Q2 2024 Kellanova Co Earnings Call

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Speaker Change: Who doesn't love a new beginning? Whether it's a first day of school or starting a dream job, beginnings are exciting.

Unknown Executive: Who doesn't love a new beginning? Whether it's a first day of school or starting a dream job, beginnings are exciting. Good morning. Welcome to Kellanova's second quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise.

Operator: Welcome to Kellanova's second quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise.

Speaker Change: Good morning. Welcome to Kellanova's second quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session with publishing analysts.

Operator: After the speaker's remarks, there will be a question and answer session with publishing analysts. At this time, I would like to turn the call over to John Renwick, Vice President of Investor Relations and Corporate Planning for Kellanova. Mr. Renwick, you may begin your conference call. Thank you, operator. Good morning, everyone.

Operator: After the speaker's remarks, there will be a question-and-answer session with publishing another.

John Renwick: At this time, I would like to turn the call over to Tron Renwick, Vice President of Investor Relations and Corporate Planning for Kellanova.

Speaker Change: At this time, I would like to turn the call over to John Renwick, Vice President of Investor Relations and Corporate Planning for Kellanova. Mr. Renwick, you may begin your conference call.

Operator: Next to Renwick, you may begin your college school.

John Renwick: Thank you, operator. Good morning, everyone, and thank you for joining us today for a review of our second quarter results, as well as an update on our outlook for 2024. I am joined this morning by Steve Cahillane, our chairman, president and chief executive officer, and Amit Banati, our vice chairman and chief financial officer.

John Renwick: And thank you for joining us today for a review of our second quarter results, as well as an update on our outlook for 2024. I am joined this morning by Steve Cahillane, our Chairman, President, and Chief Executive Officer, and Amit Banati, our Vice Chairman and Chief Financial Officer. Slide number three shows our forward-looking statements disclaimer. As you are aware, certain statements made today, such as projections for Kellanova's future performance, are forward-looking statements. However, actual results could be materially different from those projected.

John Renwick: Thank you, Operator. Good morning, everyone, and thank you for joining us today for a review of our second quarter results as well as an update on our outlook for 2024. I am joined this morning by Steve Cahillane, our Chairman, President, and Chief Executive Officer, and Amit Banati, our Vice Chairman and Chief Financial Officer.

Unknown Executive: Slide number three shows our forward-looking statements disclaimer. As you are aware, certain statements made today, such as projections for Kellanova's future performance, are forward-looking statements. Actual results could be materially different from those projected. For further information concerning factors that could cause these results to differ, please refer to the third slide of this presentation, as well as to our public SEC filings.

Speaker Change: Actual results could be materially different from those projected. For further information concerning factors that could cause these results to differ, please refer to the third slide of this presentation, as well as to our public SEC filings.

John Renwick: For further information concerning factors that could cause these results to differ, please refer to the third slide of this presentation, as well as to our public SEC filing. A recording of today's webcast and supporting documents will be archived for at least 90 days on the investor page of www.kellanova.com. As always, when referring to our results in Outlook, unless otherwise noted, we will be referring to them on an organic basis for net sales and on a currency-neutral adjusted basis for operating profit and earnings per share.

Unknown Executive: A recording of today's webcast and supporting documents will be archived for at least 90 days on the investor page of www.kelanova.com. As always, when referring to our results and outlook, unless otherwise noted, we will be referring to them on an organic basis for net sales and on a currency-neutral adjusted basis for operating profit and earnings per share.

A recording of today's webcast and supporting documents will be archived for at least 90 days on the investor page of www.kellanova.com.

Speaker Change: As always, when referring to our results in Outlook, unless otherwise noted, we will be referring to them on an organic basis for net sales and on a currency neutral adjusted basis for operating profit and earnings per share.

Unknown Executive: Also, remember that our 2023 results have been recast to treat the spun-off WK Kellogg Co as a discontinued operation in accordance with applicable accounting guidelines.

John Renwick: Also, remember that our 2023 results have been recast to treat the spun-off WK Kellogg Co. as a discontinued operation in accordance with applicable accounting guidelines. Those recast statements can be found in our Q4 2023 earnings press release from February 8th of this year. Now, I'll turn it over to Steve.

John Renwick: Those recast statements can be found in our Q4 2023 earnings press release from February 8th of this year, and now we'll turn it over to Steve.

Steven Cahillane: Thanks, John, and good morning, everyone. We're once again pleased to report strong quarterly results that are clear evidence of our more growth-oriented and more profitable portfolio following last fall's spin-off. Our year-on-year organic growth in net sales was again on algorithm, and volume trends improved sequentially, again outside of Nigeria. Our year-on-year currency neutral operating profit growth was also on algorithm, and we continue to improve our profit margins. And we've returned to full commercial activity, with our stepped-up innovation reaching shelves in the second quarter. Delighting consumers is never more important than it is right now, and we now have our full plan in the marketplace, which should help us continue to improve our in-market performance in the second half.

Steve Cahillane: Thanks, John, and good morning, everyone. We're once again pleased to report strong quarterly results that are clear evidence of our more growth-oriented and more profitable portfolio following last fall's spin-off. Our year-on-year organic growth in net sales was, again, on algorithm, and volume trends improved sequentially, again, outside of Nigeria. Our year-on-year currency-neutral operating profit growth was also on algorithm, and we continue to improve our profit margins. And we've returned to full commercial activity with our stepped-up innovation reaching shelves in the second quarter.

Speaker Change: Our year-on-year organic growth in net sales was again on algorithm and volume trends improved sequentially again outside of Nigeria. Our year-on-year currency neutral operating profit growth was also on algorithm and we continue to improve our profit margins.

Steve Cahillane: Delighting consumers is never more important than it is right now, and we now have our full plan in the marketplace, which should help us continue to improve our in-market performance in the second half. On slide number six, we remind you of our strategy, differentiate, drive, and deliver, which we continue to execute, helping us to deliver our near-term commitments but also to build for a strong future and drive shareholder value.

Steven Cahillane: On slide number six, we remind you of our strategy: differentiate, drive, and deliver, which we continue to execute, helping us to deliver our near-term commitments, but also to build for a strong future and drive your owner value. On slide number seven, we remind you of our global footprint, whose diversification and exposure to faster growing markets is a true point of differentiation for Kellanova. This differentiated footprint, along with our return to full commercial activity around the world, contributed to our continued sequential improvement in volume in most of our regions. The chart on slide number eight excludes our joint ventures in Africa, where currency-driven price increases in Nigeria have resulted in recent elasticities, as we expected.

Steve Cahillane: On slide number seven, we remind you of our global footprint, whose diversification and exposure to faster growing markets is a true point of differentiation for Kellanova. This differentiated footprint, along with our return to full commercial activity around the world, contributed to our continued sequential improvement in volume in most of our regions. The chart on slide number eight excludes our joint ventures in Africa, where currency-driven price increases in Nigeria have resulted in recent elasticities, as we expected.

Speaker Change: On slide number seven, we remind you of our global footprint, whose diversification and exposure to faster growing markets is a true point of differentiation for Kellanova.

Speaker Change: The chart on slide number 8 excludes our joint ventures in Africa, where currency-driven price increases in Nigeria have resulted in recent elasticities, as we expected.

Steven Cahillane: We see that our businesses outside those JVs posted a fourth consecutive quarter of sequential improvement in volume, and we drove this sequential improvement across our regions. Europe and the rest of Amia both recorded moderating volume declines, and North America and Latin America both returned to outright volume growth.

Steve Cahillane: We see that our businesses outside those JVs posted a fourth consecutive quarter of sequential improvement in volume, and we drove this sequential improvement across our region. Europe and the rest of EMEA both recorded moderating volume declines, and North America and Latin America both returned to outright volume growth. Another key driver is shown on slide number nine, innovation. As discussed previously, we are returning to a full innovation launch calendar after the pandemic era's supply disruption.

Speaker Change: We see that our businesses outside those JVs posted a fourth consecutive quarter of sequential improvement in volume.

Speaker Change: And we drove this sequential improvement across our regions. Europe and the rest of EMEA both recorded moderating volume declines, and North America and Latin America both returned to outright volume growth.

Steven Cahillane: Another key driver is shown on slide number nine: innovation. As discussed previously, we are returning to a full innovation launch calendar after the pandemic era's supply disruptions. As you can see on the slide, we have a plethora of innovations launching across every one of the regions this year, ranging from limited additions to new flavors to amplified wellness credentials to entirely new food platforms. I'll just highlight a few notables. In the second half, we will be launching Pringles Mingles in North America, our first out of the can launch in the United States in over 15 years.

Speaker Change: Another key driver is shown on slide number nine, innovation. As discussed previously, we are returning to a full innovation launch calendar after the pandemic era's supply disruptions.

Steve Cahillane: As you can see on the slide, we have a plethora of innovations launching across every one of the regions this year, ranging from limited editions to new flavors to amplified wellness credentials to entirely new food platforms. I'll just highlight a few notables. In the second half, we will be launching Pringles Mingles in North America, our first out-of-the-can launch in the United States in over 15 years. In late Q3, we will be introducing Cheez-It to Europe with a big launch in the UK, supported by a full arsenal of sampling, social media, and public relations and advertising.

Speaker Change: As you can see on the slide, we have a plethora of innovations launching across every one of the regions this year, ranging from limited editions, to new flavors, to amplified wellness credentials, to entirely new food platforms.

Speaker Change: I'll just highlight a few notables. In the second half, we will be launching Pringles Mingles in North America, our first out-of-the-can launch in the United States in over 15 years.

Steven Cahillane: In late Q3, we will be introducing Cheese It to Europe with a big launch in the UK, supported by a full arsenal of sampling, social media, public relations, and advertising. We've innovated in a way from home channels as well, sometimes leveraging these channels to drive consumer awareness. A good example is our partnering with Taco Bell to launch a big cheese it crunch wrap supreme and a big cheese it to stata. So we feel very good about the quality of our innovations and the buzz, trial, and incremental purchases they will generate. Indeed, this heavy innovation calendar should bring us back to normal levels of net sales contribution from innovation.

Speaker Change: In late Q3, we will be introducing Cheez-It to Europe , with a big launch in the UK, supported by a full arsenal of sampling, social media, and public relations and advertising.

Steve Cahillane: We've innovated in away-from-home channels as well, sometimes leveraging these channels to drive consumer awareness. A good example is our partnering with Taco Bell to launch a Big Cheez-It Crunchwrap Supreme and a Big Cheez-It Tostada. So we feel very good about the quality of our innovations and the buzz, trial, and incremental purchases they will generate. Indeed, this heavy innovation calendar should bring us back to normal levels of net sales contribution from innovation.

Speaker Change: We've innovated in away from home channels as well, sometimes leveraging these channels to drive consumer awareness.

Speaker Change: A good example is our partnering with Taco Bell to launch a Big Cheez-It Crunchwrap Supreme and a Big Cheez-It Tostada. So we feel very good about the quality of our innovations and the buzz, trial, and incremental purchases they will generate.

Speaker Change: Indeed, this heavy innovation calendar should bring us back to normal levels of net sales contribution from innovation.

Steven Cahillane: Slide number 10 measures Year One incremental sales from innovation launches expressed as a percent of our total net sales. Notice how the incremental net sales we expect to generate from this year's innovation launches are much higher than the last couple of years when we had been contending with global supply disruptions. Getting back to delighting consumers through innovation is a key component of what we refer to as getting back to full commercial activity.

Steve Cahillane: Slide number 10 measures year-one incremental sales from innovation launches expressed as a percent of our total net sales. Notice how the incremental net sales we expect to generate from this year's innovation launches are much higher than the last couple of years when we were contending with global supply disruption. Getting back to delighting consumers through innovation is a key component of what we refer to as getting back to full commercial activity. Another good sign is shown on slide number 11.

Speaker Change: Notice how the incremental net sales we expect to generate from this year's innovation launches are much higher than the last couple of years when we had been contending with global supply disruptions.

Speaker Change: Getting back to delighting consumers through innovation is a key component of what we refer to as getting back to full commercial activity.

Steven Cahillane: Another good sign is shown on slide number 11. In our return to full commercial activity, we obviously prioritized our biggest brand, Pringles. The chart shows how this investment and activities improving our net sales growth and in market performance for this highly differentiated brand. All of it led to another quarter of differentiated results, starting with organic net sales growth. Slide number 12 shows how we continue to well outpace the median growth of our peer group, including our more directly comparable snacking and international peer. This is precisely the greater growth orientation I mentioned earlier about our strategy and portfolio.

Steve Cahillane: In our return to full commercial activity, we obviously prioritized our biggest brand, Pringles. The chart shows how this investment and activity improve our net sales growth and our market performance for this highly differentiated brand. All of this led to another quarter of differentiated results, starting with organic net sales growth. Slide 12 shows how we continue to well outpace the median growth of our peer group, including our more directly comparable snacking and international peers.

Speaker Change: The chart shows how this investment and activity is improving our net sales growth and in-market performance for this highly differentiated brand.

Speaker Change: All of it led to another quarter of differentiated results starting with organic net sales growth.

Speaker Change: Slide number 12 shows how we continue to well outpace the median growth of our peer group, including our more directly comparable snacking and international peers.

Steve Cahillane: This is precisely the greater growth orientation I mentioned earlier about our strategy and portfolio. Now, let's talk about how we are a more profitable company than we were previously. Slide number 13 shows how our year-to-date gross profit margin and operating profit margin this year as Kellanova are meaningfully higher than the same periods pre-pandemic and pre-spinoff. And our improvement in margins continued in the second quarter, as Amit will discuss in a moment. Even with a substantial increase in brand investment.

Speaker Change: This is precisely the greater growth orientation I mentioned earlier about our strategy and portfolio.

Steven Cahillane: Now let's talk about how we are a more profitable company than we were previously. Slide number 13 shows how our year-to-date gross profit margin and operating profit margin this year as Kellanova are meaningfully higher than the same periods, pre-pandemic and pre-spend-off. And our improvement in margins continued in the second quarter, as Amit will discuss in a moment, even with a substantial increase in brand investment. Improving our margins is an important part of our strategy, as they fuel our ability to invest in our brands and withstand unexpected shocks. And clearly, we are ahead of pace toward our 2026 target of a 15% operating profit margin.

Speaker Change: Now let's talk about how we are a more profitable company than we were previously.

Speaker Change: Slide number 13 shows how our year-to-date gross profit margin and operating profit margin this year as Kellanova are meaningfully higher than the same periods pre-pandemic and pre-spinoff.

Speaker Change: And our improvement in margins continued in the second quarter, as Amit will discuss in a moment, even with a substantial increase in brand investment.

Steve Cahillane: Improving our margins is an important part of our strategy, as they fuel our ability to invest in our brands and withstand unexpected shocks. And clearly, we are ahead of pace toward our 2026 target of a 15% operating profit margin.

Amit: Improving our margins is an important part of our strategy as they fuel our ability to invest in our brands and withstand unexpected shocks.

Amit: And clearly, we are ahead of pace toward our 2026 target of a 15% operating profit margin.

Steven Cahillane: Because of how our business is performing, both from a top line and bottom line perspective, we are now raising our full year guidance. Our first half results came in better than expected, and we remain on track for our second half outlook. We feel good about our commercial activity now fully in the marketplace, and that emerging markets will sustain their underlying momentum.

Steve Cahillane: And because of how our business is performing, both from a top line and bottom line perspective, we are now raising our full year guidance. Our first half results came in better than expected, and we remain on track for our second half outlook. We feel good about our commercial activity now fully in the marketplace, and that emerging markets will sustain their underlying momentum. Finally, we continue to progress on another element of our strategy, and that is our Better Days Promise Program.

Amit: Because of how our business is performing, both from a top line and bottom line perspective, we are now raising our full year guidance.

Speaker Change: Our first half results came in better than expected and we remain on track for our second half outlook.

Speaker Change: We feel good about our commercial activity now fully in the marketplace.

Speaker Change: and that emerging markets will sustain their underlying momentum.

Steven Cahillane: Finally, we continue to progress on another element of our strategy, and that is our Better Days Promise program. Slide number 15 provides just a few examples of this program in action during the second quarter.

Speaker Change: Slide number 15 provides just a few examples of this program in action during the second quarter.

Amit Banati: So let me now turn it over to Amit, who will walk you through our financial results and outlook before I come back and discuss each of our businesses in more detail.

Steve Cahillane: Slide number 15 provides just a few examples of this program in action during the second quarter. So, let me now turn it over to Amit, who will walk you through our financial results and outlook before I come back and discuss each of our businesses in more detail. Thank you, Steve. And hello, everyone.

Amit: So let me now turn it over to Amit, who will walk you through our financial results and outlook before I come back and discuss each of our businesses in more detail.

Amit Banati: Slide number 17 summarizes our key financial results for quarter 2 and the first half. As Steve said, we delivered another quarter of strong algorithm results and another quarter of results that exceeded our expectations across all of these key metrics. Our organic growth in net sales in Q2 came in at 4%, remaining within our long-term target range. On a currency-neutral basis, our adjusted operating profit grew by 16% year-on-year, driven by organic net sales growth and continued improvement in margins, in spite of a double-digit increase in brand building.

Amit Banati: Thank you, Steve, and hello everyone. Slide number 17 summarizes our key financial results for quarter two and the first half. As Steve said, we delivered another quarter of on algorithm results and another quarter of results that exceeded our expectations across all of these key metrics. Our organic growth in net sales in quarter two came in at 4%, remaining within our long-term target range. On a currency neutral basis, our adjusted operating profit grew by 16% year on year, driven by the organic net sales growth and continued improvement in margins in spite of a double-digit increase in brand building.

Amit: Thank you, Steve, and hello, everyone.

Amit: Slide number 17 summarizes our key financial results for quarter 2 and the first half.

Amit: Our organic growth in net sales in Q2 came in at 4%, remaining within our long-term target range.

Amit: On a currency-neutral basis, our adjusted operating profit grew by 16% year-on-year, driven by the organic net sales growth and continued improvement in margins, in spite of a double-digit increase in brand building.

Amit Banati: Our below-the-line items continued to be a modest year-on-year advent, though less than anticipated, resulting in growth in earnings per share of 14% on a currency-neutral basis. Meanwhile, free cash flow also continued to increase year-on-year. Slide number 18 shows the major components of our year-on-year net sales growth in quarter two and the first half. Prize-mix growth continued to drive organic net sales growth, even as it moderated as expected outside of Nigeria, where we executed prize increases in quarter one. Volume declined on elasticity impacts around the world, but especially in Nigeria. As Steve mentioned, that market accounted for virtually all of our volume decline in quarter two, so the rest of our portfolio is clearly delivering on planned sequential improvement and even turned to growth in two of our regions.

Amit Banati: Our below-the-line items continue to be a modest year-on-year headwind, though less than anticipated, resulting in growth in earnings per share of 14% on a currency-neutral basis. Meanwhile, free cash flow also continued to increase year on year.

Speaker Change: Our below-the-line items continue to be a modest year-on-year headwind, though less than anticipated, resulting in growth in earnings per share of 14% on a currency-neutral basis.

Speaker Change: Meanwhile, free cash flow also continued to increase year-on-year.

Amit Banati: Slide number 18 shows the major components of our year-on-year net sales growth in Quarter 2 and the first half. PrizeMix growth continued to drive organic net sales growth, even as it moderated, as expected, outside of Nigeria, where we executed prize increases in quarter one. Volume declined on elasticity impacts around the world, but especially in Nigeria.

Speaker Change: Slide number 18 shows the major components of our year-on-year net sales growth in Quarter 2 and the first half.

Speaker Change: Price Mixed Growth continued to drive organic net sales growth, even as it moderated, as expected, outside of Nigeria, where we executed price increases in Q1.

Speaker Change: Volume declined on elasticity impacts around the world, but especially in Nigeria.

Amit Banati: As Steve mentioned, that market accounted for virtually all of our volume decline in quarter two. So the rest of our portfolio is clearly delivering on planned sequential improvement and has even turned to growth in two of our regions. Moving along the graph, the small impact from last year's divestiture of our Russia business is now behind us as the transaction anniversaries at the start of quarter three. However, foreign currency translation clipped net sales growth by about eight percentage points in quarter two, principally reflecting the Nigerian Lira.

Speaker Change: As Steve mentioned, that market accounted for virtually all of our volume decline in Quarter 2, so the rest of our portfolio is clearly delivering on planned sequential improvement and even turned to growth in two of our regions.

Amit Banati: Williams. Moving along the graph, the small impact from last year's divestiture of our Russia business is now behind us as the transaction anniversaries at the start of quarter three. Foreign currency translation clipped, net sales growth by about 8 percentage points in quarter two, principally reflecting the Nigerian Naira.

Steve: Moving along the graph the small impact from last year's divestiture of our Russia business is now behind us as the transaction anniversaries at the start of quarter three.

Speaker Change: Foreign currency translation clipped net sales growth by about 8 percentage points in quarter 2, principally reflecting the Nigerian Naira.

Amit Banati: Now let's discuss profitability, starting with our growth profit on slide number 19. Adjusted basis growth profit continued to increase year and year during quarter two, up 9% excluding currency and up 5% with currency. This sustains a strong trend, as you can see on the slide. Meanwhile, we also continue to improve our growth profit margin, with quarter two's margin up close to 340 basis points year on year. As we've discussed previously, the discontinued operations accounting used to recast 2022 and the first three quarters of 2023 takes into account only the expenses associated with our transition services agreement and not the pass through of those expenses to WK Kellogg Company.

Amit Banati: Now let's discuss profitability, starting with our gross profit on slide 19. Adjusted Basis Gross Profit continued to increase year-on-year during Q2, up 9%, excluding currency, and up 5% with currency. This sustains a strong trend, as you can see on the slide. Meanwhile, we also continue to improve our gross profit margin, with quarter 2's margin up close to 340 basis points year on year. As we've discussed previously, the discontinued operations accounting used to recast 2022 and the first three quarters of 2023 takes into account only the expenses associated with our Transition Services Agreement and not the pass-through of those expenses to WK Kellogg. Year on year, this comparison item again contributed about 100 basis points to our margin expansion during quarter two.

Speaker Change: Now let's discuss profitability starting with our gross profit on slide number 19.

Speaker Change: Adjusted Basis Gross Profit continued to increase year-on-year during Q2, up 9%, excluding currency, and up 5% with currency.

Speaker Change: This sustains a strong trend as you can see on the slide.

Speaker Change: Meanwhile, we also continue to improve our gross profit margin with Quarter 2's margin up close to 340 basis points year on year.

Amit Banati: Year on year, this comparison item again contributed about 100 basis points of our margin expansion during quarter two, and as we've also discussed previously, currency devaluations affected our country mix, contributing a year and year margin benefit in quarter two of approximately 150 basis points. A little less than quarter one and something that should moderate more meaningfully in the second half as we lap last year's largest devaluation of the niro. Leaving out these two transistor items, our growth margin was still up by around a percentage point year on year. A recovery that continues to be aided by a resumed higher level of productivity and moderating input cost inflation.

Speaker Change: Year-on-year, this comparison item again contributed about 100 basis points of our margin expansion during Quarter 2.

Amit Banati: And as we've discussed previously, currency devaluations affected our country mix, contributing a year-on-year margin benefit in quarter two of approximately 150 basis points, a little less than in quarter one, and something that should moderate more meaningfully in the second half as we lap last year's largest devaluation of the Naira. However, leaving out these two transitory items, our gross margin was still up by around a percentage point year on year

Speaker Change: And as we've also discussed previously, currency devaluations affected our country mix, contributing a year-on-year margin benefit in Quarter 2 of approximately 150 basis points, a little less than Quarter 1.

Speaker Change: and something that should moderate more meaningfully in the second half as we lapped last year's largest devaluation of the Naira.

Speaker Change: Leaving out these two transitory items, our gross margin was still up by around a percentage point year-on-year, a recovery that continues to be aided by a resumed higher level of productivity and moderating input cost inflation.

Amit Banati: The recovery that continues to be aided by a resumed higher level of productivity and moderating input cost inflation. The fact that this gross margin restoration has continued to run ahead of pace gives us additional confidence in our full year outlook of more than 35%. We're experiencing growth and margin expansion on Operating Profit Line 2, as shown on slide number 20. Operating profit in Q2 grew 16% excluding currency and 13% with currency, sustaining a trend of year-on-year growth.

Amit Banati: The fact that this growth margin restoration has continued to run ahead of pace gives us additional confidence in our full year outlook of more than 35%. We're experiencing growth and margin expansion at the operating profit line two, as shown on slide number 20. Operating profit in quarter two grew 16 percent excluding currency and 13 percent with currency, sustaining a trend of year-on-year growth. Even if you exclude the impact of the year ago absence of transition services expense pass through, are operating profit grew by more than six percent on this currency neutral basis, remaining on our algorithm.

Speaker Change: The fact that this gross margin restoration has continued to run ahead of pace gives us additional confidence in our full year outlook of more than 35 percent.

Speaker Change: We're experiencing growth and margin expansion at the Operating Profit Line 2 as shown on slide number 20.

Speaker Change: Operating profit in Q2 grew 16% excluding currency and 13% with currency, sustaining a trend of year-on-year growth.

Amit Banati: Even if you exclude the impact of the year ago absence of transition services expense pass-through, our operating profit grew by more than 6% on this currency-neutral basis, remaining on our algorithm. This underlying growth was driven by an improving gross profit margin and good discipline on overhead, all of which more than offset the impact of a double-digit increase in brand building investment. Even with increased investment, we are improving our profitability and marching solidly towards our guidance for an operating profit margin of over 14% in 2024 and a target of 15% by 2026.

Amit Banati: This underlying growth was driven by an improving gross profit margin and good discipline on overhead, all of which more than offset the impact of a double digit increase in brand building investment. Even with increased investment, we are improving our profitability and marching solidly towards our guidance for an operating profit margin of over 14 percent in 2024 and a target of 15 percent by 2026. Moving down the panel, we come to our earnings per share walk on slide number 21. As you can see, all of our EPS growth in quarter two was attributable to our growth in operating profit, just as it was in quarter one.

Amit Banati: Moving down the panel, we come to our earnings per share walk on slide number 21. As you can see, all of our EPS growth in quarter 2 was attributable to our growth in operating profit, just as it was in quarter 1. Looking at our below-the-line items, we can see that they again largely offset each other. Interest expense again increased meaningfully year on year, reflecting higher interest rates.

Amit Banati: Looking at our below-the-line items, we can see that they again largely offset each other. Interest expense again increased meaningfully year on year, reflecting higher interest rates. This was partially offset by an increase in other income, principally reflecting interest income and investment gains. Our effective tax rate remained in the mid-22% range. Joint venture earnings and minority interest were relatively immaterial year on year. Our average shares outstanding were flat. The result of these items was an increase in adjusted basis EPS of 12% in quarter two and 14% on a current sea neutral basis.

Speaker Change: Interest expense again increased meaningfully year-on-year, reflecting higher interest rates. This was partially offset by an increase in other income, principally reflecting interest income and investment gains.

Amit Banati: This was partially offset by an increase in other income, principally reflecting interest income and investment gains. Our effective tax rate remained in the mid-22% range. Joint Venture Earnings and Minority Interest were relatively immaterial year on year.

Speaker Change: Our effective tax rate remained in the mid 22% range.

Amit Banati: Our average share is outstanding, well flat. The result of these items was an increase in adjusted basis EPS of 12% in Q2 and 14% on a currency-neutral basis. Let's now turn to slide number 22, which shows our free cash flow and net debt positions through quarter two. We remain ahead of last year on free cash flow through the first half, though, as we mentioned previously, some of this is related to the timing of a planned distribution from a post-retirement fund, which is expected to be offset later in the year. Even aside from that, though, our cash flow generation remains solid. Meanwhile, we have continued to trim our net debt, even as we return sizable cash to share owners, mostly through dividends.

Speaker Change: The result of these items was an increase in adjusted basis EPS of 12% in Q2 and 14% on a currency neutral basis.

Amit Banati: Let's now turn to slide number 22, which shows our free cash flow and net debt positions through quarter two. We remain ahead of last year on free cash flow through the first half, though, as we mentioned previously, some of this is related to the timing of a planned distribution from a post-retirement fund, which is expected to be offset later in the year. Even aside from that, though, our cash flow generation remains solid. Meantime, we have continued to trim our net debt even as we return sizable cash to shareholders, mostly through our dividends. And our debt leverage remains well below our targeted ratio of net debt to trailing a bitter share of three times, giving us excellent financial flexibility.

Speaker Change: We remain ahead of last year on free cash flow through the first half, though as we mentioned previously, some of this is related to the timing of a planned distribution from a post-retirement fund, which is expected to be offset later in the year.

Speaker Change: Even aside from that, though, our cash flow generation remains solid.

Amit Banati: Now let's discuss our increased guidance for the full year 2024, as shown on slide number 23. With half the year behind us, it is time to narrow the ranges we first gave at our day at K Invest event 12 months ago. And because of the strength of our first-half performance, we are in a position to raise this guidance. For net sales, we now expect organic growth of above 3.5 percent and an increase from our previous guidance that reflects our better-than-expected first half performance. We are prudently keeping our second half assumptions largely unchanged. Organic growth, of course, excludes currency translation, which, based on exchange rates we saw during quarter two, would be a headwind of about 7 percent for the full year.

Amit Banati: And our debt leverage remains well below our targeted ratio of net debt to trailing EBITDA of three times, giving us excellent financial flexibility. Now, let's discuss our increased guidance for the full year 2024, as shown on slide 23. With half a year behind us, it is time to narrow the ranges we first gave at our Day at Kay Investor event 12 months ago. And because of the strength of our first half performance, we are in a position to raise this guidance. For net sales, we now expect organic growth of above 3.5% and an increase from our previous guidance that reflects our better than expected first half performance. We are prudently keeping our second half assumptions largely unchanged.

Speaker Change: And because of the strength of our first half performance, we are in a position to raise this guidance.

Amit Banati: Organic growth, of course, excludes currency translation, which based on exchange rates we saw during quarter two, would be a headwind of about 7% for the full year. For Adjusted Basis Operating Profit, we are raising and narrowing the range to $1.875 to $1.9 billion, again, primarily reflecting our first half delivery. We continue to expect margin expansion for the year, reaching above 35% for gross margin and about 14% for operating margin, though their year-on-year impacts moderate in the second half, mainly because of what we are lapping then.

Steven Cahillane: So, for adjusted basis operating profit, we are raising and narrowing the range to 1.875 to 1.9 billion dollars, again, primarily reflecting our first half delivery. We continue to expect margin expansion for the year, reaching above 35 percent for gross margin and above 14 percent for operating margin, though their year-on-year impacts moderate in the second half, mainly because of what we are lapping then. We don't provide guidance on currency translation, but to give you an idea, if the exchange rates experienced during quarter two hold for the year, it would be about a negative 3 percent headwind to our operating profit.

Speaker Change: For Adjusted Basis Operating Profit, we are raising and narrowing the range to $1.875 to $1.9 billion, again primarily reflecting our first half delivery.

Speaker Change: We continue to expect margin expansion for the year reaching above 35% for gross margin and about 14% for operating margin, though their year-on-year impacts moderate in the second half, mainly because of what we are lapping then.

Amit Banati: We don't provide guidance on currency translation, but to give you an idea, if the exchange rates experienced during quarter two hold for the year, they would be about a negative 3% headwind to our operating profit. Guidance for Adjusted Basis Earnings Per Share increases to a range of $3.65 to $3.75, which incorporates the higher operating profit and other income that we experienced in the first half. Specifically, Aadhaar income should retain its first half upside before settling back to a run rate of $15-20 million per quarter in the second half. Our effective tax rate is now expected to be in the mid-22% range, only slightly better than we previously communicated.

Speaker Change: We don't provide guidance on currency translation, but to give you an idea, if the exchange rates experienced during Q2 hold for the year, it would be about a negative 3% headwind to our operating profit.

Steven Cahillane: Guidance for adjusted basis earnings per share increases to a range of $3.65 to $3.75, which incorporates the higher operating profit and other income that we experience in the first half. Specifically, other income should retain its first half upside before settling back to a run rate of $15 to $20 million per quarter in the second half.

Speaker Change: Guidance for Adjusted Basis Earnings Per Share increases to a range of $3.65 to $3.75, which incorporates the higher operating profit and other income that we experienced in the first half.

Speaker Change: Specifically, other income should retain its first half upside before settling back to a run rate of $15-20 million per quarter in the second half.

Steven Cahillane: Joseph. Our effective tax rate is now expected to be in the mid-22% range, only slightly better than we previously communicated. These factors are partially offset by interest expense now expected to be higher given quarter two's run rate, and joint venture earnings and minority interest collectively should run a little bit more negative in the second half than the first. And we are raising our outlook for free cash flow to just above $1 billion, with the year-on-year growth driven by operating profit. And despite capital expenditure temporarily elevated, as a percentage of saves for expanded Pringles capacity in emerging markets, as well as usual cash outlets related to our two network optimization projects.

Amit Banati: These factors are partially offset by interest expense now expected to be higher given Quarter 2's run rate, and joint venture earnings and minority interest should run a little bit more negative in the second half than the first. And we are raising our outlook for free cash flow to just above $1 billion, with year-on-year growth driven by operating profit. And despite capital expenditure temporarily elevated as a percentage of sales for expanded Pringles capacity in emerging markets, as well as usual cash outlays related to our two network optimization projects.

Speaker Change: And we are raising our outlook for free cash flow to just above $1 billion, with year-on-year growth driven by operating profit.

Steven Cahillane: So we remain in a very good financial position. Our quarter one and quarter two results came in better than expected, enabling us to raise our guidance for the full year. And we are confident in the second half. We have solid commercial plans that already are improving our volume performance around the world. And this is starting to show up more plainly in our in-market data as well. Our profit margins continue to improve, progressing faster than planned, enabling us to reinvest in our brands. And our balance sheet and cash flow remain in strong shape.

Amit Banati: So we remain in a very good financial position. Our quarter one and quarter two results came in better than expected, enabling us to raise our guidance for the full year. And we are confident in the second half.

Speaker Change: So we remain in a very good financial position, our quarter 1 and quarter 2 results came in better than expected, enabling us to raise our guidance for the full year.

Amit Banati: We have solid commercial plans that are already improving our volume performance around the world, and this is starting to show up more plainly in our in-market data as well. Our profit margins continue to improve, progressing faster than planned, enabling us to reinvest in our brand, and our balance sheet and cash flow remain in strong shape. And with that, I now turn it back to Steve for a rundown of our businesses around the world. Thanks, Amit. Let's start with Kellanova, North America, on slide number 26.

Speaker Change: And we are confident in the second half. We have solid commercial plans that already are improving our volume performance around the world. And this is starting to show up more plainly in our in-market data as well.

Speaker Change: Our profit margins continue to improve, progressing faster than planned, enabling us to reinvest in our brands. And our balance sheet and cash flow remain in strong shape.

Steven Cahillane: And with that, let me now turn it back to Steve for a run through of all businesses around the world.

Speaker Change: And with that, let me now turn it back to Steve for a run through of our businesses around the world.

Steven Cahillane: Let's start with Kelvin over North America and slide number 26. Our organic net sales were plus 1 percent in North America in the second quarter. Lapping last year's revenue growth management actions and last year's relative lack of merchandising activity, our price mix was down slightly, continuing and as expected moderation that began over a year ago. Our performance on volume, meanwhile, improved sequentially for a fourth consecutive quarter and turned positive in the second quarter. Industry-wide elasticity continued to be a growth headwind across our retail categories, but our return to full commercial activity, including our launches of innovation reaching shelves during the second quarter, led to volume growth in both consumption and shipments in our U.S.

Steve: Thanks Amit. Let's start with Kellanova North America in slide number 26.

Steve Cahillane: Our organic net sales were plus 1% in North America in the second quarter. Lapping last year's revenue growth management actions and last year's relative lack of merchandising activity, our price mix was down slightly, continuing an as expected moderation that began over a year ago. Our performance on volume meanwhile improved sequentially for a fourth consecutive quarter and turned positive in the second quarter. Industry-wide elasticities continued to be a growth headwind across our retail categories, but our return to full commercial activity, including our launches of innovation reaching shelves during the second quarter, led to volume growth in both consumption and shipments in our U.S. retail business.

Steve: Our organic net sales were plus 1% in North America in the second quarter.

Speaker Change: Lapping last year's revenue growth management actions and last year's relative lack of merchandising activity, our price mix was down slightly, continuing and as expected, moderation that began over a year ago.

Speaker Change: Our performance on volume meanwhile improved sequentially for a fourth consecutive quarter and turned positive in the second quarter.

Speaker Change: Industry-wide elasticities continued to be a growth headwind across our retail categories, but our return to full commercial activity, including our launches of innovation reaching shelves during the second quarter, led to volume growth in both consumption and shipments in our US retail business.

Steven Cahillane: Retail business. This was augmented by strong growth outside of these measured U.S. channels in our U.S. away from home business and our business in Canada. North America's operating profit increased substantially year on year as margins continue to improve. Even excluding the impact of year earlier, recast figures not incorporating the pass-through of transition service expenses, North America's operating profit grew at a double-digit pace, aided by productivity and absorbing increased investment behind our brands.

Steve Cahillane: This was augmented by strong growth outside of these measured US channels in our US away from home business and our business in Canada. North America's operating profit increased substantially year-on-year as margins continued to improve. Even excluding the impact of year-earlier recast figures not incorporating the pass-through of transition service expenses, North America's operating profit grew at a double-digit pace, aided by productivity and increased investment behind our brand. Slide number 27 shows North America's split between snacks and frozen food.

Speaker Change: This was augmented by strong growth outside of these measured U.S. channels in our U.S. away from home business and our business in Canada.

Speaker Change: North America's operating profit increased substantially year-on-year as margins continue to improve.

Steve: Even excluding the impact of year-earlier recast figures not incorporating the pass-through of transition service expenses, North America's operating profit grew at a double-digit pace, aided by productivity and absorbing increased investment behind our brands.

Steven Cahillane: Slide number 27 shows North America's split between snacks and frozen foods. During the second quarter, our snacks business increased both in volume and price mix year on year, generating organic net sales growth of more than 1% even as it faced a relatively strong prior year quarter. And our much smaller frozen foods business, net sales were off slightly in the second quarter as we faced our toughest quarterly comparison of the year, but we did increase volume led by egg.

Speaker Change: Slide number 27 shows North America's split between snacks and frozen foods.

Steve Cahillane: During the second quarter, our snacks business increased both in volume and price mix year on year, generating organic net sales growth of more than 1%, even as it faced a relatively strong prior-year quarter. And our much smaller frozen foods business, net sales were off slightly in the second quarter as we faced our toughest quarterly comparison of the year, but we did increase volume, led by Eggo. Slide number 28 shows our volume recovery playing out in the measure channel.

Speaker Change: During the second quarter, our snacks business increased both in volume and price mix year on year, generating organic net sales growth of more than 1% even as it faced a relatively strong prior year quarter.

Steve: In our much smaller frozen foods business, net sales were off slightly in the second quarter as we faced our toughest quarterly comparison of the year, but we did increase volume led by Eggo.

Steven Cahillane: Slide number 28 shows our volume recovery playing out in measured channels. We expect to sustain this improvement in consumption volume and share performance through the second half. So North America is delivering strong financial results while getting back to full commercial activity that is taking hold in the form of improving volume performance, both in shipments and consumption. And as we think about the year, as shown on slide number 29, we remain right on track. We have increased brand building and merchandising, and our stepped up innovation is now in the marketplace. And we expect these investments to continue to improve our in-market performance in the second half.

Speaker Change: Slide number 28 shows our volume recovery playing out in measured channels.

Steve Cahillane: We expect to sustain this improvement in consumption volume and share performance through the second half. So North America is delivering strong financial results while getting back to full commercial activity that is taking hold in the form of improving volume performance, both in shipments and consumption. And as we think about the year, as shown on slide 29, we remain right on track.

Speaker Change: We expect to sustain this improvement in consumption volume and share performance through the second half.

Steve: So North America is delivering strong financial results while getting back to full commercial activity that is taking hold in the form of improving volume performance both in shipments and consumption.

Steve: And as we think about the year, as shown on slide number 29, we remain right on track. We have increased brand building and merchandising, and our stepped-up innovation is now in the marketplace.

Steve Cahillane: We have increased brand building and merchandising, and our stepped-up innovation is now in the marketplace. And we expect these investments to continue to improve our in-market performance in the second half. Meanwhile, our margins continue to recover ahead of pace. This is a more focused team and portfolio since the spinoff, and we expect continued delivery in the second half. Now let's turn to Kellanova Europe and slide number 30. Our organic basis net sales in Europe declined a little less than 1% in the second quarter against our toughest quarterly comparison of the year, but volume declines moderated, led by growth in snacks in the UK.

Steve: And we expect these investments to continue to improve our in-market performance in the second half.

Steven Cahillane: Meanwhile, our margins continue to recover ahead of pace. This is a more focused team and portfolio since the spin-off, and we expect continued delivery in the second half.

Steve: Meanwhile, our margins continue to recover ahead of pace.

Steve: This is a more focused team and portfolio since the spinoff, and we expect continued delivery in the second half.

Steven Cahillane: Now, let's turn to Kellanova Europe and slide number 30. Our organic basis net sales in Europe declined a little less than 1% in the second quarter against our toughest quarterly comparison of the year. Our volume declines moderated, led by growth and snacks in the UK. Currency neutral adjusted basis operating profit grew by close to 7% year on year, despite last year's mid-year divestiture of Russia. Profit margins continue to recover, with a strong rebound in profit margins funding a significant boost in brand building investments.

Speaker Change: Now let's turn to Kellanova, Europe and slide number 30. Our organic basis net sales in Europe declined a little less than 1% in the second quarter against our toughest quarterly comparison of the year.

Speaker Change: Are volume declines moderated led by growth in snacks in the UK?

Steve Cahillane: Currency Neutral Adjusted Basis Operating profit grew by close to 7% year-on-year despite last year's mid-year divestiture of Russia. Profit margins continue to recover, with a strong rebound in profit margins funding a significant boost in brand building. On slide number 31, you can see our two major category groups in Europe.

Speaker Change: Currency Neutral Adjusted Basis Operating Profit grew by close to 7% year-on-year despite last year's mid-year divestiture of Russia.

Speaker Change: Profit margins continue to recover with a strong rebound in profit margins funding a significant boost in brand building investment.

Steven Cahillane: On slide number 31, you can see our two major category groups in Europe snacks, which represent over half of our sales in Kellanova Europe grew organically by 1% year on year despite lapping last year's strongest double-digit growth. Pringles continues to perform well with strong consumption growth across key markets, with particularly strong share gains in the UK and Spain and continued expansion in Poland and Romania. And in portable wholesome snacks, we gain share in our biggest market, which is the UK. In cereal, net sales declined by less than 3% in the quarter on category elasticity.

Steve: On slide number 31, you can see our two major category groups in Europe .

Steve Cahillane: Snacks, which represent over half of our sales in Kellanova, Europe, grew organically by 1% year on year, despite lapping last year's strongest double-digit growth. Pringles continues to perform well, with strong consumption growth across key markets, with particularly strong share gains in the UK and Spain, and continued expansion in Poland and Romania. And in Portable Wholesome Snacks, we gain share in our biggest market, which is the UK. However, in serial, net sales declined by less than 3% in the quarter on category elasticities.

Steve: Snacks, which represent over half of our sales in Kellanova, Europe , grew organically by 1% year-on-year, despite lapping last year's strongest double-digit growth.

Speaker Change: Pringles continues to perform well, with strong consumption growth across key markets, with particularly strong share gains in the UK and Spain, and continued expansion in Poland and Romania.

Speaker Change: And in Portable Wholesome Snacks, we gain share in our biggest market, which is the UK.

Speaker Change: In serial, net sales declined by less than 3% in the quarter on Category Elasticities.

Steven Cahillane: Slide number 32 reminds you of what we've been planning for in Europe in 2024. Despite the slight quarter-to-quarter decline against tough comps, we remain on track to deliver a 7th straight year of organic net sales growth in Europe. Pringles continues to demonstrate momentum, supported by innovation and exciting promotional partnerships. And we are ready and excited for our late quarter three launch of Cheese It in the UK, which will expand our snacking portfolio in Europe. In cereal, innovations like Tracy or Brownie are now in market, and promotions like our Kellogg-sponsored football camps are underway in the UK.

Steve Cahillane: Slide number 32 reminds you of what we've been planning for in Europe in 2024. Despite the slight quarter 2 decline against tough comps, we remain on track to deliver a 7th straight year of organic net sales growth in Europe. Pringles continues to demonstrate momentum, supported by innovation and exciting promotional partnerships. And we are ready and excited for our late-quarter three launch of Cheez-It in the UK, which will expand our snacking portfolio in Europe. In serial, innovations like Tresor Brownie are now in the market, and promotions like our Kellogg-sponsored football camps are underway in the UK.

Speaker Change: Slide number 32 reminds you of what we've been planning for in Europe in 2024.

Speaker Change: Despite the slight quarter 2 decline against tough comps, we remain on track to deliver a 7th straight year of organic net sales growth in Europe .

Steve: Pringles continues to demonstrate momentum supported by innovation and exciting promotional partnerships.

Speaker Change: And we are ready and excited for our late Quarter 3 launch of Cheez-It in the UK, which will expand our snacking portfolio in Europe .

Speaker Change: In serial, innovations like Tresor Brownie are now in market, and promotions like our Kellogg-sponsored football camps are underway in the UK.

Steven Cahillane: So we're confident that we can manage through category-wide elasticity headwinds. Meanwhile, we are making progress on our plans for optimizing our cereal portfolio and manufacturing network.

Steve Cahillane: So we're confident that we can manage through the category-wide elasticity headwind. Meanwhile, we are making progress on our plans for optimizing our serial portfolio and manufacturing network. Now, let's look at our emerging markets regions, starting with Latin America and slide number 33. Latin America's net sales increased by 4% organically in the second quarter, sustaining a mid-single-digit growth rate on top of big growth in the year-earlier

Speaker Change: So we're confident that we can manage through category-wide elasticity headwinds.

Speaker Change: Meanwhile, we are making progress on our plans for optimizing our serial portfolio and manufacturing network.

Steven Cahillane: Now let's look at our emerging markets regions, starting with Latin America and slide number 33. Lee.

Speaker Change: Now let's look at our emerging markets regions, starting with Latin America and slide number 33.

Steven Cahillane: Latin America's net sales increased by 4% organically in the second quarter, sustaining a mid-single-digit growth rate on top of big growth in the year-earlier quarter. Price mixed growth is moderating as expected, as we lap prior year actions to offset high cost inflation. Importantly, volume returned to growth in the quarter with gains in both snacks and cereal and led by Mexico. Operating profit increased in the second quarter on top of strong year-ago growth.

Speaker Change: Latin America's net sales increased by 4% organically in the second quarter, sustaining a mid-single-digit growth rate on top of big growth in the year-earlier quarter.

Steve Cahillane: Price Mixed Growth is moderating as expected as we lap prior year actions to offset high cost inflation. Importantly, volume returned to growth in the quarter with gains in both snacks and cereal and led by Mexico. Operating profit increased in the second quarter on top of strong year-ago growth.

Speaker Change: Price mix growth is moderating as expected as we lap prior year actions to offset high-cost inflation.

Speaker Change: Importantly, volume returned to growth in the quarter with gains in both snacks and cereal and led by Mexico. Operating profit increased in the second quarter on top of strong year-ago growth.

Steven Cahillane: Slide number 34 shows our Latin American net sales growth by category group. Organic net sales for a snacks business in Latin America grew 4% year-on-year, with growth in both volume and price mix. Salty snacks categories remain in growth across key markets in the region, despite elasticities, and Pringles has continued to outpace the category in our two largest markets, Mexico and Brazil. Our cereal net sales also increased by 4% in the quarter, sustaining volume growth. Serial categories in the region remain in growth despite elasticities, and we have outpaced the category this year in key markets Mexico and Brazil.

Steve Cahillane: Slide number 34 shows our Latin American net sales growth by category. Organic net sales for a snacks business in Latin America grew 4% year-on-year with growth in both volume and price mix. Salty Snack categories remain in growth across key markets in the region despite elasticities, and Pringles has continued to outpace the category in our two largest markets, Mexico and Brazil. Our serial net sales also increased by 4% in the quarter, sustaining volume growth.

Speaker Change: Slide number 34 shows our Latin American net sales growth by category group.

Speaker Change: Organic net sales for a snacks business in Latin America grew four percent year on year with growth in both volume and price mix.

Speaker Change: Salty Snacks categories remain in growth across key markets in the region despite elasticities and Pringles has continued to outpace the category in our two largest markets Mexico and Brazil

Speaker Change: Our serial net sales also increased by 4% in the quarter, sustaining volume growth.

Steve Cahillane: Serial categories in the region remain in growth despite their elasticities, and we have outpaced the category this year in key markets Mexico and Brazil. Slide number 35 reminds you of what to watch for in our Latin America business this year. Here too, we expect a seventh straight year of organic net sales growth, and we expect the growth to come from both snacks and cereals. Margin should improve, reflecting price pack architecture efforts as well as operating efficiencies and the potential for moderating input cost pressures later in the year.

Speaker Change: Serial categories in the region remain in growth despite elasticities and we have outpaced the category this year in key markets Mexico and Brazil.

Steven Cahillane: Slide number 35 reminds you of what to watch for in our Latin America business this year. Here too, we expect a seventh straight year of organic net sales growth, and we expect the growth to come from both snacks and cereal. Margin should improve, reflecting price pack architecture efforts as well as operating efficiencies and the potential for moderating input cost pressures later in the year.

Speaker Change: Margins should improve reflecting price pack architecture efforts as well as operating efficiencies and the potential for moderating input cost pressures later in the year. So through the first half Latin America is right on track.

Steve Cahillane: So through the first half, Latin America is right on track. And we'll finish with our EMEA region, starting with slide number 36. Once again, currency-influenced price increases in Nigeria drove substantially all of the region's 16% organic net sales growth in the quarter.

Steven Cahillane: So through the first half, Latin America is right on track, and we'll finish with our Mia region, starting with slide number 36. Once again, currency influence price increases in Nigeria grows substantially. All of the regions 16% organic net sales growth in the quarter. Our business there continues to execute well, pricing again earlier this year to keep up with currency rates, and during the second quarter, its volume declines were not as severe as expected. This may have positive implications for a second half forecast, but we are taking a prudent approach. Nevertheless, these short-term challenges are dramatically outweighed by the long-term growth opportunity that this growing market and our advantage assets provide us.

Speaker Change: And we'll finish with our AMEA region, starting with slide number 36.

Speaker Change: Once again, currency influence price increases in Nigeria drove substantially all of the region's 16% organic net sales growth in the quarter.

Steve Cahillane: Our business there continues to execute well, pricing again this year to keep up with currency rates, and during the second quarter, its volume declines were not as severe as expected. This may have positive implications for our second half forecast, but we are taking a prudent approach. Nevertheless, these short-term challenges are dramatically outweighed by the long-term growth opportunity that this growing market and our advantaged assets provide us. Outside of Nigeria and our joint ventures with Talaram, our organic net sales increased at a mid-single-digit rate in the second quarter. Volume declined only slightly year on year, despite category elasticities and the negative demand impact of tensions in the Middle East.

Speaker Change: Our business there continues to execute well, pricing again earlier this year to keep up with currency rates, and during the second quarter, its volume declines were not as severe as expected.

Speaker Change: This may have positive implications for our second half forecasts, but we are taking a prudent approach. Nevertheless, these short-term challenges are dramatically outweighed by the long-term growth opportunity that this growing market, and our advantage assets, provide us.

Steven Cahillane: Outside of Nigeria and our joint ventures with Tolerance, organic net sales increased at a mid-single digit rate in the second quarter. Volume declined only slightly year and year despite category elasticity and the negative demand impact of tensions in the Middle East. On a currency neutral basis, Mia's operating profit grew by 9% with growth in both Nigeria and in the rest of Amia, and margins continuing to improve even with a substantial increase in brand building investment.

Speaker Change: Outside of Nigeria and our joint ventures with Talaram, our organic net sales increased at a mid single-digit rate in the second quarter.

Speaker Change: Volume declined only slightly year-on-year despite category elasticities and the negative demand impact of tensions in the Middle East.

Steve Cahillane: On a currency-neutral basis, Amiya's operating profit grew by 9%, with growth in both Nigeria and in the rest of the world, and margins continuing to improve, even with a substantial increase in brand-building investment. On slide number 37, we see how our net sales growth is split by major category groups. Noodles and Others 26% Organic Growth reflects currency-driven pricing in Nigeria, which was only partially offset by elasticity-driven double-digit declines in volume. Meanwhile, we continue to drive strong growth for Kellogg's noodles in South Africa and Egypt, gaining distribution and share in those markets and successfully launching this quarter in Saudi Arabia.

Amiya: On a currency neutral basis, Amiya's operating profit grew by 9%, with growth in both Nigeria and in the rest of Amiya, and margins continuing to improve, even with a substantial increase in brand building investment.

Steven Cahillane: On slide number 37, we see how our net sales growth split by major category groups. Noodles and others 26% organic growth reflects the currency-driven pricing in Nigeria, which was only partially offset by elasticity-driven double-digit declines in volume.

Speaker Change: On slide number 37, we see how our net sales growth split by major category groups.

Speaker Change: Noodles and others 26% organic growth reflects the currency driven pricing in Nigeria which was only partially offset by elasticity driven double-digit declines in volume.

Steven Cahillane: Foundation. Meanwhile, we continue to drive strong growth for Kellogg's noodles in South Africa and Egypt, gaining distribution and share in those markets and successfully launching this quarter into Saudi Arabia. In snacks, we grew net sales organically by about 13% year on year, with broad-based growth across the region led by Pringles. In cereal, our organic net sales grew 4%, and this too was broad-based across the region, in spite of category elasticity.

Speaker Change: Meanwhile, we continue to drive strong growth for Kellogg's Noodles in South Africa and Egypt, gaining distribution and share in those markets, and successfully launching this quarter into Saudi Arabia.

Steve Cahillane: In snacks, we grew Net Sales organically by about 13% year-on-year, with broad-based growth across the region led by Pringles. In cereal, our organic net sales grew 4%, and this too was broad-based across the region in spite of category elasticities. For AMEA in 2024, we continue to watch for the elements listed on slide 38.

Speaker Change: In snacks, we grew NetSales organically by about 13% year-on-year, with broad-based growth across the region, led by Pringles.

Speaker Change: In serial, our organic net sales grew 4%, and this too was broad-based across the region, in spite of category elasticities.

Steven Cahillane: For Amia, in 2024, we continue to watch for the elements listed on slide number 38. We expect this region to record yet another year of good organic net sales growth, and we expect growth both within Nigeria and in the rest of the region. Noodles remains a growth business for us in Africa. Pringles will sustain its momentum, supported by innovation, pack formats, and distribution. And we expect to sustain growth in cereal, led by emerging markets. Meanwhile, Amia's improvement of profit margins should continue.

Speaker Change: For EMEA in 2024 we continue to watch for the elements listed on slide number 38. We expect this region to record yet another year of good organic net sales growth and we expect growth both within Nigeria and in the rest of the region.

Steve Cahillane: We expect this region to record yet another year of good organic net sales growth, and we expect growth both within Nigeria and in the rest of the region. Noodles remains a growth business for us in Africa. Pringles will sustain its momentum supported by innovation, pack formats, and distribution, and we expect cereal sales to sustain growth led by emerging markets. Meanwhile, Amiya's improvement in profit margins should continue. So let me summarize with slide number 40.

Speaker Change: Noodles remains a growth business for us in Africa. Pringles will sustain its momentum supported by innovation, pack formats, and distribution.

Speaker Change: and we expect to sustain growth in cereal led by emerging markets.

Speaker Change: Meanwhile, Amiya's improvement of profit margins should continue.

Steven Cahillane: So let me summarize with slide number 40. With each passing quarter, including the second quarter, it should be increasingly clear that Kelanova today has a strategy and portfolio that is more focused, more growth-oriented, and more profitable than ever before. We're delivering on algorithm performance amidst a challenging industry environment. We have strengthened commercial plans for 2024, and they are already starting to yield gradual improvements in volume. We are committed to improving our profit margins, and this improvement remains a head of pace. We are raising our guidance, thanks to a strong first half; an enviable position to be in, especially in the current industry environment.

Speaker Change: So let me summarize with slide number 40.

Steve Cahillane: With each passing quarter, including the second quarter, it should be increasingly clear that Kellanova today has a strategy and portfolio that is more focused, more growth-oriented, and more profitable than ever before. We're delivering on algorithm performance amidst a challenging industry environment. We have strengthened our commercial plans for 2024, and they are already starting to yield gradual improvements in volume. We are committed to improving our profit margins, and this improvement remains ahead of schedule. We are raising our guidance thanks to a strong first half, an enviable position to be in, especially in the current industry environment. But we refuse to sit still.

Speaker Change: With each passing quarter, including the second quarter, it should be increasingly clear that Kellanova today has a strategy and portfolio that is more focused, more growth-oriented, and more profitable than ever before.

Speaker Change: We're delivering on-algorithm performance amidst a challenging industry environment.

Speaker Change: We have strengthened commercial plans for 2024, and they are already starting to yield gradual improvements in volume. We are committed to improving our profit margins, and this improvement remains ahead of pace.

Speaker Change: We are raising our guidance, thanks to a strong first half, an enviable position to be in, especially in the current industry environment. And yet, we refuse to sit still. We continue to create the future, be it in adding growth capacity in Pringles and emerging markets,

Steven Cahillane: And yet we refuse to sit still. We continue to create the future, be it in adding growth, capacity, and Pringles in emerging markets, expanding Cheese It into Europe, expanding noodles in Africa, or continuing to increase investment behind a portfolio with some of the most differentiated brands in the world. This commitment to driving sharing the value is shared by all of our Kelanova team members, who deserve our thanks for all that they do.

Steve Cahillane: We continue to create the future, be it in adding growth capacity in Pringles and emerging markets, expanding Cheez-It into Europe, expanding Noodles in Africa, or continuing to increase investment behind a portfolio with some of the most differentiated brands in the world. This commitment to driving value is shared by all of our Kellanova team members, who deserve our thanks for all that they do. And now, we'd be happy to take your questions. Thank you. We will now begin the question and answer session with publishing analysts. Analysts may enter the queue by pressing the star key and the number one on their telephone keypad.

Speaker Change: Expanding Cheez-It into Europe , Expanding Noodles in Africa, or Continuing to Increase Investment Behind a Portfolio with Some of the Most Differentiated Brands in the World.

Speaker Change: This commitment to driving sharing of value is shared by all of our Kellanova team members who deserve our thanks for all that they do. And now we'd be happy to take your questions.

Unknown Executive: And now we'd be happy to take your questions.

Operator: Thank you. We will now begin the question and answer session with publishing analysts. Analysts may enter the queue by pressing the star key and the number one on the telephone keeper.

Operator: As a courtesy to your colleagues, please limit yourself to one question.

Robert Dickerson: Our first question comes from Rob Dickerson with Jeffries. Your line is open. Please go ahead. Thanks so much. Good morning. I guess clearly we could see improvement in North America volumes, which is great. Being a part of that looks to be from some proactive investment.

Operator: As a courtesy to your colleagues, please limit yourself to one question. Our first question comes from Rob Dickerson on behalf of Jeffreys. Your line is open. Please go ahead. Super. Thanks so much.

Rob Dickerson: Good morning. So, Steve, I guess, you know, clearly, we can see the improvement in North America volumes, which is great. You know, part of that looks to be some, you know, from some proactive price investment. So I'm just curious, you know, I think you said, you know, as you think through the back half, we do expect, you know, back half, sustained volume improvement. And then you have, you know, a great innovation plate.

Steven Cahillane: So I'm just curious. I think you said, as you think through the back half, you do expect back half the sustained volume improvement, and then you have great innovations laid. So really, the simple question is just, as you go for the sustained volume improvement in the back half of North America, would you say most of that is coming from the think like a little distribution, innovation, or have you just been very proactive in the right way? You know, it kind of focused on certain price points that have been driving that volume improvement relative to the industry.

Jack: The simple questions Jack.

Jack: As you.

Rob Dickerson: So, you know, really, you know, the simple question is just, you know, as you go for the Sustained Volume Improvement in the back half of North America, would you say most of that is coming from, do you think, like, a little distribution, innovation, or, you know, have you just been very proactive in the right way, you know, kind of focused on certain price points that's been driving that volume improvement relative to the industry? Thank you.

Jack: Go for the sustained volume improvement in the back half in North America would you say most of that is coming from do you think about your collateral distribution innovation or have you just been very proactive in the right way.

Jack: Focus on certain price points that have been driving that volume improvement relative to the industry.

Steven Cahillane: Yeah, thanks for the question, Rob. What I tell you is, you know, we've talked about getting back to full commercial activation, and that's really the story in North America. It's really led by Pringles, which returned first and has terrific momentum. It includes increased distribution with new shelf reset in the second quarter, as you mentioned. It includes a full commercial innovation activation. You know, we're back to levels that we haven't seen since pre-pandemic, and it's, you know, it's really that Rob. It's a full commercial activation, gaining momentum. You know, we returned a volume growth in the second quarter in North America.

Speaker Change: Yes. Thanks for the question, Rob what I would tell you as we've talked about getting back to full commercial activation and that's really the story in North America, It's really led by Pringles, which returned first and has terrific momentum.

Steve Cahillane: Yeah, thanks for the question, Rob. What I'll tell you is, you know, we've talked about getting back to full commercial activation. And that's really the story in North America.

Speaker Change: <unk> increased distribution with new shelf resets in the second quarter. As you mentioned it includes a full commercial innovation activation, we're back to levels that we haven't seen since pre pandemic.

Speaker Change: And it's really that Rob its a full commercial activation gaining momentum.

Steve Cahillane: It's really led by Pringles, which returned first and has terrific momentum. It includes increased distribution with new shelf resets in the second quarter, as you mentioned; it includes a full commercial innovation activation. You know, we're back to levels that we haven't seen since before the pandemic. And it's, you know, it's really that Rob, it's a full commercial activation, gaining momentum. We return to volume growth in the second quarter in North America, that will continue into the third and fourth quarters and actually improve as activation around Cheez-It and some of our other brands starts to catch up to what we've done with Pringles. So and, you know, in terms of pricing, we had to take, as you well know, a lot of prices in the last two years.

Speaker Change: Returned to volume growth in the second quarter, North America that will continue into the third and fourth quarter and actually improve.

Steven Cahillane: That will continue into the third and fourth quarter and actually improve as activation around Cheese It and some of our other brands starts to catch up to what we've done with Pringles. So, and, you know, in terms of pricing, you know, we had to take, as you well know, a lot of price in the last two years. And so we're returning to the type of price promotion activity more or less that we saw a pre-pandemic in a very rational environment. So, bright, you know, bright spot for us is, you know, the second half of the year and the volume that we've seen in North America.

Speaker Change: As activation around Cheez, it and some of our other brands starts to catch up to what we've done with pringles, So and in terms of pricing we had to take as you well know a lot of price in the last two years and so we're returning to the type of price promotion activity more or less that we saw pre pandemic.

Speaker Change: Any rational environment so.

Speaker Change: <unk>.

Speaker Change: A bright spot for US is the second half of the year and the volume that we've seen.

Speaker Change: North America.

Unknown Executive: Sorry, super.

Speaker Change: Alright Super.

Unknown Executive: Four questions.

Speaker Change: One question.

Steve Cahillane: And so we're returning to the type of price promotion activity, more or less that we saw pre-pandemic in a very rational environment. So the bright spot for us is, you know, the second half of the year and the volume that we've seen in North America. Sorry, super long question. We now turn to Kris Carey with Wells Fargo Securities. Your line is open, please go ahead. Hi, good morning everyone.

Christopher Carey: We now turn to Chris Kerry with Wells Fargo Securities. Your line is open. Please go ahead. Good morning, everyone. I wanted to ask about your, I wanted to ask about Europe, the volume under pressure as pricing is decelerating, but you also have some innovation coming. I think you highlighted Cheese It. So, just how would you characterize, you know, your go forward in Europe? I know looking for another year of growth, but maybe, you know, how do you kind of exit rate in the complexion of trend in the market as you think about balancing price and going forward?

Speaker Change: We now turn to Chris Harris with Wells Fargo Securities. Your line is open. Please go ahead.

Speaker Change: Yes.

Chris Harris: Good morning, everyone.

Kris Carey: I wanted to ask you about your, I wanted to ask you about Europe. Volume is under pressure as pricing is decelerating, but you also have some innovation coming. I think you highlighted Cheez-It.

Chris Harris: I wanted to ask about Europe, I wanted to ask about Europe.

Speaker Change: The volume.

Speaker Change: Under pressure pricing is decelerating, but you also have.

Speaker Change: Innovation coming thank you highlighted achieved it.

Steve Cahillane: So just how would you characterize, you know, your go forward in Europe? I know you're looking for another year of growth, but maybe how do you view the kind of exit rate and the complexion of the trend in the market as you think about balancing price and voluntary forward? Yeah, Chris, so I'd start with, you know, Europe is a tough environment, always has been, and it's even tougher this year. But in the second quarter, we faced our toughest comps, particularly with Pringles.

Speaker Change: How would you characterize your go forward in Europe, I know looking for another year.

Speaker Change: Gross but maybe how do you view kind of exit rate in the complexion of trend in the market as you think about balancing price and volume going forward.

Steven Cahillane: Yeah, Chris, so I'd start with, you know, Europe is a tough environment. Always has been; you know, it's tough this year, but in the second quarter we faced our toughest comps, particularly with Pringles. And you heard us saying the prepared remarks that we have a lot of confidence we're going to continue to grow in Europe, and that's going to be in the back half of the year. So, we've got great back half plans. Our football sponsorship was really started in late in this quarter, so that'll continue on to this quarter. So, lots of confidence in Europe, lots of confidence in Europe continue to grow.

Speaker Change: Yes, Chris So let's start with Europe is a tough environment always has been it's tough this year, but in the second quarter, we faced our toughest comps, particularly with pringles and you've heard us say in the prepared remarks that we have a lot of confidence we're going to continue to grow in Europe, and that's going to be in the back half of the year. So we've got great back half plans our football sponsor.

Steve Cahillane: And you heard us say in the prepared remarks that we have a lot of confidence, we're going to continue to grow in Europe, and that's going to be in the back half of the year. So we've got great back half plans. Our football sponsorship really started late this quarter.

Speaker Change: <unk> was really started late in this quarter. So that will continue on to this quarter. So lots of confidence in Europe lots of confidence in Europe, continuing to grow you saw that our snacks did grow in the second quarter that will accelerate in the third and fourth quarter based on the Activations and we are very excited about the cheese at launch in the fourth quarter and when I say very excited.

Steven Cahillane: You saw that snacks did grow in the second quarter; that will accelerate in the third and fourth quarter based on the activations. And we are very excited about the cheese at launch in the fourth quarter. And when I say very excited, it's, you know, it's just a great program that they put together in the UK. The customers are excited about it; the consumer testing of the product is outstanding. And so, we see big things for Jesus, you know, in the next couple of years, it's going to be, it's going to be a real growth thrive for us.

Steve Cahillane: So that'll continue on to this quarter. So lots of confidence in Europe, lots of confidence in Europe continuing to grow. You saw that snacks did grow in the second quarter; that will accelerate in the third and fourth quarter based on activations. And we are very excited about the Cheez-It launch in the fourth quarter. And when I say very excited, it's, you know, it's just a great program that they put together in the UK, the customers are excited about it, and the consumer testing of the product is outstanding. And so we see big things for Cheez-It in the next couple of years. It's going to be, it's going to be a real growth driver for us. I am so bullish on Europe.

Speaker Change: It's just a great program that they put together in the UK that customers are excited about it the consumer testing of the product is outstanding and so we see big things for <unk> in the next couple of years, it's going to be it's going to be a real growth driver for us so bullish on Europe, despite a challenging environment I know that.

Steven Cahillane: So, bullish on Europe despite a challenging environment. I know that makes us a little different than some others, but, you know, our team has delivered now, you know, seven years of growth in Europe. And so, that will continue this year.

Steve Cahillane: Despite a challenging environment, I know that makes us a little different from some others. But you know, our team has delivered, now, seven years of growth in Europe. And so that will continue this year. Thank you.

Speaker Change: Makes us a little different than some others, but our team has delivered now seven years of growth in Europe, and so that will continue this year.

Unknown Executive: Thank you.

unknown: And if I could, just this is a follow up on the pricing comment in North America. It's great to see the volumes in place. You did make a comment, I think, in the prepare to mark about some year ago, you know, timing impacts with promotion or price activity. But would you expect pricing to stay negative, as you're clearly seeing this, this positive, you know, constructive uplift in volume as you go forward? Thanks.

Speaker Change: Thanks, Steve and if I could just as a follow up on the on the pricing comment in North America, it's great to see the volumes.

Unknown Executive: And if I could just, this is a follow-up on the pricing comment in North America. It's great to see the volumes. And plus, you didn't make a comment. I think in the prepared a market about some year ago, you know, timing impacts with promotion or price activity. But would you expect pricing to say negative as you, and certainly as you're clearly seeing this positive, you know, constructive uplift and volume as you go forward. Thanks. You know, we see pricing, you know, remaining very, you know, very rational in the environment. We remember, we're laughing a real dearth of activity last year.

Speaker Change: Make a comment I think in the prepared remarks about some year ago.

Speaker Change: Timing impact with promotion or price activity, but would you expect pricing to stay negative.

Speaker Change: Certainly as you are clearly seeing this.

Speaker Change: Positive constructive uplift in volume.

Speaker Change: We go forward. Thanks, so much.

Speaker Change: We see pricing remaining very.

Steve Cahillane: You know, we see pricing, you know, remaining very, you know, very rational in the environment; we remember we're lapping a real dearth of activity last year. So that's what you see when you see our year over year comparisons. You know, we've talked about it quite a lot; we pulled back on commercial activation because of the bottlenecks shortages.

Speaker Change: Very rational in the environment, we remember we're lapping a real dearth of activity last year. So that's what you see when you see our year over year comparisons we've talked about it quite a lot we pulled back on our commercial activation because of the bottlenecks shortages.

Steven Cahillane: So that's what you see when you see our year-over-year comparisons. You know, we've talked about it quite a lot. We, you know, we pulled back on commercial activation because of the bottlenecks shortages. We were perhaps a little late compared to others in returning, but we've returned. But it's all, you know, very rational, very prudent. And, you know, we see good volume growth and a good balance between price, mix, volume in the back after the year for North America.

Steve Cahillane: We were perhaps a little late compared to others in returning, but we returned, and it's all, you know, very rational, very prudent. And you know, we see good volume growth and a good balance between price and mixed volume in the back half of the year for North America. Okay, thanks so much.

Speaker Change: Perhaps a little late compared to others in returning but we've returned but its all <unk>.

Speaker Change: Rational very prudent and we see good volume growth and a good balance between price mix volume in the back half of the year for North America.

Unknown Executive: Okay. Thanks so much.

Speaker Change: Okay. Thanks, so much.

Peter Galbo: Our next question comes from Peter Galbo with Bank of America. Your line is open. Please go ahead. Hey guys, good morning. Thanks for taking the question.

Speaker Change: Our next question comes from Peter Galbo with Bank of America. Your line is open. Please go ahead.

Peter Galbo: Our next question comes from Peter Galbo with Bank of America. Your line is open, please go ahead. Hey guys, good morning. Thanks for taking the time.

Peter Galbo: Hey, guys. Good morning, Thanks for taking the question.

Speaker Change: Good morning, Peter.

Steve Cahillane: More here. Steve, maybe in our just continued tour of the world here, having gone through North America and Europe, you know, Latin America, I think you kind of had more of a standout quarter relative to what some of the peers have said, particularly around maybe some, Delay in Stimulus Payments in Mexico, and then also [inaudible] Yeah, so it was a good quarter in Latin America, you know, cereal and snacks all growing Mexico having a terrific quarter, you know, kind of record shares in the cereal business in Mexico, and Pringles continuing to do extremely well.

Speaker Change: Steve Steve maybe in or just continued tour of the world here, Kevin gone through North America and Europe.

Steven Cahillane: Maybe in our just continued tour of the world here, having gone through North America and Europe. You know, Latin America. I think you kind of had more of a standout quarter relative to what some of the peers have said, particularly around maybe some, you know, delay and stimulus payments in Mexico. And then also some weaknesses in Brazil. So maybe you can just talk a bit about more specifically the Kelenova quarter in Mexico and Brazil and then relative to kind of the macro that you're seeing there on the ground.

Speaker Change: Latin America, I think you kind of had more of a standout quarter relative to what some of the peers have said.

Speaker Change: Particularly around maybe some some.

Speaker Change: Les and stimulus payments in Mexico.

Speaker Change: And then also some some weakness in Brazil. So maybe you can just talk a bit about more specifically the calendar quarter.

Speaker Change: In Mexico, and Brazil, and then relative to kind of the macro that you're seeing there on the ground.

Steven Cahillane: Yeah. So it was a good quarter in Latin America. You know, serial and snacks all growing. Mexico having a terrific quarter, you know, kind of record shares in the serial business in Mexico. And Pringles continuing to do extremely well despite being somewhat capacity constrained. We're sourcing out of Jackson, Tennessee. You know, next year we'll be sourcing out of Mexico. So really bullish on Pringles' future opportunities in Mexico because of local sourcing.

Speaker Change: Yes. So it was a good quarter in Latin America, cereal and snacks, all growing Mexico, having a terrific quarter.

Steve Cahillane: Despite being somewhat capacity constrained, we're sourcing out of Jackson, Tennessee, and next year, we'll be sourcing out of Mexico. So, really bullish on Pringles and future opportunities in Mexico because of local sourcing. Brazil, you have to remember; Brazil was really impacted by some pretty devastating floods.

Speaker Change: A record shares in the cereal business in Mexico, and bring those continuing to do extremely well.

Speaker Change: Despite being somewhat capacity constrained because we're sourcing out of Jackson, Tennessee next year will be sourcing out of Mexico, So really bullish on pringles future opportunities in Mexico because of local sourcing Brasilia you have to remember, Brazil was really impacted by some pretty devastating floods.

Steven Cahillane: Brazil, you have to remember Brazil was really impacted by some pretty devastating floods. But the underlying business in Brazil remains strong, really driven also by Pringles. Pringles momentum in Brazil is very, very good. So the Brazilian business is strong, but impacted by, you know, pretty, pretty devastating floods that obviously we all saw on the news.

Speaker Change: But the underlying business in Brazil remained strong really driven also by Pringles Pringles momentum in Brazil is very very good. So the Brazilian business is strong but impacted by pretty pretty devastating.

Speaker Change: Floods.

Speaker Change: Obviously, we all saw on the news.

Speaker Change: Hum.

Robert Moskow: Oh, and the next question comes from Robert Moscow with TD Cohen. Your line is open. Please go ahead. Hi, thank you. I was wondering if you could talk about North America price sensitivity in terms of like pack sizes and the price points. You know, one of your competitors said that, you know, when price points get above a certain level, like above $4, it's led to consumers actually exiting the category, and they've made some pretty substantial changes to adjust to that. Would you agree with that? Or is it just not really affecting your portfolio? Thanks.

Steve Cahillane: But the underlying business in Brazil remains strong, really driven also by Pringles. Pringles momentum in Brazil is, is, very, very good. So the Brazilian business is strong, but impacted by, you know, pretty, pretty devastating floods that we all saw on the news. Our next question comes from Robert Moskow with TD Cohen. Your line is open, please go ahead. Hi.

Speaker Change: Our next question comes from Robert Moskow with TD Cowen. Your line is open. Please go ahead.

Robert Moskow: Thank you. I was wondering if you could talk about North America price sensitivity in terms of like pack sizes and price points. You know, one of your competitors said that when price points get above a certain level, like above $4, it's led to consumers actually exiting the category, and they've made some pretty substantial changes to adjust to that. Would you agree with that? Or is it just not really affecting your portfolio?

Robert Moskow: Hi, Thank you.

Robert Moskow: I was wondering if you could talk about North America price sensitivity in terms of like pack sizes and price points.

Speaker Change: Your competitors said that.

Speaker Change: When price points get above a certain level like above $4.

Speaker Change: It's led to consumers actually exiting the category and they've made some pretty substantial changes to adjust to that.

Speaker Change: Would you agree with that or is it just not really affecting your portfolio. Thanks.

Steven Cahillane: Yeah, Rob, I would agree with that, but I would also say that we've been talking about that for years. But right now it's more extreme because the consumers understand much pressure. So, you know, we've always talked about entry price points. We've always talked about price package architecture; you know, going back a number of years, we've been investing in, you know, the capability to have more pack sizes to hit different price points. But I think what you're hearing in this environment, perhaps more than in a very long period of time, the absolute dollars are under more pressure.

Speaker Change: Yes, I would.

Steve Cahillane: Thanks. Yeah, Rob, I would agree with that. But I would also say that we've been talking about that for years. But right now, it's more extreme because the consumer is under so much pressure. So you know, we've always talked about entry price points. We've always talked about price package architecture, you know, going back a number of years. We've been investing in the capability to have more pack sizes to hit different price points.

Speaker Change: With that but I would also say that we've been talking about that for years, but right now it's more extreme because the consumers under so much pressure. So we've always talked about entry price points.

Speaker Change: We've always talked about price package architecture going back a number of years, we've been investing in the capability to have more pack sizes to hit different price points, but I think what youre hearing in this environment.

Speaker Change: Perhaps more than in a very long period of time, the absolute dollars are under more pressure. So the basket that people can fill in.

Steve Cahillane: But I think what you're hearing in this environment, perhaps more than in a very long period of time, the absolute dollars are under more pressure. So you know, the basket that people can fill is affected, obviously, by the absolute dollars in their pocket. And as the consumer is so strained, it is, you know, it's become heightened in terms of making sure that you hit those right price points, particularly with consumers under $100,000 in household income with kids. That's where we're seeing the price sensitivity. And it also varies by where you are in the monthly cycle as well.

Steven Cahillane: So, you know, the basket that people can fill is affected, obviously, by the absolute dollars in their pocket. And as the consumer is so strained, it is, you know, to become heightened in terms of making sure that you hit those right price points.

Speaker Change: Is affected obviously by the absolute dollars in their pocket.

Speaker Change: The consumer is so strained it is.

Speaker Change: It's become heightened in terms of making sure that you hit those price points, particularly with consumers under $100000 in household income with kids, that's where we're seeing the price sensitivity and it also it varies by where you are in the monthly cycle as well. So we look at all of that is important more.

Steven Cahillane: Particularly with consumers under $100,000 in household income with kids, that's where we're seeing the price sensitivity. And it also, it varies by where you are in the monthly cycle as well. So, you know, we look at all of that. It is more important in this environment than perhaps, you know, a more normal environment.

Speaker Change: Important in this environment environment than perhaps.

Speaker Change: A more normalized environment.

Steven Cahillane: Can I ask a follow-up? How meaningful is your Pringles launch that the mixed Pringles launch in the back half? And what was the insight that made you think that, interesting something out of the can, is going to compete well in that very competitive marketplace?

Speaker Change: And can I ask a follow up how meaningful is your pringles launch that.

Steve Cahillane: So you know, we look at all of that; it is important, more important in this environment than perhaps, you know, a more normalized environment. Can I ask a follow up? How meaningful is your Pringles launch that is the mix the mix Pringles launch in the back half? And what was the insight that made you think that, or that introducing something out of the can is going to compete well in that very competitive market?

Speaker Change: The mix the mix Pringles.

Speaker Change: Launch in the back half and what was the.

Speaker Change: What was the insight that made you think that for that.

Speaker Change: Coming introducing something out of the can is going to come.

Speaker Change: Well in that very competitive marketplace.

Steven Cahillane: Yeah, so, you know, I wouldn't look at Pringles' mingles being a meaningful difference maker in terms of NSV forecast to the balance leaders. We're only starting to hit it. I really will activate it more in the first quarter of next year. The insight is that people love the brand.

Speaker Change: Yes so.

Steve Cahillane: Yeah, so, you know, I wouldn't look at Pringles Mingles as a meaningful difference maker in terms of our NSV forecast for the balance of the years. We're only starting to tip it, and really will activate it more in the first quarter of next year.

Speaker Change: Wouldn't look at Pringles mingles being a meaningful.

Speaker Change: The difference maker in terms of our NSV forecast for the balance of that is we're only starting to.

Speaker Change: It really more activated.

Speaker Change: More in the first quarter of next year. The insight is that people love the brand to begin with we.

Unknown Executive: We haven't stretched that brand outside the can, so that's meaningful information. The product is extruded. It is in the shape of a bowtie, Mr. Pringle's bowtie. So it plays more on the Mr. P iconography than it does the can. We believe the product tests extremely well, and Pringles stands for snacking in so many ways. So we're giving a launch outside the can, and we'll see how it goes. Great.

Speaker Change: We haven't stretched that brand outside the can so thats a meaningful innovation.

Speaker Change: Is it rooted in the shape of a bowtie Mr. Pringles both sides. So it plays more on the Mr. P iconography than it does the can we believe the product tested extremely well and pringles stands for snacking in so many ways. So we're giving a launch I began and we will see how it goes.

Steve Cahillane: The insight is that people love the brand to begin with, but we haven't stretched that brand outside the can, so that's a meaningful innovation. The product is extruded, and it is in the shape of a bowtie, Mr. Pringles' bowtie, so it plays more on the Mr. P iconography than it does the can.

Speaker Change: Great. Thank you.

Steve Cahillane: We believe the product tests extremely well. And, you know, Pringles stands for snacking in so many ways. So we're, you know, we're doing a launch outside the can, and we'll see how it goes. Great, thank you. We now turn to David Palmer with Evercore ISI.

David Palmer: Thank you. We now turn to David Palmer with Evacore ISI. Your line is open. Please go ahead. Thanks. I'm going to just ask a couple questions on North America snacks. You said in your comments, Steve, that there was consumption growth in the quarter in 2Q. Was that, you know, we see consumption being down a bit. I assume maybe there was some growth in Canada or beyond the measured channels that we can't see. Maybe you can come up on that.

Speaker Change: We now turn to David Palmer with Evercore ISI. Your line is open. Please go ahead.

David Palmer: Your line is open. Please go ahead. Thanks. Just to ask a couple of questions on North America Snacks. You said in your comments, Steve, that there was consumption growth in the quarter. You, do we see consumption being down a bit? I assume maybe there was some growth in Canada or, beyond the Measure channels that we can't see. Maybe you can comment on that. But more importantly, I'm just wondering, in the data that we are going to be tracking, are you expecting a return to at least that low single-digit growth? (Inaudible) things together are what's leading to consumption growth. Going forward to your question, we would expect to see improvement in the measured channels.

David Palmer: Okay. Thanks.

David Palmer: Just to ask a couple questions on North America snacks.

David Palmer: Said in your comments, Steve that there was consumption growth in the quarter in <unk>.

Speaker Change: Was that we see consumption being down a bit.

Speaker Change: Assume maybe there was some growth in Canada or.

Speaker Change: Beyond the measured channels that we can't see maybe you can comment on that but more importantly, I'm just wondering in the data that we are going to be tracking are you expecting return to at least that low single digit growth that you were expecting at the beginning of the year for the second half and just the consumption in the middle of plus type stuff that has pretty good.

David Palmer: But more importantly, I'm just wondering if the data that we are going to be tracking, are you expecting a return to at least that low single-digit growth that you're expecting in the beginning of the year for the second half in just the consumption. The Mule Plus type stuff that has pretty good coverage. Would you expect that? And would the improvement, if so, would the improvement be in the areas you were targeting earlier in the year around some of the merchandising and innovation on Cheese It and Rice Crispy Treats? Thank you. David, thanks for the question.

Speaker Change: Average would you would you expect that in and it would be improvement.

Speaker Change: If so would the improvement being the areas you were targeting earlier in the year around some of the merchandising and innovation on Cheez, It and rice Krispies treats thank you.

Speaker Change: Yes, David Thanks for the question.

Steven Cahillane: What you're seeing in the measured channels, you know, you hit on it. What you're not seeing is very good growth in Canada and very good growth in our away from home channels. So the non-measure channels performed at a rate that led to consumption growth overall in North America. Pringles also, you see doing extremely well lots and lots of momentum on Pringles. You see that in the measured channels, but it's also the same in the non-measure channels. All those things together are what's leading the consumption growth. Going forward to your question, we would expect to see improvement in the measured channels.

Speaker Change: What youre seeing in measured channels you hit on it what what you're not seeing is very good growth in Canada and very good growth in our away from home channels. So the non measured channels.

Speaker Change: Formed at a rate that.

Speaker Change: Led to consumption growth overall in North America Pringles also you see doing extremely well lots and lots of momentum on pringles, you'll see that in the measured channels.

Speaker Change: But it's also the same in.

Speaker Change: In the non measured channel. So all those things together are what's leading to consumption growth going forward to your question, we would expect to see improvement in the measured channels as as I mentioned <unk> seen in Pringles, which was kind of first out of the gate.

Steven Cahillane: As I mentioned, you see in the Pringles, which was kind of first out of the gate with our investments and with returning to full commercial activation. You'll see that with the other big brands. You'll see that with cheese it in the back half of the year, as well as rice crispy treats, Pop Tarts, and Ego. So we would expect the measured channels to start to catch up to some of the non-measured channels as we get into the second half of the year and exit the year.

Speaker Change: With our investments and returned to full commercial activation youll see that with the other big brands Youll see that with Cheez. It in the back half of the year as well as rice Krispies treats pop tarts and ego.

Speaker Change: So we would expect the measured channels start to catch up to some of the non measured channels as we as we get into the second half of the year and exit the year.

Speaker Change: Sure.

Michael Lavery: Okay, thank you. Oh, next question comes from Michael Lavery, with Pfeiffer Sandler. Your line is open. Please go ahead. Thank you, the morning. Just wanted to go on Nigeria. Yeah, I think I just wanted to touch on Nigeria, and obviously with the pricing, you know, you've got a big lift. But of course, the currency and volumes are a big offset. I know you called out the volume momentum, excluding that. But what are you seeing there? Maybe is sequentially, you know, when could that improve? Have you seen any kind of digestion of the pricing that the consumers are adjusting, and maybe that you lost those things are starting to mitigate it.

Speaker Change: Okay. Thank you.

Speaker Change: Our next question comes from Michael Lavery with Piper Sandler. Your line is open. Please go ahead.

Steve Cahillane: As I mentioned, you've seen in Pringles, which was kind of the first out of the gate, with our investments, and with a return to full commercial activation, you'll see that with the other big brands, you'll see that with cheese in the back half of the year, as well as Rice Krispies treats, Pop Tarts, and Eggo. So we would expect the measured channels to start to catch up to some of the non-measured channels, as we know, as we get into the second half of the year and end the year. Our next question comes from Michael Lavery with Piper Sandler. Your line is open; please go ahead. Thank you. Good morning.

Speaker Change: Okay.

Michael Lavery: Thank you good morning.

Michael Lavery: I just wanted to touch on Nigeria and obviously with the pricing, you know, you've got a big lift, but of course, the currency and volumes are a big offset. I know you called out the volume momentum, excluding that. But what are you seeing there?

Speaker Change: Just wanted to touch on Nigeria.

Speaker Change: Yes.

Michael Lavery: Wanted to touch on Nigeria.

Speaker Change: Obviously with the.

Speaker Change: The pricing.

Speaker Change: Got it.

Speaker Change: A big lift but of course, the currency and the volumes are a big offset.

Speaker Change: I know you called out the volume momentum excluding that but.

Speaker Change: What are you seeing there maybe.

Steve Cahillane: Maybe sequentially, you know; when could that improve? Have you seen any kind of digestion of the pricing that the consumers are adjusting to and maybe the U.S. cities are starting to mitigate? Just trying to understand.

Speaker Change: It is sequentially.

Speaker Change: When could that improved have you seen any kind of digestion of the pricing.

Speaker Change: The consumers are adjusting and maybe the last dose foods that are starting to mitigate.

Amit Banati: Just try and understand. Obviously, that's part of your emerging market footprint. You can see that there's a lot of things going on here. I think the only thing that I added is that elasticity came in better than expected. The volume declines were in the teams. It was definitely better than what we had expected in the quarter. I think we need to continue to take some more pricing, some of our other categories. I think we've assumed that elasticity would be there in the second half. We'll see.

Speaker Change: Just trying to understand obviously thats part of your emerging market footprint and you've called out as growth drivers that ordinarily wouldn't be kind of a.

Steve Cahillane: Obviously, that's part of your emerging market footprint. You call them growth drivers that ordinarily wouldn't be kind of a point of stress. When can that turn and really be a proper volume growth driver again? High teens against a price mix gain of more than 40% year on year. So that's obviously hugely substantive.

Speaker Change: Point of stress when can that turn and really be a proper volume growth driver again.

Speaker Change: Yeah. Thanks for the question tolerant JV collectively recorded a volume decline in the high teens against the price mix gain of more than 40% year on year. So that's obviously hugely substantive and we've been talking about the elasticities.

Steve Cahillane: And we've been talking about the elasticities and the fact that elasticities would have to, you know, would have to start to show up. And, you know, we're seeing that. We also talked about it being in our forecast for the back half of the year. We're being very prudent about that. We actually think there might be some upside to that. As we know, as the price lands, has landed in Africa.

Speaker Change: And the fact that elasticities would have to.

Speaker Change: Have to start to show up and we're seeing that we also talked about it being in our forecast for the back half of the year, we're being very prudent about that we actually think there might be some upside to that.

Speaker Change: As we as the price lands.

Steve Cahillane: But you know, we'll just have to wait and see. The team is executing very well on the ground, but the consumer in Nigeria is under a tremendous amount of strain. You can see that in the headlines. It's in our forecast. And, you know, perhaps there may be some upside. I don't know, Amit. Do you want to add anything?

Speaker Change: Has landed in Africa, but we'll just have to wait and see the team is executing very well on the ground, but the consumer in Nigeria is under a tremendous amount of strain that you can see that in the headlines.

Speaker Change: It's in our forecast and perhaps there may be some upside.

Speaker Change: Do you want to add anything no I think the only thing I'd add is that elasticity came in better than expected.

Amit Banati: No, I think the only thing that I added was that elasticities came in better than expected. So while, you know, the volume declines were in the teens, it was definitely better than what we had expected in the quarter. I think, you know, we need to continue to take some more pricing in some of our other categories. And so I think, you know, we assumed that elasticities would be there in the second half. And, you know, we'll see.

Speaker Change: Volume declines were in the teens.

Speaker Change: It was definitely better than what we had expected in the quarter.

Speaker Change: I think we need to continue to take some more pricing in some of our other categories.

Speaker Change: And so I think we've assumed that allows us that these would be down in the second half.

Amit Banati: We're encouraged by what we saw in the second quarter. But, you know, we're being prudent about the rest of the year. Okay, thanks so much. We now turn to Thomas Palmer with City.

Lucy: Lucy we're encouraged by what we saw in the second quarter.

Amit Banati: We're encouraged by what we saw in the second quarter, but we're being prudent about the rest of the year. Thanks so much.

Lucy: We are being prudent about the rest of the year.

Lucy: Okay. Thanks, so much.

Speaker Change: Yes.

Thomas Palmer: We now turn to Thomas Palmer with City. Your line is open. Please go ahead. Good morning, and thanks for the question. You indicated that the guidance increase reflects mainly the first half upside; in the second half, expectations were a little changed. I wanted to ask on the operating profit. I mean, maybe your expectations were different than consensus estimates, but I think the upside was quite a bit more than consensus estimates had. And just trying to understand if there's any incremental call outs, which you think about the second half of the year in terms of pressure on that line, that maybe right would kind of let me see that upside the guidance.

Speaker Change: We now turn to Thomas Palmer with Citi. Your line is open. Please go ahead.

Thomas Palmer: Your line is open, please go ahead. Good morning, and thanks for the question. You indicated that the guidance increase reflects mainly the first half upside, and the second half expectations were a little changed. I wanted to ask, on the operating profit, maybe your expectations were different than consensus estimates, but I think the upside was quite a bit more than consensus estimates had. And just trying to understand if there's any incremental callouts as we think about the second half of the year in terms of pressure on that line, that maybe would kind of limit the upside to the guidance in terms of how you framed it. So not really.

Thomas Palmer: Good morning, and thanks for the question.

Thomas Palmer: You indicated that the guidance increase reflects mainly the first half upside in the second half expectations were little changed I wanted to ask.

Thomas Palmer: On the operating profit.

Speaker Change: Maybe your expectations were different than consensus estimates, but I think the upside is quite a bit more than consensus estimate pad and just trying to understand if there's any incremental call outs as we think about the second half of the year in terms of.

Speaker Change: Pressure on that line.

Speaker Change: That maybe.

Speaker Change: Right.

Speaker Change: See that upside the guidance.

Speaker Change: In terms of how you framed it.

Amit Banati: So, no, clearly, I mean, you know, I think if you kind of look at, and we've talked this previously as well, right? The gross margin progression, really moderate in the second half as some of the things that we lacked, you know, start moderating. You know, we obviously had the PSA pass through last year in quarter four. So, you know that, so we'd be lapping that. I think, you know, the bottlenecks and shortages, which is a big driver of improved gross margin, particularly in quarter one. I think, you know, that's formally behind us. You saw a little bit of that in quarter two, but it was largely in quarter one.

Speaker Change: No not really I mean, I think if you kind of look at and we felt this previously as well right. The gross margin progression will moderate in the second half as some of the things that we lapped.

Amit Banati: I mean, you know, I think if you kind of look at, and we've talked about this previously as well, right, the gross margin progression will moderate in the second half as some of the things that we've lapped start moderating. We obviously had the PSA pass through last year in quarter four. So you know, that's, so we'd be lapping that. I think, you know, the bottlenecks and shortages, which were a big driver of improved gross margin, particularly in quarter one, I think, you know, that's firmly behind us. We saw a little bit of that in quarter two, but it was largely in quarter one.

Speaker Change: <unk> moderating.

Speaker Change: We obviously had the TSA bumps through last year in quarter four.

Speaker Change: So we'll be lapping that.

Speaker Change: Think another bottleneck in shortages, which was a big driver of improved gross margin, particularly in quarter. One I think that's fully behind us and you saw a little bit of that and going to do but it was largely in quarter. One so you want to add that.

Amit Banati: So you know, you want to add that in the second half, and then you know, the country's mixed impact driven by, you know, the Naira in Nigeria, but also you'll start lapping that if you recall last year, the biggest devaluation in the Naira was kind of around this time.

Amit Banati: So, you know, you want to have that in the second half. And then, you know, the country mixed impact driven by, you know, the Naira in Nigeria. We'll also, you'll start lapping that if you recall last year, you know, the biggest evaluation in the Naira was around this time, certain quarter three. So, you know, you're going to start lapping that. So, you know, we continue to, you know, we're very pleased with the progress that we're making on the margin. It's coming in better than expected. But, you know, we continue to see progression, but not as much as we saw in the first half because of some of the items that we are lapping.

Speaker Change: In the in the second half and then the country mix impact driven by the Naira and Nigeria will also youll start lapping that if you recall last year. The biggest devaluation in Idaho was around this time so in quarter three so.

Speaker Change: Youre going to start lapping that so we continue to we're very pleased with the progress that we're making on our margins.

Speaker Change: It's coming in better than expected.

Speaker Change: We've continued to see progression but.

Amit Banati: So in quarter three, you're going to start lapping that. So we continue to, you know, we're very pleased with the progress that we're making on the margins. It's coming in better than expected. But you know, we've continued to see progression, but not as much as we saw in the first half because of some of the items that we are lapping. So I think that's probably the biggest driver.

Speaker Change: But not as much as we saw.

Speaker Change: In the first half because of some of the items that we're lapping so I'd say, that's probably the biggest driver.

Amit Banati: So, I think that's probably the biggest driver. You know, brand building. We saw a good double-digit increase in the first half. That's going to moderate in the second half because, if you recall last year in the second half, we had ramped up brand building. So, you know, the absolute pressure continues to be very good, but when you look at it versus the ramp up in the second half, the growth mod rate. So, I think you know, those are some of the puts and takes in terms of the second half operating profit. Okay.

Speaker Change: Brand building, we saw good double digit increase in.

Speaker Change: The first half that's going to moderate in the second half because if you recall last year in the second half we had ramped up brand building.

Speaker Change: So the absolute pressure continues to be very good but when you look at it wasn't the ramp up in the second half the growth moderates.

Thomas Palmer: You know, brand building, we saw a good double-digit increase in the first half; that's going to moderate in the second half because, if you recall last year, in the second half, we ramped up brand building. So you know, the absolute pressure continues to be very good. But when you look at it versus the ramp up in the second half, the growth is moderate. So I think you know, those are some of the puts and takes in terms of the second half operating profit. Okay, thank you.

Speaker Change: So I think those are some of the puts and takes in terms of the technology.

Speaker Change: Operating profit.

Speaker Change: Okay. Thank you.

Amit Banati: And then on inflation, I think you previously noted that you thought it'd be pretty neutral for the year. Is this still the expectation? And then is there anything to consider in terms of the cadence over the course of 2024 in terms of that rate?

Unknown Executive: Thank you.

Amit Banati: And then on inflation, I think you previously noted you thought it'd be pretty neutral for the year. Is this still the expectation?

Speaker Change: On the inflation I think you'd previously noted you thought it would be pretty neutral for the year is this still the expectation and then is there anything to consider in terms of.

Amit Banati: And then, is there anything to consider in terms of the vacations over the course of 2024 in terms of that rate? Thanks. No real change. I think you know that continues to be our outlook to be neutral to slightly inflationary. I think in all, costs are coming in pretty much as we had expected. Obviously, Nigeria, you know, we're seeing inflation come to probably at a higher rate. But you know, other than that, costs are coming in pretty much in line with expectations.

Speaker Change: The cadence over the course of 2024 in terms of that rate.

Amit Banati: Thanks. No real change. I think, you know, that continues to be our outlook to be neutral to slightly inflationary. I think, you know, costs are coming in pretty much as we had expected. Obviously, Nigeria, you know; we're seeing inflation come through probably at a higher rate.

Speaker Change: No real change I think in all of that continues to be our outlook would be neutral to slightly inflationary inflationary costs.

Speaker Change: Costs are coming in pretty much as we had expected obviously, Nigeria, we're seeing inflation come through probably at a higher rate but.

Speaker Change: Other than that.

Speaker Change: Costs are coming in pretty much in line with expectations.

Unknown Executive: Thank you.

Speaker Change: Thank you.

Kenneth Goldman: Our next question comes from Ken Goldman with JP Morgan. Your line is open. Please go ahead. Hi. Thank you. I wanted to ask about gross margins. You know, the increases for you are impressive, obviously. And it's a trend we're seeing across the food group in general. But at the same time, we're also increasingly hearing from domestic food retailers, your customers, that they're increasingly aware, I guess, of their vendor's gross margin growth. I can say that as volumes remain constrained. So I guess the question is, you know, understanding that much of the industry's margin increases coming from efficiency efforts that should be sticky.

Speaker Change: Our next question comes from Ken Goldman with Jpmorgan. Your line is open. Please go ahead.

Amit Banati: But, you know, other than that, costs are coming in pretty much in line with expectations. Thank you. Our next question comes from Ken Goldman with JP Morgan. Your line is open. Please go ahead.

Ken Goldman: Hi, thank you. I wanted to ask about gross margins. You know, the increases for you are impressive, obviously, and it's a trend we're seeing across the food group in general. But at the same time, we're also increasingly hearing from domestic food retailers, your customers, that they're increasingly aware, I guess, of their vendors' gross margin growth, if I can say that, as volumes remain constrained. So I guess the question is, you know, understanding that much of the industry's margin increase is coming from efficiency efforts that should be sticky. You know, how do you think about that balance between inherently wanting to try and drive margins higher and sort of being cognizant of what your customers are saying lately? If so, Yeah, thanks for the question, Ken.

Ken Goldman: Hi, Thank you I wanted to ask about gross margins.

Speaker Change: The increases for you are impressive obviously and it's a trend we're seeing across the food group in general.

Speaker Change: But at the same time, we're also increasingly hearing from domestic food retailers your customers.

Speaker Change: They are increasingly aware I guess of their vendors gross margin gross margin growth. If I can say that as volumes remain constrained. So I guess the question is understanding that much of the industry's margin increases coming from efficiency efforts that should be sticky.

Steven Cahillane: How do you think about that balance between inherently wanting to try and drive margins higher and sort of being cognizant of what your customers are saying lately, if that makes sense. Yeah, thanks for the catch, the question, Ken. You know, obviously we all want to focus on gross margins because it's, you know, which drives the health of the business. And we're doing it through productivity. We're doing it by getting back to where we were in some ways because of the bottlenecks and the shortages. And we're increasing our brand building investment quite substantially, which really helps, you know, put together winning retail programs. So what we need to do is grow faster than the retailers' same store sales through great activation, great commercial activation, and have the right price point for the consumers.

Speaker Change: Do you think about that balance between inherently wanted to try and drive margins higher.

Speaker Change: And sort of being cognizant of what your customers are saying lately if that makes sense.

Speaker Change: Yes, thanks for the question Ken.

Steve Cahillane: You know, obviously, we all want to focus on gross margins because it's, you know, it's what drives the health of the business. And we're doing it through productivity; we're doing it by getting back to where we were, in some ways, because of the bottlenecks and the shortages. And we're increasing our brand building investment quite substantially, which really helps, you know, put together winning retail programs. So what we need to do is grow faster than the retailers, same store sales, through great activation, great commercial activation, and the right price point for the consumers. So we meet them where they are.

Speaker Change: Obviously, we all want to focus on gross margins because its what drives the health of the business.

Speaker Change: And we're doing it through productivity, we're doing it by getting back to where we were in some ways because of the bottlenecks in the shortages and we're increasing our brand building investment quite substantially which really helps.

Speaker Change: Put together winning retail programs. So what we need to do is grow faster than the retailers same store sales through.

Speaker Change: Through great activation, great commercial activation have the right price point for the consumers.

Steve Cahillane: And then you get into a much more constructive dialogue with customers versus, you know, who's taking, you know, what share of the pie. And so yeah, we are growing our gross margins. But it's against, you know, a backdrop of where we were.

Steven Cahillane: So we meet them where they are. And then you get into a much more constructive dialogue with customers versus, you know, who is taking, you know, what share of the pie. And so yeah, we are growing our gross margins, but it's against, you know, a backdrop of where we were. And we're increasing our brand building investments, which helps our customers, you know, drive volume through their outlets. So that's how that's basically how we would look at that.

Speaker Change: We meet them, where they are and then you get into a much more constructive dialogue with customers versus.

Speaker Change: Who's who's taking what share of the pie and so yes, we are growing our gross margins, but then against.

Speaker Change: A backdrop of where we were and we are increasing our brand building investments, which helps our customers drive volume through that through their outlets.

Speaker Change: That's basically how we would look at that.

Unknown Executive: Makes sense.

Speaker Change: Makes sense. Thank you Steve.

Unknown Executive: Thank you, Steve.

Steve Cahillane: And we're increasing our brand building investments, which helps our customers, you know, drive volume through their outlets. So that's how that, you know, that's basically how we would look at that, makes sense. Thank you, Steve. We now turn to Alexia Howard with Sanford Bernstein. Your line is open, please go ahead. Good morning, everyone. Can we ask about innovation? Hi there.

Alexia Howard: We now turn to Alexia Howard with Sunford Bernstein. Your line is open. Please go ahead. Good morning, everyone. Can we talk about innovation? Hi there. Can I just talk about the innovation graph that you put up? Obviously, you're up back up to levels, but it's slightly above the level where you were in 2021. Are you actually able to give us a number on the potential to sales coming from new products this year? And perhaps more importantly, are you back up to where you would expect to be long term, or is there another step up that we might expect over the next year or two?

Speaker Change: If we now turn to Alexia Howard with Sanford Bernstein. Your line is open. Please go ahead.

Alexia Howard: Good morning, everyone.

Speaker Change: Okay.

Speaker Change: Innovation.

Alexia Howard: Hi, there can I just ask about the innovation graph that you pushed out.

Alexia Howard: Can I just ask about the innovation graph that you put up? Obviously, you're back up to levels that are slightly above where you were in 2021. Are you actually able to give us a number on the percentage of sales coming from new products this year? And, perhaps more importantly, are you back to where you would expect to be long-term, or is there another step up that we might expect over the next year or two? And just as a super quick follow-up, should we expect guidance for 2025 when you report next quarter? Yeah, thanks Alexia.

Speaker Change: Oh, sorry.

Speaker Change: Back up to levels that are slightly above where you were in 2021 are you actually able to give us a number on.

Speaker Change: Percentage of sales coming from new products this year.

Speaker Change: And perhaps more importantly are you bumped up to what you would expect to be long term or is there. Another step up that we might expect for the next year, Okay and just as a super quick follow up should we expect guidance for 2025, when you report next quarter.

Steven Cahillane: And just as a super quick follow-up, should we expect guidance for 2025 when you report next quarter? Yeah, thanks. So let's let's work backwards. We, you know, we always release guidance, and our February earnings, and that's what we'll do again this time in terms of innovation. We don't really release numbers against that, but we are back to where we were pre-pandemic, as you saw on the slide. And that's actually going to get better because that, you know, obviously includes a cheesed launch, includes the Pringles Mingles launch. And there's a whole host list. Innovation's really by category by brand group.

Speaker Change: Yeah.

Steve Cahillane: So let's, let's work backwards. We always release guidance in our February earnings reports, and that's what we'll do again this time. In terms of innovation, we don't really release numbers against that. But we are back to where we were pre-pandemic, as you saw on the slide.

Speaker Change: Yes. Thanks, so, let's let's work backwards, we always released guidance in February.

Speaker Change: Earnings and that's what we'll do again this time in terms of innovation, we don't really release numbers against that but we are back to where we were pre pandemic as you saw on the slide and thats actually going to get better because of that.

Steve Cahillane: And that's actually going to get better, because that, you know, obviously includes Achieve It Launched, includes the Pringles and Mingles Launches. And there's a whole host of innovations, really, by category, by brand group. So it's meaningfully different than it was in the last couple of years, back to where we were in 19 and 18. 2019 was the Snap Launch, which was a good year for us.

Speaker Change: Obviously includes achieves it launched includes the Pringles mangoes launch and there is a whole host.

Speaker Change: Innovations really by category by brand group.

Steven Cahillane: So it's meaningfully different than it was in the last couple of years, back to where we were in 1918. 2019 was the snap one, which was a good year. And we're, you know, we're beating that. So we feel very good about innovation. And we've got a great calendar for next year as well. When we get to February, we'll talk about not only guidance of the year, but we'll give some outlook as they want to. And we'll see the innovations that will be launched in 25 spot. Thank you very much.

Speaker Change: It's meaningfully different than it was.

Speaker Change: In the last couple of years back to where we were 19% and 18 2019 was the snap launch which was a good year.

Speaker Change: And we're we're beating that so we feel very good about innovate.

Steve Cahillane: And we're, you know, beating that. So we feel very good about innovation. And we've got a great calendar for next year as well. When we get to February, we'll talk about not only guidance for the year, but we'll give some outlook as to exactly the innovations that will be launched in 2025 as well. Thank you very much. I'll pass it on.

Speaker Change: And we've got a great calendar for next year as well when we get to February we will talk about not only guidance for the year, but we'll give some outlook as to exactly the innovations that we'll be launching in 'twenty five.

Speaker Change: Thank you very much I'll pass it on.

Unknown Executive: I'll pass it on.

Steve Powers: Our next question comes from Steve Powers with Deutsche Bank. Your line is open. Please go ahead. Hey, good morning. Hey Steve, I wanted to follow up on, I think it was Chris Kerry's question and your response. I think you talked about a, expecting a good balance of, you know, volume, price, and mix in the back half in North America. And I guess the question is, does that to say you expect each of those components to be positive in the back half? Yeah, no, we don't really get into breaking that down in terms of a forecast, but I think we're returning to the type of balance that we seek.

Speaker Change: Our next question comes from Steve Powers with Deutsche Bank. Your line is open. Please go ahead.

Steve Powers: Our next question comes from Steve Powers with Deutsche Bank. Your line is open, please go ahead. Hey, good morning.

Speaker Change: Hey, Good morning, Hey, Steve I wanted to follow up.

Steve Cahillane: Hey, Steve, I wanted to follow up on I think it was Chris Carey's question and your response. I think you talked about expecting a good balance of your volume, price, and mix in the back half in North America. And I guess the question is, does that mean you expect each of those components to be positive in the back half? Yeah, no, we don't really get into breaking that down in terms of a forecast.

Speaker Change: I think it was Chris carriers.

Speaker Change: <unk> in your response I think you talked about a <unk>.

Speaker Change: Expecting a good balance of.

Speaker Change: Volume price and mix in the back half in North America, and I guess.

Speaker Change: That's not to say that you expect each of those components to be positive in the back half.

Speaker Change: Yeah, no we didn't really get into breaking that down in terms of forecast, but I think we're returning to the type of balance that we that we seek and the most important really is getting back to volume because it's a little bit aberrant. When you look at it because of what we're lapping we're lapping these enormous prices in these declines in <unk>.

Steve Cahillane: But I think we're returning to the type of balance that we seek. And the most important thing is really getting back to volume, because it's a little bit aberrant when you look at it because of what we're lapping. We're lapping at these enormous prices and these declines in volume. So now we're looking at, you know, better volume and lower price. And so when you look at what's happening, it's just kind of strange.

Steven Cahillane: And the most important really is getting back to volume because it's a little bit apparent when you look at it because of what we're laughing, we're laughing these enormous prices and these declines and volumes. So now we're looking at, you know, better volume and less price. And so when you look at what's happening, it's just kind of strange. So we're getting back to volume growth, which I think is going to drive NSV growth. And you can kind of back into what that might look like. When you look at our second half, is that if you exclude Nigeria, where we talk, right, that we expect, we continue to expect volume declines because it will be lost between you and because of the pricing that we're taking.

Speaker Change: <unk>. So now we're looking at better volume and less price and so when you look at which lapping its just kind of strange. So we're getting back to volume growth, which I think is going to drive NSV growth. Then you can kind of back into what that might look like.

Steve Cahillane: So we're getting back to volume growth, which I think is going to drive NSV growth, and you can kind of back into what that might look like. Go ahead, Emma. The only thing I'd add to you... Yeah, when you look at our second half, if you exclude Nigeria, where we talked about, right, that we continue to expect volume declines because of the elasticity and because of the pricing that we're taking, if you exclude that, you know, we pretty much expect volume growth in all of our other regions other than Nigeria. So I think you should expect that trend to continue for us in the second half. Okay, that all makes sense.

Speaker Change: I'm sorry.

Speaker Change: Go ahead I'm, the only thing I'd add Steve.

Speaker Change: Yes, when you look at our second half is that if you exclude Nigeria, where we felt that we expect we continue to expect volume declines because it would be lumpy and because of the pricing that we're taking if you will.

Steven Cahillane: If you exclude that, you know, we pretty much expect, you know, volume growth in most of all in all of other regions, other than Nigeria. So I think you should expect that trend to continue for us in the second half.

Speaker Change: That we pretty much expected.

Speaker Change: Volume growth.

Speaker Change: And most of all in all our volatile regions other than Europe.

Speaker Change: I think you should expect that trend to continue for us in.

Speaker Change: In the second half.

Steven Cahillane: Okay, that all makes sense. I guess the follow-up though is that you've had good returns on this sort of return to activation and promotional investment that you've made so far, but as I'm sure you're aware, you know, a lot of your direct and direct competitors, some of them reported today, some of them reported earlier this week, some of them reported earlier in the month, all have talked about, you know, kind of incremental step-ups in investment as we go through the back half. So, you know, you've talked about the environment as rational. Do you view those comments as rational and amidst, you know, the competitive set, arguably leaning in a bit more in the back half? Do you expect the same kind of return on your run rate investments?

Steve Cahillane: I guess the follow-up, though, is that, you know, you've had good returns on this sort of return on activation and promotional investment that you've made so far. But as I'm sure you're aware, a lot of your direct and indirect competitors, some of whom reported today, some of whom reported earlier this week, some of whom reported earlier in the month, all have talked about, you know, kind of incremental step-ups in investment as we go through the back half. So, you know, you've talked about the environment as rational; do you view those comments as rational? And amidst, you know, the competitive set, arguably leaning in a bit more in the back half, do you expect the same kind of return on your run rate investment?

Speaker Change: Okay that all makes sense I guess as a follow up though is that you had good returns on this sort of returned to.

Speaker Change: Activation and promotional investments that you've made so far but.

Speaker Change: I'm sure you're aware.

Speaker Change: A lot of your direct and indirect competitors some of whom reported today some of them are for earlier this week.

Speaker Change: Some of them report earlier in the month all have talked about.

Speaker Change: Kind of incremental step ups and investment as we go through the back half so.

Speaker Change: You've talked about the environment as rational.

Speaker Change: Do those comments as rational.

Speaker Change: <unk>.

Speaker Change: The competitive set arguably leaning in a bit more in the back half do you expect the same kind of return on on your run rate investments.

Steven Cahillane: Yeah, no, I would just reiterate; we do see it as rational. We see, you know, things returning to where they were pre-pandemic, not anything more than that. You know, the things that are going to drive these categories are innovation, brand building, quality display merchandising, all those types of things. You know, we've all been impacted by extraordinary input cost inflation. So, we've had to, you know, take a lot of price; the consumers obviously reacted to that. But, you know, a lot of that price discovery had happened. You know, consumers are getting more use to these prices.

Speaker Change: Yeah, No I would just reiterate we do see it as rational we see things returning to where they were pre pandemic not.

Steve Cahillane: Yeah, no, I would just reiterate, we do see it as rational, we see things returning to where they were pre-pandemic, not, not anything more, more than that, the things that are going to drive these categories are innovation, brand building, quality display, merchandising, all those types of things. You know, we've all been impacted by extraordinary input cost inflation. So we've had to, you know, take a lot of prices, and the consumers obviously reacted to that.

Speaker Change: Not anything more more than that the things that are going to drive these categories. Our innovation brand building quality display merchandising all of those types of things.

Speaker Change: <unk> all been impacted by extraordinary input cost inflation.

Speaker Change: So we've had to take a lot of price to consumers, obviously reacted to that.

Speaker Change: But a lot of that price discovery has happened.

Steve Cahillane: But you know, a lot of that price discovery has happened, consumers are getting more used to these prices, but it doesn't mean they're not still under pressure, and that we have to, you know, make sure that, in line with some of the earlier conversations, we're hitting the right price points, the right pack sizes, you know, the right promotions at the right time of the month, all those types of things are really quite important. But you know, brands matter.

Speaker Change: Tumors are getting more used to these prices it doesn't mean, they're not still under pressure and that we have to make sure to the some of the earlier conversations we're hitting the right price points. The right pack sizes. The right promotions at the right time in the months all of those types of things are really quite important.

Steven Cahillane: It doesn't mean they're not still under pressure, and that we have to, you know, make sure to be some of the earlier conversations. We're hitting the right price points, the right taxis is, you know, the right promotions, at the right time in the month; all those types of things are really quite important. But, you know, brands matter, and we have to make sure that we're continuing to invest in our brands and innovation, meeting the consumers where they are. But having said all that, we continue to forecast a rational pricing environment going forward.

Speaker Change: Brands matter and we have to make sure that we're continuing to invest in our brands and innovation meeting consumers where they are.

Speaker Change: But having said all that we continue to forecast.

Speaker Change: <unk>.

Speaker Change: Pricing environment going forward.

Unknown Executive: Okay, very good. Thanks so much. I appreciate it.

Speaker Change: Very good thanks, so much I appreciate it.

Max Gumport: Probably in time for one more question, Operator. Our last question comes from Max Gumport with BMP Paraba. Your line is open. Please go ahead. Hey, thanks for the question. Just wanted to follow up on the last one there and get a better sense where. Should we expect, or why do you not think your business needs more price investment, given what we're hearing from all of your competitors, particularly competitors in your near, near and categories within snacking. It feels like we're hearing more and more about these companies saying that consumer needs some pricing give back. It feels like the retailers are saying the same system makes you understand why your own business doesn't need that.

Steve Cahillane: And we have to make sure that we're continuing to invest in our brands and innovation, meeting the consumers where they are. But having said all that, we continue to forecast a rational pricing environment going forward. Very good. Thanks so much. Appreciate it. We probably have time for one more question operator.

Speaker Change: Probably have time for one more.

Speaker Change: Question operator.

Speaker Change: Okay.

Max Gumport: Our last question comes from Max Gumport with BNP Paribas. Your line is open, please go ahead. Hey, thanks for the question. Just wanted to follow up on the last one there and get a better sense for, should we expect, or why do you not think your business needs more price investment given what we're hearing from all of your competitors, particularly competitors in your near-in categories within snacking? It feels like we're hearing more and more about these companies saying the consumer needs some pricing give-back. It feels like retailers are saying the same thing, so I just want to make sure I understand why your own business doesn't need that.

Speaker Change: Last question comes from Mexican ports with BNP Powerbar. Your line is open. Please go ahead.

Speaker Change: Yeah.

Speaker Change: Okay. Thanks for the question just wanted to follow up on the last one there.

Speaker Change: Sure.

Speaker Change: Should we expect or why do you not take your business needs more price investment given what we're hearing from all of your competitors, particularly competitors in your near nearing categories within.

Speaker Change: It feels like we're hearing more and more about just companies say that consumer need.

Speaker Change: On pricing give back it feels like the retailers are saying the same just wanted to make sure I understand why why your own business doesn't need that thank you.

Steven Cahillane: Thank you.

Steven Cahillane: Yeah, Max, I just point you to, you know, we had a terrific second quarter. We raised our guidance. We've got great confidence. You can't speak to where, you know, everybody else is, but we feel very, very good about where we are. We feel good about our innovations. We feel good about the return we're getting from our brand building. We feel good about our geographic portfolio. And I hope that you heard that come through in not only the results, but the outlook. And so I just point you right to there and say we don't feel like we're missing anything.

Speaker Change: Yes.

Steve Cahillane: Yeah, Max, I just want to point out that we had a terrific second quarter. We raised our guidance, and we've got great confidence. You can't speak to where, you know, everybody else is, but we feel very, very good about where we are. We feel good about our innovations, we feel good about the return we're getting from our brand building, and we feel good about our geographic portfolio. And I hope that you heard that come through in not only the results but the outlook.

Speaker Change: <unk> point, you to we had a terrific second quarter.

Speaker Change: We raised our guidance, we've got great confidence.

Speaker Change: You can't speak to where everybody else's, but we feel very very good about where we are we feel good about our innovations we feel good about the return we're getting from a brand building we feel good about our geographic portfolio.

Speaker Change: And I hope that you heard that come through in not only the results, but the outlook and so I'd just point you right to there and say we don't feel like were missing anything we do.

Steven Cahillane: We don't feel like we need to do anything on the pricing front that we're not already doing that you haven't seen. Because again, you know, we hear we are today announcing good results, very good results, and raising guidance. So I just, you know, I just would end it with that.

Speaker Change: Don't feel like we need to do anything on the pricing front that we're not already doing that you haven't seen.

Speaker Change: Because again, we here we are today announcing good results very good results and raising guidance. So I just would.

Speaker Change: Ended with that.

Andrew Lazar: Thank you very much. I'm maybe one more. Yes, we have a question from Andrew Lazar with Barclays. Your line is open; please go ahead. Great, just a super quick one. You see, with all of the activation, commercial activation back up to more normal levels, we're hearing a lot of that about more normal levels of emotional activity from peers as well. It's all off of obviously much higher list pricing, so promoted price points are still quite a bit higher.

Speaker Change: Okay. Thanks very much.

Steve Cahillane: And so I just point you right there and say, we don't feel like we're missing anything. We don't feel like we need to do anything on the pricing front that we're not already doing that you haven't seen. Because again, you know, we are here today announcing good results, very good results, and raising guidance. So I just, you know, I just would end it with that. Great, thanks very much, or maybe one more. Yes, we have a question from Andrew Lazar with Barclays. Your line is open. Please go ahead.

Speaker Change: Maybe one more.

Speaker Change: Yes, we have a question from Andrew Lazar with Barclays. Your line is open. Please go ahead.

Andrew Lazar: Great, just a super quick one. You know, Steve, with all of the activation, commercial activation back up to more normal levels, we're hearing a lot of that about more normal levels of promotional activity from peers as well. It's all off of, obviously, much higher list prices. So promoted price points are still quite a bit higher. So I'm just curious what you're seeing around lift on promotional activity, if it's kind of where you have always seen it, is it better or worse, or how that's trending. That's it. Thanks so much. You know, great question, Andrew. I'd say, if you go back at the beginning of the year and the end of last year, the lifts were not great.

Andrew Lazar: Great just a super quick one.

Speaker Change: You'll see with all of the activation commercial activation back up to more normal levels. We're hearing a lot of that about more normal levels of promotional activity from peers as well. It's all off of obviously much higher list pricing. So promoted price points are still quite a bit higher. So I'm just curious what youre seeing around lift on promotional activity. If it is kind of where you have always seen it is it better worse.

Steven Cahillane: So I'm just curious what you're seeing around lift on promotional activity if it's kind of where you have always seen it. Is it better, worse, or how that's trending. Thanks so much. You know, great question, Andrew. I'd say if you go back at the beginning of the year and the end of last year, the lifts were not great because I think the price discovery was still happening. As you point out, that higher list prices were starting to be the truth. And so sequentially begin and week out the investments that we're making are seeing a better return, and that's part of our confidence in the back half of the year in the next year.

Speaker Change: How that's trending that's it thanks so much.

Steve Cahillane: Because I think price discovery was still happening, as you point out, higher list prices; we're starting to see them improve. And so, sequentially, week in and week out, the investments that we're making are seeing a better return. And that's part of our confidence that in the back half of the year and in the next year, the right level of investment will start to yield the type of returns that we saw pre-pandemic.

Andrew: Great question, Andrew I'd say, if you go back at the beginning of the year and the end of last year as the lifts were not great.

Andrew Lazar: I think the price discovery was still happening as you pointed out our list prices were starting to improve and so sequentially beginning week out.

Speaker Change: The investments that we're making are seeing a better return and that's part of our confidence in the back half of the year into next year that the right level of investment will start to yield the type of returns that we saw pre pandemic.

Unknown Executive: That, you know, the right level of investment will start to yield the type of returns that we saw pre-pandemic. Thanks so much.

Speaker Change: Thanks, so much.

John Renwick: Thanks so much. This concludes our Q&A, and I'll hand you back to John Renwick for closing remarks. Okay, well, thank you everyone for your interest and for your time. And if you do have follow-up questions, please do not hesitate to call us. Have a great day. Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines. Hey, what is that?

John Renwick: This concludes our Q&A on our hand back to John Renwick for closing remarks. Okay, well, thank you everyone for your interest in your time. And if you do have follow-up questions, please do not hesitate to close.

Speaker Change: This concludes our Q&A I'll now hand back to John Renwick for closing remarks.

John Renwick: Okay, well. Thank you everyone for your interest and your time and if you do have follow up questions. Please do not hesitate to call us and have a great day.

Operator: Have a great day.

Operator: Ladies and gentlemen, space call has now concluded. We'd like to thank you for your participation. You may now just connect your lines.

Speaker Change: Ladies and gentlemen, today's call is now concluded. Thank you for your participation you may now disconnect your lines.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Yes.