Beiersdorf's (BDRFF) CEO Stefan Heidenreich on Q4 2015 Results - Earnings Call Transcript

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Beiersdorf AG (OTCPK:BDRFF) Q4 2015 Earnings Conference Call February 17, 2016 8:00 AM ET

Executives

Jens Geissler - Head, Investor Relations

Stefan Heidenreich - Chief Executive Officer

Ulrich Schmidt - Chief Financial Officer

Analysts

Mirco Badocco - RBC

Pinar Ergün - Bank of America Merrill Lynch

Robert Waldschmidt - Liberum

Toby McCullagh - Macquarie

Jens Geissler

Shall we start? Yes, good afternoon and welcome to Beiersdorf’s Analyst Meeting here in Hamburg today. We are pleased to report a year of strong organic growth. We have already published our preliminary sales on January 14. And today, we would like to share with you many more details on the year 2015.

We will start with a message from our CEO who will talk about the progress Beiersdorf has made based on the Blue Agenda. Then and the second part of the presentation, our CFO, Ulrich Schmidt, will talk about the financial aspect of last year. And then, of course, we have finalizing part also with question-and-answer as always. So, I suggest we get going and I hand over to Stefan Heidenreich.

Stefan Heidenreich

Good morning, ladies and gentlemen and a warm welcome to Beiersdorf’s full year financial analyst meeting. Thank you for joining us today. Ulrich Schmidt and myself will report on the company’s results for financial year 2015 and we will also give you an outlook for 2016.

Ladies and gentlemen, Beiersdorf was successful in 2015. We were once again able to increase our sales and earnings. Our return on sales marked a new record level and we further improved Beiersdorf competitive and efficiency. We achieved this despite a difficult market environment. In the past year, the consumer goods industry faced tough conditions resulting from economic and political volatility in many important markets. Our results in 2015 clearly show that we have made Beiersdorf more resilient and are able to continue on all profitable paths even under these challenging conditions. This is a solid foundation for further economic success in 2016.

Let’s take a look at the key figures. We increased organic group sales by 3%. Nominal sales rose by 6.4% from €6.285 billion to €6.686 billion. EBIT, excluding special factors, increased by 11.6% from €861 million to €962 million. The corresponding EBIT margin improved to 14.4% compared with last year’s 13.7%. Profit after-tax excluding special factors rose from €581 million to €671 million. The Executive Board and Supervisory Board will propose a dividend of €0.70 per share to the Annual General Meeting.

To the consumer segment, the Consumer Business segment delivered organic sales growth of 3.6%. In financial year 2015, nominal sales rose by 6.5% from €5.209 billion to €5.546 billion. The positive sales trend was driven by all three core brands: NIVEA increased by 4.5%, Eucerin by 5.4%, and La Prairie by 1.2%. EBIT, excluding special factors, rose by 13.6% from €678 million to €771 million. The EBIT margin, excluding special factors, improved from 13% to 13.9%, a new record. All regions contributed to this positive performance.

In Europe, we strengthened our market position generating sales growth of 1.3%. Sales in Western Europe slightly declined by 0.3%. Good sales growth was recorded in Germany, Spain and in the UK. However, sales declined in Italy and Switzerland. Sales in Eastern Europe rose by 7.9%, driven in particular by all performance in Russia, where we increased both sales and market share. In the Americas, we increased sales by 8.4%. Sales rose by 3.9% in North America and by 10.9% in Latin America. Brazil and Mexico recorded particularly strong growth, but the economic situation in Venezuela once again had a negative impact on sales for the region as a whole. In the Africa, Asia, Australia region, we increased sales by 4.8% with particular good growth in Japan and India. Our business in China improved through the year.

For tesa, in 2015, tesa recorded organic sales growth of 0.4%. In nominal terms, sales rose by 5.9% from €1.076 billion to €1.140 billion. Sales growth was driven by the direct customer business and the distribution business in Europe and the Americas. In Asia, sales declined against the previous year’s level. EBIT, excluding special factors, rose by 4.2% from €183 million to €191 million. This corresponds to an EBIT margin of 16.8% compared with last year’s 17%.

Ladies and gentlemen, the 2015 financial figures show that Beiersdorf is on a long-term profitable growth path. We focus on the following strategic pillars: our brands, our innovation power, our emerging markets and above all, our people at Beiersdorf. Our highly motivated and skilled employees have put Beiersdorf on this sustainable and successful path.

Two brands. In the past year, we continuously continue to systematically strengthen our brands and to manage them for success with our disciplined brand strategy. Consumers around the world [indiscernible] NIVEA, Eucerin and La Prairie with trust, quality and consistency and we deliver what we promise. This commitment has made our brands even more successful. NIVEA was again voted Europe’s most trusted brand in 2015. In addition, the survey determined that NIVEA MEN was the most popular cosmetic brand for men in Germany.

Innovations, one key factor for Beiersdorf’s success is our increased innovation power in recent years. In 2015, we again introduced very successful product innovations to the market. This includes the all-purpose creams, NIVEA Care and NIVEA MEN Creme. These new products underline our commitment to being an international leader in skincare and offer exceptional value for money. In all markets, they gained significant market shares just after their launch. At the same time, we continuously extend the innovation cycle of our major innovations by targeted marketing activities. This enables us to support our important growth drivers in the long-term, including products like NIVEA Deo Black & White, NIVEA Body In-Shower or NIVEA Face Cellular Anti-Age. These products again contributed significantly to our business performance in 2015.

One of our major innovations for 2016 is about to be introduced globally, NIVEA Protect & Care deodorant. For the first time, the innovative formula combines effective 48 hours protection with the unique care and send off the NIVEA Creme. To markets, Beiersdorf remained focus on the European home market in 2015. At the same time, we systematically expanded our market presence in the emerging markets. The Consumer Business Segment now generates more than 50% of its sales in emerging markets. We also established new production size and expanded our local development labs. That way, we can identify the specific and local needs of our consumers even more quickly. This further improves our competitiveness in the emerging markets.

Ladies and gentlemen, before I hand over to Ulrich Schmidt who will conclude this presentation with an outlook for financial year 2016 let me say the following. I would like to express my sincere gratitude to my colleague, Ulrich Schmidt. He will retire following the AGM on March 31, 2016. For more than 30 years, he has done an outstanding job for Beiersdorf in various management positions. Ulrich has significantly contributed to Beiersdorf’s success and deserves to be thanked and recognized for his excellent work. As you know, Jesper Andersen will replace Dr. Schmidt as CFO on April 1. As is tradition at Beiersdorf, Jesper has been with the company for now already 8 months and has prepared himself carefully for his new role. My fellow Executive Board members and I look forward to working with him.

Ladies and gentlemen, thank you for your attention. Let me now hand over to Ulrich Schmidt to conclude this presentation.

Ulrich Schmidt

Yes, good afternoon. Let me comment a bit more detail on the key figures of the group. First of all, you see that we have nominal growth of 6.4% where the like-for-like had been 3%. You will be aware that we had substantial devaluation of emerging market currencies like Brazilian currency, like ruble, like South African rand and others. On the other side, we have also weak euro against the dollar, so that very many dollar-denominated currencies and other Asian currencies has appreciated and we have a currency effect of 3.4%.

You see the EBIT compared to EBIT, excluding special factors and the – excluding factor had been the impairment that we have done in 2014 on the Chinese brand to the extent of €65 million. Operationally we therefore like to comment on the figures excluding those special factors. You see EBIT was growing on a level – to a level of €962 million, that’s a plus of 11.6% and profit after tax even grow by 15.5%. That means we have had a lower tax rate and could grow the margin from 14.4% to a level of 14.4%. And for first time, profit after tax now has reached double-digit numbers with 10%. And earnings per share as you have heard, is now €2.91.

If we breakdown regionally, you again see nominal to like-for-like that we had only a slight effect in Europe, it’s mainly from Eastern European currencies like zloty and some Balkan countries, so these figures are close. Americas were profiting from strong U.S. dollar. We had 11.4% nominal growth, 8.1% like-for-like. And all other areas were profiting a lot, especially in the Asian countries due to the weakness of the euro. So the respective figures of 14.1% compared to 3.1% like-for-like. And if we now have a look to the EBIT, you see that we have grown the profitabilities throughout all regions. Europe could increase further on the good level of 17.2% to now 17.9%, that’s a growth in nominal of 4.8%. Americas now up to 8.4%. Margin, it’s a growth of 30.4%. And all other regions, the emerging markets are now on a level of 12% of margin and that’s a growth of 24.8%. So, we are more balanced in our profitability and start to make use of our growing market share in emerging markets.

If we now look to the tesa business, we have seen some years of strong growth. Tesa is now suffering from industrial markets. They were cooling down in 2015 and still could keep the sales and the operating EBIT margin on a quite acceptable level. Specifically, Americas was doing fine, but we were suffering on project-based business. The previous years, the market for especially markets for smartphones and notebooks look like separated. That cooled down the growth in Asia or in electronics. Still, tesa’s strength and its market leadership with innovations in the bond and the touch line for smartphone batteries and we hope to see better growth again in the next years. The newest line of ACX Plus, high performance tape has been applied in the car industry and is also showing encouraging sales development. We have a new tesa headquarter, north of the Airport of Hamburg with all functions including the R&D lab, the trail center. So we hope that this one place will fuel innovations of tesa in the years to come.

Now let’s have a look towards the capital expenditures, in 2014 we have seen the peak of innovations also I have seen for many years we have finished not only tesa headquarter and R&D, but at the same time, the Mexican plant, the Indian plant and the Chile expansion of its plant. So in the moment, it looks like we have no bottleneck in the work, but good – have enjoying sufficient capacity for years to come. Together with the ongoing effort regarding working capital improvement, that should help our cash position further.

Let me come finally to the guidance of the year 2016. While Europe has stabilized, many emerging markets are challenged due to the oil price and to the raw material price, which are main income tool in many emerging markets. Therefore, we think that we will have the similar challenging year like we had 2015. The rest need to be seen in the months to come. In the moment we look like similar numbers like sales growth of 3% to 4%, in consumer and in EBIT margins, slightly above 2015. At the same time, for tesa, sales growth of 2% to 4% and EBIT margins similar to last year’s level. Tesa ranges broader because of the unclear development, especially in Asia in industry. So total group will be dominated due to the waiting on consumer and to focus is sales growth of 3% to 4% and see EBIT margins slightly above the previous year and also same profit after tax slightly above previous year.

Thanks for now.

Jens Geissler

Okay. So that was the business update. I think we are ready to move on to question and answer. I can see we have the microphone ready. So any questions, please?

Question-and-Answer Session

Q - Mirco Badocco

Hi, good afternoon. Mirco Badocco at RBC, you obviously sit on quite a lot of cash and you didn’t increase your dividend this year. So I wonder if you can remind us your – the ratio behind your capital allocation strategy and if you think you will at a certain point start distributing cash to shareholders? Thank you.

Stefan Heidenreich

Well, I think you know we have a majority shareholder and the latter, you asked for will not happen we are finalizing. But you have to ask him, not me. That’s not going to happen, as long as familiar, so I think it’s a good sign that they keep the cash into the business. On the other side, we also have to do something with the cash and I think now after 4 years, I said it already this morning in the press conference, we will start looking more actively at certain targets. I mean, we now have an enormous cash pie. We increased last year, which was another record for us in the company history by €500 million cash to €3.076 billion or €3.072 billion. So we have €3 billion cash – free cash. We have 10% owner shares, so you can add it all up, we have enough firepower to do something. Again, targets have to come, that’s not a given. But we will be definitely more actively looking for chances to use the cash in the future.

Jens Geissler

Yes.

Unidentified Analyst

Well, could you elaborate a bit, what innovations you said the protect and care deodorant, what regions and categories do you expect to provide the biggest growth impetus for 2016. And also looking at your tesa guidance, actually an acceleration of top line growth you are forecasting there, to what extent do you have the visibility there, I guess we all are on the same page that we assume that economy – well climate is not really improving, so what visibility you have there?

Stefan Heidenreich

Let me do the first one and then Ulrich does the second one on tesa. I think innovation first of all, most important point. We have absolutely fully loaded pipeline. We have at the moment, more innovations that we can handle, that’s the good news. But we also stick very much on our, if you want, two pillar strategy. Number one, that has served us very well, we are keeping innovations on a long-term base support. I will give you an example that I am happy to share, Black & White which over the years has become the most important innovation or let’s say, the biggest innovation, generated last year again double-digit growth. And I am saying to my troops all the time, if we generate in the products double-digit growth, it’s still is an innovation. When you have such a product and obviously, it limits a little bit how many innovations, for example in the Deo categories you can launch in a year or can handle. Lucky enough in Deo again, we feel it’s time for another big one. And that one I am happy to share, I have it with me. That is the new deo, normally we don’t announce new products, but it’s, at the moment, being rolled out worldwide. We announced – because in 2015, we tested it in the biggest market in the world, in Brazil. Brazil, as you know, our friends from you have the biggest market share there. We are now close to 20% market share in Brazil. It’s huge. And it’s the first deo and we are very proud of that. It’s the first deo, first of all, it’s blue, we never had a blue deo, but more importantly, it combines for the first time a unique combination of protection, efficiency and care. And it has the goodies of the NIVEA Creme integrated into that formula and it also brings [indiscernible] NIVEA. We had tremendous success in Brazil behind it.

It’s also one of the things, another point, which is interesting to mention, it goes a little bit far, but that you understand and I always said that more and more will become very, very important that our regional labs develop. That’s the first worldwide innovation and I think that becomes bigger than Black & White, which was developed, created, sort of from Brazil. And that is the new trend that more and more innovations, not only come here from Hamburg, still innovations are coming from Hamburg, but more and more are coming from Brazil. In the other categories, I mean, we can go through it, I think, in Body, we have had the last 4 years, a super run. In-Shower is still doing extremely well, especially in America, where we launched new, relatively new. On the creams, which we launched, we are particularly happy, because we went exactly the opposite way, we didn’t went to the high end of products, we went to the super price value segment, which served us not only very well in Europe, it served us especially well in the emerging markets.

Also, here we can go later on if you want even more categories, this is the NIVEA MEN Creme. You know, we are an absolute number one in men in the world and that thing has boosted penetration like nothing before. Why it does that is very simple? Normally, a face cream of NIVEA MEN cost you around €7, €8. This costs €3.95 and you have double or triple the content in it. And that is a way to grow to penetrate, because in men, one of the biggest potential in men is to penetrate men even more, so that more men using men, that was exactly spot on. So I think I feel extremely comfortable as I said in my first sentence, with the innovations. There are many coming, even in fields, which today have not seen big innovations. That makes me – that’s the positive side to 2016 quite positive for ‘16 and ‘17. So innovation-wise and brand-wise, we can be very confident.

Unidentified Analyst

Looking at your guidance, may I interpret is slightly lower top end of your guidance than last year as a sign that you generally see the market more subdued or do you consider your own outperformance also to be a bit less?

Stefan Heidenreich

I do that question and then Ulrich can answer your second question. I mean, first of all, we are always extremely prudent in the beginning of the year with our guidance. It has been for years the case and I am not intending that to change. Second point is what has changed in the last weeks and months and that’s not deniable is that the market has – markets have very much cooled down. I mean, I cannot understand what last week was discussed and proposed from our French friends just simply not true. The markets are now at a range of 1% to 2%. They are not at 3%, 4%. They have cooled dramatically down. And that is the trend over the last 3 months. So, we have to see what that really means. That goes in line with tremendous FX hikes we see at the moment, particular in Russia we are above the RUB80 again. In Brazil, we see it and worst of all, is South Africa. Now, in all these markets, we have to react. And we are taking the action, it’s coming down, but I think at the moment, with the freefall, I feel very, very good with. We have – if you ask me again, in May and I am always saying the first 3, 4 months for many reasons, because we launch our innovations, I can see what the competition does, we see what happens to the trade, we get a better feeling also on how the world is turning better we hope. Then I think much better guidance, at the moment, it’s out, they are very volatile, which have chances, but also has negatives and that’s why I am saying we are at the moment also vis-à-vis as, as in the team, we are prudent and let’s see what the next 3, 4 months bring.

Ulrich Schmidt

Yes, commenting on the tesa, well, what has been the organic growth in 2015? We have seen 1.3% in Europe and that had been accelerated and we have reached 3.1% in the last quarter. So Europe was there stabilizing. In Americas, tesa had grown 6.4% and that had even accelerated to 9.2% in the last quarter. Another way round in rest of the world and here it’s dominated by China, Korea, by Asia. In tesa, we have seen the whole year for minus 4.3% and that had accelerated to minus 7.8% in the last quarter. So, all that depends developing next year, depending very much on Asia, how Asia is doing, how the de-stocking and stock cycle look like and also when the next generation of smartphones are coming. We have developed various tapes for flexible displays and we feel well prepared for the next generation, but it needs to come and also generate the volume we used to have. So, that’s more or less the speculation, how is smartphones and notebooks doing and how is China doing industry wise. And I think there is a lot of speculation around and we are not sure how this will go within the year.

Jens Geissler

Yes?

Pinar Ergün

Thank you. Pinar Ergün, Bank of America Merrill Lynch. I have two questions. One is could you give us a little bit more color on the regions. Looking at the quarterly growth rates, Latin America appears to have slowed in Q4 and AAA has accelerated. Do you expect these recent trends to hold in 2016? And my second question is what are some of the steps you are taking to improve Beiersdorf’s working capital? Thank you.

Stefan Heidenreich

Good. I mean, first question is going into the same direction. I mean, it is again if you just look at our growth rates in the last 6 months, which have been around 6%, it’s very good, there is no doubt. And I think we are particularly pleased in the last half year of 2015. Russia was outstanding. India was outstanding. Brazil and Mexico were outstanding. And I think that China, thanks God, for the first time, really stabilized. So, from that trend, very positive. But as I said to you and it probably sounds more negative than I probably mean it, it’s just that at the moment, I am just switching on the TV and things happen everyday. And my take this year is the companies who will be the most eager and the most flexible to change plans will win. If we can do this and react to every situation what’s at the moment occurring and there is many, we are just 6 weeks into the market and I can see even many things happened. Not everything is bad.

To give you an example, Iran we are absolute market leader in our six carriers. It’s still a small market, but we have neither retreated that could potentially be a big market for us. So that’s a positive. On the other hand, you all know Argentina by mid-December we all got slashed by 25%, 30%. Now that is gone now and whether I can increase prices to the same extent to be seen, because we also have a consumer, which we have to look at. And this, how you say, bars of positive bars and swimming off negative and positive at the moment is constant. And every time something happens, we have our people in the regions and that’s going on at the moment. Nobody has expected the South African rand where we had a superb last year, I think 3, 4 years in the range of 20%, 30%, we got market leadership in two more categories in the home turf of the big queue was fantastic. But now, I mean, it’s out of range at the moment. So again, the people have to decide and we are in the midst of it as what do we do and how do we intend to deal with it.

Russia, I will give you another example, we had a fantastic run because we got really everything right last year. But now I am again with the ruble of over 80 and you tell me what I am going to do. So it’s a lot of really tasting your – you are saying forward and then taking the right action. So it’s tough to see what it is. We have markets like India, no issue going through the roof. Japan is fantastic, we made a fantastic Japan and I don’t expect Japan to go down. But there other signs where I don’t know, China is stable for the time being, but within China, the switch from classic trade to e-commerce is enormous making 20%, 25% of our sales now in e-commerce. So I mean massive changes and I am just saying that it’s probably the newest thinking also of us is really about the flexible guys who will win. It’s also an interesting one there I agree with the French guys from last week is the real winners over the last 2 years were the local brands. It won the private label, it won – we won in our carries, thanks god. But I mean the big winners were the locals. And that shows you a direction that again the locals are closer to the market, they can react quicker, they have potentially the better innovations, etcetera, etcetera, that’s what we have to do, that’s where we have to go. And protect and care is one of the many things we launched and developed from the markets and we give more and more autonomy and flexibility to the local market because I sleep at night and if something happens in the Far East, so I go at night to bed and something happened in America, so guys to act and don’t always wait until Stefan or Ulrich wake.

And then we need to give more flexibility to the regions and the countries, that’s the game at the moment. I also, think one last point is what I have also experienced over the last 4 years or 5 years is a plan, which is done in September you can put in the bin already in February, March. So what we do is the forecast in Feb and we do the forecast in March, you wouldn’t already it looks in a lot of circumstances, different, not different for probably from the top line, but the compositions of growth and the compositions in a country very, very different. So this is also a thing where we are learning more and more. We go from forecast to forecast. We change things very quickly. And thanks god we have very flexible structures to also do that, because we can pretty good decide on regional level and group level. Working capital?

Ulrich Schmidt

Yes, working capital. So first, perhaps additional information regarding for LAT-AM, so like Stefan was saying, we were not planning the big devaluation in Argentina. In December, were affecting Argentinean business. And secondly, you will see that markets are coming down in Brazil and also the stock, the trade started to de-stock and also reflect that slower growth that market used to grow something like 10% together with an inflation of 7%, 8%. Now the inflation is rather 10% and so the markets are rather 3% to 4%. So I think we are happy to gain market share, but it’s not as easy. And therefore, also we need to be cautious this year. Working capital, we have started to do initiatives. This year you might see in the balance sheet we have done good progress with about nearly 10%. So ratio is becoming much better and that’s one of the reason for our improved cash situation that we have. We have started to do initiatives like that. We are focused with the targets of the affiliates in region for the next year and the years to come on working capital because we think we have a number of low-hanging fruits. We have discussed a number of times in the last years that this had not been our focus but rather market share and growth. So now, we were adding this one. We have management in place, experienced management and we feel that we can do it.

Jens Geissler

Okay. Next question. Yes, please, Robert?

Robert Waldschmidt

Robert Waldschmidt from Liberum, three questions actually. You have seen good gross profit improvement in both absolute and margin terms and can you detail how much of that is mix versus cost savings and efficiencies programs, which I understand now are in place and will get stronger as we go forward. Secondly, again good leverage on the marketing front, in particular I think in terms of advertising, can you detail how that’s coming about exactly from where and how you see that evolving going forward. And then I guess lastly to your point about the locals being potentially closer to customer, which is also one of your buy words, also being good on innovations and such and given that cash pile, is that where you go hunting maybe is in that area? Thank you.

Stefan Heidenreich

I will take the third one and Ulrich can take one and two. I mean I think you can nicely learn from the locals. And I think if you take the big markets, the entrants from locals in China is already a given since many years. What is interesting there to see is that the locals, that gives me some hope in the long run, the locals have a fantastic ride, then they get either sold to stupid Westerners or they collapse. So that is how I see things. I mean a good example is one brand, which I am not citing that, but anyhow you can look at the shares. So they seem to have – they can have really good track on trays, but they don’t seem know the branding and the marketing of it. Yet, you can learn they hit it with insights and you have to do. On these things, we just have to be faster, quickly learn from them, still with pride and adapt it to us whatever suits our brands. And when you look at Brazil, the local sentiment is also already a long, long time, right. Again, here in Brazil what comes to my mind is such a vast country where you have skin types, many skin types in one country. Then also East is completely different than the South. And there are special requirements, special needs which you have to serve and the locals are better in that. Sometimes locals are also like in China just operating. They don’t operate 10 Brazil, they operate in one region.

Now, a region may be bigger than size wise and then Europe and etcetera, so that’s something we can learn and they are very quick and they are very quickly adapting. And sometimes get it right. India is the same thing, alright. I mean there are many locals, good locals since the years were developed. Our medicine to that, as I said is local labs, absolutely local labs and then giving the guys the autonomy to really develop and create new initiatives, protect and care is one. But I can give you many. I mean we correct South Africa literally by re-innovating couple of products upon, which were absolutely for the black African skin, which is very different skin type than the Caucasian skin type. Now that opened the market for us. And that’s what we have to go on. I mean I can go on, on haptic feelings of the skin care. You can also see fragrances, right. Certain fragrances connect very well in Europe, but they mean nothing when you go to the African countries, for example. So all these specialties we have to do. And the challenge, so we are letting the guys more from the work, the challenge obviously is that we keep the frame intact, so that we run the brands even more in a strict frame, so nothing happens. But we have to give more autonomy to counter that. And it’s a huge chance for us. I think this is – and we also have an advantage to that. It might raise complexity or definitely it will, it might also be not as efficient than having one product going through the world, but that’s the best way to compete, I believe with the locals in the long run.

Ulrich Schmidt

Coming to the efficiency and savings, there a number of factors I would like to mention. First of all, regarding the gross margins, we have been able to do price increases in the emerging markets wherever you have seen inflations like there have been. Secondly, we have our inter-company [ph] pricing in Europe, that means in the moment that euro is weak against the other currency, the affiliates are profiting from that and we were profiting from some raw material like oil in the manufacturing. So we could also supply the affiliates with very competitive prices. One of the elements I also would like to mention that the freight rates have been lower because a lot of contracts are based on oil, oil prices, so we were also happy to see lower costs there. We have intensive discussion with customers about straight term and condition and we are insisting also on counter performance. So, we need to be more efficient there and also compensate cost increases that had worked out. Finally, your question regarding the A&P, we were successful in limiting our increases on nonworking media costs. So, while we could keep our share of advertising and share of voice and obviously investing a good part that enabled our market share gains. So, we could cut the number of costs in A&P. So, all that together added up.

Jens Geissler

Any other questions? Yes, Toby, please.

Toby McCullagh

Hi, there. It’s Toby McCullagh from Macquarie. I have a couple of questions if I can. Firstly is just on innovations, I mean you have got some fairly material innovations in maybe four of your six core categories. There are currently two significant innovations in deo with the addition to this new one. I suppose the first question is, last year, certainly during the second half, you talked a little bit about potentially branching out into adjacent or new categories. I wonder if you can give us an update on any of the progress there? And secondly is just I am wondering about the difference or the divergence in your view of market growth relative to what L'Oréal was talking about last week. Given that you are a specialist on the skincare, to what degree do you think that this might actually reflect your slightly differing category exposures? And while skincare has clearly been a strong advantage for Beiersdorf over the last couple of years, if that category has slowed down, which it appears to have done, is that maybe a headwind that you are going to be facing? And then linked to that, I suppose, is that La Prairie, the numbers there are perhaps a little bit disappointing this year certainly relative to what you were saying at the half year point in terms of optimism for the second half of the year. Is that the way that you are performing relative to the luxury numbers that we are seeing out of some of your competitors, is that something brand-specific, launch-specific or again is it something that’s perhaps a little bit category-related?

Stefan Heidenreich

Yes, many questions. Okay. On categories, I think, the focus has been and will be, first of all, on the six big categories and I think there is still a lot of potential to be grabbed there. I think we are making great progress when you go through the six we are making great progress on Body, Deo, Men, Shower. I think we are going to do a lot more in face and a lot more in sun. So face and sun, sun probably growth wise, the smaller item, but face, we see a lot of chances and also face we will come with more initiatives this year. We have as categories number 7 and 8, we have now added one category, which are the creams, so the creams are now in our definition a category on its own. And we not only have launched NIVEA MEN, we also have launched creams into the face arena with big success. We became market leader in face care in Poland, with the cream. And also Mexico, where we started something similar, very early interest and we got success. Can it be adjacent? Yes, we are looking categories which we are looking at, some of them you know, we experiment, some really interesting success. So, we will probably further rollout that. Others, where we still have to work, but also they are not – I am not worried. This is all talked about NIVEA – that is with NIVEA, so lots of potential still on NIVEA and don’t forget in many emerging markets, yes, we have now 50% of the sales in emerging markets, still a lot to go.

In terms of the market growth, you could be right, Toby, I don’t have all the categories in my view. I don’t see all of them. I am just referring and as far as I know, their biggest categories are also the cosmetics. Their business then worsened us. I mean, the numbers are correct and there we see the slowdown. On active cosmetics, or let’s say, medical, as we have it with Eucerin, it’s definitely a growing field, but it’s a small field for them and for us. And on selective and that leads also to the third question, the market split is very, very different to their market split, right? We are not in fragrances and we are definitely not in the hottest category at the moment in selective makeup. We are in skincare. And skincare, unfortunately last year, only has only grown 1% to 2% and we just have been about. Am I happy with La Prairie? No. So, they have to do a lot better. We were hoping much more with the innovation we brought and we are working extremely hard to get a better grip on La Prairie. We are not unhappy, because it’s – over the last year, it has grown good and the profit has been staggering. But I mean, it has to, with the innovation, I expected more. So, that has still to come here.

Jens Geissler

Okay. Any other questions? I don’t see any. Okay. Well then, this concludes our question-and-answer session. Thank you. We have some snacks on the outside and can actually keep on talking a little bit there informally. Thank you very much.

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