Full Year 2021 Nestle SA Earnings Call

Good afternoon, and good morning to everyone.

Speaker 1: Good afternoon and good morning to everyone.

Speaker 1: Welcome to the Nestle full year 2021 results webcast. I'm Luca Borlani.

Welcome to the National at full year 2021 results webcast.

I am Luca Bellini and of National Investor Relations.

Today I'm joined by our Chief Executive Officer, Mark Schneider, and our Chief Financial Officer, Frank <unk>.

Speaker 1: Today, I'm joined by our Chief Executive Officer, Mark Schneider, and our Chief Financial Officer, Francois Roget.

Speaker 1: Mark will begin with an overview of 2021 and discuss the 2022 guidance as well as the midterm outcome.

Mark will begin with an overview of 2021 and discuss the 2022 guidance as well as the midterm outlook.

Speaker 1: Francois will follow with a review of the full year 2021 sales and profit figures. We will then open up the...

Francois will follow with a review of the full year 2021 sales and profit figures.

We will then open up the lines for your questions.

Yeah.

Speaker 1: Before we begin, please take note of our disclaimer. And now I hand over to Mark.

Before we begin please take note of our disclaimer.

And now I hand over to Mark.

Okay. Thank you and warm welcome to our conference call participants is always a wee strongly appreciate your interest in our company.

I would like to turn straight to the key messages for 2021 and in all modesty I think it's been an exceptional year.

Speaker 2: I would like to turn straight to the key messages for 2021. And in all modesty, I think it's been an exceptional year with organics.

With our organic sales growth at the highest level in more than a decade and all.

Effective bowl underlying trading operating profit margin performance.

Speaker 2: I won't go through all the details on this slide, but to me the key message of 21 is that in a year that was still very much marked by significant pandemic related and supply chain headwinds and issues, we navigated all of that. We delivered very strong financial results.

Don't go through all the details on this slide but to me the key message of 'twenty. One is that in a year that we're still very much marked by significant pandemic related and supply chain headwinds in issues. We navigated all of that we delivered very strong financial results and at the same time, we kept investing for the <unk>.

And we did not lose sight of our key strategic priorities.

Our focus around chrome innovation portfolio development and also increasingly our ESG commitments and advancing the state of the art on dose.

So.

In underlying EPS growth of five 8% in <unk>.

Constant currency and all of that also then rewarded with another dividend.

Dividend increase of 501 team to Swiss francs, and <unk> <unk> per share. This is our 27th consecutive dividend increase and the 67 and 62nd consecutive year of either stable or rising dividends. So clearly in a year that was smart a lot of turbulence another year off.

Speaker 2: per share. This is our 27th consecutive dividend.

Speaker 2: in the 67, 62nd consecutive year of either stable or rising dividends. So clearly, in a year that was marked by a lot of turbulence, another year of a stable or rising dividends.

I am very consistent and dependable performance, which is one of the hallmarks of our company.

Yeah.

Speaker 2: Moving now for the next two pages to organic sales growth. So while the seven and a half percent for last year did stand.

Moving now for the next two pages to organic sales growth. So while the 7.5% for last year did stand out I think to me. The key messages that we now consistently will deliver mid single digit organic sales growth performance, we hinted at.

Speaker 2: I think to me the key message is that we now consistently will deliver mid-single-digit OK, and he says, cool.

Speaker 2: We hinted at you in previous quarterly calls that we have now what it takes from a setup and portfolio point of view to do that. You see it reflected in our guidance for this year and you also see it reflected in our midterm outlook.

In previous quarterly calls that we have now what it takes from a setup in portfolio point of view to do that you see it reflected in our guidance for this year and you'll also see it reflected in our midterm outlook. So how did we do this well it is essentially the continuation of investments in fast growing categories.

Speaker 2: So how do we do this? Well, it is essentially the continuation of investments in fast growing categories and geographies, fast paced innovation that's at par or even better than some of our smaller and startup competitors, increased digitalization, market share gains as a result of that and also portfolio rotation.

And geographies fast paced innovation, that's at par or even better than some of our smaller and startup competitors increased digitalization market share gains as a result of that and also portfolio rotation.

Yeah.

Taking a closer look at the.

Speaker 2: growth drivers for organic sales growth in 2021. Let's focus first on the high growth categories and channels. So to me, Petcare, coffee and Nestle Health Science were clearly the star performers in 21. Kick the lights out when it comes to organic growth. Petcare and Nestle Health Science delivering double digit organic sales growth and coffee just a shade under at 9.7.

Growth drivers for organic sales growth in 2021, let's focus first on the high growth categories and channels.

So to me Petcare coffee and Nestle Health Science, where clearly the star performers in 'twenty, one keep the lights out when it comes to organic growth Petcare, Nestle health science, delivering double digit organic sales growth and coffee just a shade under at nine 7%.

Speaker 2: Let's take a quick look at all three of them because I think in addition to that stellar performance in 2021, they stand to benefit from some mid to long term growth drivers that are going to be very beneficial.

Let's take a quick look at all three of them because I think in addition to stellar performance in 'twenty one they stand to benefit from some mid to long term growth drivers that are going to be very beneficial to us. So petcare clearly pet adoptions around the world up in.

Speaker 2: So pet care, clearly pet adoptions around the world are up.

Speaker 2: in 20 and 21 during the pandemic and that bodes to a permanent step up and grow from a higher base when it comes to pet food and pet care products. Hence very good prospects here and as you know we have invested significantly in meeting the capacity demands of this attractive and growing category.

In 2020 , one during the pandemic embed boats to a permanent step up and grow from a higher base when it comes to pet food and pet care products, hence very good prospects here and as you know we have invested significantly in meeting the capacity demands of this attractive and growing category cause.

Speaker 2: Coffee to me is the signature category to benefit from what I call the at-home revolution. And that's the fact that aside from the pandemic and some of the lockdowns, as a part of more flex-

<unk> to me is the signature category to benefit from what I call. The at home Revolution, and Thats. The fact that aside from the pandemic and some of the Lockdowns as a part of more flexible work styles.

Speaker 2: and more work being done remotely and from home, even after the pandemic, more coffee will be consumed at home and that plays right into our retail strength. We may lose a cup of coffee out of home, but obviously our market share in home is so much stronger. So we tend to benefit net net from this development, which I believe is here.

And more work being done remotely from home even after the pandemic more coffee will be consumed at home and that plays right into our retail strength.

We may lose a cup of coffee out of home, but obviously our market share in home is so much stronger. So we stand to benefit net net from this development, which I believe is here to stay.

Speaker 2: And then on Nestle Health Science, clearly demand was up significantly at the time of the pandemic and continues to be very strong as people do have concerns over their health and they also want to boost their immune systems. But we also have increasing evidence that that interest is here to stay.

And then on Nestle Health Science, clearly demand was up significantly at the time of the pandemic and continues to be very strong as people do have concerns over the health and they also want to boost the immune systems, but we also have increasing evidence that that interest is here to stay so strong.

Speaker 2: So a strong immune system, the benefits of that, and taking good care of your health in a forward-looking way. I think both of these notions are very much on trend with consumers around the world, and Nestle Health Science is ideally suited to benefit.

Immune system, the benefits of that and taking good care of your health and a forward looking way I think both of these notions are very much on trend with consumers around the world and Nestle Health Science center, you'll be suited to benefit from that.

Speaker 2: Plant-based food, as you know, is something that we account for under our food category. Also, good, strong, double-digit organic sales growth. I think here our foray into specialties has really paid off. So we're not just offering the plain, straightforward products such as burger patties and chicken pieces. But rather...

Plant based food as you know is something that we account for under or food category also good strong double digit organic sales growth I think here our foray into specialties has really paid off so we're not just offering the plane straightforward products such as Burger patties in chicken pieces, but.

Rather well go into specialties, just think about for example, our tuna or shrimp plant based alternatives and we're also increasingly pushing into ready made meals that benefit from high quality plant based ingredients. So this is a good way to differentiate in addition to that we also have is trying to see it at risk.

Speaker 2: we're going to specialties. Just think about, for example, our tuna or shrimp plant-based alternatives.

Speaker 2: and we're also increasingly pushing into ready-made meals.

Speaker 2: benefit from high quality plant-based ingredients. So this is a good way to differentiate. In addition to that we also have this trying to see that risks rests on two pillars. There's the retail side of the house and then of course there's also the out-of-home presence which really benefits us. So very good position here for continued growth. I believe and continue to believe that plant-based food is one of these once-in-a-generation opportunities to revitalize and upgrade our food category and we're taking

Rests on two pillars theres the retail side of the house and then of course, there's also the out of home presence, which really benefits us. So very good position here for continued growth I believe and continue to believe that plant based food is one of these once in a generation opportunity is to revitalize and upgrade our food category.

Laurie and we're taking advantage of that.

Speaker 2: E-commerce, some of you may have followed the event we had in November this year, so I think nothing much to add to the ambitious targets from there. You saw that even in a year and at a time when the pandemic is abating, the interest in e-commerce is on the rise, hence our share of sales from that is also increasing, and we're targeting another significant increase towards the year 2025.

E Commerce. Some of you may have followed the.

Event, we had in November this year.

So I think nothing much to add to the ambitious targets from there you saw that even in a year and at a time when the pandemic is abating the interest in E. Commerce is on the rise hence our shelf sales from that is also increasing and we're targeting another significant increase towards the 2025 and <unk>.

Speaker 2: Benar, our Chief Marketing Officer, they're both very much into...

<unk> been our chief marketing officer owed they are both very much into that so if you haven't seen the presentation I think it's still available and replay and I would encourage you to take a look at that because that details the strategies behind our e-commerce .

Speaker 2: So if you haven't seen that presentation, I think it's still available on replay and I would encourage you to take a look at it.

Speaker 2: because it details the strategies behind our equal.

Bush.

Speaker 2: Portfolio management, I'll focus on that on the next slide, but suffice it to say for 2021, two major steps. One is pushing deeper into the vitamins, minerals, and supplements opportunity with Nestle Health Science.

Portfolio management I'll focus on that on the next slide but suffice it to say for 2021 two.

Two major steps one is pushing deeper into the vitamins minerals and supplements opportunity with Nestle health science and building that into a leading global nutrition and health platform and at the same time also putting the defining steps on the transformation of our global water business trading out of some friends trading into <unk>.

Speaker 2: building that into a leading global nutrition health platform and at the same time also putting the defining steps on the transformation of our global water business, trading out of some friends trading into another one called Essentia.

Other one called essential and.

Speaker 2: I think we're seeing on the growth side the first benefits of that transformation. And now of course we also have to manage for better profit.

We are seeing on the crop side, the first benefits of that transformation and now of course, we also have to manage for better profitability.

Speaker 2: It was not only about portfolio management. As always, fixing, underperforming, and or recovering businesses is also part of a hallmark. I think this is how a business like ours could...

It was not only about portfolio management as always fixing underperforming and are recovering businesses is also part of our hallmark I think this is how a business like ours continues to create value.

Speaker 2: by really getting the most out of the business we're in. And two examples for 21, one is the bounce back of the out-of-home channels, almost 25% growth here, very close back to 2019 levels. This is more than just a bounce back. This is also a lot of re-imagining and rethinking of the out-of-home business in order to take advantage of new and different.

But really getting the most out of the business. We're in and two examples for 'twenty. One one is the bounce back of the out of home channels.

Most 25% growth year very close back to 2019 levels. This is more than just a bounce back. This is also a lot of re imagining and rethinking of the out of home business in order to take advantage of new and different consumer behavior and then the other one I'd like to point out is the frozen meals.

Speaker 2: And then the other one I'd like to point out is the frozen meals in the U.S., close to 10% organic sales growth. And here as well, this is more than just a bounce back and the support from pandemic times. This is also about just revitalizing some of the plant offerings and also improving our recipes and our products.

Close to 10% organic sales growth and here as well this is more than just the bounce back.

And the support from pandemic times. This is also about just in revitalizing some other plant offerings and also improving our recipes and updating those.

Speaker 2: The next slide focuses on our portfolio and here you see the summary.

The next slide focuses on our portfolio and here you see the summary.

For the time since 2017 more than 85 transactions, some divesting activities, some acquiring and investing activity.

Speaker 2: for the time since 2017, more than 85 transactions.

Speaker 2: some divesting activities, some acquiring and investing activity.

Speaker 2: And all in all, a rotation equivalent to about 20% of the crew.

All in all a rotation equivalent to about 20% of group sales.

Speaker 2: It's been giving us a good contribution to organic sales growth. You see that at the bottom right hand corner of the slide, it's around 80 basis points.

It's been getting us a good contribution to organic sales growth you see that at the bottom right hand corner of the slide surround 80 basis points are.

Speaker 2: coming from that portfolio rotation activity. And just in case you're wondering, are we buying Crowe? No, we're not. So when you look at the margin development from 2016 to now, about a third of that margin improvement is also due to the portfolio rotation activity. So on both fronts.

Coming from that portfolio rotation activity and just in case, you're wondering are we buying growth no. We are not so when you look at the margin development from 2016 to now about a third of that margin improvement is also due to the portfolio rotation activity. So on both fronts.

Speaker 2: sales and margin, I think a positive contribution from that portfolio trading activity. And so while it's certainly not a panacea, it is an essential part of our value creation strategy.

Sales and margin I think a positive contribution from their portfolio trading activity and so while it's certainly not a panacea it isn't a central part of our value creation strategy and I think we have the numbers to bear that out.

On the next two slides I'd like to focus on to ESG issues here.

Speaker 2: On the next two slides, I'd like to focus on two ESG issues. Here on the first one, I'm talking about...

Here on the first one I'm talking about the.

Novel programs that we have launched at the end of January to address child labor risks and cocoa farming.

Speaker 2: program that we have launched at the end of January to address child labor risks in cocoa farming. This program was launched with the support of the government of Cote d'Ivoire and it builds on our longstanding Nestle cocoa plan and also some of the insights we got from extensive pilot programs that we ran on the ground in Cote d'Ivoire and Ghana.

This program was launched with the support of the government of Coty path and it built on our longstanding nessler cocoa plan and also some of the insights we got from extensive pilot programs that we ran on the ground in Cote d'ivoire and Ghana.

Speaker 2: And what's new about this is that we're paying direct premiums for practices such as school involvement of children.

And what's new about this is that we're paying direct premiums for.

Practices, such as Kool enrollment of children.

Speaker 2: sustainable agricultural activities, most often pruning for example, and also planting shade trees and also income diversification so that people don't depend on cocoa income.

Tangible agricultural activities most of that most often pruning for example, and also planting shade trees and also income to steeper certifications. So that people don't depend on cocoa income alone.

Speaker 2: The program is designed to really help people achieve a living income level because that also is one of the best drivers to avoid.

The program is designed to really help people achieve a living income level.

Because that also is one of the best drivers to avoid trial.

Speaker 2: child labor, and it's important that we de-link it from production volume because we also wanted to have a sustainable benefit for smallholders.

Child Labor.

It is important that we deal linkage from production volume because we also wanted to have a sustainable sustainable benefit for small hold farmers.

Speaker 2: That program will be complemented by a significant upgrade in our supply chain over the coming year.

That program will be complemented by a significant upgrade in our supply chain over the coming years.

Speaker 2: So over the next five, six, seven years, we attempt to make our supply chain in cocoa fully traceable. And I think that's important to build consumer trust and really give consumers that confidence that this comes from very sustainable and socially just farming.

So over the next 567 years, we attempt to make our supply chain and cocoa fully traceable and I think that's important to build consumer trust and really give consumers the confidence that this comes from very sustainable and socially trust farming practices.

Speaker 2: And then hot off the press, I would like to focus on our latest greenhouse gas emissions data. I think this is also timely because there was quite a bit of discussion around this issue last week following an NGO report. And I think it's probably best to let the facts speak for themselves. And to me, the most important statement is that peak carbon is clearly being reduced.

And then hot off the press.

I'd like to focus on our latest greenhouse gas emissions data I think this is also timely because there was quite a bit of discussion around this issue.

Last week following an NGL report and I think it's probably best to let the facts speak for themselves and to me. The most important statement is that peak carbon is clearly behind us. So we talked out somewhere around 2019 at about 90 $697 million.

Speaker 2: So we topped out somewhere around 2019 at about 96, 97 million tons. And even though we have kept.

Tons and even though we have kept growing strongly since then.

Speaker 2: we have been able now for the year 2021 to get down to a level of 94.3 million.

We have been able now for the year 2021 to get down to a level of $94 3 million tons. So this is adjusting fully reflecting the growth, but it's fully based on true reductions and these numbers have been reviewed by Ernst <unk> Young our auditors and they are also fully aligned with the Prince.

Speaker 2: So this is adjusting, fully reflecting the growth, and it's fully based on true reductions. And these numbers have been reviewed by Ernst & Young, our auditors, and they're also fully aligned with the principles of what we consider to be the gold standard here, and that is the science-based target.

<unk> of what we consider to be the gold standard here in Dallas to Science based targets initiative. As you know that initiative has the full backing of the UN global compact.

Speaker 2: you know, that initiative has the full backing of the UN Global Compact, and most scientists see them as the most rigorous approach.

And most scientists do you see them as the most rigorous approach.

Speaker 2: in this field. Obviously everyone has their own opinions about this, but we believe this is a very solid plan to follow. We'd like to confirm we're fully on track for our targets that we have issued with our time-bound plan, and those targets call for a 20% reduction by 2025 and a 50% reduction by 20...

In this field, obviously, everyone has their own opinions about this but we believe this is a very solid plan to follow we'd like to confirm we're fully on track for our targets that we have issued with our time bound plan and those targets call for 20% reduction by 2025, and a 50% return.

And by 2030.

Speaker 2: So I know there's lots of discussions when you think back to COP26 and some of the media coverage about what people intend to do in 2040 and 2050. But the focus to me is about what happens in this decade to really bring down greenhouse gas emissions and put a dent in the curve here and really have that curve point down.

So I know there's lots of discussions when you think back to cop 26.

Some of the media coverage about what people intend to do in 2014 2050, but the focus to me it's about what happens in this decade to really bring down greenhouse gas emissions and put a dent in the curve here and really have that curve pointing down enhance to meet the define.

Speaker 2: And hence, to me, the defining question when it comes to either companies or governments or whoever is, are you already on your way down as we are, or are you still on your way up? And so I think here the facts clearly show we are on the way down. This overcompensates the growth our business has, which we always said it would.

<unk> question when it comes to either companies or governments or whoever is.

Already on your way down as we are or are you still on your way up and so I think here. The parents clearly show we are on the way down this overcompensate the growth our business has which we always said it would.

Speaker 2: And I think the data here is very convincing. And I

I think the data here is very convincing.

And I wanted to share with you firsthand.

For the next two slides I'd like to focus on the 2022 guidance. So.

Speaker 2: For the next two slides, I'd like to focus on the 2022 guidance, and also our midterm outlook. So for 2022, we expect organic sales growth of around 5%.

So a midterm outlook. So for 2022, we expect organic sales growth of around 5%.

Speaker 2: and an underlying trading operating profit margin between 17.0 and 17.5.

And underlying trading operating profit margin between 17.0 and 17, 5%.

Speaker 2: The underlying earnings per share in constant currency and capital efficiency are expressed

The underlying earnings per share in constant currency and capital efficiency are expected to increase obviously looking at the attention and some other questions. We got up. This morning, Yes. There is the question is that expectation around the underlying trading operating profit margin conservative in my answer to that is yes. It is and I think in light of the.

Speaker 2: Obviously, looking at the attention and some of the questions we got this morning, yes, there is the question, is that expectation around the underlying trading operating profit margin conservative? And my answer to that is, yes, it is. And I think in light of the

Speaker 2: turbulence and volatility that we see around us, inflation and supply chain issues, it's a good thing to be conservative and it's fully in line with our meet or exceed approach when it comes to giving.

Turbulence and volatility that we see around us inflation and supply chain issues. It's a good thing to be conservative and.

And it's fully in line with our meet or exceed approach when it comes to giving guidance. So the same applies to organic sales growth were of course, a lot depends on inflation and pricing activity. So we see a very good chance of being around 5%, but depending on where inflation goes it also could take us higher.

Speaker 2: So the same applies to organic sales growth, where of course a lot depends on inflation and pricing activity. So we see a very good chance here of being around 5%, but depending on where inflation goes, it also could.

And turning it into the mid term outlook, we are again confirming that sustained mid single digit organic sales growth.

Speaker 2: And turning then to the midterm outlook, we're again confirming that sustained mid-single digit organic sales growth. And then I think it's also important that we point you to expect continued moderate underlying trading operating profit margin improvements. So this is a return to, I think, one of the hallmarks of the Nestle model, where with increasing our growth and operating leverage, we also expect to have some margin benefits.

Then I think it's also important that we point you to expect continued moderate underlying trading operating profit margin improvements. So this is a return to I think one of the hallmarks of the Nestle model, where with increasing our growth and operating leverage. We also expect to have some margin benefit and so that's.

Speaker 2: And so that should also give you confidence that whatever margin compression we've been seeing now in 21 and that we might see in 22.

It also gives you confidence that whatever margin compression we've been seeing now in 'twenty, one and that we might see in 'twenty two.

Speaker 2: that that compression is temporary and over time then will lead to that normal pattern of continued moderate.

That that compression is temporary and overtime, then will lead to that normal pattern of continued moderate improvements.

Speaker 2: And of course, for the long term and midterm, we also continue to practice prudent capital allocation and we also

And of course for the long term and midterm. We also continue to practice.

Practice prudent capital allocation and we also expect capital efficiency.

Movements.

Speaker 2: That concludes my part of the presentation. Let me hand it over to Fransma, and then we'll be both back for Q&A. Thank you.

That concludes my part of the presentation, let me hand, it over to Francois and then it will be both back for Q&A. Thank you.

Speaker 1: Thank you, Mark. Good morning or good afternoon to you all. I will now go into further details on our financial performance in 2021, starting first with a breakdown of the components of growth.

Thank you Mark good morning, or good afternoon to you all I will not go into further details on our financial performance in 2021.

Starting first with a breakdown of the components of growth.

Speaker 1: Organic growth was 7.5%. Rig was strong at 5.5% with increased contribution from volume and solid mix.

Organic growth was seven 5% rig was strong at five 5% with increased contribution from volume and solid mix.

Speaker 1: Pricing increased to 2% with an acceleration to 3.1% in the 4th quarter.

Pricing increased two 2% with an acceleration to three 1% in the fourth quarter.

Speaker 1: Acquisitions net of divested shares reduce sales by 2.9%, largely relating to the Nestle Waters North America, Yinlu and Hertha transactions, which more than offset the acquisitions of the core brands of the Bountiful company and Fresh.

Acquisitions net of divestitures reduced sales by two 9% largely relating to the Nestle waters, North America, <unk>, and a half that transactions, which more than offset the acquisition of the core brands of the bountiful company on freshly.

Speaker 1: The negative impact on sales from foreign exchange, Moderated to 1.3% turning positive in the second.

The negative impact on sales from foreign exchange moderated to one 3% turning positive in the second half.

Speaker 1: Total sales were 87.1 billion Swiss Francs, a 3.3% increase versus last year on a reported announcement.

Total sales were $87 1 billion Swiss francs, the three 3% increase versus last year on a reported basis.

Speaker 1: These slides illustrate the development of ourselves by geography and includes both our zones as well as our globally managed businesses.

This slide illustrate the development of <unk> by geography, and includes both our zones as well as a globally managed businesses.

Organic growth was strong in all geographies.

Speaker 1: Pricing increased particularly in the Americas and RIG remained strong across all zones.

Pricing increased particularly in the Americas and rig remains strong across all zones.

Speaker 1: Pricing in AOA also improved to 2.2% in the fourth quarter.

Pricing also improved to two 2% in the fourth quarter.

Growth was balanced with strong contributions from developed and emerging markets organic.

Speaker 1: Growth was balanced with strong contributions from developed and emerging markets.

Speaker 1: Organic growth in developed markets reached 7.2%, the highest level in more than a decade, based mostly on RIG.

We're getting growth in developed markets reached seven 2% the highest level in more than a decade based mostly on the region.

Pricing was positive led by North America.

Speaker 1: Growth in emerging markets was 7.8% with robust rig and positive pricing, based on strong contributions from Brazil, India, Russia and Mexico.

Growth in emerging markets was seven 8% with robust rig and positive pricing based on strong contributions from Brazil, India, Russia and Mexico.

Let's now look at the breakdown of sales by channel.

Speaker 1: Organic growth for retail sales remained strong at 6.4%, with a high base of comparison in 2020.

<unk> growth for retail sales remained strong at six 4% with a high base of comparison in 2020.

Speaker 1: Within retail, e-commerce saw sustained growth of 15.1% led by the United States, Russia, and the United States of America.

Within retailer ecommerce so sustained growth of 15, 1% led by the United States, Russia, and the United Kingdom.

Speaker 1: E-commerce now accounts for 14.3% of total...

E Commerce now accounts for 14, 3% of total sales.

Speaker 1: Most categories saw strong momentum in e-commerce, particularly Purina Petcare, coffee, and Nestle Health?

Most categories saw strong momentum in e-commerce , particularly purina Petcare coffee unnecessary health science grew.

Speaker 1: growth in out-of-home channels reached 24.5%, helped by a low base of comparison due to the pandemic.

Growth in out of home channels reached 24, 5% helped by a low base of comparison due to the pandemic.

In 2021 that pricing reached 2% accelerating to three 1% in the fourth quarter.

Speaker 1: In 2021, pricing reached 2%, accelerating to 3.1% in the fourth quarter.

Speaker 1: We have proactively and responsibly addressed inflationary pressures and steadily increased prices over the course of 2021.

We have proactively and responsibly addressed inflationary pressures and steadily increased prices over the course of 2021.

Speaker 1: strengths of our brands, product differentiation, and leading market positions enhances our ability to pass through prices.

The strength of our brands product differentiation and leading market positions enhances our ability to pass through pricing.

Speaker 1: So far, we have not seen any material evidence of demand elasticity, and we are closely monitoring for any signs of change.

So far we have not seen any material evidence of demand elasticity and we're closely monitoring for any signs of change.

Speaker 1: Volume growth has remained above pre-pandemic levels over the last several quarters.

Volume growth has remained above pre pandemic levels over the last several quarters.

Speaker 1: For 2022, we expect to continue to progressively increase pricing in a responsible manner.

For 2022, we expect to continue to progressively increase pricing in a responsible manner.

Speaker 1: We continue to offer products across price points and are focused on the development of affordable offerings, particularly those that meet nutritional needs in emerging markets.

We continue to offer products across price book price points are not focused on the development of affordable offerings, particularly those that meet nutritional needs in emerging markets.

Speaker 1: These efforts help to soften the effects of inflation for those most impacted.

These are false to soften the effects of inflation for those most impacted.

Speaker 1: We are also using other levers such as product mix, discipline cost management, and the further rollout of strategic revenue management.

You are also using ASO lives such as product mix disciplined cost management on the further rollout of strategic revenue management tools.

Speaker 1: Let's now look at the results of our five operating segments, beginning with zone AMS, where we saw high single-digit growth with a high base of comparison in 2020. Cells were

Let's now look at the results of our five operating segments, beginning with zone, Ams, where we saw high single digit growth with a high base of comparison in 2020.

Sales were $33 8 billion Swiss francs.

Speaker 1: Organic growth was 8.5% with robust rig of 4.8%

Organic growth was eight 5% with robust rig a four 8%.

Speaker 1: Pricing increased by 3.7%, reaching 5.2% in the fourth quarter.

Pricing increased by three 7%, reaching five 2% in the fourth quarter.

Speaker 1: Growth was supported by new product launches, continued strong momentum in e-commerce, and a further recovery in out-of-home channels.

Growth was supported by new product launches continued strong momentum in e-commerce on the SASSA recovery in out of home channels.

Speaker 1: The zone also saw continued broad-based market share gains, led by coffee, pet food and frozen

Zone also saw continued broad based market share gains led by coffee pet food and frozen food.

North America, so high single digit growth in the context of significant supply chain constraints. The largest contributors to growth were purina petcare unnecessary professional which grew at double digit rates.

Speaker 1: North America saw high single-digit growth in the context of significant supply chain constraints.

Speaker 1: The largest contributors to growth were Purina Petcare and Nestle Professional, which grew at double digit rise.

The beverage category, including Starbucks at home products coffee met Undisc Etsy, so mid single digit growth.

Speaker 1: beverages category, including Starbucks at-home products, Coffee Mat, and Nescafé, so mid-single-digit growth.

Sales in frozen and chilled foods grew at a mid single digit rate with strong sales development for staffers lean cuisine and hot buckets.

Speaker 1: Sales in frozen and chilled food grew at a mid-single-digit rate, with strong sales development for staffers, lean cuisine, and hot

Speaker 1: Water saw mid-single-digit growth, reaching a double-digit rate in the fourth quarter, driven by Essentia, and a recovery for international premium brands, San Pellegrino and Perrier.

Waters saw mid single digit growth, reaching a double digit rate in the fourth quarter driven by essentially on our recoveries are international premium brands, some pellegrino and perrier.

Speaker 1: Latin America posted double-digit growth with broad-based contributions across geographies led by Mexico, Brazil, and Chile.

Latin America posted double digit growth with broad based contributions across geographies led by Mexico, Brazil and Chile.

Speaker 1: By-product category, the largest contributors to growth were Purina Petcare and Confection.

By product category, the largest contributors to growth were purina petcare confectionery.

Sales in coffee unnecessary professional but also grew at a strong double digit rate in.

Speaker 1: Sales in coffee and Nestle Professionals also grew at a strong double-digit rate.

Speaker 1: infant nutrition, so mid-single-digit growth, supported by the expansion of our human milk oligosaccharides.

Infant nutrition saw mid single digit growth supported by the expansion of our human milk oligosaccharides products.

Speaker 1: the zone underlying trading operating profit margin increased by 30 basis points, with a positive margin impact of the divestment of Nestle Water's North America bronze, more than offsetting significant cost.

The zone underlying trading operating profit margin increased by 30 basis points with a positive margin impact of the divestments of Nestle waters, North America brands more than offsetting significant cost inflation.

Shifting to zone immuno sales were $21 1 billion Swiss francs organic growth was seven 2% the highest level in the last decade request strong pricing increased by one 2% and reached two 5% in the fourth quarter.

Speaker 1: Shifting to zone MNR, cells were 21.1 billion Swiss.

Speaker 1: Organic growth was 7.2%, the highest level in the last decade.

Speaker 1: RIG was strong, pricing increased by 1.2% and reached 2.5% in the 4th quarter.

Speaker 1: Growth was supported by continued evolution of the portfolio towards fast-growing categories and channels, as well as innovation.

Growth was supported by continued evolution of the portfolio towards fast growing categories and channels as well as innovation.

The zone continued to see broad based market share gains, particularly for pet food coffee as well as ambient and chilled culinary.

Speaker 1: The zone continued to see broad-based market share gains, particularly for pet food, coffee, as well as ambient and chill culinary.

Speaker 1: All markets posted positive growth, with strong sales developments led by the United Kingdom, Russia, Italy and France.

All market posted positive growth with strong sales developments led by the United Kingdom, Russia, Italy and France.

Speaker 1: By product category, the key growth drivers continue to be Purina, Petcare, and Coffee, supported by continued innovation across all brands.

By product category. The key growth drivers continue to be Purina petcare on coffee supported by continued innovation across all brands.

Speaker 1: Nestle professional reported double-digit growth. Water saw high single-digit growth. Sands in confectionery grew at a mid-single-digit rate, with strong growth for KitKat.

Nestle professional reported double digit growth what are so high single digit growth centered in confectionary grew at a mid single digit rate with strong growth for kitkat.

Speaker 1: culinary reported low single digit growth with a high base of comparison for Maggi and strong growth for plant-based

Culinary reported low single digit growth with a high base of comparison for Maggie on strong Roes for plant based food.

Speaker 1: Garden Gourme sounds increased by more than 40%

Garden Gourmet sounds increased by more than 40% on.

Speaker 1: and infant nutrition posted positive growth with continued market share gains, despite lower birth rates in the context of the pandemic.

Infant nutrition posted positive growth with continued market share gains despite lower birth rates in the context of the pandemic.

Speaker 1: The zone underlying trading operating profit margin decreased by 10%.

The zone underlying trading operating profit margin decreased by 10 basis points.

Speaker 1: cost inflation, particularly in the second half, as well as increased consumer-facing marketing expenses, more than offset operating leverage on product.

Cost inflation, particularly in the second half as well as increased consumer facing marketing expenses more than offset operating leverage on product mix.

Speaker 1: There is a time delay between cost inflation and pricing actions, particularly in Western Europe , where pricing is often fixed for a one-year period.

There is a time delay between cost inflation and pricing actions, particularly in western Europe , where pricing is often fixed for a one year period.

Speaker 1: Moving next to ZoneAway with sales of $20.7 billion.

Moving next to zone AOA with sales of $20 7 billion Swiss francs.

Speaker 1: Organic growth was 4.2%, showing resilience in a difficult economic environment.

Again, the growth was four 2% showing resilience in a difficult economic environment.

Speaker 1: The zone saw market share gains in culinary, coffee, and pet food. Infant nutrition report.

The zone, so market share gains in culinary coffee and pet food.

Nutrition reported market share losses.

Speaker 1: China posted low single-digit growth. Instant nutrition saw a sales decline impacted by challenging market conditions.

China posted low single digit growth infant nutrition saw a sales decline impacted by challenging market conditions.

Speaker 1: turnaround initiatives continue to progress, including a review of our product portfolio and distribution strategy.

Turnaround initiatives continue to progress, including a review of our product portfolio and distribution strategy.

Speaker 1: excluding infant nutrition. China reported double-digit growth driven by Nestle professional, coffee, culinary, and purina.

Excluding infant nutrition, China reported double digit growth driven by Nestle professional coffee culinary and Purina petcare.

Speaker 1: Outside of China, the zone reported high single digit growth.

Outside of China, There's only reported high single digit growth South Asia Sub Saharan Africa, Japan, and Korea also strong set of developments southeast Asia. So positive growth despite continued movement restrictions.

Speaker 1: South Asia, Sub-Saharan Africa, Japan and Korea also strong self-development.

Speaker 1: Southeast Asia saw positive growth despite continued movement restrictions.

By product category, the key growth drivers, where coffee culinary unnecessary professional.

Speaker 1: By product category, the key growth drivers were coffee, culinary, and Nestle professional.

Speaker 1: Cells in confectionery, ice cream, and purina pet care grew at a high single-digit rate.

Sales in confectionery ice cream on Purina Petcare grew at a high single digit rates.

Speaker 1: infant nutrition saw a sales decline with growth turning positive outside of China in the second half.

Infant nutrition saw a sales decline with growth turning positive outside of China in the second half.

Speaker 1: The zone's underlying trading operating profit margin decreased by 40.

The zones underlying trading operating profit margin decreased by 40 basis points.

Speaker 1: cost inflation, and product mix more than offset operating level.

Inflation and product mix more than offset operating leverage.

Next is <unk>, which saw sales of $6 4 billion Swiss francs.

Speaker 1: Next is Nespresso which saw sales of 6.4 billion.

Speaker 1: Organic growth was 8.8% based on strong rig of 8.2% and pricing of 0.6%.

Organic growth was eight 8% based on strong rig of eight 2% on pricing of 0.6 persons.

Speaker 1: growth was fueled by new consumer adoption, particularly for the virtual system, continued momentum in e-commerce, and a recovery in boutiques and out-of-home channels.

Growth was fueled by new consumer adoption, particularly for the virtual system continued momentum in e-commerce on a recovery in boutiques outperform channels.

Speaker 1: By geography, the Americas and EOA both grew at a double-digit rate. MNAS saw mid-single-digit growth. And overall, Nespresso gained market share with contribution from most markets.

By geography, the Americas on AOA, both grew at a double digit rate.

So mid single digit growth on other road nespresso gain market share with contribution from most markets.

Speaker 1: During the year, Nespresso also continued to progress on its sustainability agenda, achieving carbon neutrality certification in five markets, including its two largest, the United States and France.

During the year Nespresso also continued to progress on its sustainability agenda, achieving carbon neutrality certification in five markets, including its two largest United States Upfronts.

Speaker 1: The underlying trading operating profit margin decreased by 60 basis points.

The underlying trading operating profit margin decreased by 60 basis points.

Speaker 1: increased growth investments more than offset operating level.

Increased growth investments more than offset operating leverage.

Speaker 1: Finishing with Nestle Health Science which reported sales of 4.8 billion Swiss francs

Finishing with Nestle Health Science, which reported sales of $4 8 billion Swiss francs.

Speaker 1: The business grew at a double-digit rate, building on a strong sales development in 2020, with broad-based market share gains across channels and markets.

The business grew at a double digit rate building on the strong sales development in 2020 with broad based market share gains across channels and markets.

Speaker 1: Growth was supported by e-commerce momentum, new product launches, and geographic.

Growth was supported by e-commerce momentum new product launches and geographic expansion.

Speaker 1: Consumer care posted double digit growth with strong contribution from vital proteins, garden of life, persona and pure encapsulation.

Consumer care posted double digit growth with strong contribution from vital proteins garden of life persona on Purion cancellations.

Speaker 1: healthy aging products such as Boost, Meriten, and Nutren all grew at a double-digit rate.

Healthier gene products, such as boost May return on new trend all grew at a double digit rate.

Speaker 1: The newly acquired core brands of the Bountyful company posted high single-digit growth, led by Nature Bounties and SOLGAR.

The newly acquired core brands of the Bountiful company posted high single digit growth led by natural bounties unsold Gal.

Speaker 1: Noon functional hydration products grew at a strong double digit rate. And Garden of Life achieved...

New functional hydration products grew at a strong double digit rate and garden of life achieved carbon neutrality certification.

Speaker 1: Medical nutrition, so high single-digit growth with robust demand for pediatric and adult medical care products.

Medical nutrition, so high single digit growth with robust demand for pediatric and adult medical care products.

Speaker 1: The rollout of Palforzia, the peanut allergy treatment, was impacted by the pandemic.

The rollout of California, the peanut allergy treatment was impacted by the pandemic in the fourth quarter. The product started to see increased adoption in the United States and was also launched in the United Kingdom and Germany.

Speaker 1: In the fourth quarter, the product started to see increased adoption in the United States and was also launched in the United Kingdom and Germany.

Speaker 1: By geography, the Americas and AOA posted double-digit growth.

By geography, the Americas, and AOA posted double digit growth.

Sales in EMEA grew at a high single digit rates.

Speaker 1: The underlying trading operating profit margin decreased by 290 basis points, mainly due to investments in Palforzia, increased consumer-facing marketing expenses, and one-off integration costs related to the acquisition of the core brands of the Bountiful Company.

The underlying trading operating profit margin decreased by 290 basis points, mainly due to investments in California increased consumer facing marketing expenses and one off integration costs related to the acquisition of the core brands of the Bountiful company.

Speaker 1: Looking now at product categories, we saw strong growth in all segments, with the exception of instant nutrition.

Looking now at product categories, we saw strong growth in all segments with the exception of infant nutrition.

Speaker 1: Categories with strong market share gains included coffee, pet food, culinary, and Nestle Health Science Am another source oflist opportunity hold

Categories with strong market share gains included coffee pet food culinary honestly health science.

Speaker 1: Within powdered and liquid beverages, coffee saw growth of close to 10%, supported by Nescafe, Nespresso, and Starbucks.

Within powdered and liquid beverages coffee, so growth of close to 10% supported by net cafe Nespresso and Starbucks products.

Speaker 1: Sales of Starbucks products grew by 17.1% to reach $3.1 billion.

Sales of Starbucks products grew by 17, 1% to reach $3 1 billion Swiss francs.

Speaker 1: This business is now 50% bigger than it was three years ago.

This business is now 50% bigger than it was three years ago.

Speaker 1: We have now captured close to 20% of the Nespresso-compatible capsules market globally.

We have not captured close to 20% of the Nespresso compatible capsules market globally.

Speaker 1: Cocoa and mulled beverages grew at a mid-single-digit rate, with particular strengths for ready-to-drink format.

Cocoa and malt beverages grew at a mid single digit rate with particular strength for ready to drink formats.

Speaker 1: Petcare maintains its strong growth momentum. Most segments and geographies grew at a double-digit rate with talked to often with hard options.

Petcare maintained its strong growth momentum most segments and geographies grew at a double digit rate with market share gains.

Speaker 1: Purina's performance was driven by continued e-commerce growth and increased demand for premium products.

Purina performance was driven by continued e-commerce growth and increased demand for premium products.

Speaker 1: science-based innovations such as Proplan LifeClear, the first allergen-reducing cat food, so almost triple digits.

Science based innovation, such as pulp line life clear because the first gen, reducing cat food, so almost triple digit growth.

Speaker 1: Nutrition and health science grew at 1.4%. Organic growth in infant nutrition was minus 4.6%, reflecting a sales decrease in China and a slowdown in birth rate across geography.

Nutrition and health Science grew at one 4% organic growth in infant nutrition was minus four 6%, reflecting a sales decrease in China and the slowdown in both right across geographies.

Speaker 1: Sales of HMO products continue to see robust growth, reaching 1.2 billion Swiss francs in sales. We have already.

Sales of HMO products continued to see robust growth, reaching $1 2 billion Swiss francs in sales.

We have already discussed Nestle health science.

Prepared dishes and cooking AIDS saw six 6% growth led by ambient culinary and frozen meals Columbus.

Speaker 1: prepared dishes and cooking aids, so 6.6% growth, led by ambient culinary and frozen meals.

Speaker 1: Plant-based food products continue to deliver strong double-digit growth, with sales reaching around 800 million.

Plant based food products continued to deliver strong double digit growth with sales, reaching around 800 million Swiss francs.

Milk products on ice cream grew at five 9% with a high base of comparison in 2020, particularly for home banking products.

Speaker 1: milk products on ice cream grew at 5.9% with a high base of comparison in 2020, particularly for home baking products.

Speaker 1: The key growth drivers were premium and fortified milks, as well as coffee creamers and ice cream.

The key growth drivers, where premium and 45 milks as well as coffee creamers on ice cream.

Speaker 1: Growth in confectionery reflected a continued recovery in impulse on gifting products.

Growth in Confectionary reflected a continued recovery in in person gifting products within confectionery kit kit Kat grew at a double digit rate.

Speaker 1: Within confectionery KitKat grew at a double digit rate. And innovation supported growth with new launches such as Incor, Vegan KitKat and Sharknuts weather in China.

Innovation supported growth with new launches such as <unk> <unk> kit Kat in shock nuts, whether in China.

Water posted six 8% growth supported by a steady recovery in out of home channels and a low base of comparison.

Speaker 1: Water posted 6.8% growth supported by a steady recovery in out-of-home channels and a low base of comparison.

Speaker 1: The recently acquired functional water brand, Essentia, grew at a strong double-digit rate.

The recently acquired functional watch a bronze essential grew at a strong double digit rates.

Speaker 1: International premium brands also saw strong growth, particularly in the fourth quarter.

International premium brands also saw strong growth, particularly in the fourth quarter.

Moving now to profit margin by product category.

Speaker 1: Moving now to Profit Margin by Product category.

Speaker 1: The extent and timing of cost inflation varied significantly by product, with contrasted impact on category margins, particularly in the second half of the year.

The extent and timing of cost inflation varied significantly by product with contrasted impact on category margins, particularly in the second half of the year.

Speaker 1: powered on liquid beverages, so a substantial margin increase, reflecting strong sales growth and the benefit of operating leverage.

Powdered and liquid beverages saw a substantial margin increase reflecting strong sales growth and the benefit of operating leverage.

Speaker 1: We did not yet see any meaningful effects from green coffee price increases in 2021, but the impact will be material in 2020.

We did not yet see any meaningful effects from green coffee price increases in 2021, but the impact will be material in 2022.

Speaker 1: Purina Petcare posted a margin decrease as higher commodity and distribution cost more than offset operating leverage on price.

Purina Petcare posted a margin decrease as higher commodity and distribution costs more than offset operating leverage on pricing.

Speaker 1: Nutrition and health science, so a margin decline in both infant nutrition and Nestle health science. We have already.

Nutrition and health science, So a margin decline in both infant nutrition and Nestle Health Science we.

We have already discussed Nestle health science.

Speaker 1: In infant nutrition, the margin decline reflected reduced cells as well as higher commodity and freight.

In infant nutrition, the margin decline reflected reduced sales as well as higher commodity and freight cost.

Speaker 1: prepared dishes and culinary products saw a margin decline, reflecting higher commodity and distribution costs, as well as investments behind newly acquired D2C businesses and plant-based foods.

Prepared dishes on culinary product, so our margin decline, reflecting higher commodity on distribution costs as well as investments behind newly acquired <unk> businesses and plant based food.

Speaker 1: The margin increase in milk products on ice cream was supported by portfolio management, more specifically the divestitures of Yinlu on US ice creams, as well as operating leverage.

The margin increase in milk products on ice cream was supported by portfolio management more specifically the divestitures of <unk> and U S ice creams as well as operating leverage.

Speaker 1: Confectionery saw a substantial margin improvement, reflecting the benefit of operating leverage. And water saw a margin decline due to increased freight and commodity.

Confectionery saw a substantial margin improvement, reflecting the benefit of operating leverage on water saw a margin decline due to increased freight and commodity cost.

Speaker 1: Growth margin is a key component of our value creation model, evidenced by our track record of increases in seven of the last ten years.

Gross margin is a key component of our value creation model evidenced by our track record of increases in seven of the last 10 years.

Speaker 1: 2021 was exceptional with a gross margin decrease of 130 basis points to 47.8% reflecting time delays between cost inflation and pricing activity.

2021 was exceptional with a gross margin decrease of 130 basis points to 47, 8%, reflecting time delays between cost inflation and pricing actions.

Speaker 1: Inflation was significant and broad-based across raw and packaging materials as well as freight and energy costs, particularly in the second half.

Inflation was significant and broad based across raw and packaging medallion loans as well as freight and energy cost, particularly in the second half.

Speaker 1: Overall, the impact of cost inflation was slightly above 4% of cost of goods sold, higher than expected, and mainly related to items that could not be hedged or bought forward.

Overall, the impact of cost inflation was slightly above 4% of cost of goods sold hires unexpected and mainly related to items that could not be hedge both for world.

Speaker 1: The impact of cost inflation is expected to be significantly higher in 2022, particularly in the first half, with the most material increases coming from coffee and metal.

The impact of cost inflation is expected to be significantly higher in 2022, particularly in the first half with the most material increase is coming from coffee unmetered homes.

Speaker 1: we expect to offset increased inflation through mitigating actions, including pricing, operating leverage and efficiency.

We expect to offset increased inflation through mitigating actions, including pricing operating leverage and efficiencies.

Moving next to underlying trading operating profit margin.

Speaker 1: Moving next to Underline Trading Operating Profit month.

Speaker 1: Overall, for 2021, our underlying trading operating profit margin decreased by 30 basis points to 17.4%.

Overall for 2021, our underlying trading operating profit margin decreased by 30 basis points to 17, 4%.

Speaker 1: One of integration costs related to the acquisition of the core brand of the Bountyful company had a negative impact of around 10%.

One off integration costs related to the acquisition of the core brands of the Bountiful company had the negative impact of around 10 basis points.

Speaker 1: The remaining decrease reflects time delays between cost inflation and pricing action.

The remaining decrease reflects time delays between cost inflation and pricing actions.

Speaker 1: As discussed earlier, gross margin decreased by 130.

As discussed earlier, our gross margin decreased by 130 basis points.

Speaker 1: Distribution cost as a percentage of sales decreased by 20 basis points, mainly as a result of the disposal of the Nestle water brands in North America.

Distribution costs as a percentage of sales decreased by 20 basis points, mainly as a result of the disposal of the necessary water brands in North America.

Administration, and marketing expenses decreased by around 80 basis points as a percentage of sales based on strong operating leverage and efficiencies.

Speaker 1: Administration and marketing expenses decreased by around 80 basis points as a percentage of sales, based on strong operating leverage and efficiency.

Speaker 1: At the same time, we continue to invest for growth, increasing our consumer-facing marketing expenses in constant current.

At the same time, we continue to invest for growth, increasing our consumer facing marketing expenses in constant currency.

R&D expenses were flat as a percentage of sales investments in AI immune had been financed through efficiencies in R&D.

Speaker 1: R&D expenses were flat as a percentage of sales. Investments in AI MUN have been financed through efficiencies in R&D.

Speaker 1: We have made good progress and delivered on most of the internal sustainability targets we set ourselves for 2021.

We have made good progress and delivered on most of the internal sustainability targets, we set ourselves for 2021.

Speaker 1: So far, we are on the right trajectory to meet our 2025 ambitions.

So far we are on the right trajectory to meet our 2025 ambitions.

Speaker 1: In 2021, our sustainability investments were around half a billion with franks. The material increased versus 2020.

In 2021, our sustainability investments, we're around half a billion Swiss francs, but material increase versus 2020.

Speaker 1: As expected, our sustainability investments were fully self-financed through gross leverage and discipline control of our structural costs.

As expected our sustainability investments were fully self finance will gross leverage and disciplined control of our structural cost.

Speaker 1: Looking forward to 2022, we expect our underlying trading operating profit margin to be between 17% and 17.5%.

Looking forward to 2022, we expect our underlying trading operating profit margin to be between 17% and 17, 5%.

Speaker 1: In terms of phasing, given the ongoing impact of inflation, we expect a margin decrease in the first half of 2022 before improving in the second half.

In terms of phasing given the ongoing impact of inflation, we expect a margin decrease in the first half of 2022 before improving in the second half.

Speaker 1: Moving on to the P&L items from Underline Trading Operating Profit down to Underline EPS

Moving onto the P&L items from underlying trading operating profit down to underlying EPS.

Speaker 1: Restructuring expenses and net other trading items increased by 260 basis points, largely reflecting impairments related to the YS business.

Restructuring expenses, our net other trading items increased by 260 basis points, largely reflecting impairment related to the wireless business.

Speaker 1: As a result, the trading operating profit margin was 14%, a decrease of 290 basis points on the reported basis.

As a result, the trading operating profit margin was 14% a decrease of 290 basis points on a reported basis.

Higher income from associates, and joint venture, reflecting the l'oreal transaction as well as lower taxes more than offset lower gains on disposals.

Speaker 1: higher income from associates and joint venture, reflecting the low real transaction, as well as lower taxes, more than offset, lower gains and disposal.

Speaker 1: As a result, the net profit margin increased by 490 basis points to 19.4%.

As a result, the net profit margin increased by 490 basis points to 19, 4%.

Moving to underlying EPS underlying earning per share increased by five 8% in constant currency.

Speaker 1: Moving to underlying EPS, underlying earnings per share increased by 5.8% in constant current.

Speaker 1: The main driver of the underlying earning per share improvement was operating performance, more specifically organic growth.

The main driver of the underlying earning per share improvement was operating performance more specifically organic growth.

Speaker 1: All other items such as finance cost, underlying tax rate, and share buybacks net of finance cost also contributing positive for…..

All of the items, such as finance cost underlying tax rate and share buybacks net finance cost also contributed positively.

Yeah.

Speaker 1: Free cash flow decreased from 10.2 billion Swiss francs to 8.7 billion Swiss francs, reflecting temporarily higher inventory levels and an increase in capital expenditure to meet strong volume demand, particularly for pure in-app-ed care and coffee.

Free cash flow decreased from $10 2 billion Swiss francs to $8 7 billion Swiss francs, reflecting temporarily higher inventory levels and an increase in capital expenditure to meet strong volume demand, particularly for Purina Petcare coffee.

Speaker 1: Moving on to working capital, this chart shows our working capital levels based on a 5 quarter rolling average.

Moving on to working capital. This chart shows our working capital levels based on a five quarter Rolling average.

Speaker 1: Working capital was essentially stable in 2021. The group was able to offset a temporary increase in inventory through further improvements in payables.

Working capital was essentially stable in 2021, the group was able to offset the temporary increase in inventory through further improvements in payables.

Speaker 1: the decision to increase inventory levels should be seen in the context of significant supply chain disruption.

The decision to increase inventory levels should be seen in the context of significant supply chain disruptions.

Speaker 1: The group's return on invested capital before goodwill and intangible bonds increased by 60 basis points to 41.7% reflecting improved operating performance, particularly sales growth.

The group's return on invested capital before goodwill and intangibles increased by 60 basis points to 41, 7%, reflecting improved operating performance, particularly sales growth.

Speaker 1: The group's return on invested capital was 14.2% when excluding the wire's impairment with a decrease of 50 basis points mainly reflecting the acquisition of the core brands of the bounty full-cam.

The group's return on invested capital was 14, 2% when excluding the wireless impairment with a decrease of 50 basis points, mainly reflecting the acquisition of the core brands of the Bountiful company.

Net debt increased by $1 6 billion Swiss francs to reach $32 9 billion Swiss francs as at December 31, 2021.

Speaker 1: Net debt increased by 1.6 billion Swiss francs to reach 32.9 billion Swiss francs as at December 31st 2021.

Speaker 1: The dividend payment, share buybacks, and the net cash outflow from M&A more than offset proceeds from the disposal of L'Oreal shares and free cash flow generation.

The dividend payment share buybacks under net cash outflow from M&A more than offset proceeds from the disposal of lohan shares on free cash flow generation.

Speaker 1: During 2021, we return 13.9 billion Swiss francs of cash to our shareholders in Dividend and ShareBuy Bank.

During 2021, we returned $13 9 billion Swiss francs of cash to our shareholders in dividends and share buybacks.

Speaker 1: We are committed to maintaining our practice of increasing the dividend every year in Swiss France.

We are committed to maintaining our practice of increasing the dividend every year in Swiss francs.

Speaker 1: At the next Annual General Meeting, the Board of Directors will propose a dividend of 2.80 Swiss Francs per share.

At the next annual General meeting the board of Directors will propose a dividend of $2 80, Swiss shrunk spill shale.

Speaker 1: If approved, this will be the 27th consecutive annual dividend increase.

If approved this will be the 27th consecutive annual dividend increase.

Speaker 1: The company has maintained or increased its dividend in Swiss francs over the last 62 years.

The company has maintained or increased its dividend in Swiss francs.

The last 62 years. This concludes my remarks, I know on the over to Luca to open the Q&A session.

Speaker 1: This concludes my remarks. I now hand over to Luca to open the Q&A.

Speaker 1: Thank you, Francois. With that, we move to the Q&A session. We open the lines for questions from Financial Analyst.

Thank you Francois with that we move to the Q&A session.

We open the lines for questions from financial analysts.

Please limit yourself to no more than two questions.

Speaker 1: The first question comes from Warren Ackerman at Barclays. Please go ahead, please go ahead, Warren.

The first question comes from Warren Ackerman at Barclays. Please go ahead. Please go ahead Warren.

Speaker 3: Good morning Mark, Francois, Lucas, Warren Ackerman here at Barclays. Hope you're all doing well. So two questions. The first one is for Francois. I just wanted to understand the 2022 margin guidance and inflation. You said inflation will be significantly higher in 2022. I mean, how high could it be? I mean, we talked about Cox inflation pushing 10%.

Good morning, Mark Francois Lucrezia Warren Ackerman here at Barclays I hope, you're all doing well.

So two questions. The first one is for Francois I just wanted to understand the 2023 margin guidance and inflation. When you said inflation will be significantly higher.

In 2022, I mean, how high could it be I mean, we've talked about Cogs inflation pushing 10%.

Speaker 3: And could you say something about your visibility on that and hedging?

Could you say something about your visibility on that and hedging.

Speaker 3: I'm trying to understand, you know, is gross margins actually going to be down in 2022 and how do you actually make that up down the P&L? Are we going to see another 80-bit benefit from admin and marketing in 2022? I'm trying to understand the difference between the top and the bottom of the range, 17, 17.5, how do you get there? And then the second one is for Mark. It's a question on M&A. In an interview this morning, you said that you were open to a big deal, although you're not compelled to do one. I know you said.

I'm trying to understand you know is gross margin is actually going to be down in 2022, and how do you actually make the op down the P&L are we going to say.

Another benefit from admin and marketing in 2022, I'm trying to understand the difference between the top and the bottom of the range 17 17, five how did you get there and then the second one is for Mark just a question on M&A.

In an interview. This morning, you said that you will open so a big deal, although you're not compelled to do one I know you said in this interview is not a major change of focus so it does feel to me a little bit like.

Speaker 3: in this interview is not a major change of focus, but it does feel to me a little bit like a different tone.

A different tone.

Speaker 3: I'd always assumed that deals above 10 billion Swiss francs you'd worry about execution risk. I'm just wondering whether that's changed and whether you can share with us your thinking.

I'd always assumed that deals above 10 billion Swiss francs, you would worry about execution risk I'm, just wondering whether that has changed and whether you can share with us your thinking on.

Speaker 3: on what you might define as big. And maybe at the same time you can remind us of what your M&A criteria is. Thank you.

Or what you might define as bake.

And maybe at the same time, you can remind us of what your M&A criteria is thank you.

Speaker 4: Good afternoon Warren, so we'll start with the first question. So our margin guidance for 2022 is between 17 and 17.5%. We do expect a significantly higher impact of input cost inflation in 2022 over 2021.

Good afternoon, Warren So I will start with the first question. So our margin guidance for 2022 is between 17 and 17, 5%. We do expect a significantly higher impact of input cost inflation in 2022 over 2021, we cannot really give you a figure as of now even if we have a view and we have a very clear view as of now but we.

Speaker 4: We cannot really give you a figure as of now, even if we have a view and we have a fairly clear view, as of now, but we are just six weeks into the year. There are still a lot of moving parts, so we are really focusing on the actions in order to mitigate the impact of the

Just six weeks into the year. They are still a lot of moving parts. So we are really focusing on the actions in order to mitigate this input cost inflation pricing will be obviously the main one but it goes beyond that because we can look into efficiencies mix strategic revenue management and so forth. We do have aging in place, we usually don't share.

Speaker 4: this input cost inflation. Pricing will be obviously the main one, but it goes beyond that because we can look into efficiencies, mix strategic revenue management.

Speaker 4: We do have a G in place. We usually don't share the...

The timing and the lengths of the hedging because we consider that it is a commercially and price sensitive information.

Speaker 4: the timing and the lengths of the aging because we consider that it is commercially and price sensitive

Speaker 4: But so we do have hedging in place but be aware of the fact that a significant portion of the input cost inflation that we are receiving is actually cannot be hedged or cannot be covered through forward buying. And I would mention there a lot of the packaging that we do. I would mention transportation, ocean freight and so forth which cannot be hedged or bought forward. We are confident overall and we are really putting everything in place.

But so we do have aging in place, but be aware of the fact that a significant portion of the input cost inflation that we are receiving is actually cannot be hedge of cannot be covered through forward buying that we mentioned there are a lot of the packaging that we do.

I would mentioned transportation.

Ocean freight and so forth, which cannot be edge or both for what we are confident overall and we are really putting everything in place.

Speaker 4: in order to offset as much as we can during the year and we will obviously continue to benefit as well from the growth leverage as well.

To offset as much as we can during the year.

We will obviously continue to benefit as well from the gross leverage as well in terms of timing. It is important to understand that the we do expect.

Speaker 4: In terms of timing, it is important to understand that we do expect.

Speaker 4: a decrease of underlying trading operating profit margin in H1 2022 versus H1 2021. In H1 we will still

A decrease of four underlying trading underlying trading operating profit margin in each one 2022 versus <unk> 102021.

In each one we would still have some of this negative impact from the timing difference between input cost inflation and pricing as we will have some pricing ramping up let me just give you. One example, one concrete example in Europe . We are not fully we have not fully completed the negotiation on pricing because the timing is still.

Speaker 4: some of this negative impact from the timing difference between input cost, inflation and pricing as we will have some pricing ramping up. Let me just give you one example, one concrete example. In Europe , we are not fully, we have not fully completed the negotiation on pricing because the timing is still going on for some of the retailers or some of the markets. So which means that in a certain number of cases, not all but in a certain number of cases we will get

Going on for some of the retailers or some of the markets, So which mean that in a certain number of cases, not all but in a certain number of cases, we will get the benefit of price increase only from Q2, and we are planning in those all geographies as well some felt the pricing activity that will take place later in the year.

Speaker 4: the benefit of price increase only from Q2 and we are planning in other geographies as well.

Speaker 4: some further pricing activity that will take place later in the year.

Speaker 2: One, this is Mark, and thanks for the question. Look, I wasn't trying to send any signals to the market there tomorrow, at this morning. So we have always been open for deals in all size categories, all geographies, and all categories, so no change.

Warren This is mark and thanks for the question look I wasn't trying to send any signals to the market that tomorrow. At this morning. So we have always been open four deals in all size categories, all geographies and all categories. So no change there and what also continues to apply as well.

Speaker 2: And what also continues to apply is what you mentioned, and that is, yes, our interest level in small to mid-sized deals is much larger because at a time of pretty full valuations out in the market, our chances of making our money back are much better there because they tend to be easier integration jobs, and usually there's less antitrust.

You mentioned and that is yes, our interest level in small and small to midsized deals is much larger because at a time of.

Pretty full valuations out there in the market our chances of making our money back a much better they are because they tend to be easier integration jobs, and usually theres less antitrust leakage involved with those transactions. So the bias is still the same but obviously I also don't want to rule out anything but from my end no.

Speaker 2: So the bias is still the same, but obviously I also don't want to rule out anything. But from my end, no change.

<unk> and <unk>.

Speaker 2: across the full spectrum we remain interested, but we have our focus. And when you look at our actual acquisition activity, I think, you know, given that our narrative on this hasn't changed in five years, you see it exactly bear out.

Across the full spectrum, we remain interested but we have our focus and when you look at our actual acquisition activity I think you know given that our narrative on this hasn't changed in five years, you see it exactly bear out this way I mean, it was all kind of in that size brackets, you indicated below 10 billion into.

Speaker 2: It was all kind of in that size bracket you indicated below $10 billion and as you saw from the summary slide.

And as you saw from the summary, slide it really benefited our company.

Okay. Thank you Beth.

Speaker 1: Next question is from John Ennis at the Goldman Sachs. Please go ahead and...

Next question is from John Ennis at Goldman Sachs. Please go ahead John .

Speaker 5: Yeah, good afternoon everyone. Thanks for taking my question. My first is to come back on the organic sales growth guidance. You said in your opening remarks that that could be seen as conservative. I guess can I push you with a bit more detail than exactly what you're assuming within that 5%. Is it a higher degree of volume elasticity than maybe in your base case or is it that perhaps you don't take as much pricing because commodities roll over? A little bit of detail as to how you got to 5% would be helpful.

Yes. Good afternoon, everyone. Thanks for taking my question My first just to come back on the organic sales growth guidance. You said in your opening remarks that that could be seen as conservative I guess can I appreciate with a bit more detail on exactly what you're assuming within that 5% is it a higher degree of volume elasticity. There may be in your base case or is it perhaps you do.

Take as much pricing because commodities a little bit of detail.

How you got to 5% would be helpful.

Speaker 5: And then my second question is actually a follow up on pet care. Again, in your opening remarks, you talked about pet adoption being favorable for 2021 and 2020. Can you share the contribution from that to your overall growth? And I guess what is your outlook for pet adoption as a contribution to growth in 2022? Thank you.

And then my second question is actually a follow up on pet Cat again in your opening remarks, you talked about pet adoption being favorable for 2021 and 2020.

Can you share the contribution from that to your overall growth.

I guess, what is your outlook for pet adoption as a contribution to growth in 2022. Thank you.

Okay.

Speaker 2: Thanks John . So, look, I can try and give you a bit more color on the organic sales growth, but obviously at a time of significant turbulence, what's hard to do is to give you a precise breakdown here. So obviously we're dealing with a number of unknowns.

Thanks, John So look I can try and give you a bit more color on the organic sales growth, but obviously at a time of significant turbulence, what's hard to do is to give you a precise breakdown here. So obviously, we're dealing with a number of unknowns.

Speaker 2: where exactly inflation is going, how much pricing we can...

Where exactly inflation is going how much pricing we can.

Speaker 2: get away with and also what the volume elasticity is going to look like exactly because that's also an open question out there. Franspa confirmed that we haven't seen any significant volume elasticity so far, but that doesn't mean that assumption is going to apply to the full year 22. So that's why I feel that 5% range is a very reasonable middle of the road estimate.

Get away with and also.

What the volume elasticity is going to look like exactly because that's also an open question out there from a confirmed that we haven't seen any significant volume elasticity, so far but that doesn't mean that assumption is going to apply to the full year 'twenty. Two so that's why I feel that 5% range is.

A very reasonable middle of the road estimate and then depending on where pricing goes and what exactly volume elasticity is doing.

Speaker 2: and then depending on where pricing goes and what exactly bottom elasticity is

Speaker 2: We may be going higher than that, but at this point a precise breakdown frankly is not telling you very much because the assumptions May be changing so much from one month to another.

We may be gone higher than that but at this point a precise breakdown frankly is not telling you very much because the assumptions may be changing so much from one month to another.

Speaker 2: So we feel very confident about that level, and I think that should also give you confidence here. And obviously, it's the highest level we've been guiding to in a number of years. But again, we need to stay flexible as we go throughout the year. I think that's the one lesson we learned from 21.

So we feel very confident about that level and I think that should also give you competence here.

And obviously, it's the highest level, we've been guiding to in a number of years.

But.

Again, we need to stay flexible as we go throughout the year I think that's the one lesson we learned from 'twenty one regarding pet care.

Speaker 2: Regarding pet care, it's hard to give you a precise step-up that relates to pet adoption, but just looking at circumstantial evidence here, it's not that there was tremendous flowback that

It's hard to give you a precise step.

Step up that relates to pet adoption, but just looking at circumstantial evidence here, it's not that there was tremendous flowback that you know that.

These pets that were adopted have been going back and huge numbers to animal shelters or sell and from what I know from circumstantial evidence waiting lists with many praetors are still very long. So I think this has truly ignited interest in pet ownership, which is a good thing and something we always promoted.

Speaker 2: that were adopted have been going back in huge numbers to animal shelters as well and from what I know from circumstantial evidence waiting lists with many pretas are still very long so I think this has truly ignited interest in pet ownership which is a good thing and something we always...

Speaker 1: Next question is from Patrick Schwendiman at Sülker Cantonal Bank. Please go ahead Patrick.

Next question is from Patrick 20 minutes silica Kantonalbank. Please.

Please go ahead Patrick.

Speaker 1: Thank you, Luca. Good afternoon, Mark and Francois. First question, the developed countries had a very strong rate of 5.9% in 2021. As the world is hopefully going into a post-COVID mode, would you expect that RIC could be negative in the developed countries in 2021?

Thank you Luke good afternoon, Marc and Francois first question developed countries had a very strong rate of five 9% in 'twenty one as the world is hopefully going into a post COVID-19 mode would you expect that rig could be negative in developed countries in 'twenty.

Speaker 1: 22 in the current year, bearing in mind the strong basis, or in other words, if you want to achieve a positive RIC in 22, this has to come predominantly from the emerging markets. What's your opinion here? That's my first question. And second question, in nutrition and health science, the underlying EBIT margin was down by 420 basis points to 17.5%.

<unk> 22 in the current year bearing in 90 strong basis or in other words, if you want to achieve a positive <unk> 22 piece has to come predominantly from the emerging markets. What's your opinion here Thats My first question.

Second question in Nutrition, and health Science underlying EBIT margin was down by 420 basis points to 17, 5%. What is your best guess, how long will it take to get back to an underlying margin of above 20%. Thank you.

Speaker 1: What is your best guess? How long will it take to get back to an underlying margin of above 20%?

Patrick Good afternoon. So the rig was indeed strong in emerging markets in 2020, 151%, we still see a very good momentum uneven in Q4, it remained at an attractive level.

Speaker 4: Patrick, good afternoon. So the RIG was indeed strong in emerging markets in 2021, 5.1%. We still see a very good momentum. And even in Q4, it remained at an attractive level. We are monitoring the situation very carefully because we know that in emerging markets, there is more.

We are monitoring the situation very carefully because we know that in emerging market. There is more sensitivity to price and especially whenever we are in the affordability segment.

Speaker 4: sensitivity to price and especially whenever we are in the affordability segment. So we are tracking that it's very dependent. The situation is in the elasticity might be very dependent by category, by market.

We are tracking that it's very dependent the situations and the elasticity might be very dependent by category by market and even buyers can you at the end. So this is something we are monitoring very closely so no clear have you done once again of any sign of <unk>.

Speaker 4: and even by SKU at the end. So this is something we are monitoring very closely. So no clear evidence, once again, of any sign of significant negative elasticity so far. But this is something that may happen a little bit during the year. By the way, we are tracking not only the elasticity on volume. We are tracking the elasticity on mix as well.

Significant negative elasticity so far.

But this is something that may happen, a little bit during during the year by the way we are tracking not only the elasticity on volume we are tracking the elasticity on the mix as well because he knows that the number of cases people will have to eat anyway, but they may have to tread down in terms of shopping habits, so it might impact as well.

Speaker 4: Because in a certain number of cases, people will have to eat anyway, but they may have to tread down in terms of shopping habits. So it might impact as well the mix, which is something that we are carefully monitoring. Because as you know, historically, mix has been a very strong component of our growth, and it remains the case still as we speak today. Thank you for us on an indeed developed country.

The mix, which is something that we are carefully monitoring because as you know historically mix has been a very strong component that component of our growth and it remains the case as we are as we speak today.

Thank you Francois and ended the developed countries.

You have countries I would say.

Speaker 4: It's exactly the same story except that we are probably less exposed to affordability offerings in the developed world. So we have a portfolio which is more premiumized. You have seen that 35% of our total sales today at group level are in the premium segment where price increases and input cost inflation is less of an issue. We need first of all to increase prices by less and consumers are more likely to accept it.

It's exactly the same story, except that we are probably less exposed to affordability offerings in the developed world. So we have a portfolio, which is more premium as you have seen that 35% of our total sales today at group level or in the premium segment, where price increases and input cost inflation is less of an issue I mean, we.

First of all to increase prices by a buy less and consumers are more likely to accept it. So it says a challenge is probably less acute there, but once again, we are monitoring the situation very closely I would say the comment that I made on mix does apply equally to our developed countries as well.

Speaker 4: So we say the challenge is probably less acute there. But once again, we are monitoring the situation very closely. I would say the comment that I made on mix does apply equally to developed countries as well.

Speaker 2: Maybe Patrick could build on that. Clearly one of the strong points here of our organic growth composition for 2021 was that nice bounce that Francois pointed out earlier.

And maybe Patrick if I could build on that.

Clearly one of the strong points here of our organic growth compensation for 2021 awards that nice balance that Francois pointed out earlier between.

Speaker 2: volume growth, the pricing and the mix. I think that is so much more resilient than any one trick pony. And if it's giving any confidence, I mean we end up the year 22 year with very nice momentum and that's nice stable multi-pillar mix continue to apply. So at least as of now we're looking good.

The volume growth the pricing and that makes us think that is so much more resilient than any one trick pony and it was giving you any confidence I mean, we ended the year 22 here with very nice momentum and that's nice.

Stable multi pillar mix continue to apply so at least as of now we're looking forward in that front.

And Patrick Thank you on the margin question for next day and science. So we expect clearly the margin of material science to go up and you will see it already in 2022. This is largely as a result of gross leverage because as you. So they're growing they have been growing at a double digit level.

Speaker 4: And Patrick, on the margin question for the science.

Speaker 4: So we expect clearly the margin of Nestlé Alliance to go up, and you will see it already in 2022.

Speaker 4: This is largely the result of growth leverage, because as you saw, they have been growing at a double-digit level.

Speaker 4: And this is linked as well to the fact that we will start immune and its main product, Oct infusion.

And this is.

Linked as well to the fact that we will start immune under its main product portfolio to start to gain momentum as well in 2022 will be an interesting year from that point of view and in addition to that we do expect to get some synergies, especially between the bountiful company.

Speaker 4: start to gain momentum as well and 2022 will be an interesting year from that point of view and in addition to that we do expect to get some synergies especially between the Bountyful company and other VMS businesses that we that we have, more specifically Atrium that we bought five years ago.

The EMS businesses that we that we have and more specifically at <unk> that we bought five years ago.

Thanks, a lot.

Speaker 6: Next question is from Céline Panuti at J.P. Morgan. Please go ahead, Céline.

Next question is from ethylene continuity of Jpmorgan. Please go ahead is celina.

Speaker 7: Yes, good morning, or good afternoon, rather. My first question is on...

Yes, good morning, and good afternoon.

My first question.

The China the way.

Speaker 7: The China, the Wyatt

Yes.

Speaker 7: Goodwill impairment that you made. Could you, I'm sure that you've been looking at, you know, your long-term assumption on this business and on this country. Could you share with us what, you know, is happening on the ground in this business?

Goodwill impairment that you made could you.

Sure that you've been looking at your long term assumption on this business and in this country and could you share with US what is happening on the ground in this business and also what does long term assumption how you see this market developing.

Speaker 7: and also what those long-term assumptions, how you see this market and your business developing.

And my second question is on consumer health.

Speaker 7: And my second question is on consumer health.

Speaker 7: Well, you certainly are integrating the Bounty Food and other VMS, and there seem to have been other of your competitors as well interested in that same category. Could you tell us whether you still, you know, really focus on consumer health and nutrition, or whether, you know,

Like <unk> and <unk>.

Integrating the bountiful and other Vms and they all seem to have been.

Oh here continue to we're interested in that.

Category could you tell us whether you scale.

When you forget some comes from a health and nutrition all winter.

Yeah.

Speaker 7: scale would make you look at different adjacent categories within that bigger segment. Thank you.

Mix, you look at different edits from category within that.

Thank you.

Speaker 2: thanks a million pieces market so uh... on wire uh... obviously we've been very transparent with you the last two years uh... that we were not satisfied with the performance and the chinese market and so while you know that the impairment only was uh... announced today following the review from our orders and the approval of our board i think it was very clear that uh... there was trouble growing and uh... we had to reflect the carrying value

Thanks, Helane this is mark so on.

Wyeth, obviously, we've been very transparent with you over the last two years that we were not satisfied with the performance in the Chinese market and so while you know that the impairment only was announced today following their review from our auditors and the approval of our board.

I think it was very clear that there was trouble accruing and we had to reflect the carrying value.

Speaker 2: and had to adjust it for the latest assumption on where the trading is today.

<unk> had to adjust it for the latest assumption on where the trading is today and what we expect going forward.

Speaker 2: what we expect going forward. Having said that, we are committed to this business and I just wanted to be very clear on this.

Having said that we are committed to this business and I just wanted to be very clear on this.

Because the question has come in a few times are you potentially retreating from that market no we won't.

Speaker 2: the question has come in a few times, are you potentially retreating from that market? No we won't and we are strongly believing in this core business of ours.

We are strongly believing in this core business of ours, we strongly believe in the fact that China is the largest and most advanced infant formula market and so if you want to stay committed to this business I think it's important to stay there and compete and win and that's firmly what we intend to do.

Speaker 2: I strongly believe in the fact that China is the largest and most advanced input formula market. And so if you want to stay committed to this business, I think it's important to stay there and compete and win. And that's firmly what we intend to do.

And so more than the numbers suggest.

Speaker 2: I think management has taken very energetic action there, and we expect improvement already to become visible this year. There was another question that we got.

Management has taken very energetic action, there and we expect improvement already become visible. This year. There was another question that we got like do you expect to be back in positive territory. This year, Yes, I think we have a good chance of being back in positive territory. This year and then over time recovering from there.

Speaker 2: Do you expect to be back in positive territory this year? Yes, I think we have a good chance of being back in positive territory this year and then over time recovering from there. And basically, it's about improving our channel presence. It's about improving

And basically it's about improving our channel presence, it's about improving.

Speaker 2: our presence in lower tier cities and also continued innovation and offering cutting edge products. So we believe there is a space for us there to compete and to be successful and we are fully committed.

Our presence in lower tier cities and also continued innovation and offering cutting edge products. So we believe there's a there's a space for us there to compete and to be successful and we're fully committed to that.

Speaker 2: When it comes to consumer health, interesting question. I sense the background of this question, and so let me just be very clear. We are very deeply committed to Nestle Health Science, but exactly along the lines of what we told you very consistently since 2017, and that is we don't want to create a soup to nuts portfolio of all sorts of consumer healthcare assets. What we want to do.

When it comes to consumer health interesting question I sense. The background of this question and so let me just be very clear we are very deeply committed to Nestle health science, but exactly along the lines of what we told you very consistently since 2017 and that is we don't want to create a soup to nuts.

Portfolio of all sorts of consumer health care assets, what we want to do.

Speaker 2: is consistently grow and develop around nutrition and metabolism as our angle into consumer health. And vitamins, minerals and supplements are the largest part of that, but medical nutrition and some of the sports additives that we are offering are other good examples. And so we will stay focused. You see now that this patient strategy of doing it is paying off. We're coming here to a very nice size and presence of this business.

It has consistently grow and develop around nutrition and metabolism is our angle into consumer health and vitamins minerals and supplements or the largest part of that but medical nutrition and some of the sports additives that we are.

Offering our other good examples and so we will stay focused you see now that this patient strategy of doing it is paying off we're coming here to a very nice size and presence of this business.

Speaker 2: It's all very synergistic inside the company, which is good. And that's what's paying off here. A broad-based consumer healthcare portfolio is something that we kind of signal low interest in from the beginning, and we stay true to that, and I think it is truly paying off.

All are very synergistic inside the company, which is good and.

That's what's paying off here a broad based consumer health care portfolio is something that we kind of signaled lower interest in from the beginning and we stay true to that and I think it is truly paying off.

Thank you.

Speaker 6: Next question is from Bruno Montain at Bernstein. Please go ahead, Bruno.

Next question is from Bruno maintain at Bernstein. Please go ahead Bruno.

Speaker 2: Hi, good afternoon. The marketing spend in brands of what is down by 80 basis points year on year. I mean, really what you said about operating leverage and efficiencies, but if I were to phrase the question as such, if the gross margin pressure hadn't been as bad as it's been.

Hi, good afternoon.

In the marketing spend and brand support is down by 80 basis points year on year.

And then the reason would you say about operating leverage and efficiencies that we're to phrase. The question is such like.

Margin pressure haven't been as bad as it's been what the marketing spend.

Speaker 2: Would the marketing spend have ended up at the current number or would it have been higher? And are there any implications waiting for the growth we are expecting this year, the 5%?

Current number or would it have been higher and are there any implications related for the growth rate you're expecting this year to 5%.

Speaker 2: And the second one is on your margin outlook, 17 to 17.5. Are you making any assumptions of the nature that commodities will roll over? Are there any of those kind of things will get better in the external market that you're relying on? Or do you not need those assumptions to hit those?

And the second one is on your margin outlook 70, 217, and a half are you, making any assumptions of the nature that commodities will rollover.

Any of those kind of things will get better.

And the external market that you rely on or do you not need those assumptions to hit those numbers.

Speaker 4: Bruno, good afternoon. Let me take the first question. First of all, I think it's important to clarify...

Kimberly new good afternoon, let me take the first question.

First of all I think it's important to clarify we did not cut marketing expense actually we increased the amount of marketing spend during the year in absolute value in Swiss francs, and even in niche too because I saw that there was a perception that we cut marketing spend in H two in order to reach a certain level of profit we did not actually we spent more in depth.

Speaker 4: We did not cut marketing expense. Actually, we increased the amount of marketing spend during the year in absolute value in Swiss France. And even in H2, because I saw that there was a perception that we cut.

Speaker 4: marketing spend in H2 in order to reach a certain level of profit. We did not. Actually, we spent more in absolute value in H2 than in H1 2021. So we did raise our investment. What could be maybe misleading is the fact that indeed we reduced our

Would you add value in niche to niche one 2021, so we did raise our investment.

What could be may be misleading as the fact that indeed, we reduced our spending in marketing in niche to 2021 versus edge to 2020, because in etch to 2020, we had spent quite a lot after having occurred in the first part of the year, which was just the starting point of the pandemic, so but no we have.

Speaker 4: spending in marketing in H2 2021 versus H2 2020 because in H2 2020 we had spent quite a lot after having cut in the first part of the year which was just the starting point of the pandemic.

Speaker 4: So but no, no, we have raised our investment last year. I think that this is something that is.

<unk> raised our investment last year I think that this is something that is.

Speaker 4: to a certain extent, the beauty of what we have achieved in 2021 because in spite of very difficult conditions with the significant impact of input cost inflation, we have been able to invest for the future in marketing, in sustainability. I mentioned it in my comments earlier, as well as in Capex. So we are really investing for the long term. And marketing spend is really at the heart of it. Would we have spent more if we had not been facing?

To a certain extent the beauty of what we've achieved in 2021, because in spite of very difficult conditions with E. Cigs.

Significant impact of input cost inflation, we have been able to invest for the future in marketing in sustainability I mentioned it in my comments earlier as well as in Capex. So we are really investing for the long term and our marketing spend is really at the art of it would we have spent more if we had not been facing input costs.

Speaker 4: Input cost inflation, difficult to answer, but we don't look at it that way. We look at what are the needs of the investments in terms of to protect our brand, develop our brands and to launch our innovation. So I think that we were happy with the amount of investment that we have done that.

<unk> difficult to answer, but we don't look at it that way we look at what are the needs that we know.

The year of investments in terms of.

Protect our brand develop our brands onto our launch of innovation. So I think that we were happy with the amount of investment that we have done last year.

Speaker 6: Bruno, let me just build on that and then also address your second question. So clearly, some of the year-over-year effects matter here because there was a lot of marketing spend in the second half of

And Bruno let me just build on that and then also address your second question. So clearly somewhat of a year over year effects matter here because there was a lot of marketing spend in the second half of <unk>.

Speaker 6: 2020, you know, after that low in the first half of 2020. And so year over year, that's also something to keep in mind. And then tactically, given that we did have supply chain pressures and sometimes shortages of products, when you know that you're not able to deliver 100%, you become so much more tactical on your marketing and promotion spend, because the last thing you want to do is promote something you can't deliver.

2020.

After that low in the first half of 2020, and so year over year.

That's also something to keep in mind, and then tactically given that we did have supply chain pressures and sometimes shortages of products. When you know that youre not able to deliver 100% you become so much more tactical on your marketing and promotional spend because the last thing you wanted to do was promote something you can't deliver so that.

Speaker 6: So that also had some bearing more than any financial headroom that may have been a governor. So it's really about doing the best you can under the circumstances and your supply chain availability.

Also had some bearing more than any financial headroom that may have been a governor. So it's really about doing the best you can under the circumstances and your supply chain availability.

Speaker 6: So on the guidance for this year, that's exactly why I'm stressing the caution. So to me, giving you guidance on the hope that something turns better.

So on the guidance for this year, that's exactly why I'm stressing the caution so to me, giving you guidance on the hope that something turns better frankly, I wouldn't have a gamble on that okay. So that's why yes.

Speaker 6: Frankly, I would never gamble on that. Okay, so that's why, yes, we're taking very cautious approaches here because we want to be sure we meet or exceed expectations. And then, of course, as we go through the quarters, we'll keep you updated. And you may have noticed, for example, in Q3, that we broke with the practice that we never discuss something that's related to

We are taking very cautious approaches here because we wanted to be sure we meet or exceed expectations and then of course as we go through the quarters. We'll keep you updated and you may have noticed for example in Q3 that we broke with a practice that we never discuss something thats related to inflation.

Speaker 6: inflation and pricing and profitability because we knew that in a volatile environment people wanted to have.

Inflation in pricing and profitability, because we knew that in the volatile environment people wanted to have.

Speaker 6: some kind of sense of where things stand. And so all we can do is, as we go throughout the year, to share very transparently with you where we stand and then give you the best possible help here on margin expectations.

Some kind of sense of where things stand and so all we can do is as we go through throughout the year to share very transparently with you where we stand and then give you the best possible help here on on margin expectations.

Thank you.

Speaker 4: Next question is from Pascal Boulle at Stifel. Please go ahead, Pascal.

Next question is from our Pascal ball at Stifel. Please go ahead Pascal.

Speaker 8: Yes, good afternoon, Mark and Francois. And my first question touches on consumer trends. We have seen since the pandemic a constant market share decrease of private labeling. Now that prices of packaged food increase globally, what do you think is the risk that we see that consumers start to downtrend them to other lower priced food and also to maybe privately.

Yes, good afternoon market possible and my first question touches on.

Consumer trends, we have seen since the pandemic.

Austin.

Market share decrease of private labeling now that price yourself packaged food.

<unk> globally.

Do you think is the risk that we see that consumer start to downstream tend to order a lower priced food and also.

May be private label food and my second question touches on coffee.

Speaker 8: And my second question touches on coffee. If I read that correctly, that you start to roll out the Nescafe capsules for the Nespresso machines on a larger scale, what do you see in terms of potential for this product? And could this be a new growth driver for the cavity?

If I read that correctly that you start to rollout the NES coffee capsules for net for the Nespresso machines.

Larger scale.

What do you see.

Terms of potential for this product and could this be a new gross growth driver for the category.

Speaker 6: Thanks Pascal. So look on the consumer trends. Obviously, as Francois pointed out, we do watch out with a lot of intensity for any sign of either downtrading or volume elasticity. And as he mentioned so far, with a few emerging market exceptions, we have not seen any significant sign up ads.

Thanks, Pascal so look on the consumer trends.

Obviously as Francois pointed out we do watch out.

With a lot of intensity for any sign of either down trading or.

Volume elasticity and as he mentioned so far with a few emerging market exceptions, we have not seen any significant sign up at <unk>.

Speaker 6: At the end of the day, everyone needs to eat and drink and, you know, while there has been inflation in the packaged goods area.

At the end of the day, everyone needs to eat and drink and Tim you know, while there has been inflation in the packaged goods area member on prepared meals, it's even more dramatic because those inputs are increasing plus you have the labor shortages in many markets had also lead to cost inflation and so at the end of the day.

While everything is inflating packaged goods and nutrition coming from the retail sector may still be the best deal in town and and that's why I think we're reasonably protected here from some serious.

Elasticity and with regards to your second question as coffee farmers origin. That's the name of these capsules, yes, there have been very successful in markets, where we introduce them and I think that's giving us the opportunity to capture a larger share of this.

Analogues market, so basically people that that offer similar formats into his transfer pointed out we're already at 20% sure and I think this is one of our.

Very popular brand that we can bring to the consumer in this format.

Yeah.

Speaker 4: Thanks, Pascal. Next question is from Guillaume Delmas at UBS. Please go ahead, Guillaume.

Thanks Pascal next question is from the deal did mass at UBS. Please go ahead the Guiana.

Thank you and good afternoon, Marc Fox one Luca.

Speaker 4: Thank you. Good afternoon, Mark, Francois and Luca. Two questions for me, please. The first one is on your largest market, the U.S., because there seems to have been a sequential pickup or acceleration in organic sales growth in the U.S. in the fourth quarter. So just wondering what were the main drivers behind this, whether it was pricing, less supply chain constraints, or maybe just a rebound in pizza and acceleration in pet care. And also curious to hear if you've seen any kind of inventory anomaly in the U.S., or if you remain confident on maintaining that kind of run rate into 2022. And then my second question is on the concept of at-home resolution. Mark, does it effectively mean that you do not anticipate any significant normalization in at-home consumption? And I'm thinking particularly for categories such as prepared dishes or coffee. And thus, if we can continue to grow, or you can continue to grow volumes competitively from these already elevated levels.

Luca and two questions for me. Please the first one is on your largest market. The U S. Because there seems to have been a sequential pickup or acceleration in organic sales growth in the U S. In the fourth quarter. So just wondering what were the main drivers behind this whether it was pricing less supply chain.

[laughter] constraints or maybe just a rebound in pizza.

Acceleration Petcare and also curious to hear if you've seen any kind of inventory and normally in the U S. If you remain confident on maintaining that kind of run rate into 2022.

And then my second question is on the concept of at home a resolution.

Market does it effectively means that you do not anticipate any significant normalization in at home consumption and I'm thinking, particularly for categories, such as that prepare the dishes or coffee.

And thus if we can continue to grow or you can continue to grow volumes competitively from this already elevated levels.

Speaker 6: Let me start with the second one and then hand it over to Franspa for the US market. So look, at At Home Revolution, I think I made it clear when I described that, that this is not something that continues at exactly the same growth rates as we've seen in 2021.

Thanks, Kian, let me start with the second one and then hand it over to Francois for the U S market. So look at that at home Revolution, I think I made.

<unk> made it clear when I described that this is not something that continues at exactly the same growth rates as we've seen in 'twenty. One so as the pandemic hopefully continues to subside just mathematically when you look at you know a key.

Speaker 6: So as the pandemic hopefully continues to subside, just mathematically, when you look at, you know, quarter over quarter, year over year, I mean, as people return to, at least partially, to their offices and places of work, yes, I mean, you will have a temporary period where the growth rates subside, but as you can see from our all-in group growth rate that we guide to around 5%,

Quarter over quarter year over year, I mean as people return to at least partially to their offices and places of work. Yes. I mean, you will have a temporary period, where the growth rates subside, but as you can see from our all in crude growth rate that we guide to around 5%.

Speaker 6: it's not leading to a serious hangover because a member a year ago there was this question well will you have a serious hangover when this pandemic ends and I think the answer is no.

It's not leading to a serious hangover because I remember a year ago. There was this question.

Will you have a serious hanging over when this pandemic ends and I think the answer is no.

Speaker 6: What I'm pointing to is permanently elevated levels of demand compared to the pre-pandemic situation because there will be more work done remotely and for most people that means at home. And hence people still have to eat, they will still want to consume coffee and many other products that otherwise would have been consumed in an office environment, an out-of-home setting. And I think this plays into our strengths because our at-home market shares and retail market shares are higher.

What I'm pointing to is permanently elevated levels of demand compared to the pre pandemic situation because there will be more work done remotely and for most people that means at home and hence people still have to eat they will still want to consume coffee and many other products that otherwise would have.

Been consumed in an office environment and out of home setting and I think this plays into our strengths because our at home market channels and retail market shares are higher but I just wanted to be sure that people don't just take that as.

Speaker 6: But I just wanted to be sure that people don't just take that as.

And the indication that the growth rates from 'twenty. One was basically continue unabated you have to compare to pre crisis levels.

Speaker 6: an indication that the growth rates from 21 will basically continue unabated. You have to compare it to pre-crisis.

Speaker 4: On the question of the acceleration of our growth in...

Guillermo for speaking.

On the question of the acceleration of our growth in <unk>.

Speaker 4: in North America, it is true that we have seen an acceleration of the growth, which has happened essentially because of pricing. So we had pricing at mid-single digit level in Q4, including in the US.

North America. It is true that we have seen an acceleration of the growth, which has happened essentially because of pricing. So we had the pricing mid single digit level in Q4, including in the U S.

Speaker 4: and it happened across categories basically, but we saw a very resilient rig as well at the same time, which is the beauty of the exercise. You were asking if we had been facing supply chain constraints in the US. Yes.

And it happened across categories basically, but we saw a very resilient regas when at the same time, which is the beauty of the exercise.

You were asking if we had been facing supply chain constraints in the U S. Yes, a significant one it was much more on the logistics side I can tell you even in the months of November December for example, we could produce but we are not totally sure at that time that we would be in a position to ship everything and therefore to invoice everything so there'd be.

Speaker 4: significant one. It was much more on the logistic side. I can tell you even in the months of November , December for example we could produce

Speaker 4: But we were not totally sure at that time that we would be in a position to ship everything and therefore to invoice everything. So that's been quite tough. Eventually we managed to do it, but it was very, very tight. More on the logistics and transportation side than the manufacturing side itself. Thank you very much.

Quite tough eventually we managed to do it but it was very very tight more on the logistics and transportation side than the manufacturing side itself.

Thank you very much.

Next question is from James targeted bearing Berger. Please go ahead James.

Hello, Good afternoon, everyone. Two questions from me Firstly, just on water. Obviously, you had to get good growth in water. This at year end.

Speaker 5: Hello, good afternoon everyone. Two questions from me. Firstly, just on water, obviously you had good growth in water this year and you mentioned the focus is now on managing margins, managing business, sorry, better profitability. Now with the greater premium brand focus, can you speak to where you think margins could go in water, you know, maybe even hitting the group average? That's my first question. And then just secondly, on market shares, I wonder if you could update your usual stats for the percentage of the business gaining and holding share. Thank you.

You mentioned the focus is now on managing margins matching business works better profitability.

Now with a greater premium Brian if I could can you speak to where you think margins could go in water.

Even hitting the group average that's my first question and then just.

On market share I was wondering if you could update your usual stat for the percentage of the business gaining and holding share. Thank you.

Speaker 6: Thanks, James. And let me take the water question first and then hand it to Fransmar. So, look, we definitely wanted to improve, but I think it would be difficult at this time of so much volatility and also so much changing in the business as we transform it.

Thanks James.

Let me take the water question first and then hand it to Francois. So look we definitely wanted to improve but I think.

It would be difficult at this time of so much volatility and also so much changing in the business as we transform it to give you a precise target range. As you know there was a time when we were tracking significantly higher about two to 300 basis points higher than now and obviously we want.

Speaker 6: to give you a precise target range. As you know, there was a time when we were tracking significantly higher, about 200, 300 basis points higher than now, and obviously, you know, we want to claw back as much of that as possible.

Claw back as much of that as possible, but at a time when you have everything gyrating by transportation costs.

Speaker 6: But at a time when you have everything gyrating, like transportation costs, costs for both virgin pet material and recycled pet material, and so many supply chain issues, I think it would be hard to point to something more precise. But I made it very clear, we're not resting where we are. We want to have this business perform better from a profit point of view. It's going to be a several year effort.

<unk> costs for both Virgin pet material and recycled pet material.

And so many supply chain issues I think it would be hard to point to something more precise but I made it very clear we're not resting where we are we want to have this business perform better from a profit point of view is going to be a several year effort.

Speaker 6: But the most important thing when you compare this now to where the business stood a few years ago, I think we are back to an exciting growth proposition and that's borne out in.

But the most important thing when you compare this now to where the business stood a few years ago. I think we are back to an exciting proposition and that's borne out in the numbers.

Speaker 4: Good afternoon, James, Francois speaking. On the market share question, so this is the third year in a row that we see our market share improving with more than 60% of our business sales. A sale is a mix of a category and a geography. So more than 60% of our business sales gaining a holding share for three years in a row.

Good afternoon, James for speaking on the market share question. So this is the third year in a row that we see our market share improving with more than 60% of our business sale that was said is a mix of category on the geography, so more than 60% of our business sales gaining or holding share for three years in a row.

Speaker 4: and this is closer to the highest level that we had experienced which was in 2013. So this is really the consequence of our fast innovation, differentiation, premiumization and I think execution to retain this level. It is the case we are gaining or holding market share in across categories.

And we disclose that should lead to the highest level that we had experienced which was in 2013. So we continue this is really the consequence of a fast innovation differentiation premium musician and I think execution to retain this level.

Is the case, we are gaining or holding market share in across categories.

Speaker 4: There is obviously one exception, which is infant nutrition in China, and in confectionery we are not really gaining market share or holding market share because of camp lines, which is a very specific sub-market.

There is obviously the one.

Exception, which is infant nutrition in China and in confectionery, we are not really gaining market share holding market share because of count lines, which is a very specific submarkets, but apart from that across categories. We are gaining market share. The same applies to in terms of geographies, where if I take <unk> for example.

Speaker 4: But apart from that, across categories, we are gaining market share. The same applies in terms of geographies.

Speaker 4: If I take EMS for example, it's very much the case in coffee, pet food, frozen food, lemonade, pet food, coffee, ambient and chill culinary.

It's very much the case in coffee pet food frozen food immuno in pet food coffee ambient and chilled culinary.

Speaker 4: So it's and we are gaining market share as well in e-commerce outside of infant nutrition. Can we hold it? Okay, obviously we are working on it and we are using the same levers from innovation, premiumization, differentiation. This is something that we are monitoring very closely as well and even when we do price increases we do monitor the elasticity that it has on volume, on mix as well as on market share.

So it's a and we are gaining market share as well in e-commerce outside of infant nutrition can.

Can we hold it okay. Obviously, we are working on it and we.

We are using the same levers from innovation premium mutation differentiation and.

This is something that we are monitoring very closely as well and even when we do price increases we do monitor the elasticity that it has on volume and mix as well as in market share. So this is something that we are very very much focused upon.

Speaker 4: So this is something that we are very, very much focused upon.

Thank you.

Speaker 6: Next question is from David Ace at the Association General.

Next question is from.

David as its associated controller.

Speaker 9: Thank you all, good afternoon. So Chief and me just following up on the US and then one on nutrition, infant nutrition. So on the US, just following up on the

Thank you all good afternoon.

If I may just following up on the U S and then one on.

Nutrition infant nutrition, so on the U S. Just following up on the.

Speaker 9: The other question from Guillaume, obviously I know you said it was pricing but it does feel like the US has got this momentum even as people are...

Got a question for.

Obviously, I know you said it was pricing, but it does feel like the U S. Just got this momentum even as people are.

Speaker 9: moving or not as home as much. So I guess the first part of that is there anything in the US that you point to to say that you really learned something.

Moving his home as much so I guess the first part of that is there anything in the U S. The key point you just say that you really learned something which is why it's doing so well that you can apply and planning to apply elsewhere and I guess, what I used to that maybe just in terms of risks of slowdown is there anything you'd say beyond returning to the office et cetera.

Speaker 9: why it's doing so well, that you can apply and planning to apply elsewhere, and I guess relates to that maybe just in terms of risks of slowdown, is there anything you'd say beyond returning to the office, etc., that the slowdown risk is there? I'm thinking maybe snap vouchers, you've seen a doubling I think of snap voucher payouts by the government in two years, that we assume that's going to drop off, is that something that you would say?

Slowdown risk is there I'm thinking maybe snap vouchers, you seen a doubling I think of a snap voucher payouts by the government in two years, if we assume that's going to drop off is that something that you would say has an effect on underlying demand.

Speaker 9: has an effect on underlying demand. And the second question is just to clarify, I think, in some ways.

Second question is just to clarify I think in some ways and last quarter I think you talked about a glue all strategic review.

Speaker 9: I think you talked about a global strategic review of infant formula nutrition. So I guess the question was, is that correct? Is that what you did say? And if so, are we going to see findings and an update on that? How is that progressing if that is the case? Thanks so much.

Infant Formula Nutrition, So I guess the question what is that correct is that what you just say and if so are we.

You're going to see findings.

An update on that how is that progressing if that is the case. Thanks so much.

David So let me try and address both so for the U S. I think this is.

Speaker 6: David, so let me try and address both. So for the US, I think this is a business that for a long period of time happened, one of our core locomotives. And we did have

As a business that for a long period of time happened one of our CRO locomotives and.

We did have Mitch past decades kind of accrual of low that is true, but I think it's to me it's only restoring.

Speaker 6: mid-past decades kind of a growth low, that is true, but I think it's to me it's only, you know, restoring its position to its proper place and, you know, this is a leading market where consumer trends play out, where premiumization gets rewarded and

It's positioned to its proper place and you know this.

This is a leading market where consumer trends play out where premium amortization gets rewarded and and people like top notch quality and strong brand. So I think.

Speaker 6: and people like top-notch quality and strong brands. So I think on a midterm perspective, I am very bullish on the opportunity in the US market. Short-term, exactly where now that equation between some of these support vouchers and savings.

On the on the midterm perspective, I am very bullish on the opportunity in the U S market short term exactly where now that equation between you know some of these support vouchers and savings and.

Speaker 6: Pricing goes that is something that we all need to watch and we need to update you on But I think it just I'm very glad about you know The strong management we have in place in the US market and the good results that you know It didn't just come up overnight. I think you've seen a very consistent improvement here ever since 2018 and I think it's fully playing out now

Pricing goes that is something that we all need to watch and we need to update you on but I think it just I'm very glad about the strong management, we have in place in the U S market and the good results.

It didn't just come up overnight I think you've seen a very consistent improvement here ever since 2018, and I think it's fully playing out now.

Speaker 6: So on infant nutrition, that question came up a few times, and my apologies if there was a misunderstanding. So I mean, we may have meant or referred to review of certain minor segments, but overall on infant nutrition infant formula, we remain as committed as it gets. We do understand this is not the best moment in time because clearly in the face of the pandemic, birth rates took another steep drop.

So on infant nutrition that question came up a few times in my apologies if there was a misunderstanding.

I mean, we may have meant or referred to review of certain minor segments, but overall on infant nutrition infant formula we remain as committed as it gets we do understand this is not the best moment in time.

It's clearly in the face of the pandemic birth rates took another steep drop.

Speaker 6: Clearly, with all the medical and financial uncertainty that people felt, this was not the best time to either start a family or enlarge your family. Some of that will come back over time. And then, of course, you have some specific situations, and the most notable one is the one in China, where we know that we have homework to do, and we're fully committed to doing it. So, no, we're not reviewing this. We stand up and compete, and you will see us improve the business, and it's a result of that.

Clearly with all the medical and financial uncertainty that people have health. This was not the best time to either startup family or a larger family.

Some of that will come back over time, and then of course, you have some specific situations and the most notable one is the one in China, where we know that we have homework to do and we're fully committed to doing it. So we're not revealing with as we stand up and compete and you will see us.

Improve the business and its results.

Yeah.

Speaker 1: Next question is from Tom Sykes at Deutsche Bank. Please go ahead Tom.

Next question is from Tom Sykes Deutsche Bank. Please go ahead Tom.

Speaker 10: Thank you, good afternoon everybody. I wondered if you could just spend a bit of time talking about the profitability in...

Yes. Thank you good afternoon everybody.

Wondered if you could just spend a bit of time talking about.

The profitability in coffee.

Speaker 10: Obviously, you've seen what's happened to the green coffee prices and aluminium. Could you maybe talk about the scale of price increases that you might need to push through? You was hedged now on the major inputs as you would normally be.

Obviously.

Obviously, we said seamless green coffee prices.

Could you maybe talk about the scale of price increases that you might need to push through.

AE was hedged now.

The major inputs as you would normally pay.

Speaker 10: or are you taking much of a forward view? And do you think about it as managing absolute EBIT at the moment, or do you think about it in margin terms, just given the scale of some of the input increases, please? And then I'd just like to influence some of the others, but do you think there was any Omicron benefit in Q4 to the overall growth rate at all, please?

Or are you taking much of a forward view and do you think about it is managing absolute EBIT.

Momentum do you think about it in large in terms just given the scale of some of the.

Put increases place and then just.

Some of the others, but what did you do you think there was any omicron benefiting Q4 to the overall growth rate took place.

Speaker 6: Tom, if I could start with the last one. I think Omicron really only had an impact the last few weeks of December .

Maybe tell me if I could start with the last one.

I think omicron really only had an impact the last few weeks of December and so that to me why it may or it may have helped but it was certainly not the material trailer and it was not making the difference between a disappoint in Q4 and the successful Q for that.

Speaker 6: So that to me, it may have helped, but it was certainly not the material driver and it was not making the difference between a disappointing Q4 and the successful Q4 that we've seen. So it may have had some benefits to us, but again, not material. I think Q4 was shaping up to be a strong Q4 even beforehand and as mentioned, we also continue with very good momentum into January .

We've seen so it may have had some benefits to us, but again not material I think Q4 was shaping up to be a strong Q4, even beforehand and as mentioned we also continued with very good momentum into January .

Speaker 6: And then on coffee profitability, I hand it to François. Yes, thank you, Mark. Good afternoon, Tom. The profitability of coffee was very attractive and good in 2021. We did not face, I mentioned it during my comments, I think we had not any impact of increased.

And then on coffee profitability I'll hand, it to Francois. Thank you Mark good afternoon, Tom the profitability of coffee was very attractive and good in 2021.

We did not face I mentioned during my comments I think we had not any impact of increased coffee bean prices in 2021, because we had aging in place to little bit as well.

Speaker 4: coffee bean prices in 2021 because we had edging in place a little bit as well at the beginning of 2022, but this will disappear as we progress during the year, even if we have put new edging in place. But clearly there will be an increase of...

At the beginning of 2022, but this will disappear as we progress during the year, even if we have put new hedging in place, but clearly there will be an increase off.

Speaker 4: of input cost inflation for coffee. It goes, anyway, beyond coffee beans, but it goes into transportation and other items.

Of input cost inflation for coffee. It goes when you would be younger coffee beans, but he goes into transportation and other items. So we will need to increase prices for coffee in 2022, but obviously as you can understand we are not going to share anything because he sees a commercially sensitive information December applies as well to hedge.

Speaker 4: So, we will need to increase prices for coffee in 2022, but obviously, as you can understand, we are not going to share anything because this is a commercially sensitive information. The same applies as well to hedging. You were asking if we look at our margin in absolute value or in percentage. At group level, we look at it as a percentage of sales.

Are you asking if we look at our margin in absolute value and percentage at group level, we look at it as a percentage of sales and this is what we the way that we provide our guidance as well and this applies to a large extent on each and every single category. Our market. This is the way we work and this is where we operate within the organization.

Speaker 4: And this is the way that we provide our guidance as well. And this applies to a large extent on each and every single category or market. This is the way we work, and this is the way we operate within the organism.

Speaker 10: Okay, thank you. Would it be fair to say that the potential variability is a bit greater than the 17 to 17.5%?

Okay. Thank you would it be fair to say that the potential variability is a bit greater than the 17 17, 5%.

Speaker 10: sort of level of range that you have for the group as a whole in coffee or powdered and liquid beverages.

So the level of range that you have for the group as a whole.

In coffee or powdered and liquid beverages.

Tom for the for the group I mean, we've given the guidance of 70 to 75, that's what we guide to and what we standby and we believe that's the best estimate.

Speaker 6: Tom, for the group, I mean, we've given the guidance, 70 to 70 and a half, that's what we guide to and what we stand by, and we believe that's the best.

Speaker 6: And so it's already a reasonably wide range compared to what we've done in the past, and so we feel good about it.

So it's already a reasonably wide range compared to what we've done in the past and so we feel good about it.

Okay. Thank you.

Speaker 1: Thank you. We have no further questions, and we come to an end of our session today. We thank you very much for the interest in Nestle. And if you have further questions, don't hesitate to reach out to our IR team. We wish you well. Stay safe and healthy.

Thank you we have no further questions then we come to an end of our session. Today. We thank you very much for the interest in ethylene and if you have further questions don't hesitate to reach out to our IR team.

Wish you well stay safe and healthy.

Speaker 6: Thanks again for joining us and we look forward to seeing you again in Q1.

Thanks, again for joining us and we look forward to seeing you again in Q1.

Speaker 11: Music

[music].

We're done.

[music].

Yeah.

[music].

[music].

Yeah.