Q4 2021 Mondelez International Inc Earnings Call

January 27, 2022

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And by your program is about to begin if you require ought to give assistance during todays program. Please press star zero.

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Good day and welcome to the Mont Elise International fourth quarter 2021 year end earnings Conference call. Today's call is scheduled to last about one hour, including remarks by the monthly is management and the question and answer session in order to ask a question. Please press the star.

Key followed by the number one on your Touchtone phone at any time during the call.

I'd now like to turn the call over to Mr. Shep Dunlap, Vice President Investor Relations for months Lee. Please go ahead Sir.

Good afternoon, and thanks for joining us.

With me today are Dirk van de put our chairman and CEO and Luca <unk>, our CFO Earl.

Earlier today, we sent out our press release and presentation slides, which are available on our website.

During this call we will make forward looking statements about the company's performance.

<unk> are based on how we see things today actual results may differ materially due to risks and uncertainties.

Please refer to the cautionary statements and risk factors contained in our 10-K, Q and 8-K filings for more details on our forward looking statements as we discuss our results today unless noted as reported we'll be referencing our non-GAAP financial measures, which adjust for certain items included in our GAAP results. In addition, we provide our year over year growth on a constant currency basis.

Unless otherwise noted we're also presenting revenue growth on a two year CAGR basis to provide better comparability given the impact of Covid.

On 2020 results you can find the comparable GAAP measures and GAAP to non-GAAP reconciliations within our earnings release.

And at the back of the slide presentation in today's call Dirk will provide a business and strategy update then Luca will take you through our financial results and outlooks.

We will close with Q&A.

Before turning it over to Dirk I would like to remind you of two upcoming investor events first we will present virtually on February 22nd Cagny, focusing on our EMEA region and second please save the date for a <unk> Investor day on May 10.

With that I'll turn the call over to Darcy.

Thank you chip.

Thank you everyone for joining the call today.

I am starting off at slide four.

2021 marked another year of strong top and bottom line results.

Growth was driven equally by volume and pricing.

As we leverage the strength of our brands and execution capabilities.

We continued to deliver on our long term growth algorithm.

Turning nearly $4 billion in capital to shareholders, while investing in our growth initiatives.

Positioning us well to deliver strong performance in 2022 and beyond.

Yeah.

The COVID-19 pandemic continues to impact both consumer behaviors and the broader operating environment.

Against this backdrop over the past two years.

Consumers continue to choose our trusted and beloved brands for both comfort and sustenance at home and on the go.

We have delivered on this strong underlying demand across our brands and geographies with continued strength in execution activation and innovation.

As a result, our cumulative market share remains higher than pre COVID-19 levels.

At the same time, we are continuing to operate in a dynamic environment.

I recognized by global input cost inflation.

Alongside supply chain labor and transportation disruption.

We are effectively mitigating these challenges through ongoing cost discipline and strategic pricing actions.

We also continue to execute well against our strategic growth priorities.

Investing in our brands capabilities and sustainability initiatives.

Spending our portfolio with the addition of several growth accretive acquisitions.

Hugh grenades, Gourmet foods, <unk> pizza, which closed earlier this month.

These additions increase our exposure to a broader snacking categories and growing profit pools.

Along with our financial performance, we made progress in other areas.

We continue to advance our ESG goals setting ambitious new targets for achieving net zero by 2050, and we continue to accelerate our dei agenda.

And none of this would be possible without our people the best in the CPG industry.

We are proud of the way our teams continue to focus on delivering great products to our consumers.

Pandemic conditions continue to impact both our work lives and our personal lives.

I am, especially grateful to our frontline teams, whose hard work and dedication the lights families all over the world.

We are confident that the strength of our brands, our proven strategy and our continuous investments position us well to achieve our long term financial targets in 2022 and beyond.

Let's take a closer look at the market and macro trends on slide five.

With the.

The recent rise of the Omicron variant.

The rebound in mobility that we saw earlier in 2021 has slowed down in both developed and emerging markets and is expected to remain 10% to 15% below pre COVID-19 levels in many markets.

I'm at home and eating at home look likely to remain elevated.

In the U S. For example, 60% of adults are not expecting to eat out more in 2022 than they did in 2021.

This positions, our core biscuits and chocolate portfolio as well as they are skewed towards in home consumption.

The pandemic continues to fuel the desire for comfort and indulgence.

<unk>, our categories and trusted brands.

And overall as we found in a state of Snacking Survey released last week the tendency for daily Snacking is up for a third consecutive year.

And although 70% of global consumers.

<unk> concerns about inflation it has done little to date to change their grocery shopping behaviors.

This is consistent with the observed price elasticity, which has been much lower than historical levels as well as a continued share weakness for private label.

Let me spend a moment on the current operating environment on slide six.

Like other companies, we are experiencing cost inflation globally, particularly on transportation costs vary edible oils and packaging.

We have implemented material price increases and sure we are significantly hedged across key commodities and we are continuing to drive productivity measures.

We also continue to manage through significant volatility in the supply chain due to labor shortages at third parties as well as a continuing gap between demand and supply of trucking capacity in containers in places like the U S and the UK.

In addition.

Strike in Q3, although resolved impacted our production output and inventory levels in the quarter.

Additionally, COVID-19 continues to cause disruption in consumer mobility in certain geographies impacting our gum business and on the gold products.

This currently affects a small portion of emerging markets.

Additionally, the rise of the Omicron variant is driving high levels of ups enthusiasm in certain markets, while limiting recovering mobility.

We are focused on reactivating part of our Covid playbook from the early pandemic days and also looking to further simplify our operations to offset these pressures.

And although challenging we are managing effectively through each of these dynamics.

We implement our revenue growth management levers and continue to invest in our brands, while taking extensive measures to lighten the supply chain disruption.

By applying the lessons learned from earlier waves of the pandemic.

Turning our focus on execution, we are confident that we remain well positioned to deliver our growth targets.

Okay.

Turning to slide seven you can see that our strategy is continuing to drive a virtuous cycle.

Strong volume momentum combined with brand investments and strategic pricing options.

Position us well to consistently deliver profitable top and bottom line growth.

Well, a strong return of capital to our shareholders.

We grew revenue by five 2% in 2021, lapping three 7% growth in 2020.

Volume was once again, a big contributor to this growth, which demonstrates the fundamental strength and health of our business.

Despite the ongoing impact of cost inflation and supply chain volatility, we delivered gross profit growth of three 6%.

Our working media investments have increased double digits versus last year on the back of a double digit increase in 2020.

Combined with our advantage portfolio of brands and our execution and activation capabilities.

Gained or held share across 75% of our revenue on a two year cumulative basis.

We increased operating income by five 8% and delivered $3 2 billion in free cash flow.

We view these results as a healthy indicator of our ability to continue to deliver on our long term growth algorithm.

As you can see on slide eight we are now averaging a four 2% quarterly growth rate since the launch of our strategy in September 2018.

We're proud of our strong and consistent track record over this time.

We continue to focus on profit dollar growth local first commercial execution.

The return on investment and aligns the incentives we are confident that we can continue to consistently deliver attractive growth.

On slide nine you can see some highlights of our successful execution against our long term growth drivers.

These include delivering our strongest Christmas sales on record in Europe , growing double digits versus 2020 and 2019.

By gathering UK and Milka in Germany.

It also includes continuing to expand distribution in emerging markets, adding 300000 stores in China and more than 200000 stores in India.

It includes investing to sustain growth in digital commerce, which grew 29% on a reported basis lapping 75% growth in 2020.

Digital Commerce now accounts for approximately 6% of revenue up from 3% in 2019.

And it also includes expanding our presence in high growth segments, where we are underrepresented, including wellbeing, we relaunched breakthrough innovations.

Brands like Oreo zero sugar in China, as well as Cadbury planned bar and plant based Philadelphia in the UK.

As consumer demand for well being options rises.

Each of these innovations is the clear potential to expand to additional geographies.

We also grew our presence in the premium biscuits space with double digit growth led by <unk>, which we successfully transitioned to direct store delivery.

Additionally, we expanded our presence in close in Adjacencies, such as baked snacks with the successful integration of giving go.

By realizing revenue and cost synergies, we grew that business double digit in 2021.

We also expanded our presence in snack bars with the acquisition of <unk> in the UK.

Switching to slide 10.

We continue to further enhance and strengthen our portfolio in 2021.

Expanding our exposure to the growing profit pools in chocolate and biscuits as well as adjacent categories, and the well being and premium segments.

We acquired four high growth strategic assets.

<unk> baked snacks in Europe , which just closed in January .

<unk> well being snack bars in the UK.

Gourmet food premium corrector in Australia, and new premium well being snacks in the U S.

These acquisitions are worth $800 million in annual revenue and they are well positioned to collectively delivered high single digit growth for years to come.

This takes our total number of acquisitions two seven since 2018.

Contributing over $1 5 billion of revenue.

We also earned $1 $5 billion in net proceeds from selling down on our beverage assets in 2021.

Enabling further investment in our brands and growth drivers.

Additionally, we are in the process of completing a strategic review of our developed markets gum business.

<unk> to complete that review and have more information to share with you at our May Investor day.

Yeah.

2021 was a strong year and we are well positioned for another year of strong shareholder returns in 2022 and beyond.

Staying close to our consumers executing our proven strategy and taking the appropriate actions to navigate input cost inflation and supply chain volatility I am confident that we can deliver strong performance for years to come.

With that I will hand over to Luca for more details on our financials.

Thank you Erica and good afternoon.

Our full year and fourth quarter performance was strong and from solid revenue growth volume earnings and free cash flow.

We believe our revenue growth for the quarter of <unk>.

Five two and five 4%, respectively importantly half of these performance was underpinned by volume.

Emerging markets increased 12% for the year and 11% for the quarter.

Performance across a significant majority of countries, especially the brakes.

Despite the small group of countries, specifically in southeast Asia, continuing to face college related challenges overall, we are encouraged about the outlook for our <unk> in the near and long term.

Developed markets grew one 6% for the year coming off an exceptional 2020.

And two 5% for the quarter after a strong comparison.

As with our emerging markets, we're encouraged by the sustained performance, particularly in our key core snacks categories.

On Slide 13, you can see our portfolio performance Chuck.

Chocolate and biscuits remain attractive and durable categories with very strong results.

<unk> pre pandemic during the pandemic and importantly, as we enter 2022.

In addition, improved mobility as yielded quality, while maintain be versus 2020.

Approaching a return to pre pandemic levels in many markets and back to grow versus 2019 in China.

This gets to 3% for the year and 2% for the quarter.

Yes, we're the big driver of performance with majority of our EMEA business, delivering double digit or high single digit growth.

These underscore the large long term opportunity for our businesses as we continue to make investments in agency portfolio goal and distribution expansion.

Both global and local jewels brands, including Oreo chips are Holly Bosnian glop, social than the very strong growth.

Chocolate grew more than 10% and 8% for the quarter.

With significant growth across both developed and emerging markets.

Through both our global and local brands.

Chocolate is a great category to be and as in biscuits will continue to make investments in our brands and capabilities to continue to drive <unk> performance for the SOCOM.

Gum, and candy posted 7% growth for the year and more than 11% growth for the quarter as increased mobility. It resulted in a return to growth in several key markets, especially within Latin America.

Now, let's review our market share performance on slide 14.

We continue to singled sherpa four months on a two year cumulative basis, as we prioritize ANC investments and execute while in most market.

We held or gained share in approximately 75% of our revenue base on a two year stack.

Our biscuit and chocolate categories continued to do well with 80% of our revenue base holding or gaining share.

Overall share gains versus 2019, while both based with all regions growing share over a two year period.

A few of the more notable areas of share gains over this time include <unk>.

China, Russia, India, Brazil, and Mexico biscuit.

UK, Russia, and Australia and chocolate.

And China gum.

As we move into Q1, we expect software share performance driven by our North American segment as the combination of supply chain constraints from third parties and labor shortages will pressure stocks and service levels.

Why do you need that the effect of the strategies behind US we have hindsight 2022 with low stocks and we're working to rebuild inventory levels.

Takes time in this environment.

Legally as demand continues to be strong.

We expect a gradual improvement of the situation as the year progresses.

Now turning to page 16.

For the year, we deliver strong Oi dollar growth of almost 6% driven by solid gross profit dollar increases and reduced overhead.

For the quarter profitability was pressured primarily due to the lag between commodities and forex related inflation and the implementation of pricing actions, specifically in North America, where price increases became effective at the beginning of January .

Turning to regional performance on slide 16.

Europe grew 5% for the year and six 5% for the quarter supported by strong execution and activation and continued recovery in the convenience the away from home and probably tail channels.

Our Q4 results were driven by strong growth across major markets, including the UK, Germany, and Russia underpinned by solid share gains.

In chocolate, we deliver record results for the Christmas season growing double digit against both 2020 in 2019.

<unk> meals categories also delivered good results.

Why dollar growth for the high single digits, driven by continued volume leverage cost control and strong overhead management.

Looking ahead in this region, we expect muted profitability in Q1 with improvements beginning in the second quarter as price increases in the number of countries take effect.

North America declined by <unk>, 6% for the year and 3% for Q4 lapping very strong high single digit growth in the previous year.

This performance includes healthy growth from our Bank Trust portfolio.

Soft lending in the quarter and second half were also driven by supply chain constraints and low inventory levels due to the strike and third party labor constraints.

North America, Oi decline minus 10, 4% for the year and minus 20% for the quarter due to inflationary pressure and supply chain constraints.

As mentioned earlier, we expect sequential improvement that's pricing actions go into effect in Q1.

EMEA grew seven 3% or five 8% for the quarter showing continued strength across most of the region.

India grew double digits for the year and continues to execute well and reinvest for the future.

We continue to extend our leadership position in chocolate, while the growth of our biscuit business continuous to outpace larger competitors in the region.

China grew low double digits for the year and high single digits for the quarter driven by continued share gains in both biscuits and gum.

Australia, New Zealand also did well with solid performances in the year ending the quarter in chocolate and biscuit.

EMEA increased oi dollars by more than 13% for the year due to strong volume leverage productivity and overhead management, while also increasing working media by double digits.

Q4 growth was more muted due to commodity inflation.

As in other regions pricing actions to our Gen are being implemented as of Q1.

Latin America turned in strong growth for the year of 24% and 19, 7% for the quarter with overall share gains for 2021.

Brazil delivered strong double digit growth for the quarter, Mexico grew high single digits for both the quarter and now Western anthem business grew high single digits for the mid teens for the quarter.

Adjusted Oi dollars in Latin America increased high double digit for the year and more than 40% for the quarter.

These increases were driven by broad based growth across core snacking categories.

<unk> pricing and the volume and mix impact of higher gum and candy.

Inflationary pressure remains challenging, but we believe both our Gi and volume growth will enable us to largely offset this dynamic in 2022.

Moving to EPS.

Full year EPS grew 9% at constant currency. This growth was primarily driven by topline driven operating gains.

Turning to free cash flow and capital return on slide 18.

We deliver full year free cash flow of $3 2 billion, which included 300 million higher tax payments year over year.

Some related to our coffee jv's ipos and sell downs.

We continue to feel confident about our free cash flow as we move forward.

For the year, we returned $3 9 billion to shareholders in the form of dividends and share repurchases.

Now let me provide some color on our 2020 to outlook on slide 20.

We expect to deliver against our long term growth algorithm that we see as a performance floor.

Particularly as revenue goes.

As you are hearing across all sectors, we anticipate another year of material cost inflation.

In percentage terms is expected to increase high single digits versus 2021.

As such pricing will be a larger top line contributor than in the previous years, but we do expect volume growth to also be a positive factor.

In this regard a few more points.

Our superior portfolio of brands and the consistent investments, we have made and will continue to make in working media marketing and sales route to market and our GM capabilities position us well for sustained growth and profitability in this higher inflation environment.

We believe we can continue being an effective driver of category value and volume growth specifically in biscuits and chocolate.

Our focus is not changing as we aim at growing profit dollars and dollar growth underpins, our sustainable algorithm cash flow and capital return.

We have a history of cost excellence, which we expect to remain the case for 2000 2020 going forward.

Our algorithm continues to be predicated on brand building and capabilities in sales and marketing also in 2022.

All included for the year, we expect mid single digit dollar growth and high single digit EPS growth.

Earnings phasing can really affect the current inflationary environment and the sequential introduction of pricing.

We expect improved year over year gross profit dollar growth as pricing is fully realized and as we implement additional RPM stoppages, but we do still expect some pressure in Q1 and partially in Q2.

41, specifically, we still expect to face largest supply chain headwinds in North America related to third party partners and loan bankers from last year's strike that should improve as the year progresses.

With respect to free cash flow, we expect another year of 3 billion plus.

In this outlook. We also expect an ETR in the low to mid Twenty's based on what we know today.

<unk> expense of approximately $335 million and steady purchases of approximately $2 billion.

With that let's open the line for questions.

Thank you.

At this time, if you'd like to ask a question. Please press the star and one key on your telephone keypad.

Keep in mind, you may remove yourself from the question queue at any time by pressing the pound key.

And we will take our first question from Ken Goldman with J P. Morgan. Please go ahead. Your line is open.

Alright, thanks, everybody good afternoon.

Sure.

There's been some discussion lately in the media about emerging markets potentially slowing down a bit as 2022 progresses I think no one really knows for sure what will happen, but I'm just curious it seems like things are fine for you now, but as you look ahead to your major regions. Your major countries is there anything that.

You are particularly worried about anything that you look at it and say Oh this could get a little worse as we go or is it just sort of hey, we're planning on steady as she goes and I'm just curious what's baked into your guidance potentially for a little bit of.

Yes.

Demand destruction, but a little bit of a worst sort of consumer around the world perhaps.

Yeah.

Yes.

Well thanks, Ken.

First of all I would say that around the world, but also in emerging markets.

Today and for the last three years, our core categories have been doing quite well chocolate and biscuits have been growing very strongly and in fact better than they were.

Before the pandemic and Theres a number of factors at work with the consumers.

Boosting the consumption and highest snacking, so you see very.

Robust demand if I go to our to our key emerging markets the BRIC countries.

See that in those four countries also very very clearly.

As it relates to.

Investments and support for our brands. We are we are.

Also.

Continuing to do that in emerging markets, if anything that's where we increased the most.

And.

I think that.

From a pricing perspective, we have been dealing with pricing in emerging markets.

Over the years and we know that we have to hit certain price points and we're very careful with that having said that we have already started to increase prices in fact to the effect that you see.

In Q4 any price effects, there are largely coming from our emerging markets. We have increased prices in most emerging markets around the world and as you can see results have been being very good. So we also have that.

Very low elasticity.

We.

We're also seeing in the rest of the world.

So everything is sort of.

Aiming in the right direction.

We feel that at this stage there is no signs that it's slowing down in emerging markets, obviously in our projections of.

Our algorithm we have not.

Bacon the same height of performance that we've seen this year and now emerging markets, we've taken a little bit more conservatively. So based on those two seeing what we're seeing in the experience that we have and I believe us doing all the right things as it relates to pricing inverse.

<unk>.

Gaining distribution, which is another big driver in emerging markets for us.

And the fact that.

We feel that we have been relatively realistic in what we forecast for emerging markets. We feel really good we think that emerging markets will deliver for us in 2022.

Great. Thank you for that that's clear and then a quick follow up if I can.

Look you touched on this a bit.

Is it reasonable just given your comments about.

The phasing of pricing and maybe the timing of inflation two to think about the flow of your years, maybe being a little bit more back half loaded and perhaps a little bit more challenged in the front half.

And are there any if that's true are there any specific timing issues, we should consider other than pricing and inflation just as we model.

Thank you Ken.

It is mostly pricing inflation phasing that will drive the gross profit specifically as aligning the P&L progression throughout the year. Obviously, you saw the number being pressured in that in Q4, but as you look closely on the segment profitability data that we disclosed you'll see that the.

Q4, GP pressure came mostly from North America, which is.

Where we have just announced pricing.

And so you will see a sequential progression that is positive in the gross profit line as of <unk>, one, but most of the balance to hit our guidance is going to come in the second part of the year and as I said there are two elements. There one is that pricing implementation and there might be multiple pricing ways the site.

One is the fact that.

Particularly in Europe pricing will come into effect.

As of Q2, ending other places as well and third it is the fact that inflation given the favorable commodity pipeline that we had in 2021 in Q1.

<unk> is commodity pressure is most acute in the first half of the year, but you will see a better client being GP dollar as of Q1 and sequentially it will improve over the quarters.

Great. Thank you so much.

Thank you Pam.

We will take our next question from Bryan Spillane with Bank of America. Please go ahead. Your line is open thanks.

Thanks, operator, good afternoon, everyone.

Hi, Brian .

Luca just a couple of.

Maybe just following up on Ken's question, just a couple of.

Sort of bridging from 'twenty, one to 'twenty two questions. If you will if we look for <unk>.

Five or can you quantify just how much the acquisitions contribute to earnings growth in 'twenty two versus 21 adjusted EPS growth.

Look the <unk> acquisition is.

A material acquisition, obviously in terms of size, but also the number of countries it spans across and.

We'll be fully integrated but it will take a little bit of time, I will say that without giving you specific numbers that the there is a moderate positive impact on EPS.

Next year, but you will see the full benefit of the revenue and cost synergies as of.

Our Q4 and potentially and obviously in 2023, so it will be a modest contribution only normalcy there, okay and just more of a contribution in 'twenty three versus 22 upsell.

Absolutely I think youre going to see the full benefit and I think it will be placed in 2023, Okay. And then if we look at below the operating profit line in 2021, and the bridge that you laid out in slide 17.

Including share repurchases the below the below the operating profit line items contributed.

About nine cents of earnings in 'twenty, one and I guess, just looking at the guidance. It just seems like.

Interest expense the tax rate could also could both be a bit of a headwind. So can you just sort of give us.

Should we expect that there would be some earnings contribution below the operating profit line or.

And if so I guess would it be mainly share repurchases just just trying to square how much benefit we get below the operating profit line.

Interest costs will be up.

Add on about 20 $25 million. So it is one <unk>.

S headwind.

And.

Tax rates will be a little bit higher but not much and so I would say is <unk>.

Right.

Headwind.

Obviously I can't comment very much on on the joint ventures.

As those are publicly traded vehicle and but the biggest benefit is going to be most likely around <unk>.

<unk> purchases in terms of the Jv's I won't refer back to what those on fed about ABB profit guidance for 2022, and I think thats. The stance, we have taken for for that okay. Thanks, Luca I'll pass it on.

Brian .

We will take our next question from Andrew Lazar with Barclays. Please go ahead. Your line is open.

Thanks, Good evening everybody.

Hi, Andrew.

Perhaps Luca could you just comment first on what your outlook or expectation would be in terms of.

Gross margin change year over year for the full year.

Yes to the extent you see some full year gross margin compression.

More would need them to come from SG&A leverage to get to your sort of mid single digit constant currency EBIT target. So in that case, what would be those.

SG&A drivers that you would have to lean more heavily on this year potentially.

Given what your answer on the gross margin is.

Sure I think you know that we tried to move away from gross margin percentages and I think that has served us well.

So talking about gross profit dollars 2022 is no exception to what we have said consistently 12 years, we aim at getting at <unk>.

Four plus percent on on that specific line of the P&L.

And as I said, I think youre going to see year over year GP dollar growth as of Q1, but will be.

Most pronounced in the second part of the year I think again as you dissect the numbers you clearly see that the pressure in Q4 on the GP line, which was likely positive comes mostly from North America, and what you have to be need for BGP line to improve as the biggest change that has to happen.

<unk> pricing going into effect in North America. The first indication is that a price was accepted by the retailers and B we see.

Our prices going up in the marketplace. So I feel cautiously positive about that which is clearly the biggest driver of GP progression over the quarters in terms of SG&A. We will continue investing in in advertising, obviously will be very <unk>.

Sensible because those situations, specifically North America, where we don't have enough stock and so we are calibrating exactly where we want to spend but as Nick said in emerging markets. We will continue pushing and we will continue pushing in the other regions to the point here is the last thing we want to do as we.

Implement pricing is cutting back on ANC investments as far as all of our Hudson productivity. We will continue the great job that we had done over the last few years and particularly in the last couple of years, excluding the acquisitions, our ultra line pure cost SG&A is down both in 'twenty two.

And in 2021, and my goal is to keep that line down year over year.

Productivity is obviously is going to be good for the year.

We look at it.

But I'll be commenting more as.

We publish Q1 about all these specific lines.

And then monitor leaves us guiding to positive volume growth for the full year. Despite some supply chain challenges and limited shipments in Q1, maybe in the U S and Europe , and obviously the higher pricing. So I guess, what sort of elasticity relationship is monitoring is underwriting for the year.

Look we haven't been.

A little bit conservative on elasticity.

We excited elasticity is low at this point in time based on what we see across the board, but we are planning for historical level. So.

That's the type of elasticity, we have client and I think you know the number in general it is.

Onetime elasticity in give or take.

But I expect to do better than that.

Thank you.

Thank you Brian .

Thank you.

We will take our next question from Robert Moskow with Credit Suisse. Please go ahead. Your line is open.

Hi, Thanks.

I guess one of the surprises.

And the result is that North American shipments were weak and all of us look at Nielsen.

Retail data and it looks really really strong so what's happening at retail is that Jess.

Yes.

Brawn.

Consumer takeaway.

And the inventories are getting depleted.

Should we expect that that retail consumption to then weekend in first quarter as a result of running out of inventory.

Maybe help US bridge why why it looks so good from a from a consumption data and then I had a quick follow up.

Yes.

Demand remains very robust.

<unk>.

But the growth that you see is our far growth that you see is impacted by supply chain constraints and phasing of some of the price actions and so in between in between those is our inventory of course and.

If you look at it.

North America.

<unk>.

We were flat for the year, let's say it.

But for the two year CAGR of about 4%, which is still quite strong.

If you look at the last quarters, we had the strike in Q3, which left us with low inventory levels.

Although improving the.

It is going slower than you would normally expect because of all the supply chain disruption that everybody is experiencing and so we think that we will still continue to see on shelf.

Effects from the strike throughout Q1.

We also work more external manufacturing.

And then our colleagues and.

Those external manufacturers are facing labor challenges.

And we expect also that we will continue to see some pressures.

In that area at least for Q1.

And then the biggest difference probably is that price increases.

We announced price increases for January one so they were not yet reflected in Q4, but you will start to see that as we report Q1.

And we continue to work on a broader RCM capabilities. So as you look at Nielsen you start to see at the moment the effect of those price increases Thats why our Nielsen starts to look better, but if you look at the Nielsen that we saw for the last year, that's where you could see the effect of.

Supply issues.

So as we look at Q1, we expect the top line in North America to improve the margins will also improve what's going to be sequentially.

As I said pricing has been executed across U S, Canada and our ventures.

We are continuing to simplify our portfolio and we are also taking actions to increase capacity.

More temporary labor and so on so that's the sort of ease the pressure on our supply chain.

We are continuing to invest in our brands.

As Luca said, we will be careful to invest in those brands, where we have good supply.

But with the price increases we we.

We are determined that we will have to continue to support our brands.

And as you will see as these effects are these initiatives take effect in 2002.

The top and bottom line growth will start to come back for North America.

<unk>.

Maybe the last remark the bottom line will be sequential.

Because if you look at it year over year Q1 was a very good year last year. So you will still see some some year over year pressure.

And do you have that lower inventory issue that I was referring to.

But overall you will see a very good improvements over the coming quarters.

Okay.

My follow up.

You have been providing us with market share trends on a two year basis.

But are you going to continue that in 2022, because I think people will start to judge you more on it on a year over year basis.

How will how will you represent your market share trends.

Yes, no we are going to go back to year over year.

It was useful with the pandemic because there was a number of effects last year and also this year exceptional effects that influenced the market share and so we thought it was better to keep on comparing market shares.

Compared to pre pandemic now that the pandemic is.

Not behind this but improving.

We feel that we can go back to normal market share. If for instance, if you look at 2021 .

<unk>.

You have the U S strike in their retrofit effects of course, our market share.

But I think it's important to look at how do you. If there has been performing versus what it was before but pandemic and not to exclude and then excluding the strike in Canada. This year we were.

Out of our listing with one of the most important customers there for quite a while which also of course affected our market share but to get back into that clients are the market share is going to come back and then we had also exceptional effects in the UK chocolate.

Last year, we had one of our competitors had a major supply chain effect, which that benefited us. This year. The competitor is supply chain is is back up and running so as a consequence, we will.

Give back some of that market share and then we had.

One of our plants in France, which was affected.

Last year and that we were.

We're not able to supply the market. So that has an effect for us too. So there's all of these.

Last year, I am not going into the details about our competitors, but last year, we had big wins, because our supply chain performed better than our competitors I would say so the main thing for US was to show.

Cumulated over two years and over the two years, we still see a very solid increase.

Versus what it was before the pandemic and going forward, we will start to compare it year over year unless there are exceptional effects, which we can then inform you about.

Okay. Thank you.

Mhm.

We will take our next question from Chris Growe with Stifel. Please go ahead. Your line is open.

Thank you good evening.

Hi, I just had a question for you first on.

A question for Luc in relation to your hedging is there was a comment that you're about 70% hedged for the year I didn't want to get a sense of that would be considered normal or above or below where you normally would be at this time of year and then just to understand.

Because you are quite hedged in 2021 as well the degree to which some of these unhedged cost free.

Or packaging or things that you cannot.

Like a lingering risks to 2022 or do you have a good.

A better read on those on those costs for the coming year.

Thank you for the question, it's a very good one.

70% is pretty much in line with what we had in last year.

It is higher.

Then what it has been historically and over time, what we have done is we have moved the needle in terms of salt going longer.

So obviously that gives us the opportunity at the low levels to buy more and so.

Yet the opportunity to sit back and wait until the situation evolves and mostly of these hedges are.

Two options and they are not straightforward corporate so we still have flexibility should one of these commodities go lower and I think that that's a great advantage.

So I don't feel particularly worried about.

<unk>.

May mean, 30% at this point, but there are parts, where there might still be pressure what do we see these days is a little bit more pressure coming out of daily.

And potentially we will have to consider additional pricing for that in some places where.

We sell.

Daily based products and we also see some pricing and packaging and some ingredients now the assumption we have at this point in time for the second part of the year is inflation of $4 that is in line with what we have seen and what we are seeing these days.

There could be potentially more I don't expect a material number at this point in time, but we got a little bit surprised on these on Hedgeable commodities.

Exposures in the second part of last year. So we are very vigilant and.

In case, they go up we will have to pricing we will do so.

Okay. Thank you for the color of that information.

Just one other question in relation to would have been some really strong market share trends in the culmination of a lot of work in marketing and new products in your categories doing so well also I guess I'm just curious as you think about your.

Pricing strategy for the coming year is but one example, just the degree to which you think there's maybe a little risk to your market shares are you seeing are you taking pricing that largely reflects which your competitors are doing and inflation in that market and therefore, there shouldn't be a whole lot of movement in share I'm, just trying to get a sense given how strong its been if that can be a bit of a watch point.

Okay.

Yes.

Our pricing is.

Largely driven by.

What we think is acceptable to the consumers.

We don't know what our competitors are planning until they do it.

And so.

We try to price.

In line with what we think our consumers are prepared to pay for our brands and that is different between emerging markets and developed markets. So.

In developed markets, where you're largely talking about supermarkets and there is a whole bunch of pricing effects youll have a little bit more liberty in emerging markets, we need to hit certain price points. So if we do a lot of work on RCM.

Price pack architecture, and so long so we expect that.

We will be very sensible.

We're working very hard on Archie M and better understanding what is possible for pricing for our brands what is acceptable to the consumers.

As you know many years ago, we've had a few episodes, where it would be probably around a little bit overboard on pricing. So we will we will.

The step a little bit more careful as it relates to pricing so far as I was explaining.

In Q4, we've been pricing in emerging markets and so far that is working really well for us.

And so it seems to be that our methodology is working we will see what happens in the U S and in Europe , but at this stage it feels pretty solid and we don't expect that there will be any major any major issues.

Going forward second half and into 'twenty, three we will see what the inflationary pressure is going to be but.

I can assure you that we will step very carefully and make sure that we can.

To see volume growth for our brands.

Okay. Thank you for that.

Okay.

We will take our next question from.

David Palmer with Evercore ISI. Please go ahead your line is open.

Great. Thanks, Good evening question on pricing.

Hi.

We can see some clear pricing that you are taking in developed markets here into 'twenty two.

With the positive volume guidance.

Want to get too carried away about the incremental pricing are you are you thinking that there might be some moderation in pricing from emerging markets and 22 versus 'twenty, one where should those.

Very similar.

Very similar size the straight answer David.

There are pockets where we.

We don't see the level of inflation that we have for the totality of the company, but in general terms, particularly around Forex Dot places, where there is a little bit more inflation.

And so given all the puts and takes pricing wise youre going to see a level of pricing in emerging markets that is in the same ballpark of 2021, a little bit higher as a reminder, we implemented I believe two price waves in places like Russia in 2021, we implemented I believe treat.

Price, we've seen in Brazil, and I can go on and on and talk about Mexico Southeast Asia.

May end up in South Africa, where we have implemented multiple rounds in in 2021 as well.

Great. Thank you and just thinking about your contribution to growth in 'twenty two versus 21, you mentioned how in the last couple of years, perhaps you've gotten some points of distribution gains, particularly in developed markets.

Smaller brands that may not have had access might've had more issues with supply chain, even though you gave some of that back in 'twenty, one I wonder if that's going to be you suspect you'll have some.

Tougher comparisons in developed markets against smaller brands. This year, but then I think about the ability for you to have new product news this year.

And then the acquired businesses that you've had they could possibly get into greater distribution. So im trying to think about how youre thinking about the puts and takes of some what seems to be some headwinds and some tailwind going into this year. Thanks.

Yes.

First of all on the smaller brands that effect.

<unk> is certainly continuing in Q4 and they continue to do well.

To the extent that if we if we have some supply issues. It is sometimes in those smaller brands because they keep on selling at the higher levels.

We had during the pandemic and Thats, sometimes gives us some capacity pressure.

So.

We are trying to do whatever they can to deal with those capacity issues of course.

But we are at the moment.

Assuming that gradually they will give back a little bit, but we do still think that those brands will keep some of that momentum that youre seeing.

But we started to see during the pandemic.

And you're right.

Our global brands.

Really well this year this was a year, where our big global brands.

Grew outgrew our local brands last year in 'twenty. It was a local brands, who outgrew the global brands.

Reason is because.

Oreo Milka and Cadbury.

Top three brands continued to be high single digit to double digit and then you have the recovery of brands like <unk>, which is largely sold in the world travel retail or try them to gum, which is of course sold on the goal.

Heavily disrupted in 2020.

The local brands as I was saying still are prepared.

We're doing quite well they are in the mid single digit growth range.

And.

We don't necessarily see that slowing down.

Going into next into next year.

So and then there is the additional effect from the acquisitions of course, <unk> you will not see that in our top line until the acquisition is for us.

He has done for 12 months.

So you won't see an effect from from that one.

But do you see you will see a good year for giving goal.

Coming year.

We are expecting and also brand.

Perfect snacks, which is a snack bar, which is also largely consumed on the goal that was.

Affected by the pandemic, we're also expecting to see a good growth dates we have moved on to <unk>.

So very solid very strong high double digit growth. There this year, which we think will continue into next year. So yes. There is an additional effect.

Also important to mention is that the price increase that covers all of the brands.

Globally in the U S.

Global brands local brands and the venture brands.

Thank you.

Thank you David.

We'll take our next question from Jason English with Goldman Sachs. Please go ahead. Your line is open.

Hey, folks thanks for slipping me in I appreciate it.

Eyeballs on questions later.

It looks from everything we see like inflation, particularly onerous in the U S is maybe kind of close to peaking.

But it sounds like it's still building in markets like Europe and elsewhere can you walk us around the world are real quick and tell us what youre seeing in terms of cadence level pace magnitude of inflation.

Yes, sure I'll take a stab at it.

I would start by saying that the inflation is really the highest in the U S.

And look it might be at the highest point in the U S. Right now I don't necessarily see it going down.

In the second part of DSO I want to make that 0.1st in terms of inflation look majority of the commodities. We procure they are global commodities and and sold the inflationary pressure is pretty much the same around the world logistics cost is on the rise everywhere around the world not to the level that.

We've seen the U S. And then there are packaging related costs and ingredients that are pretty much consistent across the world.

In terms of all the inflation, where it is mostly acute these days. It is in places where we have seen currencies.

Turning versus the dollars.

It is in places like Russia. It is in places like Brazil, but overall, if you look around the world in terms of inflationary pressure.

I would say there are yes, some lap some peaks, but overall it is fairly even I would say there are certain commodities that are more impacted than others.

Coca for instances there'll be more benign in 2022 than it has been in 2021, and so places where we have a material chocolate business like Europe are going to see in terms of inflation, a little bit less but I just mentioned daily in one of the previous questions and.

And that might be for the price is coming up so hopefully that gave you a little bit of color on how we see costs evolving by region and by countries.

Yes, yes, no that's super helpful and just to come back to North America.

Obviously, it's unfortunate.

The persistent problems. So you are seeing in North America.

I guess my question is.

They seem to be surprising you.

If we look at the Nielsen data kind of back to where I'm Oscar's question demands there and it looks like youre actually inducing demand because the promotional levels remain elevated they are growing year on year. So it looks like you've got a sales force of one side Youre organization, pushing demand and you've got a supply chain on the other side, saying, we can't fill demand.

And there seems to be this disconnect between the two organizations so.

Two questions one is it fair into what's wrong that caused that disconnect yourself.

I would say that.

For sure in the beginning of.

Of the inflation or the supply chain disruption, which we started to see in August September .

'twenty one.

There was clearly a disconnect because our.

Sales team saw high demand and the supply chain suddenly started to realize that transportation was difficult.

And that there was a number of other issues that were going on a little bit of capacity and so on labor shortages in our third parties.

And so yes.

It took us probably a few months before we realized we need to reset here. Since then the teams have been working quite closely trying to link up.

Whatever.

Demand generation that we have with the supply capacity that we have and so.

Im expecting that in the coming months, we see that.

Starting to work a lot better for us but.

So I would say, it's fair, but we've gotten.

Under that now and we've solved the problem and so going forward, we should be we should be okay.

Got it okay I'm not sure if there was a second part to the question that was it but I believe now, yes, thats, where we would call Ralph.

Talk to you again later, so I'll follow up later too.

Okay.

And we'll take our next question from Rob Dickerson with Jefferies. Please go ahead. Your line is open.

Great. Thanks, so much.

Just have one question.

The top line kind of circling back to all the commentary so far through Q&A.

I know previously.

It sounds like Youre looking for lets call it.

Maybe 6% to 7% pricing this year, that's equal that early part of January in North America.

And then to David Palmer question it sounds like.

Pricing in most Tms would kind of remain at a similar level relative.

2021.

At the same time, there should be some improved pricing sounds like coming through in Europe . So.

Square all of that.

Is it fair to say that.

And maybe pricing for the year would it sounds like it's at least 3% maybe it could be a little bit higher.

Because I'm, obviously just tried it.

Some days as to whats irrational kind of organic.

Forecast for the year.

Kind of outside of your traditional 30% plus kind of long term debt.

Thanks.

Thank you for the question.

We are usually not giving the breakdown pricing and volume and we try to move away to keep some sort of flexibility, but what I will tell you is that.

As I said in the prepared remarks, I see the 3% plus.

Asset class as a slower.

And at this point in time, we really want to see how Q1 plays out.

Some prices increases and omnicom before we commit to a higher number but hopefully we see Q1 coming in in.

In line with our internal expectations, and we will be in a position to.

<unk>.

Raise the guidance on top line potentially after we see Q1, and we have tier one under the bylaws.

Hopefully that's.

I would say in some of your question.

Yeah fair enough.

I guess I'll try another one.

This.

In terms of the cash balance.

You are kind of ending 'twenty one is decent.

On the cash.

Leverage looks to be no.

So a bit sub three times.

And it sounds like the gum business is still under strategic review so they are.

Kind of outside of the 2 billion potential and share repo.

How are you thinking about just kind of general capital allocation.

In terms of M&A like do you feel as if as you get through 'twenty one it's about.

Stabilizing in Turkey, and Japan.

Distribution opportunities with acquisitions are done or.

Are you still pushing forward in terms of health and wellness premium et cetera, that's all thanks.

Look the.

Our cash position at the end and the net debt position at the end of 2021 is obviously for legal because we have done quite a bit of work.

All around and I'm very happy with leverage being at two seven times, having said that in January we have just cut it $2 billion check almost 40 beta so bear that in mind in terms of capital structure. We will continue generating cash flow and I was very happy with the quality of the cash that came in into 2020.

So I feel the first element, we just foundation of our capital structure is there and then clearly at this point in time.

We had an acquisition that is similar to given goal <unk> said that we will still be able to fund it through debt, we obviously have our coffee steaks and.

We have only takes including potentially switching golf share buy backs to be able to face.

And acquisition of the lateral that given goal and chip EBITDA had been.

Alright fair enough. Thanks Luca.

Sure.

And in the interest of time ill now turn the program back to Dirk Van de put for any closing remarks.

Thank you well in closing.

We feel good about our 2021 performance across our key metrics, Inc of course, including the topline growth. We see good volume profitability was good and the cash generation was excellent.

I wanted to reiterate that we are especially proud of our people I believe the very best in the CPG industry.

<unk>.

By continuing to stay close to our consumers. We are confident that we have a bright future ahead.

We remain focused on our consumer centric growth strategy that will not change we will continue to improve our execution and we will continue to invest in increasing our investment in our brands in our talent and our capabilities.

As I look ahead for towards 'twenty. Two we expect continued pockets of volatility related to COVID-19 or the inflation or the supply chain challenges, we continue to risk adjust our plans to ensure that we can successfully navigate these periodic disruptions and delivered on our targets.

So we enter 2022 with a good momentum in our categories and the vast majority of our geographies.

Our global and local brands as I explained on solid footing with strong levels of investment.

Continue to augment the portfolio with growth accretive snacking assets.

And we are excited about the opportunities to advance.

Multi category strength in our key markets, we are going to continue to expand distribution in emerging markets have you got further accelerated close in adjacencies and high growth segments.

So thank you for your time and for your investment and see you at the end of Q1.

Thank you everyone.

And this does conclude today's program. Thank you for your participation and you may now disconnect.

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Yes.

Good day and welcome to the <unk> International fourth quarter 2021 year end earnings Conference call. Today's call is scheduled to last about one hour, including remarks by the monthly is management and the question and answer session in order to ask a question. Please press the star key followed by the.

Number one on your Touchtone phone at any time during the call.

I'd now like to turn the call over to Mr. Shep Dunlap, Vice President Investor Relations for monthly. Please go ahead Sir.

Good afternoon, and thanks for joining us.

With me today are Dirk van de put our chairman and CEO and Luca <unk> our CFO .

Earlier today, we sent out our press release and presentation slides, which are available on our website.

During this call we will make forward looking statements about the company's performance.

These statements are based on how we see things today.

Actual results may differ materially due to risks and uncertainties. Please.

Unless otherwise noted.

We're also presenting revenue growth on a two year CAGR basis to provide better comparability given the impact of Covid.

On 2020 results you can find the comparable GAAP measures and GAAP to non-GAAP reconciliations within our earnings release.

And at the back of the slide presentation in today's call Dirk will provide a business and strategy update and Luc will take you through our financial results and outlooks.

We will close with Q&A.

Before turning it over to Dirk I would like to remind you of two upcoming investor events first we will present virtually on February 22nd Academy, focusing on our EMEA region and second please save the date for a <unk> Investor day on May 10.

With that I will turn the call over to Darcy.

Thank you chip and thank you everyone for joining the call today.

Im starting off at slide four.

2021 marked another year of strong top and bottom line results.

Growth was driven equally by volume and pricing.

As we leverage the strength of our brands and execution capabilities.

We continued to deliver on our long term growth algorithm.

Turning nearly $4 billion in capital to shareholders.

While investing in our growth initiatives.

Positioning us well to deliver strong performance in 2022 and beyond.

Yeah.

The COVID-19 pandemic continues to impact both consumer behaviors and the broader operating environment.

Against this backdrop over the past two years.

Consumers continue to choose our trusted and beloved brands for both comfort and sustenance at home and on the go.

We have delivered on this strong underlying demand across our brands and geographies with continued strength in execution activation and innovation.

As a result, our cumulative market share remains higher than pre COVID-19 levels.

At the same time, we are continuing to operate in a dynamic environment.

Characterized by global input cost inflation.

Alongside supply chain labor and transportation disruption.

We are effectively mitigating these challenges through ongoing cost discipline and strategic pricing actions.

We also continue to execute well against our strategic growth priorities.

Investing in our brands capabilities and sustainability initiatives, while expanding our portfolio with the addition of several growth accretive acquisitions.

Hugh grenades, gourmet food, <unk> pizza, which closed earlier this month.

These additions increase our exposure to a broader snacking categories and growing profit pools.

Along with our financial performance, we made progress in other areas.

We continue to advance our ESG goals setting ambitious new targets for achieving net zero by 2050, and we continue to accelerate our dei agenda.

And none of this would be possible without our people the best in the CPG industry.

We are proud of the way our teams continue to focus on delivering great products to our consumers.

Aspen Demi conditions continue to impact both our work lives and our personal lives.

I am, especially grateful to our frontline teams, whose hard work and dedication the lights families all over the world.

We are confident that the strength of our brands, our proven strategy and our continuous investments position us well to achieve our long term financial targets in 2022 and beyond.

Let's take a closer look at the market and macro trends on slide five.

With the.

The recent rise of the Omicron variant.

The rebound in mobility that we saw earlier in 2021 has slowed down in both developed and emerging markets and is expected to remain 10% to 15% below pre COVID-19 levels in many markets.

I'm at home and eating at home look likely to remain elevated.

In the U S. For example, 60% of adults are not expecting to eat out more in 2022 than they did in 2021.

This positions, our core biscuits and chocolate portfolio as well as they are skewed towards in home consumption.

The pandemic continues to fuel the desire for comfort and indulgence benefiting our categories and trusted brands.

And overall as we found in a state of Snacking Survey released last week.

The tendency for daily Snacking is up for a third consecutive year.

And although 70% of global consumers report concerns about inflation. It has done little to date to change their grocery shopping behaviors.

This is consistent with the observed price elasticity, which has been much lower than historical levels as well as a continued share weakness for private label.

Okay.

Let me spend a moment on the current operating environment on slide six.

Like other companies, we are experiencing cost inflation globally, particularly on transportation costs vary edible oils and packaging.

We have implemented material price increases ensures we are significantly hedged across key commodities and we are continuing to drive productivity measures.

In addition.

Strike in Q3, although resolved impacted our production output and inventory levels in the quarter.

Additionally, COVID-19 continues to cause disruption in consumer mobility in certain geographies impacting our gum business and on the gold products.

This currently affects a small portion of emerging markets.

Additionally, the rise of the Omicron variant is driving high levels of ups enthusiasm in certain markets, while limiting recovering mobility.

We are focused on reactivating part of our Covid playbook from the early pandemic days and also looking to further simplify our operations to offset these pressures.

And although challenging we are managing effectively through each of these dynamics.

We implemented revenue growth management leaders and continue to invest in our brands, while taking extensive measures to lighten the supply chain disruption.

By applying the lessons learned from earlier waves of the pandemic.

Turning our focus on execution, we are confident that we remain well positioned to deliver our growth targets.

Okay.

Turning to slide seven you can see that our strategy is continuing to drive a virtuous cycle.

Strong volume momentum combined with brand investments and strategic pricing options.

<unk> position us well to consistently deliver profitable top and bottom line growth.

Well as strong return of capital to our shareholders.

We grew revenue by five 2% in 2021, lapping three 7% growth in 2020.

Volume was once again, a big contributor to this growth, which demonstrates the fundamental strength and health of our business.

Despite the ongoing impact of cost inflation and supply chain volatility, we delivered gross profit growth of three 6%.

Our working media investments have increased double digits versus last year on the back of a double digit increase in 2020.

Combined with our advantage portfolio of brands and our execution activation capabilities.

Gained or held share across 75% of our revenue on a two year cumulative basis.

We increased operating income by five 8% and delivered $3 2 billion in free cash flow.

We view these results as a healthy indicator of our ability to continue to deliver on our long term growth algorithm.

As you can see on slide eight we are now averaging at four 2% quarterly growth rate since the launch of our strategy in September 2018.

We're proud of our strong and consistent track record over this time.

We continue to focus on profit dollar growth local first commercial execution.

The return on investments and aligns the incentives we are confident that we can continue to consistently deliver attractive growth.

On slide nine you can see some highlights of our successful execution against our long term growth drivers.

These include delivering our strongest Christmas sales on record in Europe , growing double digits versus 2020 and 2019.

By gathering the UK and Milka in Germany.

It also includes continuing to expand distribution in emerging markets, adding 300000 stores in China and more than 200000 stores in India.

It includes investing to sustain growth in digital commerce, which grew 29% on a reported basis lapping 75% growth in 2020.

Digital Commerce now accounts for approximately 6% of revenue up from 3% in 2019.

And it also includes expanding our presence in high growth segments, where we are underrepresented, including wellbeing, we relaunched breakthrough innovations on key brands like Oreo zero sugar in China, as well as Cadbury planned bar and plant based Philadelphia in the UK.

As consumer demand for well being options rises.

Each of these innovations is the clear potential to expand to additional geographies.

We also grew our presence in the premium biscuits space with double digit growth led by <unk>, which we successfully.

<unk> to direct store delivery.

Additionally, we expanded our presence in close in Adjacencies, such as baked snacks with the successful integration of giving go.

By realizing revenue and cost synergies, we grew that business double digit in 2021.

We also expanded our presence in snack bars with the acquisition of <unk> in the UK.

Switching to slide 10.

We continue to further enhance and strengthen our portfolio in 2021.

Spanning our exposure to the growing profit pools in chocolate and biscuits as well as adjacent categories, and the well being and premium segments.

We acquired four high growth strategic assets.

Pizza baked snacks in Europe , which just closed in January .

Haynesville being snack bars in the UK.

From a full premium corrector in Australia, and new premium well being snacks in the U S.

These acquisitions are worth $800 million in annual revenue and they are well positioned to collectively delivered high single digit growth for years to come.

This takes our total number of acquisitions two seven since 2018 and contributing over $1 5 billion of revenue.

We also earned $1 $5 billion in net proceeds from selling down on our beverage assets in 2021 <unk>.

Enabling further investment in our brands and growth drivers.

Additionally, we are in the process of completing a strategic review of our developed markets gum business we had.

Expect to complete that review and have more information to share with you at our May Investor day.

Yeah.

2021 was a strong year and we are well positioned for another year of strong shareholder returns in 2022 and beyond.

With that I will hand over to Luca for more details on our financials.

Thank you Erica and good afternoon.

Our full year and fourth quarter performance was strong in terms of revenue growth volume earnings and free cash flow.

We delivered revenue growth for the quarter of five two and five 4%, respectively. Importantly half of this performance was underpinned by volume.

Emerging markets increased 12% for the year and 11% for the quarter with strong performance across a significant majority of countries, especially the brakes.

Despite the small group of countries, specifically in southeast Asia, continuing to face Covid related challenges overall, we are encouraged about the outlook for our <unk> in the near and long term.

Developed markets grew one 6% for the year coming off an exceptional 2020.

And two 5% for the quarter after a strong comparison.

As with our emerging markets, we're encouraged by the sustained performance, particularly in our key core snacks categories.

On Slide 13, you can see our portfolio performance Chuck.

Chocolate and biscuits remain attractive and durable categories with very strong results.

<unk> pre pandemic during the pandemic and importantly, as we enter 2022.

In addition, improved mobility as yielded growth and while maintain be versus 2020.

Approaching a return to pre pandemic levels in many markets and back to grow versus 2019 in China.

Biscuits grew 3% for the year and 2% for the quarter.

Yes, we're the big driver of performance with majority of our EMEA and related business delivering double digit or high single digit growth.

These underscore the large long term opportunity for our businesses as we continue to make investments in agency portfolio goal and distribution expansion.

Both global and local jewels brands, including Oreo chips are Holly Bosnian glop social.

Very strong growth.

Chocolate grew more than 10% for the 8% for the quarter.

With significant growth across both developed and emerging markets.

Through both our global and local brands.

<unk> is a great category to be and as in biscuits, We continued to make investments in our brands and capabilities to continue to drive <unk> performance for the SOCOM.

Gum, and candy posted 7% growth for the year and more than 11% growth for the quarter.

As increased mobility. It resulted in a return to growth in several key markets, especially within Latin America.

Now, let's review our market share performance on slide 14.

We continue to singled share performance on a two year cumulative basis, as we prioritize ANC investments and execute well in most market.

We held or gained share in approximately 75% of our revenue base on a two year stack.

Our biscuits and chocolate categories continued to do well with 80% of our revenue base holding or gaining share.

Overall share gains versus 2019, while both based with all regions growing share over a two year period.

A few of the more notable areas of share gains over this time include.

China, Russia, India, Brazil, and Mexico biscuit.

UK, Russia, and Australia and chocolate.

And China gum.

While the immediate effect of this strategy is behind US we have hindsight 2022 with low stocks and we're working to rebuild inventory levels.

Takes time in this environment.

Ali as demand continues to be strong.

We expect a gradual improvement of the situation as the year progresses.

Now turning to page 15.

For the year, we deliver strong Oi dollar growth of almost 6% driven by solid gross profit dollar increases and reduced overheads.

For the quarter profitability was pressured primarily due to the lag between commodities and forex related inflation and implementation of pricing actions.

In North America, where price increases became effective at the beginning of January .

Turning to regional performance on slide 16.

Europe grew 5% for the year and six 5% for the quarter supported by strong execution and activation and continued recovery in the convenience the away from home and probably tail channels.

Our Q4 results were driven by strong growth across major markets, including the UK, Germany, and Russia underpinned by solid share gains.

In chocolate, we delivered record results for the Christmas season, growing double digit against both 2020 in 2019.

<unk> gets some meals categories also delivered good results.

Why dollar growth for the high single digits, driven by continued volume leverage cost control and strong overhead management.

Looking ahead in this region, we expect muted profitability in Q1 with improvements beginning in the second quarter as price increases in the number of countries take effect.

North America declined by <unk>, 6% for the year and 3% for Q4 lapping very strong high single digit growth in the previous year.

This performance includes healthy growth from our bank just portfolio.

Soft lending in the quarter and second half were also driven by supply chain constraints and low inventory levels due to the strike and third party labor constraints.

North America, Oi decline minus 10, 4% for the year and minus 20% for the quarter due to inflationary pressure and supply chain constraints.

As mentioned earlier, we expect sequential improvement that's pricing actions go into effect in Q1.

EMEA grew seven 3% for the five 8% for the quarter showing continued strength across most of the region.

India grew double digits for the year and continues to execute well and reinvest for the future.

We continue to extend our leadership position in chocolate, while the growth of our biscuit business continuous to outpace larger competitors in the region.

China grew low double digits for the year and high single digits for the quarter driven by continued share gains in <unk>.

<unk> be skipping gum.

Australia, New Zealand also did well with solid performances in the year ending the quarter in chocolate and biscuit.

EMEA increased oi dollars by more than 13% for the year due to strong volume leverage productivity and overhead management, while also increasing working media by double digits.

Q4 growth was more muted due to commodity inflation.

As in other regions pricing actions to our Gen are being implemented as of Q1.

Latin America turned in strong growth for the year of 24% and 19, 7% for the quarter with overall share gains for 2021.

Brazil delivered strong double digit growth for the quarter, Mexico grew high single digits for both the quarter and now Western Andean business grew high single digits for the mid teens for the quarter.

Adjusted Oi dollars in Latin America increased high double digit for the year and more than 40% for the quarter.

These increases were driven by broad based growth across core snacking categories effective pricing and the volume and mix impact of higher gum and candy.

Inflationary pressure remains challenging, but we believe both our GM and volume growth will enable us to largely offset this dynamic in 2022.

Moving to EPS.

Full year EPS grew 9% at constant currency. This growth was primarily driven by topline driven operating gains.

Turning to free cash flow and capital return on slide 18.

We deliver full year free cash flow of $3 2 billion, which included $300 million higher tax payments year over year.

Some related to our coffee jv's ipos and sell downs.

We continue to feel confident about our free cash flow trajectory as we move forward.

And for the year, we returned $3 9 billion to shareholders in the form of dividends and share repurchases.

Now let me provide some color on our 2020 to outlook on slide 20.

We expect to deliver against our long term growth algorithm that we see as a performance floor.

Particularly as revenue goals.

As you are heating across all sectors, we anticipate another year of material cost inflation.

In percentage terms is expected to increase high single digits versus 2021.

As such pricing will be a larger top line contributor than in the previous years, but we do expect volume growth to also be a positive factor.

In this regard a few more points.

Our superior portfolio of planes and the consistent investments we have made and will continue to make in working media marketing and sales route to market and our GM capabilities position us well for sustained growth and profitability in this higher inflation environment.

We believe we can continue being an effective driver of category value and volume growth specifically in biscuits and chocolate.

Our focus is not changing as we aim at growing profit dollars and dollar growth underpins, our sustainable algorithm cash flow and capital return.

We have a history of cost excellence, which we expect to remain the case for 2021 going forward.

Our algorithm continues to be predicated on brand building and capabilities in sales and marketing also in 2022.

All included for the year, we expect mid single digit dollar growth and high single digit EPS growth.

Earnings Phasings will affect the current inflationary environment and the sequential introduction of pricing.

We expect improved year over year gross profit dollar growth as pricing is fully realized and as we implement additional RDM stoppages, but we do still expect some pressure in Q1 and partially in Q2.

41, specifically, we still expect to face largest supply chain headwinds in North America related to third party partners and loan Bank reform less the strike that should improve as the progresses.

With respect to free cash flow, we expect another year of 3 billion plus.

In this outlook. We also expect an ETR in the low to mid Twenty's based on what we know today.

<unk> expense of approximately $335 million and steady purchases of approximately $2 billion.

With that let's open the line for questions.

Thank you.

At this time I'd like to ask a question. Please press the star and one key on your telephone keypad.

Keep in mind, you may remove yourself from the question queue at any time by pressing the pound key.

And we will take our first question from Ken Goldman with J P. Morgan. Please go ahead. Your line is open.

Alright, thanks, everybody good afternoon.

Sure.

Yes.

Demand destruction, but a little bit of a worst sort of consumer around the world perhaps.

Okay.

Yes.

Well thanks, Ken.

First of all I would say that around the world, but also in emerging markets.

Today and for the last three years, our core categories have been doing quite well chocolate and biscuits have been growing very strongly and in fact better than they were.

Before the pandemic and Theres a number of factors at work with the consumers.

Boosting the consumption and highest snacking, so you see very.

Robust demand and if I go to our key emerging markets the BRIC countries.

See that in those four countries also very very clearly.

As it relates to.

Investments and support for our brands. We are we are.

Also.

Continuing because of the emerging markets if anything that's where we increased the most.

And.

I think that.

From a pricing perspective, we have been dealing with pricing in emerging markets.

Over the years and we know that we have to hit certain price points and we're very careful with that having said that we have already started to increase prices in fact that the effects that you see.

In Q4 any price effects, there are largely coming from our emerging markets. We have increased prices in most emerging markets around the world and.

As you can see results have been being very good. So we also have that.

Very low elasticity.

We.

We're also seeing in the rest of the world.

So everything is sort of.

Aiming in the right direction.

We feel that at this stage there is no signs that it's slowing down in emerging markets, obviously in our projections of.

Our algorithm we have not.

<unk>.

Gaining distribution, which is another big driver in emerging markets for us.

And the fact that.

We feel that we have been relatively realistic given what we forecast for emerging markets. We feel really good we think that emerging markets will deliver for us in 2022.

Great. Thank you for that that's clear and then a quick follow up if I can.

Look you touched on this a bit.

Is it reasonable just given your comments about the phasing of pricing and maybe the timing of inflation too.

Think about the flow of your years, maybe being a little bit more back half loaded and perhaps a little bit more challenged in the front half.

Are there any if that's true are there any specific timing issues, we should consider other than pricing and inflation just as we model ahead.

Thank you Ken.

It is mostly pricing inflation phasing that will drive the gross profit specifically as aligning the P&L progression throughout the year, obviously, you sold the number being pressured.

In Q4, but as you look closely on the segment profitability data that we disclosed you'll see that the Q4 GP pressure came mostly from North America, which is the.

We have just announced pricing.

And so you will see a sequential progression that is positive in the gross profit line as of Q1, but most of the bonuses to hit our guidance is going to come in the second part of the year and as I said there are two elements. There one is pricing implementation and there might be multiple pricing ways.

The second one is the fact that but.

Particularly in Europe pricing will come into effect.

As of Q2, ending other places as well and third it is the fact that inflation D&B favorable commodity pipeline that we had in 2021 in Q1.

<unk> is commodity pressure is most acute in the first half of the year, but you will see a better finding GP dollar as of Q1 and sequentially it will improve over the quarters.

Great. Thank you so much.

Thank you Pam.

We will take our next question from Bryan Spillane with Bank of America. Please go ahead. Your line is open.

Thanks, operator, good afternoon, everyone.

Hi, Brian .

Luca just a couple of.

Just following up on Ken's question and just a couple of.

Sort of bridging from 'twenty, one to 'twenty two questions. If you will if we look for.

Quantified or can you quantify just how much the acquisitions contribute to earnings growth in 'twenty two versus 21 adjusted EPS growth.

Look the <unk> acquisition is.

A material acquisition, obviously in terms of size, but also the number of countries it spans across and.

It will be fully integrated but it will take a little bit of time, I will say that without giving you specific numbers.

There is a moderate positive impact on EPS.

Next year, but you will see the full benefit of the revenue and cost synergies as of.

Q4, and potentially and obviously in 2023, so it will be a modest contribution only normalcy there.

And just more of a contribution in 'twenty three versus 22.

Absolutely I think the.

Youre going to see the full benefit then I think it will be placed in 2023, Okay. And then if we look at below the operating profit line in 2021, and the bridge that you laid out in slide 17.

Including share repurchases the below the below the operating profit line items contributed.

About nine cents of earnings in 'twenty one.

Just looking at the guidance it just seems like.

Interest expense the tax rate could also could both be a bit of a headwind. So can you just sort of give us.

Should we expect that there would be some earnings contribution below the operating profit line or.

And if so I guess would it be mainly share repurchases just just trying to square how much benefit we get below the operating profit line.

Interest costs will be up.

And about $20 million to $25 million. So it is one <unk>.

S headwind.

And.

Tax rates will be a little bit higher but not much and so I would say.

Right.

Headwind.

Obviously I can't comment very much on on the joint ventures.

As those are publicly traded vehicle and but the biggest benefit is going to be most likely around <unk>.

<unk> purchases in terms of the Jv's I won't refer back to what those on fed about K BP profit guidance for 2022, and I think thats. The stance, we have taken for a for that okay. Thanks, Luca I'll pass it on thank you.

Hey, Brian .

We will take our next question from Andrew Lazar with Barclays. Please go ahead. Your line is open great.

Great. Thanks, good evening everybody.

Hi, Andrew Hi, Andrew Hey.

Perhaps Luca could you just comment first on what your outlook or expectation would be in terms of <unk>.

Gross margin change year over year for the full year.

To the extent you see some full year gross margin compression.

More would need them to come from SG&A leverage to get to your sort of mid single digit constant currency EBIT target. So in that case, what would be those.

SG&A drivers that you would have to lean more heavily on this year potentially.

Given what your answer on the gross margin is.

Sure I think you know that we tried to move away from gross margin percentages and I think that has served us well.

So talking about gross profit dollars 2022 is no exception to what we have said consistently 12 years, we aim at getting at.

Four plus percent on <unk>.

Specific line of the P&L.

And as I said, I think youre going to see year over year GP dollar growth as of Q1, but will be.

Most pronounced in the second part of the year.

Again as you dissect the numbers you clearly see that the pressure in Q4 on the GP line, which was likely positive comes mostly from North America, and what you have to be need for <unk> to improve as the biggest change that has to happen <unk> pricing going into effect in North America.

First indication is that a price was accepted by the retailers and B we see.

Ansible, because those situations, specifically North America, where we don't have enough stock and so we are calibrating exactly where we want to spend but as Nick said in emerging markets. We will continue pushing and we will continue pushing in that in the other regions to the point here is the last thing we want to do as we can.

Cement pricing is cutting back on ANC investments as far as all of our Hudson productivity. We will continue the great job that we had done over the last few years and particularly in the last couple of years, excluding the acquisitions, our ultra line pure cost SG&A is down both in 'twenty two.

And in.

2021, and my goal is to keep that line down year over year.

Productivity is obviously is going to be good for the year.

We look at it.

But I'll be commenting more as.

We publish Q1 about all these specific lines.

Look we have been.

A little bit conservative on elasticity.

As Nick said elasticity is low at this point in time based on what we see across the board, but we are planning for storage level. So.

That's the type of elasticity, we have client and I think you know the number and John It is.

One time elasticity give or take.

But you expect to do better than that.

Thank you.

Thank you Brian .

Thank you.

We will take our next question from Robert Moskow with Credit Suisse. Please go ahead. Your line is open.

Hi, Thanks.

I guess one of the surprises.

And the results is that North America shipments were weak and all of us look at Nielsen.

Retail data and it looks really really strong.

So what's happening at retail or is that just.

Strong.

Consumer takeaway.

And the inventories are getting depleted.

Should we expect that that retail consumption to then weakened in the first quarter as a result of running out of inventory.

Maybe help US bridge why why it looks so good from a from a consumption data and then I had a quick follow up.

Yes.

Demand remains very robust.

But the growth that you see is.

Our growth that you see is impacted by supply chain constraints and phasing of some of the price actions and so in between in between those is our inventory of course and.

If you look at it.

North America.

We grew our we were flat for the year, let's say it.

But for a two year CAGR rate at 4%, which is still quite strong.

If you look at the last quarters, we had the strike in Q3, which left us with low inventory levels.

And although improving the.

Coming slower than you would normally.

<unk> because of all the supply chain disruption.

<unk> is experiencing and so we think that we will still continue to see on shelf.

Effects from the strike throughout Q1.

So work more external manufacturing.

And then our colleagues and.

Those external manufacturers are facing labor challenges.

And we expect also that we will continue to see some pressures.

In that area at least for Q1.

And then the biggest difference probably is that.

This increases <unk>.

We announced price increases for January one so there would not yet reflected in Q4, but you will start to see that as we report Q1.

And we continue to work on a broader RCM capabilities. So as you look at Nielsen you start to see at the moment the effect of those price increases Thats why our Nielsen starts to look better, but if you look at the Nielsen that we saw for last year, that's where you could see the effect of.

Supply issues.

So as we look at Q1, we expect the top line in North America to improve the margins will also improve what's going to be sequentially.

As I said pricing is being executed across U S, Canada and our ventures.

We are continuing to simplify our portfolio and we are also taking actions to increase capacity.

More temporary labor and so on so that's the sort of ease the pressure on our supply chain.

We are continuing to invest in our brands as.

As Luca said, we will be careful to invest in those brands, where we have good supply.

With the price increases we we.

We are determined that we will have to continue to support our brands.

And as you will see as these effects are these initiatives take effect in 2002.

The top and bottom line growth will start to come back for North America.

<unk>.

Maybe a last remark the bottom line will be sequential.

Because if you look at it year over year Q1 was a very good year last year. So you will still see some some year over year pressure.

And do you have that lower inventory issue that I was referring to.

But overall you will see a very good improvement over the coming quarters.

Okay.

My follow up.

You have been providing us with market share trends on a two year basis.

But are you going to continue that in 2022, because I think people will start to judge you more on a on a year over year basis.

How will how will you represent your market share trends.

Yes, no we.

We are going to go back to year over year.

Compared to pre pandemic now that the pandemic is.

Not behind this but improving.

We feel that we can go back to normal market share Princeton.

For instance, if you look at 2021 .

Sure.

You have the U S strike in their retrofit effects of course, our market share.

But I think it's important to look at how do you think there's been performing versus what it was before but endemic and not to exclude and then excluding the strike in Canada. This year.

We're.

Last year, where one of our competitors have the major supply chain effect, which that benefited us. This year. The competitor is supply chain is back up and running so as a consequence.

Give back some of that market share and then we had.

One of our plants in France, which was affected.

Last year and.

And if we were not able to supply the market. So that has an effect for us too. So there's there's all of this and last year I'm not going into the details about our competitors, but last year, we had big wins, because our supply chain performed better than our competitors I would say so the main thing for US was to show.

Accumulate it's all of the two years.

Over the two years, we still see a very solid increase.

Versus what it was before the pandemic and going forward, we will start to compared year over year unless there are exceptional.

Which we can then inform you about.

Okay. Thank you.

Mhm.

We will take our next question from Chris Growe with Stifel. Please go ahead. Your line is open.

Thank you good evening.

Hi, Hi, I just had a question for you first on.

Maybe a question for Luca in relation to your hedging is there was a comment that you are about 70% hedged for the year I did want to get a sense of that would be considered normal or above or below where you normally would be at this time of year and then just to understand.

As you are quite hedged in 2021 as well the degree to which some of these unhedged costs.

Trade or packaging or things that you can.

Like a lingering risks to 2022 or do you have a good.

A better read on those on those costs for the coming year.

Thank you for the question, it's a very good one.

70% is pretty much in line with what we had in last year.

It is higher.

Then what it has been historically.

Over time, what we have done is we have moved the needle in terms of salt going longer.

Because obviously that gives us the opportunity at the low levels to buy more and so.

You have the opportunity to see back and wait until the situation evolves and mostly of these hedges are.

Two options and they are not straightforward corporate so we still have flexibility should one of these commodities go lower and I think that that's a great advantage.

Don't feel particularly worried about the.

Remaining 30% at this point, but there are parts, where there might still be pressure what do we see these days is there'll be more pressure coming out of data.

And potentially we will have to consider additional pricing for that in some places where.

We sell.

Daily based products and we also see some price selling packaging and some ingredients now the assumption we have at this point in time for the second part of the year is inflation of $4 that is in line with what we have seen and what we are seeing these days.

<unk> could be potentially more I don't expect a material number at this point in time, but.

We got a little bit surprised on these on Hedgeable commodities.

And exposures in the second part of last year. So we are very vigilant.

If in case. They go up we will have to pricing we will do so.

Okay. Thank you for the color of the information I.

Pricing strategy for the coming year is but one example, just the degree to which you think there's maybe a little risk to your market shares are you seeing are you seeing pricing that largely reflects which your competitors are doing and inflation in that market and therefore, there shouldnt be a whole lot of movement in share I'm, just trying to get a sense given how strong its been if that can be a bit of a watch point.

Okay.

Yes.

Our pricing is.

Largely driven by.

What we think is acceptable to the consumers.

We don't know what our competitors are planning until they do it.

And so.

We try to price.

In line with what we think our consumers are prepared to pay for our brands and that is different between emerging markets and developed markets. So.

In developed markets, where you're largely talking about supermarkets and there is a whole bunch of pricing effects, you have a little bit more liberty in emerging markets, we need to hit certain price points. So if we do a lot of work on RCM.

Price pack architecture, and so on so we expect that we.

We will be very sensible.

We're working very hard on Archie M and better understanding what is possible for pricing for our brands what is acceptable to the consumers.

As you know many years ago, we've had a few episodes, where it would be probably around a little bit overboard on pricing. So we will.

We will have the step a little bit more careful.

It relates to pricing so far as I was explaining.

In Q4, we've been pricing in emerging markets and so far that is working really well for us.

Going forward second half and into 'twenty, three we will see what the inflationary pressure is going to be but.

I can assure you that we will step very carefully and make sure that we can.

To see volume growth for our brands.

Okay. Thank you for that.

Okay.

We will take our next question.

David Palmer with Evercore ISI. Please go ahead your line is open.

Great. Thanks, Good evening question on pricing.

We can see some clear pricing that you're taking in developed markets here into 'twenty two.

With the positive volume guidance.

I want to get too carried away about the incremental pricing are you are you thinking that there might be some moderation in pricing from emerging markets and 22 versus 'twenty, one where should those that'd be very similar.

Very similar size the state answer David.

There are pockets where we.

We don't see the level of Inflations that we have for that.

Totality of the company, but in general terms, particularly around Forex are places, where there is a little bit more inflation.

And so given all the puts and takes pricing wise.

To see a level of pricing in emerging markets that is in the same ballpark of 2021, a little bit higher as a reminder, we implemented I believe two price waves in places like Russia. In 2021, we implemented I believe cheap price wave season in Brazil, and I can go on and on in.

Talk about Mexico Southeast Asia.

May end up in South Africa, where we have implemented multiple rounds in that in 2021 as well.

Tougher comparisons in developed markets against smaller brands. This year, but then I think about the ability for you to have new product news this year.

And then the acquired businesses that you've had they could possibly get into greater distribution. So im trying to think about how you're thinking about the puts and takes of some what seems to be some headwinds and some tailwind going into this year. Thanks.

Yes.

First of all on the smaller brands that effect.

It is certainly continuing in Q4 and they continue to do well.

To the extent that if we have some supply issues. It is sometimes in those smaller brands because they keep on selling at the higher levels.

We had during the pandemic and Thats, sometimes give us some capacity pressure.

So.

We are trying to do whatever they can to deal with those capacity issues of course.

But we are at the moment.

Assuming that gradually Dave will give back a little bit, but we do still think that those brands will keep some of that momentum that youre seeing.

But we started to see it during the pandemic.

And you're right.

Our global brands have performed really well this year. This was a year, where our big global brands.

Grew outgrew our local brands last year in 'twenty. It was a local brands, who outgrew the global brands.

Isn't is because.

Oreo Milka and Cadbury.

Top three brands continued to be high single digit to double digits and then you have the recovery of brands like Toblerone, which is largely sold in the world travel retail or try them to come which is of course sold on the go and.

Heavily disrupted in 2020.

The local brands as I was saying still are prepared.

Are doing quite well they are in the mid single digit growth range.

And.

We don't necessarily see that slowing down.

Going into next into next year.

So and then there is the additional effect from the acquisitions of course, <unk> you will not see that in our top line until the acquisition is for us.

He has done for 12 months.

So you won't see an effect from that one.

But do you see you will see a good year for giving go come.

Coming year.

We are expecting and also brand.

Perfect snacks, which is a snack bar, which is also largely consumed on the goal that was.

Affected by the pandemic, we're also expecting that to see a good growth dates we have moved onto DSD. So very solid very strong high double digit growth. There. This year, which we think will continue into next year. So yes. There is an additional effect.

Also important to mention is that the price increase is covers all of the brands.

In the U S.

Global brands local brands and the venture brands.

Thank you.

Okay.

Thank you David.

We will take our next question from Jason English with Goldman Sachs. Please go ahead. Your line is open.

Hey, folks thanks for slipping me in I appreciate it.

Hi, Hello, good questions Peter.

It looks from everything we see like inflation, particularly onerous in the U S is maybe kind of close to peaking.

Yes sure.

I'll take a stab at it.

I would start by saying that the inflation is really the highest.

In the U S.

And.

It might be at the highest point in the U S right now.

Don't necessarily see it going down in the second part of DSO.

To make that 0.1st in terms of inflation look.

Majority of the commodity because we procure they are global commodities and and so the inflationary pressure is pretty much the same around the world logistics cost is on the rise everywhere around the world notable level that we've seen the U S. And then there are packaging related costs and ingredients that are.

Pretty much consistent across the world.

In terms of all the inflation, where it is most of the acute these days. It is in places where we have seen currencies.

Weakening versus the dollars.

It is in places like Russia. It is in places like Brazil, but overall, if you look around the world in terms of inflationary pressure I would say there are yes, some lap some peaks, but overall it is fairly even I would say there are certain commodity deck.

More impacted than others.

Coca for instances there'll be more benign in that in 2022 than it has been in 2021, and so places where we have a material chocolate business like Europe are going to.

In terms of inflation, a little bit less but I just mentioned data one of the previous questions and.

And that might be for the price is coming up so hopefully that gave you a little bit of color on how we see costs evolving by region and by countries.

Yes, yes, no that's super helpful and just to come back to North America.

Obviously, it's unfortunate.

The persistent problems. So you are seeing in North America.

Sure.

I guess my question is.

They seem to be surprising you.

Look at the Nielsen data kind of back to where our Moscow question demands there and it looks like youre actually inducing demand because the promotional levels remain elevated they are growing year on year. So it looks like you've got a sales force of one side Youre organization, pushing demand and you've got a supply chain on the other side, saying, we can't fill demand.

And there seems to be this disconnect between the two organizations so.

Two questions one is it fair into what's wrong that caused that disconnect yourself.

I would say that.

For sure in the beginning of.

Of the inflation or the supply chain disruption, which we started to see in August September .

'twenty one.

There was clearly a disconnect because our.

Sales team saw high demand and the supply chain suddenly started to realize that transportation was difficult.

And that there was a number of other issues that were going on a little bit of capacity and so on labor shortages in our third parties.

And so yes.

It took us probably a few months before we realized we need to reset here. Since then the teams have been working quite closely trying to link up.

Whatever.

Demand generation that we have with the supply capacity that we have and so.

Im expecting that in the coming months, we see that.

Starting to work a lot better for us but.

So I would say, it's fair, but we've gotten.

Under that now and we've solved the problem and so going forward, we should be we should be okay.

Got it okay I'm not sure if there was a second part to the question that was it but I believe now yes, now thats, good where we've cut Ralph.

Conducted again later, so I'll follow up later too.

Okay.

And we will take our next question from Rob Dickerson with Jefferies. Please go ahead. Your line is open.

Great. Thanks, so much.

Just had one question.

The top line kind of circling back to all the commentary so far through Q&A.

I know previously.

It sounds like Youre looking for lets call it.

Maybe 6% to 7% pricing. This year that's implemented early part of January in North America.

And then to David Palmer question.

It sounds like.

Pricing in most Dms would kind of remain at a similar level relative.

2021.

At the same time, there should be some improved pricing it sounds like coming through in Europe . So.

Square all of that.

Is it fair to say that.

And maybe pricing for the year would is it sounds like it's at least 3% maybe it could be a little bit higher.

Because I'm, obviously just tried it.

Get yourself gauge as to whats irrational kind of organic.

Forecast for the year.

Outside of just your traditional 3% plus kind of long term debt.

Thanks.

Thank you for the question.

We are usually not giving the breakdown pricing and volume and we try to move away to keep some sort of flexibility, but what I will tell you is that.

As I said in the prepared remarks, I see the 3% plus we as a philosophy as a slower.

And at this point in time, we really want to see how Q1 plays out.

With some pricing increases and only come before we commit to a higher number but hopefully we see Q1 coming in.

In line with our internal expectations, and we will be in a position to.

<unk>.

Raise the guidance on top line potentially after we see Q1, and we have two one under the bylaws.

Hopefully that's.

I would say some of Europe question.

Yeah fair enough.

I guess I'll try another one.

Just.

The cash balance.

You are kind of ending 'twenty one.

On a cash.

Leverage looks to be a.

Sub three times.

And it sounds like the gum business is still under strategic review so.

Kind of outside of the 2 billion potential and share repo.

How are you thinking about just kind of general capital allocation.

In terms of M&A like you feel as if as you get through 'twenty one it's about.

Stabilizing in Turkey, and Japan.

Or distribution opportunities with acquisitions already done or.

Are you still pushing forward in terms of health and wellness premium et cetera, that's all thanks.

Look the.

Cash position at the end and our net debt position at the end of 'twenty to 'twenty. One is obviously for legal because we have done quite a bit of work.

All around and I'm very happy with leverage being at two seven times, having said that in January we have just cut it $2 billion check almost <unk>. So bear that in mind in terms of capital structure. We will continue generating cash flow and I was very happy with the quality of the cash that came in into 2020.

One so I feel the first element, which is foundation of our capital structure is there and then clearly at this point in time, if we had an acquisition that is similar to even go ultra deep et cetera, we will still be able to fund it through debt we obviously.

Have our coffee stakes and we have only takes including potentially switching golf share buy backs to be able to face.

And acquisition of the level of debt given goal and Chipita had been.

Alright fair enough. Thanks Luca.

Thank you.

And in the interest of time I will now turn the program back to Dirk Van de put for any closing remarks.

Thank you well in closing.

We feel good about our 2021 performance.

Across our key metrics, Inc of course, including the topline growth we see good volume profitability was good and the cash generation was excellent.

I wanted to reiterate that we are especially proud of our people I believe the very best in the CPG industry.

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By continuing to stay close to our consumers. We are confident that we have a bright future ahead.

We remain focused on our consumer centric growth strategy that will not change.

We will continue to improve our execution and we will continue to invest in increasing our investment in our brands in our talent and our capabilities.

So we entered 2022 with a good momentum in our categories and the vast majority of our geographies, our global and local brands as I explained on solid footing with strong levels of investment.

We continue to augment the portfolio with growth accretive snacking assets and we are excited about the opportunities to advance.

LTE category strength in our key markets.

We're going to continue to expand distribution in emerging markets have you got further accelerated close in Adjacencies and high growth segments.

So thank you for your time and for your investment and see you at the end of Q1.

Thank you everyone.

And this does conclude today's program. Thank you for your participation and you may now disconnect.

Q4 2021 Mondelez International Inc Earnings Call

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