H1 2017: performance in line with expectations, preparing for acceleration

Press release - Paris, July 27, 2017

• Double-digit recurring EPS growth (+11.0% at constant exchange rates)

  • Low start to the year as expected: +0.4% sales growth in H1 ("LfL New Danone")

  • Very strong recurring operating margin improvement at +91bps ("LfL New Danone")

• Strong cash flow delivery: €923m of free cash flow excluding exceptional items (+24.4%)

• Signing of Stonyfield sale for $875m (20x EBITDA); closing to take place early August

• Full-year 2017 guidance confirmed

All references in this document (including in the above section) to" like-for-like New Danone" changes, recurring operating income and margin, recurring net income, recurring income tax rate, recurring EPS, free cash-flow, free cash-flow excl. exceptional items, and net financial debt, correspond to financial indicators not defined in IFRS that are used by Danone. Their definitions, as well as their reconciliation with financial statements, are listed on pages 8 to 12.

CEO EMMANUEL FABER'S COMMENTS

"2017 is a pivotal year for the execution of our transformation agenda, as presented last May at our Investor Seminar. H1 2017 has been a period of intense construction for Danone, with the creation of the processes of decoupling of our growth and efficiency agendas, the creation of our regional grid, the launch of our €1 billion savings Protein program and the integration of WhiteWave in Q2.

As expected, the slow start of the year is the result of specific emerging markets' headwinds and challenges in Europe and in North America, balanced with significant successes in developing sustainable platforms in Specialized Nutrition in China, growing young and local Dairy brands in Europe and executing the Dannon Pledge in the United States. Momentum was strong also in our Medical Nutrition and Waters platforms and in former WhiteWave brands such as Alpro, Vega, and International Delight.

The very strong improvement in margin and EPS growth this semester again bodes well for our ability to reach our objectives for the year, with expected growth acceleration in the course of the second half. I am pleased with the structural progress we have made during H1, in securing short term delivery while preparing for growth acceleration and long term transformation. As we continue to aim at building a more resilient model, in deeply transforming consumer and civil society environments for our industry, our new company signature and identity "Danone, One Planet. One Health" will guide us with many others through this Alimentation Revolution".

2017 FIRST-HALF SALES

€ million except %

BY REPORTING LINE

BY GEOGRAPHICAL AREA

• "Like-for-like New Danone"

  In Q2 2017, consolidated sales stood at €6,664 million, up +0.2% on a "like-for-like New Danone"2 basis. Growth reflects a -2.1% decline in volume and a +2.3% rise in value.

  Reported sales were up +16.0% in Q2 2017, including:

  • the base effect2 related to the consolidation of WhiteWave from April 12, 2017 (+14.9%);

  • positive changes in exchange rates (+1.3%) reflecting the Russian Ruble, the Brazilian Real and the US dollar's favorable impacts;

  • negative changes in the scope of consolidation excluding WhiteWave (-0.4%), resulting primarily from the deconsolidation of Fresh Dairy Products operations in Columbia and Chile in Q4 2016 and Q1 2017 respectively.

The Essential Dairy & Plant-Based (EDP) International reporting line reported sales down -1.8% in Q2 2017 on a "like- for-like New Danone" basis, including a -4.8% decline in volumes and a +3.0% rise in value.

In Europe, Danone adjusted its execution plans around the Activia brand throughout the second quarter. Packaging is being adjusted in five key markets and communication campaigns are being adapted locally as new products are being launched such as Activia drinks, Activia Double Zero, and Activia WeCereals. Danone will continue to roll out these adjustments and innovations in the second half of the year, working country by country. At the same time, young and local heritage brands including Les deux vaches in France, Light & Free in the UK, Danio in Poland and Benelux, and Oikos in Italy continued to grow successfully.

The newly acquired plant-based brand Alpro delivered a double-digit growth in Q2 2017, supported by strong dynamics in all countries where Alpro operates, such as the United Kingdom, Germany, Benelux.

1 North America (Noram): United States and Canada

2 Please refer to financial indicator definitions on page 9

The Essential Dairy & Plant-Based (EDP) Noram reporting line reported sales down -2.9% in Q2 2017 on a "like-for- like New Danone" basis, including a -0.4% decline in volumes and a -2.5% decline in value.

As expected, Q2 2017 was a quarter of transition for EDP Noram, still impacted by a challenging environment in the Food & Beverage industry in the US and by the adverse effects of a delayed closing process. Since closing, the priorities have been to start the integration and reengage the teams, start the delivery of the synergy agenda and continue to fix short-term operational issues around Silk, Horizon and Earthbound Farms brands that performed negatively over the quarter.

The Yogurt segment continued to demonstrate resilience in Q2 in the retail channel in the United States, outperforming the category. High growth momentum continued for the Coffee Creamers segment, driven by market share gains across its broad portfolio through effective marketing and innovations. In the Plant-Based segment, while the beverage business was negative, with the transition to new and improved Silk packaging fully completed in Q2, Vega continued to grow and expand, supported by robust plant-based nutritional category growth across channels and by good early results from recent innovations. Premium Dairy continued to experience the effects of excess supply in the organic milk category and historically high price gaps with conventional milk. Danone expects this oversupply environment to continue over the next quarters. The Company will now selectively reassess prices according to current market conditions and continue to focus on reducing the organic milk surplus. Lastly Danone has continued to work on the turnaround of Fresh Foods.

The initiatives launched by Danone across its portfolio to match evolving consumer needs and preferences will create the conditions to accelerate the business and support a progressive ramp-up of net sales growth.

Specialized Nutrition sales rose +5.5% in Q2 2017 on a "like-for-like New Danone" basis, with a +1.0% rise in volume and a +4.5% rise in value.

Early Life Nutrition sales accelerated in Q2 2017, reflecting a good momentum and a Chinese market growth that has resumed since the beginning of the year. Major progress has been achieved in developing a direct distribution model in China through a growing presence in specialized stores and direct e-commerce, as reflected by continued market share gains and double-digit growth reported in this channel. In parallel, sales through the indirect channel remained highly volatile: after declining for several consecutive quarters, Q2 sales growth was positive from a low base last year, but volatility should last over the rest of the year until new regulations are fully enforced in 2018. Danone also continues to invest in new segments and markets to ensure a sustainable growth, such as Tailored Nutrition, a major growth driver in the short and medium term, and the organic segment in the US which delivered a very strong growth of more than 10% through its organic brand Happy Family. Advanced Medical Nutrition reported solid growth, building on robust geographical platforms of growth in Europe (Benelux, the UK, Nordic countries), and in the rest of the world (Turkey, Latin America and also China despite early inventory build-up in the first quarter 2017). All segments contributed to this overall performance.

The Waters reporting line reported sales up +0.3% in Q2 2017 on a "like-for-like New Danone" basis, including a

-3.5% fall in volume and a +3.8% rise in value.

launch of Mizone Pro and Lemonade. In Latin America, trends were contrasted with Bonafont in Mexico doing very well and Brazil impacted by persistently difficult market conditions. In Europe, revenue showed, as expected, a sequential rise from the first quarter, driven by efficient sales execution, successful activation and innovation plans as well as favorable weather conditions in June. Spain, the UK and Germany performed particularly well, with growth running at over 5%. In Spain, where the category is supported by strong dynamics related to consumers' switch to healthier hydration options, Danone continued to gain market shares, led by its flagship brand Font Vella and the fast development of its local brand Lanjarón. In North America, Danone continued to rapidly expand its premium evian brand.

H1 2017 RECURRING OPERATING MARGIN: +91bps ("like-for-like New Danone")

In the first semester of 2017, Danone's recurring operating income stood at €1,720 million, up+16.3%.

Recurring operating margin stood at 14.18%, up +81 bps on a reported basis including the dilutive impact from WhiteWave consolidation from closing date (-21 bps), other scope effects (+26 bps) reflected the impact of the deconsolidation of Dumex as well as the sale of Fresh Dairy Products activities in Columbia and Chile, and currencies had an unfavorable impact (-16 bps, mainly from the Brazilian real and the British pound).

On a "like-for-like New Danone" basis, recurring operating margin increased by +91 bps. This very strong improvement reflects:

• continued structural efficiencies, through portfolio mix management and productivity gains, that mitigated the strong negative impact over the semester from inflation on raw materials (mainly milk and plastics);

• disciplined pace in supporting growth,

• a first delivery of cost synergies in North America from WhiteWave integration (around €10 million impact on recurring operating profit as of the end of Q2 2017);

• a positive impact of an insurance payment in the Specialized Nutrition reporting line in connection with the fire in Cuijk plant in the Netherlands in 2015.

In Q2 2017, Danone launched three country pilots in order to kick-off its Protein program, an efficiency program aimed at maximizing and accelerating efficiencies in a sustainable manner, with the objective to deliver €1 billion of sustainable savings by 2020.

("like-for-like New Danone")