Danone // 2020 Universal Registration Document

4 83 DANONE UNIVERSAL REGISTRATION DOCUMENT 2020 4.1 Consolidated financial statements and notes to the consolidated financial statements Note 7. Events and transactions outside the Group’ s ordinary activities • energy supplies, which account for only a limited portion of its purchases. Danone’s strategy increasingly focuses on the upstream portion of its activities and in particular its supply of rawmaterials, not only to manage its costs but also to make it a source of value creation and differentiation relative to the competition. However, the price trends of major rawmaterials may affect the structure of Danone’s results. Risk monitoring and management Danone manages cost volatility through operational initiatives such as continuous productivity gains: Danone strives in particular to optimize its use of raw materials (reductions in production waste, lighter packaging and more effective use of milk sub-components in its products) and take advantage of pooled purchasing, for exa- mple through centralized management of purchases other than milk for the EDP and Specialized Nutrition Reporting Entities. Furthermore Danone has implemented a purchasing policy (Market Risk Management) which is detailed in the section Management of commodities price volatility risk of Note 13.3 of the Notes to the consolidated financial statements. Sensitivity of net income to changes in prices of the two main categories of raw materials purchased by the Group Impact on the cost of raw materials for the fiscal year concerned of an increase/decrease in their price applied uniformly across all countries, throughout that fiscal year, using constant exchange rates (projected annual rate determined by Danone for the 2020 fiscal year) Year ended December 31 2019 2020 (in € millions) Income (expense) Income (expense) Increase of 5% Liquid milk, milk powder and other milk-based ingredients (111) (145) Plastics, including PET (74) (56) Decrease of 5% Liquid milk, milk powder and other milk-based ingredients 111 145 Plastics, including PET 74 56 NOTE 7. EVENTS AND TRANSACTIONS OUTSIDE THE GROUP’S ORDINARY ACTIVITIES Note 7.1. Other operating income (expense) Accounting principles Other operating income and expenses comprise items that, because of their significant or unusual nature, cannot be viewed as inherent to Danone’s recurring activity and have limited predictive value, thus distorting the assessment of its recurring operating performance and its evolution. These mainly include: • capital gains and losses on disposals of businesses and fully consolidated companies; • impairment charges on intangible assetswith indefinite useful lives; • costs related to strategic restructuring or transformation plans; • costs related to major external growth transactions; • costs related to major crises or major litigations; • in connection with IFRS 3 (Revised) and IAS 27 (Revised) relating to business combinations, (i) acquisition costs related to business combinations, (ii) revaluation profit or loss accounted for fol- lowing a loss of control, and (iii) changes in earn-outs relating to business combinations and subsequent to the acquisition date. Other operating income (expense) in 2020 In 2020, the net Other operating expense of €(519) million consisted mainly of the following items: (in € millions) Notes Related income (expenses) Impairment of intangible assets 10.2, 10.3 (353) Costs related to the transformation of Danone’s organizations and operations 7.2 (163) Costs related to the integration of the Early Life Nutrition and Advanced Medical Nutrition businesses (a) (46) Proceeds from disposals of businesses and assets 51 (a) Related mainly to the costs associated with staff and information systems.