Half Year 2021 Nestle SA Earnings Call
Good afternoon, and good morning to everyone.
Welcome to day, Nestle first half 2000.
Q1 results webcast.
I am Luca Bellini and of Nestle Investor Relations.
Today I'm joined by our Chief Executive Officer, Mark Schneider, and our Chief Financial Officer Francois here.
Mark will begin with key messages and discuss the full year 2021guidance.
2 and Francois will follow with a review of the first half of 2021 sales and profit figures.
We will then open the lines for your questions.
Before we begin please take note of our disclaimer.
And now I and over to Marc.
Thank you Luca.
And a warm welcome to our conference call participants today as always we appreciate your interest in our company.
And our modesty it has been and exceptionally strong first half lift.
And with organic growth beyond our expectations.
Continued strong at home consumption.
Recovering.
<unk> accomplished and the out of home setting and in China as well as market share gains in several categories were behind this stellar performance.
My sincere thanks go out to Vanessa community around the world for truly rising to the challenge.
It took strong airports to deliver this growth and a period.
And that still.
Still saw significant COVID-19 restrictions and daunting and supply chain challenges due to major transportation and logistics problems worldwide.
We've managed to navigate those challenges neutralize unexpected transportation and packaging and commodity price increases Jack.
Jack up.
Spending behind our brands and still deliver a constant underlying trading operating profit margin.
And pair to H 1 last year.
Meanwhile, outright portfolio transformation continued.
Significant croak steps are taking our Nestle health science business to the next level.
And the expansion.
And of our Starbucks partnership into ready to drink coffee and Southeast Asia, Oceania and Latin America will add to the outstanding success story of our global Coffee Alliance with Starbucks.
Our sustainability agenda continues to advance with new projects and commitments and our waters business.
And will outline later.
Yeah.
I would like to spend a bit of time on the expansion of BOE Nestle Health Science business, which has seen tremendous growth in recent years.
The headline Grabber. This year was certainly our acquisition of the core brands of the boundary Paul Company.
But.
And Theres a lot more work here and I would like to ensure that you have the whole picture.
The Nestle Health Science business has 3 main pillars, which are all focused on nutrition and metabolism, and which are highly synergistic with regards to the underlying science and technology.
The first and oldest.
Pillar is medical nutrition, and well known and established category, where we are 1 of leading companies worldwide.
We cover special nutritional needs for pediatrics specific diseases, and the elderly population in hospital long term care and home care settings.
The second pillar has seen the most significant expansion in recent years. It is and our consumer care segment, which includes nutritional health products such as boost.
And which has increasingly focused on be attractive vitamins minerals and supplements space.
Our vital proteins collagen business.
And noone, our recent electrolyte titration acquisition are also part of this pillar.
The third pillar is novel therapeutic nutrition, which we also refer to as pharma.
It includes true nutritional specialties and be Rx or prescription area.
They focus on gastrointestinal and food processing disorders, as well as food borne allergies.
And while regulatory hurdles are higher the technologies are well within the scope of our capabilities.
With our recent acquisitions Nestle Health Science has now reached an annual.
This your run rate of 5 to 6 billion Swiss francs and continues to enjoy a very attractive organic growth profile.
The bountiful transaction makes us a global market leader and the vitamins minerals and supplements space.
We initially expanded and this segment with premium price specialty offerings.
Revenue last garden of life pure and persona.
The business acquired from Bountiful will build on these highly successful investments and add major a leading brands such as nature's bounty Sagar and Puritans Bryant.
Giving us a broad based leading presence across products and channels.
So if we will also benefit from state of the art manufacturing capacity, which will create synergies for all of our brands.
Finally, our extensive international presence will help the acquired brands to advance the global crop journey.
We welcome the accomplished bountiful executive leadership team in our group.
And are confident that we will take there and our business to amazing places.
As indicated in our press release, we expect this transaction to close and August.
Under the business as a force for good section I would like to focus today on our recent water management announcements.
Group as you know, we have refocused, our nestle waters business to position it for profitable growth.
From a smaller and more attractive space.
The new growth strategy includes and accelerated approach to improving the environmental footprint of this category.
A key aspect is the carbon footprint.
Ounce meant and we already started to address that with last year's commitment to make our international premium water brands carbon neutral by 2022.
Another 1 is packaging and we are seen as a leader and the ramping up of recycled P. T material for our bottles.
In June.
Grant <unk> enhanced water stewardship plants at the 48 sites, where we operate.
True more than 100 projects at or near these sites, we will help to manage water resources sustainably.
And help regenerate local water cycles.
As of 2025 these measures.
And we know nature and each of our sites to retain more water than the business currently uses and its operations.
Water is life and these projects will have plenty of positive impacts such as improved biodiversity and soil quality.
Before.
And that's where he overdue Francois I would like to cover our updated guidance for this year.
Based on the strong first half, we now expect organic sales growth and the range of 5% to 6%.
As indicated before we will start to lap 2 strong 2020 quarters and the.
And second half of this year.
We remain optimistic and see continued strengths and our market share and growth prospects.
While the pandemic has made the evaluation of our true current run rate for organic revenue growth harder.
I would like to confirm that we have now what it takes.
Turning about consistent mid single digit organic sales growth going forward.
Regarding our underlying trading operating profit margin, we have been able to avoid a decline and the first half despite significant input cost increases and strong marketing investments.
To deliver second half, we will face 2 additional items.
1 is and even stronger impact from input cost inflation.
The second 1 is 1 time integration costs related to the acquisition of core assets of the Bountiful company.
Which we had flagged already as part of the deal announcement in April.
And.
While our efficiency gains and structural cost savings continue to progress. These 2 items will temporarily reduce our underlying trading operating profit margin in H 2.
And we're taking a cautious view here and now expect a margin of around 17, 5% for the full year 'twenty.
And 21.
I would like to point out that we considered this as transitory.
We're all facing a surprising uptick and inflation this year and it takes a few months for pricing to catch up with input cost increases.
For 2022, and beyond we expect to return to steady and moderate <unk>.
20th in our underlying trading operating profit margin.
Finally, we would like to confirm our previous guidance regarding underlying earnings per share and capital efficiency for this year.
With this I would like to hand, it to Francois and I look forward to answering your questions later.
Thank you Mark and good.
Increase and good afternoon to all let me start with the highlights for the first half of 2021 organic growth was 8.1% and behalf rig was strong at 6.8% on pricing increased to 1.3% mix remained solid and consistent with prior years.
Acquisitions net of divestitures.
The reduced sales by 3.1%.
Largely related to the divestment of the Nestle waters brand in North America, the EFTA charcuterie business under <unk>, peanut milk and cat and the rice porridge businesses.
Foreign exchange reduced sales by 3.5%, reflecting the appreciation of the squeeze.
And with Franco versus most currencies.
Total reported sales for the first 6 months were $41.8 billion Swiss francs, and 1.5% increase versus last year on a reported basis.
Overall strong organic growth and the first half was driven by 3 key factors continued momentum.
In retail sales and the return to growth and out of home channels.
Increased contribution from pricing, reflecting input cost inflation further market share gains across most categories and.
At the end of June we were gaining or holding share in more than 60% of business sales.
These slides illustrate the development of our sales by geography and includes both our zones as well as a globally managed businesses.
Organic growth was strong in all geographies.
Pricing improved, particularly in the Americas on immuno, reflecting our ability to offset input cost increases.
And currency appreciation.
In both developed and emerging markets, we saw an acceleration of rig and increase the pricing.
Organic growth in developed markets increased to 6.7%, reflecting positive contribution from most regions.
Growth in emerging markets.
<unk> was 10% with particularly strong contributions from BRIC markets and Mexico.
Let's now look at the breakdown of sales by channel.
Organic growth for retail sales was 7.3% moderating to a mid single digit rate in the second quarter due to a high base of <unk>.
And in 2020.
Within retail and e-commerce, so sustained growth of 19, 2%.
Commerce now accounts for 14, 6% of total sales.
And most categories saw strong momentum pick, particularly coffee purina petcare and culinary.
Sales growth and out of home channel accelerated to 21, 3% helped by a low base of comparison and the easing of movement restrictions in some geographies.
Going forward, we expect a continued recovery in out of home channels.
Growth in retail and is expected to.
Brett However, sales should remain at higher levels than in 2019.
We believe that some changes in consumer behavior are here to stay such as increased working from home pet parenting and the search for health and immunity benefits.
Since the start of 'twenty.
2021, we have seen significant input cost inflation relative to agricultural commodities packaging material and freight cost.
In the first half the inflationary impact on the P&L was still moderate given edging and forward buying in place.
However, there was.
And as already some effect and the second quarter for costs that cannot be hedge such as packaging materials and freight.
Since we last talked in April the full year impact of input cost inflation has materially increased.
We now expect our cost of goods sold to increase by around 4% for full.
<unk> and T 21.
This is based on what we know at the end of July and the situation may evolve.
We are proactively addressing inflationary pressures and that's already materially increased prices over the last week waters.
We expect to step up pricing progressively.
And in a responsible manner over the remainder of 2021 and 2022 with different trends by geography and category.
At the same time, we are strengthening the development of affordable offerings, particularly those that meet nutritional needs in emerging markets.
Lisa.
Airports help to soften the effort the effect of inflation for those most impacted.
Beyond pricing, we also using other levels such as product mix disciplined cost management and the rollout of strategic revenue management tools.
We have also benefited from increased.
Centralized procurement.
While we expect to offset input cost inflation over time its impact may not be fully compensated in the same quarter of Samsung Mr. In some cases, there will be a lag between inflation headwinds and our actions taking effect.
Let's.
Now look at the results of our operating segments, beginning with zone M. S, where we saw high single digit growth with a high base of comparison in 2020.
Sales were $16.2 billion Swiss francs with organic growth of 7.6% based on strong rig of 5.3% supported.
Volume and mix and a significant step up and pricing to 2.3%.
Growth was based on new product launches and continued momentum in ecommerce and a recovery in out of home channels.
And the zone and also reported broad based market share gains led by coffee and pet food.
Good bye Erie and infant nutrition.
North America grew at a mid single digit rate with particularly strong growth and purina petcare and beverages.
Sales and frozen and chilled foods grew at a mid single digit rate with double digit growth for staffers lean cuisine and freshly.
During the first half freshly expanded its production capacity with new manufacturing operations in California.
Pizza posted a sales decrease following elevated demand in 2020.
And it's the professional water and Starbucks out of home products returned to positive.
In the second quarter.
Latin America reached double digit growth with broad based contributions across geographies and categories led by Brazil and Mexico.
Zones underlying trading operating profit margin increased by 40 basis points, the increase was driven by.
Operating leverage and structural cost reduction and product mix, which more than offset input cost inflation and increased consumer facing marketing expenses.
Shifting to zone immuno sales were $10.2 billion Swiss francs organic growth was 7.3% based on strong.
Rig supported by volume and mix.
Pricing and the semester turn positive for the first time in 4 years contributing 0.6%.
Growth was supported by successful innovation and continued strong momentum and ecommerce.
The zone continued to see broad based market share gains.
Gains, particularly for pet food coffee plant based food and water.
Each region posted positive growth with strong sales development in Russia, Turkey, and the United Kingdom and Italy.
The key growth drivers, where coffee and purina, petcare, which grew at a double digit rate.
Right.
Sales growth and Nestle professional non water strongly positive as movement restrictions eased sale.
Sales and confectionery reach a mid single digit rate based on improved demand for in person and gifting products.
The zone continued to focus on opportunities and plant based offerings.
Within food sales and garden gourmet grew by 40% with market share gains.
Within milk alternatives, we launch window and the new Pea based beverage across a number of European markets.
The products neutral test and high protein content allows it to be fully there fertile.
For many different uses.
These are also 1 of the most environmentally friendly sources of plant based protein.
The zones underlying trading operating profit margin increased by 50 basis points.
Operating leverage structural cost reduction and product mix more than offset.
As consumer facing marketing expenses and commodity inflation.
Moving next to zone AOA with sales of $10.2 billion Swiss francs.
Organic growth was 6.8% showing resilience in a difficult environment.
Most categories gained market share.
In particular, and pet food coffee confectionery and culinary.
China posted double digit growth supported by a recovery in out of home channels and the timing of Chinese new year.
The largest growth contributor was nestle professional with sales exceeding 2019 levels.
Net cafe totally dairy and Purina Petcare all grew at strong double digit rates.
Infant nutrition saw a sales decrease impacted by challenging market dynamics.
We continue to focus and nocturnal turnaround initiatives, particularly in the lower tier cities.
And while still losing market share so level of market share losses is slowly stabilizing.
In Hong Kong, we continue to gain share.
Outside of China. The zone reported mid single digit growth led by South Asia Sub Saharan Africa and Japan.
Southeast Asia saw slightly negative.
Net <unk> growth in a difficult economic environment.
Overall for the zone culinary coffee confectionery and ice cream posted double digit growth within culinary harvest Gourmet a plant based food offering was launched in China and <unk>.
Sales and dairy grew at a meeting.
<unk> digit rate led by strong demand for adult milks.
Infant nutrition posted negative growth, but continued to gain market share in South Asia on Africa.
Growth in this way professional was double digit and positive across all regions.
The zones and the.
Airline trading operating profit margin decreased by 40 basis points.
Commodity inflation and product mix more than offset operating leverage and structural cost reductions.
Next is nespresso, which saw sales of $3.2 billion Swiss francs.
Organic growth was 40.
14, 6% based on strong rig of 13, 8% and pricing of 0.8%.
The virtual system continued to grow strongly with further extension in new markets, including our launch in Brazil in March.
The original system also saw robust consumer demand.
Yeah.
Overall growth was fueled by new customer adoption, the return to positive growth in boutiques and out of home channels as well as innovation.
New products included a new range of iced coffees and cash yeah, Congo, and the first organic coffee in the reviving.
And <unk> range.
Nespresso and also rolled out momentum.
The versatile touch less machine that create specialty coffees with fresh milk for out of home channels.
By geography, the Americas Amey now on AOE all grew at.
And at a double digit rate.
Overall, nespresso and gain market share across most markets.
Underlying trading operating profit margin increased by 10 basis points.
Operating leverage on structural cost reduction more than offset increased consumer facing marketing expenses.
Following an exceptional first half of the year, we expect growth to moderate in the second half of 2021 as we cycle the high base of comparison.
It should also be noted that margin and the second half is traditionally lower given higher marketing spend link 2 seasonal events.
Can you share with Nestle Health Science, which reported sales of $1.9 billion with France. The business grew at a double digit rate with a high base of comparison in 2020.
Growth was driven by sustained momentum in ecommerce and new product launches and geographic expansion.
Commerce grew by 30.
And 1% and now represents 21% of Sam's.
Consumer care posted double digit growth vitamin and minerals and supplements that support health and the immune system continued to see strong demand.
Vital protein and peso now more than doubled their sales.
Pure.
Encapsulation, mainly sold through health care practitioners posted strong double digit growth in the U S.
Garden of life, So continued strength in e-commerce channels health.
Healthy aging products grew at a double digit rate with market share gains for boosting North America, new training and emerging market.
Kit and May retained and Europe.
Medical nutrition, so mid single digit growth with robust demand for complete and adult medical care product as well as for Alterra Alpha and Alpha we know pediatric care products.
The underlying trading operating profit margin of Nestle Health Science.
<unk> decreased by 580 basis points as expected investments in immune and consumer facing marketing expenses more than offset operating leverage.
I'm using margin dilution reflects initial commercial investments behind portfolio.
The rollout of this peanut allergy.
And the treatment has been impacted by the pandemic, but it is expected to ramp up as visits to allergies resume unschoolers reopen.
Increased consumer facing marketing expenses included the highly successful celebrity campaigns for vital protein.
Looking.
King now at product categories, we saw strong growth in all segments with the exception of infant nutrition most.
Most categories, so market share gains with particular strength in coffee and pet food.
Within powdered and liquid beverages coffee grew at a double digit rate.
Supported by net Cafe, Nespresso and Starbucks products.
Coffee at home continued to grow strongly while out of AUM and undergo channel improved.
Sales of the Nespresso system, including Starbucks by and as Russell grew by 17% and sales of Starbucks products.
<unk> also grew by 17% to reach $1.4 billion Swiss francs across 79 markets.
We have captured close to 20% share of the Nespresso compatible capsule market globally over the last 2 years.
Cocoa and malt beverages grew at a mid.
<unk> Detroit led by increased demand for ready to drink formats.
Petcare continued to see outstanding growth globally, most segments grew at a double digit rate with market share gains.
<unk> performance was driven by continued strong momentum and ecommerce and increased.
And gordian for premium products.
The rollout of propel and likely the first allergan, reducing cat food continues to gather pace and we have now expanded into 23 markets.
Nutrition and health Science grew at 1% organic growth and infant nutrition was.
<unk>, 4%, reflecting a sales decrease in China, and the slowdown in growth rate across geographies in the context of the pandemic.
Outside of China, we continue to gain market share.
We have already discussed Nestle health science.
Prepared dishes and cooking AIDS saw.
Miners and growth with double digit growth in ambient culinary and chilled drill.
Driven by Maggie and the recently acquired D to C business is freshly and mindful shape.
Columbus food products continued to deliver strong double digit growth.
Milk products and ice cream.
<unk> grew at 8.2% the key growth driver, we're fortified milks coffee creamers and ice cream.
Their recruiting dairy products, so high single digit growth, but moderated in the second quarter following exceptional sales in 2020.
What else will return to positive growth held by.
By a recovery in out of home channels and market share gains were broad based across all 3 zones with strong contributions from international and premium brands and the newly acquired functional waters Brown essential.
Growth and confectionery rebounded sharply, reflecting a recovery in in person and gifting.
Which more than offset reduced demand for baking products into the United States.
Innovation supported growth with new product launches, such as <unk>, the Vega and kit Kat and shock nuts wafer in China.
Moving now to profit margin by product categories.
As a word of caution we see contrasted dynamics by category versus 2020 as the base of comparison has been impacted by the pandemic.
Powdered and liquid beverages, so significant increase reflecting strong sales growth and the benefit of operating leverage.
<unk> net petcare.
Products decreased as higher commodity and distribution costs more than offset operating leverage.
Prepared dishes and culinary products saw a decline reflecting increased consumer facing marketing expenses and investments behind recently acquired DTC businesses.
Nutrition.
Christian and health Science saw a margin decline in both infant nutrition and Nestle Health Science.
We have already discussed Nestle and science in infant nutrition, the margin decline reflected reduced sales as well as a higher commodity and freight cost.
Margin and milk products and ice cream increased.
Share posteriorly, reflecting the benefit of strong sales growth and portfolio management, more specifically <unk> and U S ice cream.
Confectionery and waters saw improvements as sales recovered following a low base of comparison in 2020.
Moving next.
Next to underlying trading operating profit margin in the first half gross margin increased by 20 basis points distribution cost as a percentage of sales decreased mainly as a result of the disposal of the Nestle water brands in North America.
And we continued to delivered structural cost reduction across European.
P&L, leading to strong operating leverage.
COVID-19 related cost were also materially lower.
Consumer facing marketing expenses increased by around 80 basis points over 2020, when we could not fully activate in store promotions.
And the like for like basis.
We are now slightly above 2019 net levels.
And we increased media spend to support brand building and consumer engagement, including and digital media, which now accounts for 48% of total media spend.
R&D expenses also increased mainly in Nestle health science.
As a result of investments in onion.
And the impact of portfolio management was slightly positive as the divestitures of <unk>.
And the Nestle water brands in North America, more than offset investments behind new growth platforms, such as immune and freshly.
Overall for the first.
First half our underlying trading operating profit margin was unchanged at 17, 4%.
In the second half of 'twenty, 'twenty, 1 and the impact of input cost inflation will be significantly larger and as a result pricing is expected to increase further.
And the possible time delay between.
And as factors could put more pressure on our margins.
In the second half we will also absorb 1 off items related to the acquisition of the core brands of the Bountiful campaign.
1 off items are mainly related to the inventory step up this will have a 10 basis point impact for the full year.
In bulk and will largely fall in the second half.
This is reflected in our revised guidance and our midterm outlook for moderate margin improvement remains unchanged.
Adas is cautious given the ongoing macro volatility.
Moving to underlying EPS and.
Underlying earnings per share increased by 10, 5% and constant currency and 8.3% on a reported basis to $2.17 Swiss francs.
And the main driver of the underlying EPS improvement was organic growth combined with lower finance costs and underlying tax rates as well as the benefit.
And also grew our buybacks.
Given our midterm ambition of sustainable mid single digit organic growth and moderate margin improvement. We can expect that going forward organic growth will be the main driver of underlying EPS growth as we see in this first half.
Our average cost of net debt has decreased.
From 2.6% to 2 persons.
The line others in the chart largely relates to income from associates and joint ventures, particularly l'oreal.
Cash flow generation is a priority in the first half it remained strong as illustrated by the fact that cash generated from.
From operation, which means before Capex was almost unchanged at $5.8 billion Swiss francs.
And this is equivalent to 14% of Sam's a level consistent with previous years.
Free cash flow, which means including Capex decreased from $3.3 billion Swiss francs to $2.8 billion.
Mainly due to a temporary increase in capital expenditure to meet strong volume demand, particularly for Purina Petcare and coffee.
The slight increase in adjusted EBITDA reflects improved operating performance, which more than offset the negative impact of exchange rates and divestitures.
We continue to make progress on working capital management with a further reduction of net working capital by 52 basis points on a 5 quarter average basis.
Let me now hand over to Luca we will monitor the Q&A.
Yeah.
Thank you Francois with that we move to the Q&A session.
We open the lines for questions from financial Analyst day.
The first question. The first question comes from Patrick Schwendeman ancillary Kantonalbank. Please go ahead Patrick.
Yeah. Thanks, a lot for local hi, Mark Hi, fossil and congrats from my side very impressive growth I couldnt find actually a higher Rick and my spreadsheet sensor and.
18.9.
So my questions outstanding growth for Petcare, and cough feed and you have mentioned I mean, there are more pet owners said and more premium products, etc. What is the new normal of growth for the Petcare Division and coffee category for that for the next couple of years. What's your assumption here. That's my first question and second question.
Gardening I'm you own this off a drag is it as expected on neuro marching what was the margin impact on the group level.
From a stemming from and you want and what are your expectations for immune for the next couple of years.
<unk>.
Patrick Thank you, let me start with the first 1.
And that Rick and hand over to Francois for a immune.
Look I mean, it's very clear that in the aftermath of Covid. Both of these categories, which were high growth categories to begin with we'll see improved dynamics. So I can point you to a specific number but it's better.
And therefore.
And it's different reasons I think with a pet.
And.
I think I had discussed this on previous occasions, I mean, everyone has to work from the own assumptions how long. These pets will stay with their owners, how many of them will actually like.
Like having a Pat and go for a follow up pet as well, but there's going to be a long long long positive tail to this and we'll benefit from it.
And and coffee I think it's fair to assume as most of you look at your own work life arrangements that we will spend a larger part of our time going forward.
And even after the pandemic working remotely and remote from most people means working from home and.
And hence this is exactly our wheelhouse.
At home consumption of coffee. This is where we are strongest and so we stand to benefit with cups consumed at home.
But he can force was speaking good afternoon. So the margin of this little sales decreased.
<unk> by 580 basis points in the semester to 13, 5% and a large part of it was coming from immune and this is fully in line with what we expected.
These investments and 9 you know margin dilutive, but there is no issue at all or part of a <unk> of what we have been seeing at the onion is linked to the fact that the pandemic impacted the role.
<unk> Gulf OCR, the peanut allergy treatment, but overall the business is and our portfolio is in and early investment phase and given the nature of the business on the development of new products. We are fully comfortable with that as you know we expect that for the year overtime to become a blockbuster product with more than 1 billion.
And sales, but we are planning and investment position of prompts and dishes are fully in line with what we expected.
Thanks, a lot Mark and trough and next question is from March and debut at the Jefferies. Please go ahead with your questions Martin.
Yeah, good morning, everybody.
I think there are many ways.
Conceptualizing your.
Strong top line performance, but.
<unk>.
The way I'm thinking about it from what's out very nicely and your slide.
35, and quarterly reach out and out of home.
Sales progress and it shows I think that.
What's striking is that in.
Retail growth.
Holding.
Holding up much better and you would expect given the swing back to I have to find growth and I'd like to ask a question I think it was asked on the previous call, but I think it's worth.
Asking again, what is your view of why this is happening is that.
People are actually consuming more calories and aggregates and youre benefiting and taking our fair share of.
Was there something and the relative mix of your in home versus out of home categories. That's driving it or is it something to do with <unk>.
Relative price points and high by the volume, but the question is just why are we seeing this resilient Sabine.
Out of home comes back so strongly and that's the central question.
Martin This is Mark let me take a stab at this and maybe <unk> can also build on it I don't think people are consuming more calories.
I think the answer is simply that while we're seeing a strong recovery and out of home, we're not back yet to pre COVID-19 levels. So you know either because of remaining fears.
Fears over COVID-19 or because simply people are and drawing that new more flexible remote working style people still spend more time at home and hence they consume at home our market shares across the various products, we sell in home and out of home are always larger for the in home part there's no question about that.
And hence we stand to benefit from that trend.
So that's my best crack at it all I can tell you we're drifting from most People's Waistlines I don't think that you know a bit more calories are being consumed if anything people are more health conscious which of course playing into another strength of ours, you know offering products that cater to.
And a boost and be immune system. That's another 1 that's right go in into our direction.
Okay and also speaking to complement was Mark said for out of home channel and the growth will benefit from a low base of comparison, but at the same time, we expect growth in retail to moderate but it will stay at a high.
Helpful. And then what we have experienced in the 2 pre COVID-19 levels in 2019, given that structural changes and consumer behavior and I would mention 3 for example, after are here to stay as such has increased working from home.
Pet parenting as well as a search for health and immunity benefits, So I think that.
Clearly that will stay and will help us to maintain a strong level of at home consumption.
Next question is from selling Penuche at the J P. Morgan. Please go ahead celina.
Good afternoon, everyone and Mike.
Question on the royalty income again for the year.
And could you say what kind.
Kind of a raw material inflation, you, Andy accumulates to and what kind of price thing you are assuming to get to the COVID-19 and hot.
Margin and what I'd appreciate it and you're not guiding from next year you did say that from next year. We should go back to motivate and margin increase I just want to and.
And the explain why what visibility you have that you know the roadmap.
And price and accretion will be balanced.
And to 'twenty 2.
And then my second question is on.
And infant milk formula and retail.
Canadian debt it was down 3% and Q2 and.
Could you say what was.
Was the number and you said that China was and they get to what was.
Infant milk ex China performance.
And and why the margin in the day in that specific business was down a lot I think 5 at and around 500 and turned into Costar. Thank you.
So and good afternoon, and let me take the first.
If you could get on.
The tougher increased input cost will be certainly much stronger and niche to then and towards the net $1.22, a still relatively moderate because we had some aging in place and actually we saw very strong acceleration and input cost inflation coming in Q2, especially on items that we could not hedge like transportation.
First question and the packaging medallion, so much a much larger impact and as we will have more pricing as well what is important to understand as well is that in each 1 we could have a benefit of pricing combined with mix combined with our cost efficiencies.
And combined with.
And costs items like our strategic revenue management that allowed us to exceed in terms of benefit the input cost inflation.
We will even do more and pricing, we will do more and mix, we will do more in AR and AR.
Cost efficiencies as well in H 2 we may be net may not be necessarily in a position to fully compensate as we have indicated.
And also all of these input cost inflation and niche do but we are working on it and still early to conclude that our adjusted but certainly much more mature a stronger impact in a niche on the second question was on the impact of the margin on a and.
Nutrition, so the margin and nutrition is abuse me significantly down.
This is largely linked to the fact that we have lower sales to start with combined with AR and input costs that has increased as well as you know dairy is 1 of the categories, where we have seen the largest cost increase.
Celine This is mark maybe you can add 1 high level thought on inflation and our.
Our way of thinking about it.
Thank the issue. This year is simply that we have experienced a turning point on inflation, where we didn't see much of inflation before and then starting from March April we've seen there's a tremendous acceleration and I think it's this turning point that's posing the.
And because some.
Some of these cost items as Francois explained are hitting our stride on and basically from 1 day to another especially around transportation, which has seen a very chaotic situations all throughout the spring.
And we in turn as we look at our pricing towards our retail partners we.
And usually depending on the contractual arrangements may happen and place a there is a lead time until price and becomes effective and hence this is why you take some.
Some temporary hit.
And if inflation is here to stay going forward and if there's a regular pattern and then you can much better addressed to it so it's not that inflation per se.
Is and automatic hit to our profitability interest that when you are to turning point and when is pointing up.
And certainly at a it is a headwind for a limited period of time.
When it comes to 'twenty 2 I think this is anyone's guess, whether this is a 1 to 2 year blip or whether this is something that's here to stay this way.
Stay flexible.
But either.
Either way either through continued pricing or.
Through the normal operating and structural cost improvements.
And we feel confident about the underlying mid to longer term guidance that we've given you before and that is to expect these moderate.
Margin improvements.
And then we had.
Next question is from the balloon and maintain at Bernstein and please go ahead Bruno.
Hi, Good afternoon, Michael Crosswalk. My first question is again on the margin guidance and whether there is effectively a double margin guidance do you have your usual medium term outlook I guess about 10.20 basis.
For the year, but you also have the temporary nature of this inflation impact so you're effectively saying when you've had time to pass through the pricing. We should have the biggest step up and underlying margin next year, because you combine the usual increase plus the recovery of the temporary cost. The second question is around the progress other and.
And China, I, just want to isolate where the market share losses.
Is it only in infant milk or do you have market share losses, and brands like <unk> and baby food or other categories as well. Thank you.
Yeah.
Good afternoon.
And guidance as we have indicated for 2021 so.
So we will be around $17.5 due to the timing a difference between input cost inflation and pricing going forward, we maintain our indication for the medium term, which is for a moderate margin improvement and that remains absolutely valid from 'twenty 2 onwards, so no change.
Change at all day.
Coming back to the second question now eating our infant nutrition the market share losses that we have seen our essentially our infant formula and we have seen a little bit of pressure on Gaba Haswell, but this was for a totally different reason as you know we had some marketing.
And my issues in net marketing issues, but some.
Yes issues and the U S.
In fact, as well in China, but.
It looks like we are recovering as we progress over time, but the main market share losses were essentially and infant formula and China.
Thank you.
From a and B congressional inquiry.
And to some of the baby food in the U S, which of course these days through the Internet also made its way to China and that led to temporarily a fairly strong hit but as Franco said, we are recovering from that so mainly as he said its infant formula.
Next question.
It's from John and he said Goldman Sachs. Please go ahead Jim.
Good afternoon, everyone. My first question, so on and espresso and I Wonder if you could give us an indication of machine growth over the half I guess, if we break down the 15% growth and 1 H I mean, how much would it would be attributed to increased usage per existing customer losses.
Question, and you do machine registration and any kind of rough day that would be helpful. And then my second question is to come back to I guess, the margin reduction and that's the health science.
It was a immune more than 50% of the margin reduction and that segment.
And if not can you give us a bit of a rough steer in terms of percentage contribution.
And should any of the consumer facing investments with us into the second half or should we expect them to largely persist. Thank you very much.
Thanks, John and let me try and take a crack at the first 1 and then hand it to Francois for the second 1 so look we're trying to be and <unk>.
Helpful and transparent weakness principle as possible but.
I would prefer to stay away.
Specifically from a machine growth park numbers.
I think it's fair to assume during the pandemic that the usage per machine was more of a driver and the machine Park growth. Because this was usually not the best time.
You know to go out and get advice on.
On which machine exactly Dubai, but.
Again as much as we're trying to open up unit price. So I think for whatever involves competitive signaling we will prefer to stay away from that.
John.
Your question was on margin was toward the group offer and interest sorry, I missed it sorry.
It was.
So desperate health science specific thing and and what propulsion. So we have increased significantly consumer facing marketing expenses and are in each 1 and we had the low base of comparison in the edge last year and December 1st quarter first semester, because we could not activate quite a lot of activities in store.
So.
Increased consumer marketing expenses are included as well in each 1 these very successful campaign that we have flow vital proteins and vital proteins is doing actually extremely well sales have more than doubled over last year.
Next question is from humans and mice at UBS. Please go ahead.
And the Gilman.
Good afternoon, and my task.
And your cap.
First question, it's very much a housekeeping question and I apologize if I missed it but tax.
Tax rate was lower than anticipated and the first half.
So does it change your assessment for your full year guidance for the tax rate and.
And potentially for your medium term.
Guidance for your tax rate.
And and then my second question is on the Vms category Nestle now, becoming a global leader here with the acquisition of Bountiful am I mean I appreciate it's early stage, but your business today is.
Very much skewed towards North America, So where do you see the biggest opportunity in the short term and its about expanding your reach offering innovation in the region or do you think geographical rollout could rapidly be a meaningful contributor to your growth there. Thank you.
The question on tax and what happened is that we have seen a decrease of the corporate income tax rate in 2 countries, which are significant for us for us, namely France from the Philippines and this is what it was about in each 1 obviously since it does decrease we will benefit from it and niche too as well.
Thank you and let me comment on.
<unk> and Vms space.
I think the first priority force of course, given the size of the business that we acquire here is a picture perfect and equation. So best drop 1 and it's something that the entire neste. The health science team is very much focused on I think youre right. There is a significant international.
Opportunity because these brands.
That's both our existing brands and the new ones that we acquire are having a very strong global appeal and.
And we see significant inbound interest from all 4 corners of the world to do more with that so think about points like Sagar, a which I think has a very.
On the international following already if you couple that now with our stronger global footprint and clearly there's ups and down the road and we're doing the same already on some of our existing.
And such as garden of life, and pure which are making their way into Europe and select Asian <unk>.
Markets. So you have that will give a strong upside going forward. Obviously, you can imagine as the pandemic subsides there may be a period and I think we flagged that from the beginning of 1 or 2 or 3 quarters, where the year over year growth will not be as stellar as usual, but when you look at the fundamental underlying usage.
Of BMS around the world. It has been very steadily increasing its a strong growth category as people become more aware of which vitamins minerals and supplements there may be lacking.
And.
As part of the whole immune boosting and self medication trend and we believe were right on on the trend here.
And next question is from Tom Sykes Deutsche Bank. Please go ahead.
Yeah, good afternoon, everybody 2.
2 questions 1 just on e-commerce growth and e-commerce growth it looks like all of us.
See that slowing down somewhat maybe.
Maybe could you give some people on the stickiness of habits and E Commerce and.
Is it a little bit harder as maybe some of that ease back a little too continue to get the same level of of share gains and operating operational leverage.
And that you had false fastest growing more quickly please.
And then just on coffee, obviously, we've seen exponential rise in the coffee price on our screens over the last few weeks and days could you maybe just help us with a little bit more detail on how you will build out and how you compensate for that through the different parts of your coffee coffee business.
And and the different parts of the price lack of and you have that place.
And Tom I'm also speaking I will take the first question. It looks indeed that we see a slow down and the E. Commerce growth is not really the case, what happened and that we have done exceptional growth last year and Q2 at the beginning of the pandemic towards actually 67% and Q2 last.
True. So this is mainly due to the fact that the comparison and beds was very high and we continue to be very happy with E. Commerce. We have as you know the higher market share online and offline and we continue to gain market share ours, once and no issue whatsoever, and it accounts and offer as you know almost 15% of our total sales and there is no dilution impact on the bottom line as far.
This is concerned.
And Tom Let me comment here on coffee prices. So obviously as the world's largest producer we watch this very carefully and Tim as you can imagine.
And we do pursue a very careful and hedging policy in this area so that the increases you've.
Seen here and not immediately translating into like for like a bottomline hits or precious poor pricing.
So for 'twenty, 1 and we're certainly quite about covered and some other cover also stretches into 'twenty, 2 and I think what needs to happen now is we need to track this very carefully and then see how.
As you come out if we should take appropriate pricing action, but unlike some of the other items that were hitting us literally without any warning and had an impact on the bottom line right away I think here and coffee this being 1 of our signature commodities.
We are having a good degree of protection through hedging.
And so we'll look at this going forward and then were needed to adjust the pricing also do keep in mind for growth category that has a large share of premium products usually that type of.
Pricing action is easier to take than sports and what the others.
Next question is from Jeremy Fiat and call it the Redburn. Please.
How and Jeremy well, sorry, HSBC now.
Hi, good afternoon, everybody and so you're just 1 and.
1 question from me is could you clarify and sort of pricing.
And we're gonna be expecting whether there's a comment on bringing back from body when mark talks about getting 2% pricing for.
Good day to fully offset the commodity so would that imply that the pricing would be approaching 3% and the second half.
Youre, saying its going to be a little bit lower than that because of the fact, you don't expect a pretty upset.
And there's a bit more color on that point please.
Yeah, Jeremy happy to comment and just to be sure that the Bloomberg.
And abuse, not misunderstood and I wasn't trying to give a 2% target for the pricing because I think you know.
It's in our best interest not to give a specific target pricing here given that this is all subject to negotiations with our retail partners always trying to do is I was trying to explain if you have or.
<unk> effecting a 4% increase to your cost of goods sold.
At about a 50%.
Gross profit situation, then that means you would need 2% pricing to offset that but as Francois explained earlier in his comments. This is not the only angle we're looking at.
So we're looking at a centralized purchasing and revenue management structural cost reductions operational efficiency improvements, where the Swiss franc is coming from to offset it is.
And is not so important as long as it helps to offset it and so we will see.
Stronger pricing action in the second half than the first.
Half, but and the interest of our own commercial strategies here, it's important that we're not targeting how much pricing and exactly what we'll do.
Yeah.
Next question is from Jon Cox at Kepler. Please go ahead John.
Okay. Thanks, and thanks very much a couple of questions just wondering on the free cash flow for the year, what we should think about.
And that after.
And maybe some unusual activity and in the first half of the year a second.
Second question just on the M&A line, obviously, a lot of stuff moving in and I Wonder if you just give us a best guess, what you think the M&A impacts will be this year and next at the moment I've called and negative 2 points. This year and next year are positive.
We are 50 basis points, 1 and you do you think that sort of in the right ballpark and then just the last question and I know Starbucks is not included in the suppress of reporting just wondering how Starbucks developed and the in the in the period and instead of and add on and I'm, just wondering why youre going into.
And fifth from venture with Starbucks in Asia on the ready to drink rather than going it alone or is it just the wording of the document was just being polite to to Starbucks and they won't really have much too much to do with it. Thank you very much.
Good afternoon, John speaking I'll take the first question on the free cash flow. So we value obviously your cash flow.
And to a joint is and the area, where we have made some progress over the last couple of sales. If we start by talking operating free cash flow, which means before capex and we are we willing and niche 1 and we expect to be probably around that level and as windfall and for the full year and disembodied waters, where we were over the last couple of years, which is around 14% of sales so that the strong level they're.
And is that we are really using all the levers from growth to margin.
And cost discipline, as well and free cash flow is will be lower this year as a percentage of sales and it was last year for 1 single reason is that as you saw in each 1 we are ramping up ramping up our capex investment mainly around coffee and petcare.
Care to meet the increased demand and the fact that we are gaining market share as well. So you can expect a little bit of a higher level of capex. This year of 2021 and 2022 as well, but this is to a large extent to have good news on the M&A impact you saw that it was about.
About a little bit more than 2 persons and they get to.
E versus first half it will be lower and the second half because we will have the same headwind coming from North American water and <unk> for the full year, but we will have the benefit of the bounty food company. Because we are just confirming now that we expect that true transaction to close in the months of August So we'll get some benefit from from that.
No and this is Marc let me briefly comment on Starbucks. So look we couldnt be more pleased with how this partnership is going.
The sales of Starbucks products in the first half of this year increased by 16.7%. So very solid very strong performance and we also have a day.
We're excited.
Exciting pipeline here.
To keep refreshing and that product lineup and have for years to come so a wonderful partnership where I think the coffee expertise of both companies is really building upon each other and.
Excellent personal relationships and theyre very constructive smooth execution here from both sides.
And when it comes to ready to drink and Southeast Asia.
And we have been of course active in this space already and there's some other plants most notably the NASCAR paper and you know does have a number of very exciting a ready to drink offerings and southeast Asia. Because this is a way of consuming coffee there and we had cater to it early on but Starbucks and.
1 other.
Way to approach that market and usually at a much more premium.
Positioning and we're building on the iconic strained flip and Brian and team that really resonates around the world, including Southeast Asia and.
We've also seen very strong success with our Starbucks retail offerings there so.
I think it really shows that the consumer is ready for that brand. So I think 1 does nyx towards the other we're having a thriving and ready to drink business there already and now we're having 1 more exciting tool.
And the tool set here and that is the Starbucks rollout.
Next question is from James targeted.
Barry and Berger. Please go ahead James.
Hi, yes, good afternoon, everyone.
Questions from me Firstly, just on the on the Capex increase that you just referenced.
Following and extra investments and in Petcare and coffee do you have enough capacity to support demand and I always thought if car and growth rates continue.
And with the growth you're experiencing at the moment generally are there any other categories, where capacity is tight or whether that's a material supply disruptions and then my son.
Questions on the bounds for acquisition I was just wondering given yesterday's.
His experience in dairy and plant based proteins are why you didn't include the sports nutrition brands and the transaction. Thanks.
And frankly speaking and I'll take the first question.
We have enough capacity to meet the demand with our in Petcare theres not been and easy 1 and especially last year, because we saw a lot of volatility in terms of demand bias Ku and <unk> have also congratulations by the way to our teams because they have been really able to do that we had to use a little bit of Copa.
Packing as well to support the demand, but overall, we have been able to meet the demand, but it is necessary given the growth rate that we have which is largely volume related as well and that we are investing capex. This is what we are doing both in North America and in Europe.
This is mark could you repeat the second question and I'm not sure I totally got it.
On the on the Bountiful acquisition.
I think you mentioned that you weren't going to include.
The sports nutrition brands and the acquisition.
And I just wanted just considering you know you have good expertise and dairy and plant based proteins. While you and you didn't want to have those brands as part of the transaction.
Yeah.
So look we were very much focused on these 3 brands that we believe are the most synergistic ones to the Nestle health science business that is going to be running.
And this company going forward and.
And that is the.
The ones I mentioned.
So.
And that's why we felt.
Copying and up into different categories here was probably not the best way going forward. We appreciate their service flexibility and handling this and in a way that we were able to focus on the price that we were most interested in.
Next question is from David Ace at Societe Generale. Please go ahead.
Thank you Hello, So 2 questions from me collected I guess in a way.
The first 1 on price versus input and then the second 1 on the margin guidance again and say.
And so on the first 1 price versus input into the way you're talking about it it sounds like it's the case of inputs have gone up contract negotiations take a while but eventually it catches up but but I guess beyond that are there any market.
Markets today, where you'd like to take pricing, but you're delaying it because of consumer weakness.
And maybe retailer reactions collections that and or competitor reactions, you'll seeing smaller players local players getting back up to speed post COVID-19 and that's just not the right time to take pricing for those reasons and so it's a conscious decision rather than the mechanics.
And then related to that I fear the answer might be it's too soon to talk about this and myself and wage, but if I go back to the guidance pre and post the results today and Youre looking at $17.8 let's say roughly this year up again and wish you modestly next year, which would equate to 18 and you're talking about the 17 and a half now.
I'll take a modest 8 to $17.6 and so the point being you know you're kind of guiding and effect. So about 40 basis points lower for next year. If you just put the 2 statements together and is that a fair representation of what's going on is there a step dropped down or should we start to assume that you have next year, you have modest increase plus a bit.
Because as you catch up on the on the dynamics that I just mentioned thanks, so much.
Thanks, David and let me try and take a stab at both of them. So I think on pricing as you can imagine.
This has dominated the conversation and the industry ever since it accelerated so much and the inflation and accelerated.
Cash in the spring.
So I think this is by and large understood and accepted because people see and have transparency here, but input costs are increasing so the only area, where we may have added a little slower in the spirit of pricing and responsibly is in particular in emerging markets and developing countries.
And so I'm sure you've heard from some of the extremely affordable products in the poorest of the countries. There are what's called magic price points like our price points beyond which people simply cannot afford the product anymore and so it's important to really keep those in mind and act responsibly, there because you're essentially providing you know and part of that.
Daily Nutrition, and Bayer and especially at this time of economic stress you don't want to price. It out of reach that's also a good reason why in zone, AOA youre seeing a bit less pricing action than in the 2 other zones.
But other than that I think.
The compensation and see what our retail partners are very straightforward.
They tend to have their hearing a very consistent message here from everyone and it reflects the facts on where input costs are going so no particular issue there.
And when it comes to 2020..2 yes, you were right. It's too early to talk about that and detail and when it comes to the Matthew we're setting up.
What.
I would want to point you to is caution here on our side so.
Rather than saying, it's 1 or the other let's give us that time, let's see where we land the year 2021 and based on that.
Within articulate our guidance expectations for 'twenty 2 the 1 thing I can certainly confirm is that.
And as Franco and said the 10 basis points that refer to the inventory step up and.
The Bountiful branch.
That's clearly something that strictly related to 'twenty, 1 and will not be recurring and 22 and then on everything that's price and related I think we're learning so much more here month by month, where it's headed and.
And our hedging position looks like so let's revisit that as we go through the year and and into next year.
Next question is from zone Philibert cheerful and double please go ahead and they don't sleep.
Thanks, Rocco and good afternoon. The first 1 is on your recent acquisitions and it looks like a detailed and personnel.
We were just super performing and we saw very strong acceleration and the second quarter and most of your health Science. The question is how much you have of.
And the acquisition and the organic growth and the second quarter.
And maybe as well and it looks like the future weakness.
So what can you learn from those acquisitions.
Bolt ons, you made and what you can.
Replicate Eaton and network and the second 1 is probably more like it and remarks, focusing on this margin and pricing.
As you were taking some pricing action to offset the cost inflation. This is a kind of a net net zero game from a cash.
Cash point of view.
And as it is just like a time lag, but then you would recover gosh just wants to see European switchover from here. Thanks.
And there's not really a good afternoon, and you were referring them from a good day NIM of 2 vital protein.
Yes vital proteins, yes.
So no indeed, the vital part and he's doing extremely well and you don't win.
Very happy with this acquisition because he sees a leading company in college and in North America collagen is a category that is not very developed for the time being in Europe. For example, so we are currently leveraging on our presence in Europe, particularly on the.
<unk> footprint in order to rollout the success of these products in our industrial geographically, so very very happy with it and.
So that's the reason why we continue doing the acquisition debt and the same spirit as what we did with new and as well there.
And happy with what we have seen so far are interesting.
Our base of business and the U S with.
With a possibility to expand it and the U S to start with and expanded to other geographies as well and jumpy, we didn't break out the specific contribution of vital proteins, but.
Youre right its been a strong crop here for that company, but all the other France.
And especially including those.
Our latest acquisitions in the Vms space for US have performed really well and I think the pattern is 1 day, we intend to apply to the bountiful brands as well and that is in the leading market for these BMS products and that is the U S. Acquirer of some of these leading companies are continuing to run them.
And with you know most of the existing management team in place and then Gulfport with global opportunity and the global appeal of these products sell vital proteins now has taken internationally.
And a very rapid clip the celebrity campaign that are from.
From a supply had mentioned is helping with that a lot and so.
So it becomes a household name and M. S from as I mentioned in Europe. For example, the use of these products are per capita is still way below what this and be wise. So I think theres, some catching up to do here and we intend to tape out. So I think that pattern has worked really well for us and I think Vanessa health science.
Leadership team has also been able to create a very good cohesive consumer care team out of these various executives that came to us with that acquisition.
Next question is from the peanut Irgun from Morgan Stanley. Please go ahead dinner.
Hi, Thanks for taking.
My question, if inflation persists and Nestle responds with further pricing, which of your categories would be more at risk of losing share to private label and how would you respond in that scenario. Thank you.
Yeah, Peter maybe from school and I can both take a stab at this I guess my first reaction would be what.
And the kind of input cost inflation, we're seeing here, it's not that private label is spared from that.
So you know these were real input cost increases that had everyone, which is also why the conversations with our retail partners on those were pretty straightforward because I mean, no 1 can deny it that something has.
Bob.
So obviously the categories that allow for more differentiation by brand and products.
Coffee and Petcare being again, the best examples here I think and those are categories, it's easier to escape and.
And the share losses.
As prices go up but again generally I think it is not so much a question of elasticity that people switched to another brand or private label. It's more like may be that some people at some point would consume less because the products get more expensive and and become less affordable, but so I'm not so sure of it and what is escaping right.
Now net inflation hit and that's been.
And taking hold.
And P&L force, we're speaking just to complement what Mark is saying I think beyond the categories. It's maybe more of a matter of the positioning of our products. So for example, if we look at premium products. Obviously, we are far less exposed the good news as well and is at a premium.
<unk> now accounts for almost a third of our total sales and just as a reminder, it was 11% and 2012. So that's a very good positioning that we have there in the premium segment, especially in the context of higher inflation for CTO and next year, but at the other extreme I mean, we are when we talked about affordability area. That's.
And protein that we want to develop further offerings into into affordable.
Segment as well this is important as we said because some people will suffer from inflation and then we need to make sure that we are offering affordable products to them as specialty nutritional products on the specialty and emerging market. So this is a reason why we have included.
Increased offering them affordable products for us have grown by 9% and niche 1 so very happy with that and just as a side comment of Hollywood products doing dilutive margin wise. So no no issue whatsoever. There. So we are really pushing under 2 extremes affordable and premium.
And I see.
Something of a questions here, but I also wanted to conclude with 1 point that I briefly touched upon and the intro and then I wanted to try at home and that is I hope you're seeing the underlying strength with which we handled the situation and especially all the good work that has gone into and boosting our organic growth.
Really we're seeing.
No failed once here related to Covid, but I wanted to draw your attention to what I said in my section of the prepared remarks and that is we believe now from a portfolio set up innovation of 8 marketing spend point of view that we have what it takes to consistently deliver mid single digit growth.
Inked and that is not a COVID-19 statement, that's basically statement on us and our and the engine here that supports the growth and as you know that was an important milestone weapon and working towards for several years. We had told you before COVID-19 and beginning of 2020 that we weren't quite there yet close but not quite there yet we can tell you now.
Growth here and I think that is an important growth driver for ice and of course also an important value driver down the road.
On that note and thanks for joining us have a great summer and we look forward to talking to you as part of Q3.
Yeah.
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And with.
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