Q1 2020 Sales and Revenue Call
Before we begin please take note the overall disclaimer.
And now I hand over to Mark.
Thank you know comp and a warm welcome teleconference call participants today.
Always we appreciate your interest in our company.
Our last call what took place only 10 weeks ago.
Yet the global social and economic context seems worlds apart.
Many of our basic assumptions as far as our plants is trying to tease had to change in the short period of time.
I'm glad to report to you, but in this past moving situation you have seen nestle and its best.
On the one hand, reacting swiftly and with lots of entrepreneurial spirit.
Frankly actions would do.
On the other hand meeting its obligations.
Acting as a steadfast trusted and reliable employer.
Business partner citizen enable MPS uncertain times.
Reliability is also up importance when it comes to our shareholders.
As such it wasn't important madoff principle to us that we kept our board's debit and proposal unchanged.
It was approved yesterday power shareholders and will be paid on time and info.
[music].
Let me take this opportunity to thank our associates around the world our team Nestle.
They have truly risen to the occasion.
They have acted with intensity, where prompt changes where required.
And with compassion, where help and support put those in need what's called for.
Prove it darkest days up this crisis, the energy and devotion has been truly motivating.
They brought our purpose in value is fully to life.
This applies in particular to our front end workers, who are Nesler's heroes of the Iowa.
In several factory visits I was able to see first hand, what they had accomplished in a short period of time.
To make our facilities safe in the pace of his pandemic.
And to keep our output and performance up.
Our metros adopted to protect our workforce are based on latest scientific findings and fully compliant what guidance from local authorities.
Moving to slide five I think it is fair to say that we have proven our resilience in this crisis.
Well I will take you through the details in a minute.
It is important however, not to get carried away by the strong organic growth of 4.3% for the first quarter.
Behind this global and consolidated number you see significant an unprecedented ups and downs by category channel and geography.
This highly volatile situation is expected to stay with us for awhile.
We will of course try and give you Maxwell transparency on how our business develops.
I am also asking for your understanding that we will not happen not too often this call when it comes to forecasting the next quarters or years.
Well, our operating teams maximize safety business continuity an output.
Our strategic business units are working hard to understand that define what this new CLO one situation means well category strategies going forward.
Our ambition is not only to make it through this crisis, but also to come out of it in a successful man.
We hope to have more detail sushi and this when we report future quarters.
As you saw from today's announcement, we also continue and our journey of portfolio transformation.
We announced the strategic review of our getting new peanut milk and rice porridge businesses.
Our highly successful netscout pay ready to drink business, which also runs on begin lose supply chain platform will be retained.
We will continue to invest heavily in the next couple be ready to drink opportunity.
Well as the greater China region overall, given their strategic importance for the group.
On a separate node I would also like to confirm that we continue to make good progress well down units the waters strategy.
We have seen some delays due to our focus on business continuity during the cobot 19 crisis, but expect to update you later this year.
Before turning it over the promise one I would like to comment on our guidance for the year.
There's no reason to remove or change our earlier guidance.
Even with all the significant changes we have witnessed.
What I'm asking for your understanding that beyond Q1, we're not in a position to forecast future cobot 19 effects and the impact on our financial results.
We cannot and should not speculate on which turned that endemic will take next and what exactly at the global economic consequences and the impact on our business will be.
Our confirmation of the earlier guidance after the stronger than expected organic sales growth in Q1 should not be interpreted as a sign of specific bad news that we are aware of.
Rather it is a sign of humility and caution on our part haven't seen how quickly the world has changed over the past 10 weeks.
Well this let me hand, it over to Francois.
Thank you Mark on the good morning, good afternoon to all let me start with the highlights for the first quarter of Twentytwenty.
And the growth was 4.3% reorder internal growth was strong at 4.7%.
Pricing temporarily decreased 200.4%, mainly due to the timing of promotions in North America.
We expect to be back to positive pricing in Q2.
Net acquisition reduce grows by 4.7% this largely relates to the divestments of Nitpicking house on U.S. ice cream.
The set of the latter was completed on the Safi first of January.
Foreign exchange had the negative impact of 5.8%, mainly as a result of the appreciation of the Swiss francs against most currencies.
For the three months were 20.8 billion Swiss francs.
6.2 person decrease versus last year on the reported basis.
Let me not let me not take the opportunity to share a prompt some insights on how covered 19 has affected our business.
Why did you still early to quantify impact we know that he said things vary materially by geography product category Unsaid channel, depending on the timing of the outbreak the depth of the like downs on market specific consumer behaviors.
From a geographic perspective, a majority of markets, but particularly is all in North America on Europe reported significantly increase growth, partially supported by consumer stockpiling.
It happen essentially in a short timeframe, particularly in March for I mean, now under letter part of March for the Americas.
By contrast, China posted the shop set of decline due to movement restrictions in place for almost a full quarter.
Limited consumer stockpiling as well as a relatively high your exposure to out of my own channels.
In addition, we still have to manage some supply chain challenges post Chinese new year, but we were able to gradually resto production on logistics to level growth to know more by the end of March.
In terms of product categories product perceived as Avery Dennison cities, so elevated demand culinary products Purina Petcare Kofi unless they had science or reported significant sales increases.
In some categories. How your sales were driven by consumer stocking up on increased levels of home cooking for example, Pete.
Maggie and baking products.
By contrast categories, such as Confectionary, an ice cream posted said declined reflecting reduced impetus buying and lower demand for seasonal and gift, giving products such as to who Chinese new year products and Easter eggs.
By channel all markets saw a significant shift from out of home to in home conception.
Businesses, which were most impacted include Nissley professional what the in the out of home channel as well as Nespresso boutiques.
These businesses account for about 10% of cells. In addition, we also saw reduce consumer demand in convenience and Mems and pop stores for on the go products.
By contrast, we observe elevated demand in retail and the significant increase in ecommerce sales of 29.4%.
The latter now represent 10.4% of total net sales versus 8.5% in 2019.
This slide shows the development of Offsetted by geography.
It includes both of those as well as though globally on regionally manage businesses.
This quarter SOCOM trusted growth in terms of geographies.
Any growth on request to be positive in the Americas on every now and sharpening they get either anyway.
Pricing was negative in the Americas, and let me now but flat anyway.
Turning to the distribution of growth between developed and emerging market again, the first quarter should be seen as typical.
Organic growth in developed markets increased to 7.4%.
The broad based on strong rig across all regions with the exception of Japan.
Emerging markets grew by 0.5% organic growth was lower than usual as the result of who said a decline in China.
We see this has a temporary slowdown on we remain positive and emerging market as a key roles platform.
Excluding China organic growth in emerging market was in mid single digits.
Let's now look at the result of four authority segment, starting with only emits where we saw strong organic growth.
Sales were 8.3 billion Swiss francs organic growth increased to 7.4% supported by higher rig of 7.9%.
Pricing was negative at 0.5%, reflecting timing of promotion in North America.
Such promotion had already been agreed with customer of prior to covert 19 and saw strong consumer uptake in March.
North America grew at a high single digit right supported by exceptional read in most product categories.
Purina Petcare was against a standout category with continued momentum in E commerce and premium rooms.
Coffee, including Starbucks and Kathy reported high single digit growth.
Frozen food posted high single digit growth supported by did you all know pizza stuffers meal and put bucket snacks.
Baking products, including told how is more songs and coalition Milt so higher demand as consumer Cook more at home.
Gerber Baby food reported mid single digit growth supported by organic range on healthy snacking.
Water posted positive gross net the professional reported the sale decline as the out of home channel close towards the end of March.
Latin America, so mid single digit growth was positive contribution from most geographies categories.
Sales in Brazil grew at a high single digit right supported by significant growth in infant nutrition ambien dairy coffee.
Mexico, So mid single digit growth with increased sales from this KFC coffee met overall for Latin America Purina Petcare on culinary product reported double digit growth.
The other hung confectionary, so instead of declining.
Turning now to so let me now said is were 5.3 billion Swiss francs organic growth was 7.1% with strong rig supported by both volume and mix.
Pricing remain negative as deflationary trends continued across most markets in Europe.
The zone continue to see broadband market share gains across most product categories and geographies.
During every product coffee purina petcare infant nutrition, all reported double digit growth.
Culinary product so increase demand across all segments, Maggie posted strong growth in particular for soups, new doors and sources.
Garden Gourmets budget, Diane unplanned bets wood products continued to grow at the strong double digit right helped by product launches such as the new vegetarian sausage.
Coffee posted increased growth supported by Starbucks on net cafe.
This capital she goes too so we bought it from Ross.
Purina Petcare continued strong momentum led by Salix Purina, one on tell dot com infant nutrition, so increased consumer demand across most geographies.
On the other hand water posted negative growth impacted by said the decline in the out of home channel unless they professional recorded a double digit sales decline.
Moving next to zone anyway, we says of 5 billion Swiss France.
Again growth was negative at minus 4.6%, mainly due to a shop set a decline in China.
Other sub regions so positive growth.
Pricing was flat with negative pricing in China, Japan and Australia.
In China demand for seasonal items was reduced you do covered 19 look down the restrictions as a consequence, we implemented additional promotional activities, particularly in confectionary.
China posted double digit negative growth, reflecting a significant said decline for business. He is weighted to the out of home channel on gifting.
Examples include Nestle professional yilu peanut milk and can rise bridge soup, which he confectionary ready to drink products on ice cream.
Growth was also negatively impacted by the timing of Chinese new year as around three weeks of pre season shipments took place in Q4 last year.
Infant nutrition sales decreased.
I said decline for wireless infant formula and particularly the 26 range more than offset positive gross for not an infant formula on double digit growth for Gilbert infants areas.
Purina Petcare grew at a double digit rate ecommerce sales posted strong dope posted double digit growth supported by strong demand from let Cathy and Starbucks products.
South East Asia posted solid growth supported by strong momentum in Indonesia, and improved growth in the Philippines and Thailand.
South Asia recorded high single digit growth, India continue to perform well with continued momentum from non Maggie and keep kept.
It's then returned to positive growth based on improved contribution from ambien dairy.
Sub Saharan Africa accelerated to a double digit right supported by needle Milo and coffee.
Japan, I know, saying, yes, so low single digit growth or setting up posted strong growth with increased contribution from all categories, particularly purina Petcare confectionery and this Kathy.
Japan saw a decline in sales with kit Kat impacted by reduced number of inbound tourist.
Overall for the zone, Purina, Petcare, Milo and Maggie delivered positive growth.
Within coffee Starbucks products continue to see strong consumer demand.
Side of China infant nutrition, so good solid momentum and Mr. professional recorded a double digit sales decline.
Finishing with other businesses, which include Nespresso literally had science total sales for the other businesses were 2.2 billion squeeze France Congress at 8.5 person was driven almost entirely by rig of 8% pricing was 0.5 person.
Nespresso maintain mid single digit again growth, we strong momentum in the Americas on EOA.
Sales in Europe decreased due to booty closures and significantly reduced demand in the out of home channel, especially in the latter part of the quarter.
By the end of March 98% of our boutiques, where clause globally.
At this end time, you cannot sounds grew by nearly 60% in March which more than offset declines in other channels.
This shows the strength of the Nespresso business model, which can adapt and recover in one channel whatever might have been lost India, though.
Virtual line continue to see strong double digit goals.
Nestle Health Science grew at a double digit right supported by strong growth for consumer care on medical nutrition products.
Got enough life on pure uncapped relations, so strong momentum with increased demand for supplements that support overall health and the immune system.
Ecommerce south so strong double digit growth.
Looking now at grows by product categories. There. There is a clear contrast between segments of our rolled the first quarter demonstrates the resilience of our business and shows how the diversified portfolio is well be up for difficult conditions.
Pardon liquid beverages grew 3.9 person for the three months.
Coffee grew by slightly more than five person supported by Starbucks products Nespresso on this Kathy.
Starbucks added incremental sales of more than 150 million Swiss franc in the quarter.
Cocoa on more beverages grew at around 3%, while other ready to drink beverages were negatively impacted by greater exposure to outperform channels.
Nutrition and health Science grew at 2.9% infant nutrition growth was impacted by you said a decrease in China outside of China.
Infant nutrition, so a good solid momentum supported by our science based products such as infant formula with human milk only go take a rights.
We are already discussed Nestle health science.
Mid products on ice cream grew 2.1%. Please note that we saw the USA screen as at the end of January.
Pet care continued to see an outstanding growth globally supported by E Commerce and strong demand for premium products.
During the quarter Purina successfully launch plan life clear in the United States.
This is the world's first and only cat food that reduces allergan in cat tail.
In prepare dishes and cooking ads growth was broad based by region brand and product segment.
Ambient culinary group in high single digits supported by increased demand for cooking ads, so sees new doors on soups.
Frozen until the grew in high single digits.
Vegetarian unplanned beds food products continue to deliver strong double digit growth.
Confectionery decline, mainly due to read use impaired the buying and gifts gifting, particularly in China and Japan.
What else so negative growth, reflecting lower demand in the out of home channel offsetting increased growth in retail channel.
Let me know handover to look out for the Q1 is session.
Thank you for its what we that we move to the Kuni session. We open the lines for questions from investors and financial analyst.
As a reminder, please press star one or two entered the Q and start to if you want to withdraw please limit yourself to no more than two questions.
The first question is somewhat an outcome what does that come in at Barclays. Please go ahead Warren.
Good morning, Mark I was wondering if that were in here at Barclays. Two from me.
First one is just around the supply chain and the cost of right.
Mark.
How do you interview recently and you're talking about trying to make this next phase financed our.
Even normal production would be an outstanding achievement and you were talking about even having to add freight.
What I was just interested to understand how we should be thinking about the supply chain and any kind of risk factors.
Whether its raw materials, so let's just stick.
That we should be so thinking about and then how.
The interplay between dies call. So now the cost input costs Francois.
Must be a lot lower than you were previously guiding say.
Well, it's a guy just interested to see how the interplay and how you're thinking about those different different factors at the first one and the second one is a specific one around China infant nutrition.
I noticed you Didnt mention ILUVIEN in your prepared remarks, which has been the big.
Dry, but the billionaire brand could you maybe just talk a little bit about what you're seeing obviously with coal.
It's difficult, but you mentioned that link.
Offsetting us 26, but what about Lima, what about kind of innovation, what about the outlook in China.
Given the phrase that there is.
Place regarding new products with the government. Thank you.
Thanks for aren't this is mark let me handle the first one and then hand it over the front spot for the second one so no.
That's what I was trying to new too when I was talking about all the work and all the ups and downs behind the 4.3% organic growth figure. So this has been a tremendously demanding period now tip my hat too.
A supply chain and manufacturing teams.
We want walk in distribution centers and quality assurance maps, because literally everything has been impacted by this and this starts with inbound logistics for a number of our raw materials and.
Clearly you know when there were locked down super sometimes hard to get holder piece, we had to air freight at times to expedite the process.
Some of our factories when it comes to absenteeism health related we had to adjust to that who still keep our performance up.
We have to take extra safety precautions that sometimes impacted.
[music] term productivity and so we had to make up for that.
And all of this of course happened in the face off strongly rising demand for some of our categories. So it all really.
Required extra flexibility.
And making.
Turn up the time decisions here to be sure better short term, we really meet our safety and output requirements and yes. Some of that also did come I think this was the trees up your question with some extra cost.
We're still in the process of course as you know in Q1, we focus on our sales development when the crosses off and analyzing this understanding it better suffice it to say that we also have some savings here because as you know for example business related travel is way down and some of the promotional activity has also been lowered so we'll be.
Giving you a full picture he as part of our Q2 call, but clearly yes on the supply chain side of manufacturing site, keeping that enormous business continuity into an output up did require some extra effort and at times and also some extra cost.
Good afternoon also speaking so.
Regarding your question on earmarked for the good news that Yruma maintained its market share during the quarter on especially supported by Yuma organics.
You could look at to be young Illuminati infant formula Gab variance around Gainshare. The issue that we have the first in Q1 is much more on the in particular on his 26 range, probably 19 red user traffic in baby stores, where wires and more specifically at 20 seekers six harvest from position, especially long.
Our cities. So this is really the problem that we had we see that largely as a short term issue, where the minor issue as well with which is a decline in Hong Kong local and cross border business, which once again, we see as a short terms you.
Nestle brands on the other Hunter so positive gross on as I said, none infant formula gain market share.
Well thanks.
The next question is from Selena JP Morgan. Please go ahead Selena.
Yes, good morning, everyone and.
Good luck to come back to the outage.
Mark in your prepared remarks.
I got confused and I'm not so sure on that.
I meant to read you haven't mannkind yet.
Let me.
We put in almaden against growth above last year and better margin, that's right or I just answered. Thank you.
Okay and that that would be my first question.
Second question and I appreciate it cannot be difficult one but.
Possible to ever recover underscore ligand that moving parts on the pluses and minuses.
On the quarter to understand whether on that basis.
You had a better quota for.
Hello.
A particular spectrum could read and is it possible as well to get the exit trait of China, which you said was down.
A double digit in the quarter, how was it accurately to match. Thank you.
Thanks, Saline so let me start on the guidance, let me remind you that when we gave your guidance in February.
While this had not turn into a global pandemic yet it clearly had already impacted China and so we told you in February back what we guided was before any impacts from.
The corporate 19 endemic and.
That has not changed because again what will happen now in Q2, three and four I do not dare to say and hence.
The guidance now is unchanged from what we had in February so we stick power guidance. It includes now one quarter of actuals in three quarters on which we do not forecast the corporate 19 impact.
Regarding selling the the moving parts on the net impact of could be 19 very difficult to major which is the reason why we don't really want to go there that would be a lot of judgment to assess what is linked to covidien. What he is not.
We described to you the moving parts be beat in terms of geography Beacon in term of category of channel that we cannot says because I mean, we see significant moving parts. So the net impact we don't we know the only thing I can tell you the quarter was a little bit slightly better than what we expected, but once again to related to.
Covered 19, specifically either difficult exercise and we don't want to go there on the exit level in China. That's difficult that's moving I would say almost every day what I can tell you we that we start seeing China coming back clearly, but we are not deliver where we were before the crazy. So it's I think it's a gradual improvement on a daily basis.
This which is better and maybe in some instances and some sub geographies of China as well, but we starting.
Some assembly or improvements, which is which was expected in where given that we will have to significantly negative level during February and March.
Next question is primarily charter at Morgan Stanley. Please go ahead.
Good afternoon, everybody Richie Taylor.
Well quite well.
Bigger picture question, if I may so the first one is could you give us.
A little bit of color of how much stock piling contribute to see.
Like like in the first quarter I think you need the said yesterday. It was cheap sensor that say, it's the same ballpark for you as well and then the second question I'm very interested in your perspective on the M&A landscape.
This crisis means the banks in terms of opportunities and all say.
What it means potential buyers. So any divestments you plan to make and I guess related to that these kind of crises spring.
Opportunities to accelerate in areas I know youre strong growth in E commerce.
10% of sales should we be thinking that lets say, we'll come out of this crisis.
Make it kind of giant leap in digital particularly cost categories like pacsun infant formula and spread so thank you.
Thanks, Richard let me try and take both for these.
So clearly there was some benefit from consumer stockpiling in this quarter, but I would not be in a position to quantify that intermediates, it's difficult to judge you know how much of that.
He has been consumed a has not been consumed I think this is very hard to measure up any consumer product and hence we were trying to stay away from it.
For the second question, we did tell you that we expect more vigorous year when it comes to M&A and Tim I think looking at our pipeline here that continues to be the case and we're quite interested in expanding our business. We're working on a number of interesting leads.
If there are some now that may be coming up in addition, because of the economic crisis I think it's too early to tell that because remember this is only a month one.
Of month to depending on where the crisis. It for most regions and you would probably see.
M&A opportunities that relate to financial difficulties only come up after several months or quarters. So it's a little early to speculate on that I also would not go overboard on on that side of M&A, because member when food and beverage and most food and beverage makers did see.
Very good business as a result of increased consumer demand.
But overall again, just like we said set in February.
Quite.
Interested in M&A transactions to build our business in a very disciplined way and the pipeline certainly looks more interesting than it looked at last year.
Ecommerce I think you're spot on I think this is a key area. This is where we saw true significant increases.
And I think some of that will be here to stay.
I think one of the side effects of this crisis will be it will be kind of a price through event when it comes to E commerce for food and beverage.
You know food and beverage categories tended to be somewhat slower when it comes to E commerce compared to for example books or consumer electronics or something like that and I think some of that is changing now because people see the convenience of E commerce in food and beverage as well.
Next question is from a baby days that Societe Generale. Please go ahead David.
Thanks, good afternoon or might you.
The first one I think it's mark.
On TV.
Couple of weeks ago, I think mark talking about.
Purchasing behaviors in China coming out of the locked down you said typically that you were seeing less premium purchases or mix negatives I guess the question is going to be the ought to think about how.
The via that dynamic was based on Barry I guess limited data, what kind of behavior as you'd expect to see from consumers.
We gave you the second quarter hopefully some of these lockdowns coming off elsewhere I don't know second question on the cost side you talked in the release about couple of the so a couple of initiatives.
One being dairy farmers commitment buying their product the other one being I think 500 million.
Initiative for out of home retailers I, just I understand what impact that might have on appear now in terms of writing off inventory, that's a perishable medications that going to be a rich that we should think about either on the 500 million is that I guess cash, but in some of that PNM and some of that just a working capital and you can split that out for US. Please. Thank you.
Thanks, David Let me take the first question also the first part of your second question than handed over to Francois, especially on our.
Out of home in Foodservice business initiative, So I think some or the initial reactions, we saw in China and also.
Apply here for the rest of the World now this and increased interest in value for money and that's not surprising because this healthcare crisis also goes hand in hand, where an economic crisis in I think it's safe to say that were middle of a global recession, right now and term and hence people are very value conscious and.
And there's a strong interest in that.
Looking back at the first quarter, we nonetheless saw our premium products held up well and that is something that in hindsight also.
It's very much in sync with the experience we have from previous crisis, including the World financial crisis, where usually is the two extremes the value side and the premium site that do hold up quite well.
In a downturn and Tim at least now for the early innings of this new situation that seems to apply as well.
The other one while still early days that we saw is an interest in larger pack sizes. That's also not surprising when people spent more time and home robin consuming lots of small packs that rather by fewer large packs.
As I said, our strategic business units and now working overtime to really understand.
Not only in light of the.
Healthcare crisis, but also be cannot make pressure what that means for each of our categories to me that is super interesting work because clearly this is not going to be a quick recovery. This is going to be several quarters, if not several year kind of process.
Where it is safe to expect some changed.
Category dynamics, and so we want to recognize those early and adapt to those early and be a leader.
When it comes to those trends.
To your second question about the cost on the dairy one that's easy there is one thing we have that.
That milk pharma wouldn't half, we have the ability to turn to milk powder.
And so that's why I think standing by our commitments here.
Is it good one and.
That really means that we can stand by the commitment at an acceptable cost to us. There's some extra cost there is a bit of extra inventory here, but again.
The business relationship over years and generations, but those moat farmers around the world. This is what really tax preference. He and this is what nestle's recognized for in agricultural circles.
On the out of home and Foodservice initiative for us, but can give you a bit more of a crack down here.
But again this is something where I think we're combining doing good and go doing well.
Any sense that foodservice an out of home businesses do need support at this difficult now, but I think we can also strengthened the relationship and so I see there's an investment going forward that really helps this channel I think when all is over when all said and done.
The fundamental trend that out of home consumption tends to be.
On the rise around the world.
That trend after again some quarter. Some years, we'll certainly continue and ask you know it was one of our strategic initiatives to be well positioned for this trend.
Now something happened that no one had foreseen, it's a tremendous burden to the out of home businesses were there to help we have a strong balance sheet, we had the ability to work with them.
And then going forward when things go back to normal I think this will also pay off but let me handle the francois four bit more detail. So they didn't indeed, we want to offer pronto prompt them problematic assistance to.
Some of our out of home on food service partners to help them to weather the crises and help them to restart the business. That's really the idea one part will he to our working capital enough cash flow, we need more time to assess the exact needs of our business partners, but it's a significant amount probably a little bit more than half of the total amount could be even potentially more.
Once again, we have a reasonable idea as of now, but we need more time in order to assess the exact to needs. The other part will hit the penal piano accounts. He is a part that corresponds to free goods on suspension of her rental fees for coffee machine. This is a substantial amount is probably a little bit less than half of the total consideration that we have there.
But there again, we need a little bit more time to assess the things that need. So we will find you need to as we make progress, but certainly we are fully committed to support them.
Thank you got next where Tony's from Alan, albeit at Mainfirst a please go ahead.
Thank you Im not sure Cook wanting mark and on San Lucas two question from my side. He called thing the value development, which was negative I have to go back up to.
90, 97 to see a negative.
But there could you elaborate little bit more what happened there more important what we expect as you said flat for.
The second quarter, probably in which category. It take question is regarding southeast Asia.
Had strong sales momentum declared imagining a niche as well as Philippines, and Thailand, if the whole thing going on there or is it really fundamental improvement in the three no. Thank you.
Hello, and good afternoon, we'll take the pricing one so pricing was negative by 0.4% in Q1, and we expect that to be temporary and this is mainly due to the timing of promotion and more specifically in North America. We had some promotion in North America that has already been pre agreed with our customers prior to.
The coded nineteena and during the stockpiling and panic buying some what we saw strong consumer uptake for these products in March so we'd got amplified to certain extent as a percentage of total sales. So I want to be very specific for example, you hit.
More specifically water on pizza on frozen prepare dishes, which is most the type of product that been been hit by this a panic buying and pantry building.
And this is mark so on the rest of Asia outside of China and of course.
The situation always varies a little bit country by country, but to keep in mind that they did benefit just like Europe in the United States from some of the time delays I think what made China, particularly.
Difficult is the fact that.
This.
Prices were spreading at the time of Chinese new year enhance people, even if they wanted to get prepared they had a few opportunities to actually do somewhat the pantry loading that we saw in other geographies and so when the.
Cobot 19 virus spread to other countries in southeast Asia, They had a better opportunity get prepared for that hence there was more of a consumer reaction enhance less of a have a negative impact that we saw in in China. So I think it's consistent work some weather patterns that we're seeing in zone amena and so on amas.
Next question only from a Jeremy.
Joining me from HSBC. Please go ahead.
Hi, Good afternoon, Jeremy Fialko HSBC couple of questions for me I guess first what is.
You would think about success in Twentytwenty should we think about this their narrowly intensive if you can the guidance despite.
All of this that would be how you would be success. So there's some broader metrics, we should probably be easier judging you on this weather Twentytwenty was a success, we if necessary.
You could elaborate on that.
Second question is.
Clearly, there's a few about sort of stockpiling stop building here, what we would have expected what we didn't expect but maybe another way of thinking about it is.
What do you think youre market grew at an aggregate during the course, what do you think yours are relative outperformance or underperformance versus those markets might have been thanks.
Jeremy This is mark.
Great, we probably won't be very helpful. On both of these.
So second one I have not seen data on that.
I think what do you all you can do is due a comparison here between the various pearson industry and how they have been sort of holding up in this time.
On the first one honestly.
The way to be successful in this and this was how we switched our operating mode. In February as this is no longer bounce several quarters for several years. It is literally day to day week to week, and what I applaud the team forests.
To a person everyone sort of got it that you know a lot of things here there longer term out the window. It is about doing the best under the circumstances in an a very fast moving situation and this is still the mode. We're in and so we have not at the opportunity yet to frame this into longer term financial or success.
Gold is really you know what is your what are your KPN eyes, what are your on time and fall deliveries and stuff like that on a day to day week to week basis and to be entire management team has been handling this very very very tightly.
To be sure we on top of this and it remains a top priority.
Okay. Thank you very much units at Goldman Sachs.
Yes, Hello, everyone. Thank you very much a couple from me as well. Please the first is on China infant Formula again, I wondered if you could tell the magnitude the calling you saw the and then going back to your market share comment I guess from looking at the Nielsen trends.
It's been losing share within the offline channels I wondered if this is also what youre, saying.
All right when you say that share we stated that because if something else such as online shaping a lot stronger so little bit clarity on that would be helpful. And then the second is on espresso.
Just wondered if you could give the channel split between E com boutiques et cetera, and then maybe shed some insights in terms of the channel performance fuel business in Europe, specifically to help better explain the decline there. Thank you very much.
John Let me technical question on market share, but this is what we had available at the end of March which does not fully reflect what happened during the covered 19 crises, but you know we look at to market share in terms of business sounds a sale is a mix of the geography on the category as at the end of March.
We gained or maintaining market share in 59% of ourselves. It was 51 person gain an 8%.
He lives, so which seemed to indicate that overall, we gain market share.
The market share gains were really clear across categories Illumina.
Globally, we gained market share in pet care in coffee in ambient until culinary infant cereal and what we have as data is that in ecommerce channel as well we gained market share. So that's what I can tell you once again I would be very careful in growing conclusion, there from the covered 19 impact the quick.
Can you had on China infant Formula I think I covered it partly before.
Once again, I mean, we gain market share with you do mass, whom organic so we gained market share in an infant formula.
We.
First some issues and even significant issues with as the Xtwenty six range, mainly because of reduced trafficking button baby stores, we see that as a temporary impact on we expect to be back to growth. Our focus will be again on innovation. This is very much what we are working a partner.
And as you know for example in China, we have not been able to register yet the.
Chemours in human Mill Coty go take a ride, but we are working in order to bring more relevant innovation to our consumers in China and across the globe.
On the smart when it comes to the second question is Precima ask where your understanding that we're not disclosing the channel breakdown, we see that as competitive sensitive information.
Next question any sort of emergency Burberry accountable. Please go ahead your flip them.
Good afternoon.
Got you kept several location.
So you can from yesterday, you actually it's the payback.
Squeaks quite significantly you can share with.
Youre glance at Augusta.
Cash.
Getting the Capex investments as was the buybacks going forward.
The second on swear to God.
The print products Mark.
Thats reserve quite robust.
Four cents last year can you share with us towards accelerating decelerating in first quarter.
Thanks, Ron Philippe so.
Dependent I think I made that point in my prepared remarks, and this whole notion of continuity. There is very important for us, especially given the very large chair of.
Retail shareholders among our shareholder base. So for them. This cash income the fact that was coming in as planned and on time.
It was very important on the buyback nothing new to report we are implementing this exactly in line with what we outlined mast October when we announced this new program as a three year program.
When you look at the last program, which went over two and a half years you always saw basically some variation here.
Paying on market circumstances, when it comes to the speed, we're not day trading here on the buybacks as you know we typically defined credits that one for amount or six weeks at a time and that.
Determine the quantity of buybacks relative to the share price and so of course, when you have a credit like this and the share price goes down and the quantity does go up and so that may have explained some of the larger volume here that you saw in March in particular, but when it comes to a timeframe and also everything we said.
At around that buyback program everything we said in in October about that still applies.
Not to deepen the premium products once again I would take these data we scale because there are relating to the first quarter. So we didn't have the full impact of covered 19, yet, but the growth of premium product in Q1 was pretty much in line with what we experience over the last couple of field and more specifically last year, which means high single digit.
So we see it's too early to draw any conclusion at this stage, where even if there was a.
There is likely to be some.
Heading down in terms of shopping habits in Indonesia, future, we'll see let's not forget that we have 75% of cells, which are in the mainstream and affordability or what we call PDP segment. So.
For the need for some consumers have to trade done tons of her shopping habits. We are we going to be comfortable that we'll be able to address their needs.
Next question is from a James Edwardes Jones with RBC. Please go ahead you into them.
Yes. Thanks.
Can you just explain your thinking.
Not withdrawal in your guidance given given that it doesn't.
The allowance for the impact occurred at 19.
I think a lot of your competitors.
In these circumstances, just just withdrawn their gardens completely.
James This is mark so I can't comment for them on our behalf nothing has added if we increase the amount of uncertainty for you and so again, we've given you a guidance before corporate 19 in February and we continued with that practice now so.
So what we want to signal here is that many of the underlying things that we talk to you about still do apply and we want to take uncertainty out enter.
Yes, I mean, if this crisis takes a very unexpected new turn that is not something I want to be held accountable for and I think that's understandable, but.
Under normal.
Base case assumptions, we do feel large degree of certainty here and that's what we want to signal.
So.
From the Patrick 20 minutes Kantonalbank. Please go ahead Patrick.
Hi, Mark for us on local congrats the whole initially family you were mentioning also that value was holding up well, what's the percentage of sales in value. That's my first question and second question. You have mentioned that you are quite optimistic about emerging markets I guess that sells for me terminal, but what about the short term debt.
It's already mean that that's caught one could have been the bottom for emerging markets. Thank you.
Okay.
The your first question I think he them premiumization. So the value is I don't have to figure, but he is pretty much inline with what we had last year. I mean, we were 25 person I said, 75% in mainstream and and affordability. So we are dissimilar going around 25% emerging markets. Obviously, you see that the growth was totally atypically, mainly because of.
China.
We reached the bottom very difficult to draw any conclusion. They are we remain very committed to emerging markets and.
We are therefore, the long term we have been in many of these countries for more than one of the deals.
And they are usually with the exception of this quarter, but once again, it's a very exceptional one really contributing to growth and margin. So.
We are we're fully committed to emerging market for the future. It might be you know emerging markets are it's not always a straight line of gross it might be little bit of a bumpy roseland time to time, but we are well diversified does well that's something that we see as part of the resilience that we've been able to offer this quarter, which is a factor for being diversified by geography on.
Sorry does help us as well and we always have ups and downs.
Next question is from a James targeted bring back.
Hello, Good morning.
Question, just how she one was just.
Clarify the point all on PPD, 75%.
We should mainstream.
How much is that CPP I like the east display that.
And then secondly.
I appreciate your market you said you very much operating for the short term, making sure that everything is running smoothly, but when you look about your own restructuring initiatives and reorganization initiatives going on this year expected again this year how much of those are on hold either due to just take reasons or to preserve cash.
As a question on PPP devalues of last year was.
At 12% of total sounds it's about the simple Q1 as well.
In terms on the second question very simple answer nothing absolutely nothing is on hold.
Okay, and we're proceeding with our plans now strategies going forward.
Of course, you know as this crisis hit and I think the water strategy is a good example.
You do have a few weeks of delays now as you know people were working from home was office environment, what may be less efficiency from day, one and they had to focus on business continuity issues and so some of the longer term walk may happen gotten delayed by some days or weeks and so bad is normally and I think we all experienced that.
All of our plans for the last few weeks and months I think got a bit delayed and disrupted but in terms of what we want to accomplish here. In addition to happen in the crisis. Nothing here is is put on hold or or or taken off and to me is very important you know we got to handle this crisis.
But then whether it is business efficiency, our strategy or whether it's our sustainability issues. The future will still happen and we want to be ready for it and we won't be ready for it among the first.
Next question is from a tree standards Redburn. Please go ahead.
Judgment and just a question about government regulations, Mark are you seeing any changing changes in government regulations and the loosening are tightening up the rules that maybe a bit more permanent post this period.
The second order effect to some distinguished packages and how do you think the conversation that you have with different regulatory bodies will change on things like each safety and how you guys are position going into this conversation exposed to cover Terry.
Yes. Thank you. So of course short time, you saw a lot of emergency regulation I think that has to be expected to enter and I think we will always pursuing a very intense dialogue with regulators to be sure that they understand what we're doing and we're in full compliance longer term I think this was the gist of your question.
We're not seeing any significant changes yet.
Think there's a lot of interest in recovery work that also meets ecological and crean objectives like you know the European Crean deal and so we want to be part of that we want to be helpful in that.
And Tim, but specifically when it comes to food safety.
Or nutritional products into some of the regulations around that we have not seen any changes yet.
Now we are now at the end of our call. It there is still at one last question from Jimmy Norman and Societe Generale. Please go ahead the Jimmy.
Oh good afternoon gentlemen, thank you very much for taking this last question Mark when you took over in the top job.
Almost in your mind was the threat of challenger brands.
And it would seem I think to many commentators and observers that this crisis has played into the hands of those owning bigger brands, perhaps down to scale and agility, but very much appreciate your comments on that and if you agree.
Yup.
Action all of the opportunity you have to consolidate and build on that.
Yes. Thank you I think short term you're right in the sense just like people are seeking value for money I think they also seeking trust that comes from strong brands and established brands. So yes. This is a phenomenon we're seeing right now.
But when you look back over several years and far or some other conversations that we had here through the quarter US and also as part of our Investor Day last may the more interesting thing was how through meaningful innovation, we made our powerful brands more relevant to consumers by actually meeting what they want so.
This whole notion of faster innovation that we really implemented over the last two to three years that to me is the more lasting and more important thing when it comes to really making those large strong trusted brands resonate with consumers because you know consumers don't find even under a strong grant the products. They want then or.
But time, they kind of go somewhere else into so winning them back and I think were when making good progress even before the crisis that to me is the more important same because.
This crisis is over that hold trend meaningful innovation and filling these large France with life there will still apply.
Thanks, let fantastic this ends our.
Webcast. So we know for the questions.
Thank you very much for participating to demand and we look forward to interacting with you I Erika with available for your questions. Thank you very much so they happy to say.
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