subsidiary. Moreover, capital expenditure remained high in H1 2014 at
€457 million, or 4.4% of sales.
In H1 2014, Danone paid dividends totaling €851 mliilon including €307 million in cash and
€544 million in DANONE shares. Over the same period, the Group also finalized a number of external acquisitions totaling €704 million, including the move to increase its equity interest in the
Chinese dairy company Mengniu to the current level of around 10%.
Including the €3,098 million in put options granted to minority shareholders, the Group's net financial debt[1] stood at €8,678 million at June 30, 2014. Excluding these same put options, the Group's net financial debt[1] was up €858 million to €5,580 million.

[1] See pages 9-11 for details on calculation of financial indicators not defined in IFRS

The Group assumes that consumer demand will remain similar to 2013, with sluggish trends in Europe, significant carry-over of milk price inflation and persistently high exchange-rate volatility in emerging markets, resulting in higher inflation in those countries.
In response, Danone will continue to deploy action plans already under way in Europe-updating its product portfolio and sharpening its competitive edge-with a view to stabilizing its performances in the region by the end of 2014. The Group will also build on its strong momentum in markets outside Europe to continue growth in emerging countries and North America, and to manage rising inflationary pressures as appropriate. Finally, the Group will focus on rebuilding its Early Life Nutrition positions in Asia, in particular through product launches and brand extensions, favoring solid, lasting growth over speed.
Due to this rebuilding effort and to 2013 bases for comparison, organic growth in sales and operating margin will vary widely from one half to the next in 2014. The Group thus anticipates a return to strong, sustainable, profitable growth beginning in the second half.
Danone has set the following targets for full-year 2014:
• like-for-like sales[1] growth of between +4.5% and +5.5%[2]
• trading operating margin stable within a range of -20 bps and +20 bps[2], reflecting the flexibility that the Group seeks to manage its operations, in particular for its Early Life
Nutrition business in Asia
• free cash-flow of around €1.5 billion excluding exceptional items[3].

[1] Net sales

[2] Like-for-like: see pages 9-11 for details on calculation of financial indicators not defined in IFRS [3] See pages 9-11 for details on calculation of financial indicators not defined in IFRS

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Corporate Communications: +33 1 44 35 20 75 / Investor Relations: +33 1 44 35 20 76

Danone: 17, boulevard Haussmann, 75009 Paris, France

On June 11, 2014, Danone announced a plan to close its plants in Casale Cremasco (Italy), Hagenow (Germany) and Budapest (Hungary). Since 2010, a lasting downturn in the European economy and consumer spending has led to a significant decline in sales in this region. While European sales volumes now show signs of gradual improvement, the group's Fresh Dairy Products division in Europe has seen overall business fall back, with local cases of surplus capacity. In this context, Danone announced a plan to close its sites at Casale Cremasco, Italy; Hagenow, Germany; and Budapest, Hungary-all countries particularly hard hit by the fall in sales. The planned closure of these three plants and a gradual shift in production volumes to Belgium, Poland, Germany and France should allow the Fresh Dairy Products division to improve its production capacity and competitive edge in Europe.
This plan would lead to the suppression of 100 positions in Italy, 70 positions in Germany and 155 positions in Hungary. Working closely with works council representatives, Danone intends to take
social measures identifying job solutions for each of the employees who might be concerned. This project would be fully implemented by mid-2015.
On May 28, 2014, Danone announced the results of the option offered to shareholders to receive payment of their 2013 dividend in the form of DANONE shares. This option was approved by the General Meeting of Shareholders held on April 29, 2014. The option period was open from Wednesday May 7, 2014 to Wednesday May 21, 2014 included. At the end of the option period,
65.23% of rights had been exercised in favor of the 2013 dividend payment in shares. For the purposes of the dividend payment in shares, 11,932,014 new shares were issued, representing
1.89% of Danone's share capital on the basis of share capital of April 30, 2014. The settlement
and delivery of the shares as well as their admission to trading on Euronext Paris took place on Tuesday June 3, 2014. The shares carry dividend rights as from January 1, 2014 and are fully assimilated to existing shares already listed.
o o O o o

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Corporate Communications: +33 1 44 35 20 75 / Investor Relations: +33 1 44 35 20 76

Danone: 17, boulevard Haussmann, 75009 Paris, France

Due to rounding, the sum of values presented may differ from totals as reported. Such differences are not material. See Methodology note on page 11.

Information published by Danone uses the following financial indicators that are not defined by
IFRS:

• like-for-like changes in net sales, trading operating income, trading operating margin, underlying net income and underlying net income per share;

• trading operating income;

• trading operating margin;

• underlying net income;

• underlying fully diluted EPS or current net income - Group share, per share after dilution;

• free cash-flow;

• free cash-flow excluding exceptional items;

• net financial debt.

Given severe deterioration in consumer spending in Europe, Danone has set a target for savings and adaptation of its organization to regain its competitive edge. Starting in the first half of 2013, Danone has published a free cash-flow indicator excluding cash-flows related to initiatives deployed within the framework of this plan.
Calculation of financial indicators not defined in IFRS and used by the Group is as follows:

Like-for-like changes in net sales, trading operating income, trading operating margin, current net income - Group share (or underlying net income) and current net income - Group share per share (or underlying net income per share) essentially exclude the impact of: (i) changes in exchange rates, with both previous year and current year indicators calculated using the same exchange rates (the exchange rate used is a projected annual rate determined by the Group for the current year), (ii) changes in consolidation scope, with indicators related to considered fiscal year calculated on the basis of previous-year scope and (iii) changes in applicable accounting principles.

Trading operating income is defined as the Group operating income excluding other operating income and expense. Other operating income and expense is defined under Recommendation

2009-R.03 of the French CNC, and comprises significant items that, because of their exceptional nature, cannot be viewed as inherent to current activities. These mainly include capital gains and
losses on disposals of fully consolidated companies, impairment charges on goodwill, significant costs related to strategic restructuring and major external growth transactions, and costs related to
major crisis and major litigations. Furthermore, in connection with of IFRS 3 (Revised) relating to business combinations, the Group also classifies in Other operating income and expense (i) acquisition costs related to business combinations, (ii) revaluation profit or loss accounted for
following a loss of control, and (iii) changes in earn-outs related to business combinations and subsequent to acquisition date.

Trading operating margin is defined as the trading operating income over net sales ratio.

Underlying net income (or current net income - Group share) measures the Group's recurring performance and excludes significant items that, because of their exceptional nature, cannot be viewed as inherent to the Group's current performance. Such non-current income and expense mainly include capital gains and losses on disposals and impairments of non-fully-consolidated equity interests and tax income, and expense related to non-current income and expense. Non- current net income - Group share is defined as non-current income and expense excluded from Net income - Group share.

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Corporate Communications: +33 1 44 35 20 75 / Investor Relations: +33 1 44 35 20 76

Danone: 17, boulevard Haussmann, 75009 Paris, France

Underlying fully diluted EPS (or current net income - Group share, per share after dilution)

is defined as the underlying net income over diluted number of shares ratio.

Free cash-flow represents cash-flows provided or used by operating activities less capital expenditure net of disposals and, in connection with of IFRS 3 (Revised), relating to business combinations, excluding (i) acquisition costs related to business combinations, and (ii) earn-outs related to business combinations and paid subsequently to acquisition date.

Free cash-flow excluding exceptional items represents free cash-flow before cash-flows related to initiatives that may be taken by the Group to deploy the plan to generate savings and adapt organization in Europe.

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Corporate Communications: +33 1 44 35 20 75 / Investor Relations: +33 1 44 35 20 76

Danone: 17, boulevard Haussmann, 75009 Paris, France

[1] Represents acquisition costs related to business combinations paid during the period

[2] Represents earn-outs related to business combinations and paid subsequently to acquisition date and over the period

[3] Net of tax

Net financial debt represents the net debt portion bearing interest. It corresponds to current and non-current financial debt (i) excluding Liabilities related to put options granted to non-controlling interests and (ii) net of Cash and cash equivalents, Short term investments and Derivatives - assets.

[1] Includes derivatives - liabilities

Unless otherwise stated, amounts are expressed in millions of euros and rounded to the nearest million. In general, figures presented in this press release are rounded to the nearest full unit. As a result, the sum of rounded amounts may show non-material differences with the total as reported. Note that ratios and differences are calculated based on underlying amounts and not on the basis of rounded amounts.

FORWARD-LOOKING STATEMENTS

This press release contains certain forward-looking statements concerning Danone. Although Danone believes its expectations are based on reasonable assumptions, these forward-looking statements are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those anticipated in these forward-looking statements. For a detailed description of these risks and uncertainties, please refer to the "Risk Factor" section of Danone's Registration Document (available at www.danone.com).

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Corporate Communications: +33 1 44 35 20 75 / Investor Relations: +33 1 44 35 20 76

Danone: 17, boulevard Haussmann, 75009 Paris, France

€ million

[1] Like-for-like: see pages 9-11 for details on calculation of financial indicators not defined in IFRS [2] North America= United States and Canada

[3] ALMA = Asia-Pacific / Latin America / Middle-East / Africa

[4] Due to rounding, the sum of values presented may differ from totals as reported. Such differences are not material. See Methodology note on page 11.

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