Beiersdorf's (BDRFF) CEO Stefan Heidenreich on Q2 2014 Results - Earnings Call Transcript

| About: Beiersdorf AG (BDRFF)

Beiersdorf AG (OTCPK:BDRFF) Q2 2014 Earnings Conference Call August 7, 2014 3:00 AM ET

Executives

Jens Geissler – IR

Stefan Heidenreich – CEO

Ulrich Schmidt – CFO

Analysts

Hermine de Bentzmann – Raymond James

Catherine Rolland – Kepler Cheuvreux

Harold Thompson – Deutsche Bank

Andreas Riemann – Commerzbank

Iain Simpson – Societe Generale

Javier Escalante – Consumer Edge Research

Bassel Chougari – Berenberg Bank

Rosie Edwards – Goldman Sachs

Eva Quiroga – UBS

Operator

Good morning everybody. We would like to welcome you to Beiersdorf’s Conference Call about the first six months of 2014. This is Jens Geissler together with our CEO, Stefan Heidenreich and the CFO of Beiersdorf, Ulrich Schmidt

We will start with a brief presentation which you can follow on the internet by using the link that was sent out in the invitation. After the presentation you will have as always the opportunity to ask questions. The Q&A session will be limited to two questions per caller. Now I would like to hand over to Stefan Heidenreich for the results of the first half year.

Stefan Heidenreich

Good morning ladies and gentlemen and welcome to Beiersdorf, our CFO, Ulrich Schmidt and myself report on our company’s performance in the first half of 2014 and we will also provide an outlook for the full year.

Ladies and gentlemen Beiersdorf remains on track, we recorded sustainable profitable growth in the first half year of 2014 and we increased sales and earnings in both business segments consumer and tesa. Once again we lifted our market shares in our relevant markets and key categories and we achieved this despite sometimes difficult market conditions.

We are therefore satisfied with the overall business performance in the first half year. Turning to the figures, Beiersdorf delivered organic sales of 5.0% in the first six months and nominal terms sales rose by 0.2% to €3.171 billion compared with €3.163 billion in the previous year. EBIT excluding special factors improved by 4.3% to €452 million up from €434 million. The EBIT margin was 14.3% compared with 13.7% in the previous year.

To tesa, tesa continued its successful performance with organic sales growth of 5.4% in the first six months of 2014. In nominal terms sales rose by 2.4% from €522 million to €574 million. EBIT excluding special factors improved from €83 million to €85 million. As of previous year the EBIT margin was 15.9%.

Sales rose in both the industrial and consumer business, growth is been driven by the automotive and electrical industries in both the U.S. and the Asian markets.

To the consumer segment, in the consumer business segment organic sales rose by 5.0%, in nominal terms sales declined by 0.2% to €2.637 billion down from €2.641 billion last year.

EBIT excluding the special factors increased from €351 million to €367 million. The EBIT margin rose to 13.9% compared with 13.3% in the previous year. This positive top line performance is a result of strong organic growth in the emerging markets even if in some of these markets we saw a significant softening of the gross dynamic. At the same time we gained momentum in the European markets. The consumer business segment recorded organic sales growth of 2.0% in Europe, sales in Western Europe rose by 1.6% and Southern European markets Beiersdorf benefited from a slight economic recovery.

We achieved clear sales growth of 3.9% in Eastern Europe. The sales trends in North America was again positive with 4.2% growth, this same applies to Latin America, where sales increased by 5.1% referred particularly strong increase in Brazil.

The organic sales growth of 5.1% already includes the negative exchange rate effects in Argentina and Venezuela. Due to the high inflation rates sales in Argentina and Venezuela have been calculated using current exchange rates rather than the average rate from the previous year as it is usual. Excluding these two countries the growth rate for the Latin American markets would be significantly higher.

We again recorded strong sales growth in Africa, Asia and Australia region, sales rose by 11.3% in these markets and the first half year. Almost all of the markets in the region contributed to this increase. In contrast the economic slowdown in Thailand, Japan and China impacted our sales growth.

In China we increased the amount of stock supplied to retailers in the first quarter due to the integration and restructuring of our sales platforms.

Given the weaker markets this led to a decline in sales in the second quarter that this reflected in our figures for the region. The situation was stabilized over the course of the year. Ladies and gentlemen our results for the first half year showed that we’re on track. Our strategy, the Blue Agenda is our compass. We focus on strong brands, greater innovation power and an increased presence in emerging markets without losing sight of our European markets.

Our brand focus is leading to clear sales growth for the third year in a row. Nivea, Eucerin and La Prairie each saw sales increases of more than 6% in the first half of the year. Our product innovations are moving Beiersdorf forward. Our Black & White and Stress Protect deodorants continue to achieve double digit growth rates. The new body In-Shower product line is enjoying international success. We have expanded our Nivea men product line further extending our number one position, the men’s skin care market in the world.

Our presence in emerging markets is paying off, we now generate more than 50% of sales in these regions and this trigger is continuing to grow. We are expanding our development and product capacities in these regions to meet specific region and market requirements even better. Our commitments to these high growth market is demonstrated by the substantial investments we’re undertaking.

A few days ago we opened a new factory in in Silao, Mexico. The factory took only two years to build and will produce more than 250 million cosmetic products a year. The number of employees will increase from 350 to 600 by the end of the year, the new facility will enable us to meet the growing demand from North and Central America. The affiliated R&D Center will significantly increase our ability to develop and manufacture products in-line with the needs of our local consumers.

In India, the ground-breaking for production facility with an integrated R&D lab employing 300 people took place in place in Sanand, Gujarat in mid-June. The factory will develop and manufacture for the Indian market that is expected to be completed in the mid-2015.

To the outlook, ladies and gentlemen let me now conclude with our outlook for the full year 2014 despite the challenging marketing environment we’re confirming our previous forecast that Beiersdorf Group sales will outperform the market with projected growth of 4% to 6%. The EBIT margins from operation should be above 13%.

In the consumer business segment we are aiming for above market sales gross of 4% to 6%, the EBIT margin should be around 13%.

At tesa, we expect sales growth of about 4%, whereas the market is forecasted to increase by 2% to 3%. The EBIT margin from operation is expected to be about 16%.

Ladies and gentlemen thank you for your attention.

Jens Geissler

This concludes the presentation. We’re now ready to take your question. Please remember two questions per caller only.

Question-and-Answer Session

Operator

(Operator Instructions) And the first question is from the line of Hermine de Bentzmann – of Raymond James. Please go ahead.

Hermine de Bentzmann – Raymond James

The first question would be on the consumer division in the U.S., we have noted a marked deterioration in Q2. Can you may be precise what happened there? And one of your competitor mentioned a slight improvement since a few week in the U.S. market, I was wondering if you share that comment. Second question on your brands, your three main brands have outperformed the consumer division in H1. Can you maybe discuss about Hansaplast growth in H1 and the current momentum? Thank you.

Stefan Heidenreich

The question to North America, first of all we’re not managing the business on a quarter-to-quarter basis on a long term view. We had a very good first quarter, second quarter was softer that had to do with innovations and product entries which we had, which had good effect in the first quarter. We will come with quite some big news in the second half year. So I remain quite confident when it comes to the American market on the longer view. In terms of Hansaplast, we’re going to give normally specific numbers. Business will come back into focus as other brands are also coming back into focus at the moment and yes we remain more or less flat over the years and that stays on.

Operator

Next question from the line of Catherine Rolland of Kepler Cheuvreux. Please go ahead.

Catherine Rolland – Kepler Cheuvreux

Two questions for me, please. First of all regarding China, could you tell us what was the growth rate that’s registered in China in H1? And if I correctly understood, you're saying that for the whole year we should have a slight decline in sales in China. I just wanted to know if it's only due to further destocking impact in the second half or if you think also that market trends are going to worsen in the second half. This was my first question. And the second question is about innovation and new product launches. You quoted some product launches that you already launched over the past quarters. Could you tell us if you have new product launches on the cards for the second half and if possible, if you could give us some details about these launches? Thank you.

Stefan Heidenreich

On innovations like, I will do your first question and my colleague will do the first question on China. On innovation I always will remain silent. We will come loud when we go into the market. I think as I iterated our innovations, you see that we have brands like Black & White and Stress Protect are still growing double digits. The In-Shower is still a fantastic success which is rolled out over the years and also in men we have some yes we will also come with more innovations for the end of the year but innovation I think this is very important, what I have learned now in the 2.5 years innovations have to be much longer and much also on a continuous base.

The race for innovations which was going on year-after-year is not the right way. We can prove that with the deodorants, we can also prove that on body, innovations now have longer cycles to really be penetrated across regions and it just takes time and we are definitely not going into innovation mania. We stay focused with the high discipline and then when we see trends going down on the innovation then we will bring new innovation to enhance the categories again.

Ulrich Schmidt

Yes regarding China, we were saying already that integration and restructuring of sales platform in China to play and we’re seeing the effect in first half. Please accept that we don’t comment on growth rates specifically for countries here. For the second half we see that markets coming down and of course we used to have clearly double digit growth rates, in China it's coming down to single, it's coming down to low single and that of course will have also the stock effect. At the end we will need to judge and observe our much development we will have in the course of second half. So in the moment that’s an open topic.

Operator

Next question from the line of Harold Thompson of Deutsche Bank. Please go ahead.

Harold Thompson – Deutsche Bank

Couple of questions. The first one is on your EM growth. I mean, you've already flagged a few markets. But nevertheless, the growth rate seems to have halved Q1 on Q2, it seems pretty broad-based. So is it -- maybe just give a bit more color by key countries around that. And that and specifically on your LATAM, you say that the organic growth would be much greater if it wasn't for Venezuela and Argentina. Could you actually give us what the number is given you seem to have done the calculation on one of the slides? The second question is about margins. I note that your gross margins have fallen significantly in the second quarter by I think about a 130 basis points, how much of that is due to the growth slowing down or the mix affect or possibly the startup costs with your new plants for example in Mexico? So what's driving down the gross margins? Thank you.

Ulrich Schmidt

Yes let’s start with the gross margin overall, you see that we have much better growth also over the year and emerging market used to have different mix of assortment. It's more personal care. Personal care has automatically lower gross margins so that’s also development we’re seeing. That doesn’t mean that our profitability is suffering because of that. And specifically we also see in the moment some countries with nice growth, we have also that higher share of personal care. So overall we don’t see that we have at risk our gross margin. We think it's 100% mix effect.

Regarding, LATAM, you have seen the number in the second quarter excluding Argentina and Venezuela where we have applied the effective rate instead of concentrate the outstanding for the 800 basis points, so it would have growth rate of 13% if we exclude this.

Harold Thompson – Deutsche Bank

That's in H1 or Q2?

Ulrich Schmidt

That’s for the half year.

Harold Thompson – Deutsche Bank

For the half year. Okay, thank you. And just on the opening of your plants in Mexico and I guess next year in India, is that -- other than clearly the CapEx, is that having any other effects one way or another? I guess there must be some benefits of doing so.

Stefan Heidenreich

Yes, so at the moment we’re ramping up and which will take a year until we have the full capacity, we expect the Mexican plant to have full capacity mid of next year. So we have extraordinary cost at the moment up for few million euros, that is effecting our Latin American profitability, as we are profiting from that plant already in next year, the effect should be flat in 2015 and we should profit from the plant in 2016. The Indian plant is smaller one where we will have much lower effects than the Mexican one.

Operator

Next question is from the line of Andreas Riemann of Commerzbank. Please go ahead.

Andreas Riemann – Commerzbank

Two questions from my side. First one on Eastern Europe, the region recovered nicely. It seems like inventories are now better under control. But what about Russia, can you comment on the Russian market? And then second one, given the inflationary trends in many developing countries, did you or do you implement any price increase at present? That's it from my side. Thanks.

Stefan Heidenreich

The Eastern European markets did recover. We said it all the way like you said that last year we had a stock issue in Russia which we don’t have at the moment that is a reason why these numbers are now better and concerning Russia obviously we’re waiting like everybody looking at the news, but we are just a small percent. Let’s see what happens there.

The second question was on inflation trends, inflation trends in Europe on pricing, yes here and there we take price, we have to take price because conditions will also go up and we have done that in a couple of markets but we’re not specifically reporting on that one.

Andreas Riemann – Commerzbank

Okay. But did you see a slowdown in Russia recently just looking at your business without looking into the future?

Stefan Heidenreich

It depends on how you look at it, I mean in general, I mean you’ve also seen that from our competition the markets are cooling down dramatically. I was last week in Asia, we’re seeing in China for example where we have spent time for example one of the biggest markets as you know is in hair care market and the latest periods which we can read that there is zero growth. I have been out there for the last three years there, it was double digit as long as I can remember. It came down to high singles now we have zero and when you look into Thailand for example it's zero growth, Vietnam is minus 10 at the moment and so on and so on. So markets are cooling down but as I tell my people I will tell you also that morning doesn’t count. The key currency for us is market shares. Are we winning market shares? Are we gaining market shares? And when you look in Nielsen trends in Europe or you looked at also in the emerging markets they look very, very healthy, so I’m pretty pleased with the development in these difficult conditions but it's also clear that these eroding markets, Beiersdorf is also affected. I mean, mind you, first half year once again Nivea, Eucerin and also La Prairie are over 6% and we considered that to be very satisfactory results and we are happy with the results as it is but we have to take the challenge and that challenge, as also our colleagues from the competition said that challenge will remain intact for the time being.

Operator

And the next question is from the line of Iain Simpson with Societe Generale.

Iain Simpson – Societe Generale

Just a couple of questions, if I may, on, firstly on Japan. That's clearly gone from being very strong in the first quarter to disappointment in the second quarter. Is that just to do with VAT? And if so, should we expect to see that recover in the second half? Secondly, in France that was weak in the first quarter, you called out it's a phasing issue. It seems to be weak again in the second quarter. Does that mean that again we should look for a second half recovery? And then just lastly if I may on China. I understand you not wanting to give this specific number, but you said almost all regions contributed to growth with the exception of. Should we, therefore, assume that China's sales were negative in the second quarter on the destock? Thank you very much.

Stefan Heidenreich

I mean let’s give some color as you know we’re not giving normally specifics, on Japan everybody knows April 1 was a VAT increase. Our market or our business in Japan is extremely strong. And when you look at the market share that is something I can report, we have become -- in our categories market leader for the first time in history in this first half year. So we’re very product of that. And I think one of the only Westerner brands beating the Japanese in their categories which is quite an achievement.

On France, it is indeed so we started very slow. It's still not where it should be but we are having reviews at the moment. I think we could expect some recovery in the second half year, also behind some nice innovations to come and in China I said everything I had to say to China.

Ulrich Schmidt

And we mentioned explicitly that it's a broad based deterioration of growth in AAA, and it involves Korea, Japan, China, Thailand and we mentioned some others as well. So it's an overall topic in the region and emerging markets in general.

Operator

Next on the line of Javier Escalante of Consumer Edge Research.

Javier Escalante – Consumer Edge Research

I actually would like to come back to China even though as Stefan said that he said everything that he needed to say. But could you comment on the skin care market because you have referenced the hair care market to be flat? When you mentioned the market to be flat, are you talking about retail sales? Is that measure reliable knowing that the track data is poor in China? So number one is when you mentioned hair care being flat, are you talking about retail sales? Number one. And then number two, could you comment the same thing with regards to skin care and particularly whether how Nivea is fairing vis-a-vis the local Chinese brands. The second question that I have is with regards to Brazil. Many companies have mentioned that the market accelerated in June but it has come back in July and it has to do with the World Cup and fewer working days. Do you see the same thing in Brazil? Are you seeing a rebound after the festivities? Thank you.

Stefan Heidenreich

Let me give you again the overall answer to both of these markets, all right? That is absolutely the statement remains, when we look at Nielsen or your monitor, markets are softening. So that’s a general statement which goes literally for all markets in the world what we see and that’s a broad trend. In China once more I referred to Nielsen’s figures what we got, reliable or not that’s the best we got. That’s the Europe trend at the moment on healthcare and faced for the first time is also in the low single digit. However the good news is when you look at our shares and we particularly play with NIVEA Men and we play in deo and body, our shares are rising on hair care more or less they remain flat in a very competitive market. And then Brazil is the same way, markets are also there getting slower but when you look at our market shares they are significantly growing against major competitions. But we’re very pleased there and that’s how we look at it. I remain once more our currency is market shares, we’re not managing by the quarter. We’re managing for the long run, that’s in-line also with our major shareholder and that’s how we look at the business and we are satisfied with the first half year and remain also confident for the second half year.

Ulrich Schmidt

Yes first add to Brazil, surprisingly you know the Group’s GDP is really flat but cosmetic market is still double digit growing. They have not changed those surprisingly.

Operator

Next question from the line of Bassel Chougari of Berenberg Bank. Please go ahead.

Bassel Chougari – Berenberg Bank

Two questions from me please. The first one is on North America. Could you give us some details on the performance? Is it mainly driven by Eucerin or -- and how is Nivea doing in North America and more specifically in the U.S.. And the question is you were talking about the market share gains, but are there any markets where or sizeable markets where you are actually losing market share? Thank you.

Stefan Heidenreich

I’m just thinking are we having any markets where are losing significantly. I’m thinking loud. No, it says only one. There is one where we’re losing and that is due to again the specific one. There is one way I’m losing here I’m just looking at my share tracker and that is surprisingly Poland where we have to do better but the rest is Blue. I have always have my share tracker on blue and red. Blue means growth and red means -- and I don’t have a lot of reds here so that’s how it looks like and to North America again I said everything, the first half year overall also in terms of shares look good. Eucerin and Aquaphor are both brands which score much more in the winter times. You know that in this year particularly in the U.S. had very strong winter which helped us tremendously. Now we’re back to normal summer, sales will again increase during the course of September – October, so I’m fairly relaxed in the U.S. U.S. is on a good track as always with in the limits of our business.

Operator

Next question from the line of Rosie Edwards of Goldman Sachs. Please go ahead.

Rosie Edwards – Goldman Sachs

Two questions, firstly on sun care, just wondered if you could sort of give us some comments regarding you sun care business, quite surprised it hasn't been mentioned given Europe has obviously had a very good quarter in terms of weather. And then secondly, previously you've given some very interesting color on kind of M&A and the state of sort of acquisitions within personal care, and your comments, I think were that assets becoming increasingly scarce and multiples were very stretched and that was putting you off utilizing cash. So I wondered if you could just give us your latest views on that topic. Thank you.

Ulrich Schmidt

Well on M&A it remains the same message as always, we’re focused on organic growth with our brands and without losing sight if something would come along but as you know the market is what it is and our focus remains the same, unchanged. In terms of sun care I do not have the complete picture yet because we’re in the midst of the season. From what I hear we have markets which are developing very nicely, other markets are significantly down. The Northern European markets entertain very nice weather from what I have heard. I can say that the Southern European markets have dreadful weather with lot of rain, very cold, et cetera, et cetera. So in July in these markets that’s what I can report was not good.

Operator

Next question is from the line of Iain Simpson of Societe Generale.

Iain Simpson – Societe Generale

I was just slightly intrigued by something you said about China hair care now holding market share, I mean clearly that's been something that you've turned around very successfully in the last year or two. Should we read anything into the fact that it's no longer gaining share in a market that's flat or is it just a phasing issue and you're happy with the long term trajectory of that category? Thank you.

Stefan Heidenreich

Again I’m happy. I think when you look at the overall trends in markets like face care, on hair and so on I mean there is hardly any Westerner brands which hold or increase. There is a lot of competition coming up from the locals at the moment where we have to fight. So holding at the moment is okay and innovations have to come, that’s clear, we have come to with more innovations on the hair care, they are in the pipe and then we see what happens.

Operator

And the next question is from the line of Harold Thompson of Deutsche Bank. Please go ahead.

Harold Thompson – Deutsche Bank

Just, Stefan, you mentioned on innovation that over the last 2 1/2 years you've kind of realized that there should be bigger and longer lasting, and you've given examples in how Black & White is still growing double digit. But you've also said in the past that your innovation pipeline was full for ‘14 and you were even more excited about 2015. So is there any implications of your learnings of how launches have gone thus far, i.e. they gone on for longer, and what you've actually got in the innovation pipeline and how that links back to your marketing strategy? My second question is on, you mentioned that there was some trade loading in China in the Q1 and there's a bit of a reverse going on in Q2. Are there any other items in the second quarter in any regions or categories which I guess we've not heard about which may crop up in the conference call in the second half which we should be aware of? Thank you.

Stefan Heidenreich

The second question no, not aware to that. That’s only China and LATAM what we can report and LATAM will stay on. China as I said will remain firm and that will stabilize over the year. Your first question Harold is a very interesting one and that obviously has I think quite a lot of implication for how you successfully run cosmetic company, at least our company whether that was true for everyone else I don’t know. What I’ve seen is that in the world of cosmetic, the bombardment of product news sometimes bigger, sometimes smaller is just too hard for the consumer to grab and I also see that every year news we’re looking at the wrong cycles at least in our business.

When you look at for example the deodorant, Black & White, which is now by the far the most successful innovation we have in the company in centuries. Number two, I think we’re entering into the fourth or fifth year with that one. Now still growing double digit, what does it tell me that for me it's still an innovation as it grows that strong and we look at that not only by expanding into new markets we’re also obviously look very much in longer markets where we would the first if it stays strong. The implication of that means that initiative still has to be supported during the year which means that in a way if you want to launch news there has to be space for it.

So the more successful innovations you bring into the market in a way you know also limits the amount of the new, new innovations you can bring into the market. So that is an interesting cycle, which gives us much more breadth which also I think is good because we can really fine tune the execution better and better and you know the moment we see the trend stabilizing we bring news and that’s what we’re trying to do more and more and so also in categories which we have not mentioned yet you will see innovations in the next 6 to 9 months which we believe here and there our breakthrough innovations like we have done with Black & White, like we have done with In-Shower and like we have done with a lot of the men’s stuff. You will see pretty soon I think already in the next week, some breakthrough innovations and then we see how they go but the point is that innovations would be fired only for 12 months, only for 24 months, it takes to really bring it to the consumer probably cycles of more than 2 to 3 years and that’s the difference to how we run businesses here before and that has quite some implications but it's a much surer bet I think that’s what you’re looking after, what are the -- the moment I have gold in my hand I just make the gold bigger and I’m not betting every year on news, news, news, I’ve track to make them.

So that’s the difference in the industry at least for us which makes our business much more reliable to what gross numbers and market share gains.

Harold Thompson – Deutsche Bank

I agree. But should that, therefore, also not give you a greater profit benefit because if you are pushing something which is already working and you've kind of gone past the initial zero sales and your absolute sales number of a specific launch just become bigger and bigger, should the gearing of that growth not actually accelerate? And one could argue one should see bigger -- I know you're not too keen on margins generally, but shouldn't we actually see better margins from that?

Stefan Heidenreich

Well normally I’m not talking about margins too much but let’s just Harold, make one thing clear, I mean again the margin increased significantly in that first half year. So I mean that is not you know a small increase and we go further on that path. I think one also has to see and I am reiterating on that is one has to see that Beiersdorf is still in the merger markets quite small compared to the competition which is great news and it's such that we still have a lot of potential to lift. Now that potential first and foremost will cost money, like we have seen in Brazil, like we have seen in a lot of other markets but the moment we have the innovation, the moment we have sure bets we’re going in and we’re driving that up and up and up and so yes innovations will have different cycles. Do I see changes overtime? Maybe. But for the time being since we have so much backlog still in markets where we’re weaker the spending number will still be at a higher rate.

Harold Thompson – Deutsche Bank

And you said in your answer that in the next few weeks we will see some what you believe might be breakthrough ideas. Is that in existing categories you're in, so your six categories you're focusing on? Was it just something completely different under different brand running like that? I just wasn't clear what you said.

Stefan Heidenreich

Just one more because you already had 10 questions, the answer Harold is again a very, very good question, I’m just saying one word, both.

Operator

Next question is from the line of Javier Escalante of Consumer Edge Research.

Javier Escalante – Consumer Edge Research

Yes, Stefan, just getting a little bit from the small view to the bigger view, right. The way I understood it, your changing guidance was that you were more interested in driving top line growth than basically trying to balance very persistently top line and margin growth. Given that you’re seeing these broader deceleration in emerging markets, do you think that in terms of timing is this the right timing to shoot for top line growth when the potentially the return of the investment in A&P is now and again as much traction given the state of the consumer in emerging markets? Thank you.

Stefan Heidenreich

Again we’re going for market shares. I think 5% is still best in class and we remain on the gas pedal and I’ve not said anything it's top line growth and market shares remain the number one priorities for the years to come.

Operator

So in the interest of time our last question is from Eva Quiroga of UBS. Please go ahead.

Eva Quiroga – UBS

I would like to come back to smaller questions please. First of all, you have given us the 13% adjusted growth in Latin America for the first half if we exclude the Venezuela and Argentina impact. Could you remind us what that number was in Q1? And then secondly on Western Europe, you had been talking in Q1 about the sell-out being very strong, the sell-in lagging a bit. Can you update us what you've seen in terms of those two trends?

And then lastly I would like to come back to the margin, which in consumer was pretty solid in the second quarter and I was wondering if you could talk a little bit what kind of trends you've seen in the various regions. And also just update us on the situation in China, if in front of the capital background we’re still looking at breakeven by the end of the year?

Ulrich Schmidt

Yes let me start with the Latin America number, we had very comparable number in the Q1 for the other countries excluding Venezuela and Argentina. And as Harold was asking I think it's very important to be aware that in the moment there are no dollars available in Venezuela for imports not only affecting us but everybody. So you see empty shelves and this will be also politically relevant. And it is a difficult situation for all of the industry. That change will mean that also the sales will come down in local currency because we will still selling out our remaining stocks. Argentina is also increasingly tough situation because of the default, might even need a stronger devaluation for the weeks to come. So there is the remark regarding the guidance saying excluding the two countries we feel that we’ve very good track and gain a lot of market share but we need to give a pre-warning saying these two countries remain very critical. Argentina, we are pleased with the sales which are sales and market share development but still it translate into less euro.

Jens Geissler

The trends and regions?

Stefan Heidenreich

Trends and regions, sell-in and sell-out in Western Europe. I think Eva you were referring to around the world is that what you meant?

Eva Quiroga – UBS

That was on the margin front, that is also the question sell-in, sell-out is mostly on Europe, please.

Stefan Heidenreich

Okay. Sell-in, sell-out I don’t think--

Ulrich Schmidt

As we were saying we have not specific watch out regarding selling stock, problems in trades, we think we’re in the balance situation in Europe, yes. So it's synchronized if that’s what you’re aiming at.

And the other last question was? I think you also referred to breakeven in China? That remains a goal, of course.

Operator

I will hand now back to Jens Geissler.

Jens Geissler

Yes. Thank you. So thank you for all your questions and for having joined our conference call. Beiersdorf’s next Investor Relations event will be the publication of nine months figures on the 6th of November. We will also have a conference call on that day. Thank you for your interest in Beiersdorf and goodbye.

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