Beiersdorf Aktiengesellschaft (BDRFF) CEO Vincent Warnery on Q4 2021 Results - Earnings Call Transcript

Beiersdorf Aktiengesellschaft (OTCPK:BDRFF) Q4 2021 Earnings Conference Call March 1, 2022 2:30 AM ET

Company Participants

Jens Geissler - Head, Investor Relations and Corporate Treasurer

Vincent Warnery - Chief Executive Officer

Astrid Hermann - Chief Financial Officer

Patrick Rasquinet - Executive Board Member

Conference Call Participants

Guillaume Delmas - UBS

Iain Simpson - Barclays

Celine Pannuti - JPMorgan

Bruno Monteyne - Bernstein

Olivier Nicolai - Goldman Sachs

Tom Sykes - Deutsche Bank

Emma Letheren - Royal Bank of Canada

David Hayes - Société Générale

Karel Zoete - Kepler

Fulvio Cazzol - Berenberg

Chris Pitcher - Redburn

Rogerio Fujimori - Stifel

Pinar Ergun - Morgan Stanley

Jens Geissler

Good morning to all of you. I would like to welcome you to Beiersdorf’s Full Year Results Analyst Meeting here in Hamburg. This is a special event today as we have three Board members on stage. With me this morning are Beiersdorf’s CEO, Vincent Warnery and our CFO, Astrid Hermann. For the first time, we have Patrick Rasquinet, who joined our Executive Board last year, and is in charge of our Pharmacy & Selective brands, including La Prairie and Eucerin. So I am looking forward to a review of the year ‘21 and presentations of our priorities for the year ‘22. Before we start, let me make some technical remarks. [Operator Instructions]

Okay. So we will start now. And I hand over to Vincent Warnery for the introductory statement.

Vincent Warnery

Thank you, Jens. Good morning, ladies and gentlemen. We all know how wrong it feels to talk about business figures these days. Given the current developing situation in Eastern Europe, all our thoughts and deepest sympathy are with the people in Ukraine, especially our colleagues and their families.

As part of our commitment to care beyond skin, to foster peaceful togetherness across borders, Beiersdorf has initiated an immediate aid donation to our partners, the German Red Cross and the head organization, CARE Deutschland. Both organizations will receive €1 million each. The financial resources have to be used as quickly as possible to implement projects and measures to support people in Ukraine. We provide humanitarian aid to those in need. As a caring company, we believe in thriving together, and care is inclusive always.

Let me now take a hard swing and talk about the 2021 annual results. Astrid Hermann, Patrick Rasquinet and I have the honor of presenting the results of our past financial year and also providing you with an outlook for the current year. 2021 was an extremely successful year for Beiersdorf. Our capital strategy, again, proved its worth and showed that it is the right strategy for Beiersdorf. Our investments and our strategic focus on sustainability, innovation, digitalization and growth are clearly paying off. We are impressing our consumers with sustainable skin care innovations and thus are setting ourselves in a challenging market environment. We are further expanding our e-commerce business and ensuring that we reach our consumers digitally wherever they might be.

We are tapping growth potential and investing in a state-of-the-art efficient and sustainable global production and logistics network. This is also reflected in our 2021 business figures. Here are some of the highlights. Despite ongoing COVID-19-related turmoil, we delivered strong organic sales growth of 9.7% at group level, which brings us 3.2% above the pre-crisis level of 2019. Organic sales in the Consumer Business segment were up 8.8%. There was a significant contribution from our e-commerce business, which grew by a strong 32%. Other results, our online share of total sales in the Consumer Business segment now exceeds 10%.

Growth was particularly encouraging in the face care business, where we grew 10x faster than the market in the last 2 years. This is due in no small part to our successful NIVEA LUMINOUS630 products. At the same time, our personal and body care products are also posting dynamic growth. In our tesa business segment, we achieved exceptional sales growth of 13.6%. This growth was driven, in particular, by the electronics business and the strong recovery in the automotive business. Despite rising material and procurement costs, we were able to keep our gross margins largely stable. EBIT margin, excluding special items at group level, increased year-on-year to 13% despite accelerating cost pressures in the fourth quarter.

Astrid Hermann will now give us a detailed overview of how our brands contributed to the success of the past financial year and other financial results achieved.

Astrid Hermann

Thank you, Vincent. I would like to welcome you to our presentation of the full year 2021. This was also my first year as CFO of Beiersdorf. We are very proud of our strong results, and I’m happy to guide you through our key financial figures.

As Vincent already mentioned and despite the current challenging market environment, we were able to achieve growth at group level, both on the top line as well as on the bottom line. One reason being our high service levels despite significant supply constraints. Organic sales grew by 9.7% year-on-year. FX and structural effects had an impact of 1.1 percentage points, leading to a nominal growth of 8.6%. Excluding special factors our EBIT margin at group level increased by 10 basis points to 13.0%. We see a much improved tax rate from 29.7% in 2020 to 27.8% in 2021. This is in line with our long-standing tax guidance of around 28%, and it will be our benchmark going forward. The return on sales after tax also went up by 10 basis points to 9.2%, resulting in increased earnings per share of €3 after €2.73 in the previous year.

Looking at our individual business segments in more detail, we grew organic sales in Consumer by 8.8%. The EBIT margin benefited from this rise in sales, although the effect was offset by investments in digitalization and sustainability as well as by significant higher input costs in the second half and especially in Q4. Nevertheless, we were able to keep our gross margin stable, which results in an EBIT margin of 12.1% for the full year 2021 and a slight decrease of 20 basis points versus previous year. In the tesa business segment, we look back at a remarkable year with strong organic sales growth of 13.6%. Here, we could increase our EBIT margin by 150 basis points to 16.9%. Since the beginning of this year, we have seen a strong recovery in the Consumer Segment. Besides the outstanding recovery in Q2, which had been hit hard by COVID in 2020, we are pleased to report positive growth in all fourth quarters, which also brings us above the 2019 levels for the full year.

Let us now take a closer look at the individual brands in our Consumer Business segment. NIVEA generated organic growth of 1.7% in the fourth quarter, which leads to an overall growth of 5.5% in the full year 2021. The transformation of our iconic brand is progressing well. We have made NIVEA one of the fastest-growing brands in face care in the mass market. This growth was supported by the launch of products around our breakthrough innovation, LUMINOUS630. Furthermore, the body and sun categories within skin care also recorded strong growth year-on-year. Additionally, we kept the momentum in personal care, led by the good development in our deodorant business.

The Derma business completed another strong year with 19.5% organic growth. The key markets in Germany and the U.S. as well as the newer markets in Latin America and China contributed strongly to this performance. Derma is the business unit with the highest share in growth in e-commerce in 2021. On product level, Thiamidol remains one of the main growth contributors. We were not only successful in terms of net sales, but at the same time, gained market share in most categories and regions.

Also our Hansaplast and Elastoplast brands recorded strong broad-based growth with 13.7% sales growth. Our successful plaster relaunch in the beginning of the year and a strong recovery in the sports category boosted our sales. La Prairie finished the year up 6.1% in the fourth quarter, a growth of over 30% when compared to the fourth quarter 2019. This performance was primarily driven by strong acceleration of sellout between the third and fourth quarter 2021, with especially strong sales in Hainan and travel retail more in general. Additionally, we saw a strong recovery in the U.S. For the full year, this leads to an overall growth of 20.1%. Patrick will give you more details on the La Prairie strategy in a few minutes.

Next, let us turn to the performance of the individual regions in the Consumer Business segment. In Europe, organic sales rose by 5.8%. We achieved growth of 5.7% in Western Europe. Healthy growth rates were recorded in UK and Italy. Face, sun and body were successful categories not only for NIVEA but also for Eucerin. We also saw a significant contribution from the recovery of travel retail at La Prairie, which is reported under Western Europe. In Eastern Europe, sales were up across all countries with an organic sales growth of 6.3%. Poland and Russia were among the main contributors.

In the Americas regions, organic sales rose by 15.9%, organic sales in North America increased by 13.0%. This was predominantly driven by the strong double-digit growth in the Coppertone sun care business and continued sales growth at a high level in the Eucerin and Aquaphor brands. Latin America continued its success story in Q4 and recorded overall very strong sales growth of 18.8% for the full year. We can report double-digit sales growth in just about all countries with Brazil, Mexico and Chile making the biggest contributions to this performance.

The Africa/Asia/Australia region recorded organic sales growth of 8.9%. Our sales performance was particularly strong in China, India, Indonesia, as well as in African countries, Nigeria, Ghana and South Africa. On a brand level, La Prairie achieved significant year-on-year sales growth in Asia, accompanied by good performances in Eucerin and NIVEA in the complete Africa/Asia/Australia region.

Coming back to our gross margin development, we are very pleased to report a stable gross margin development despite significant headwinds in the second half of the year, which even accelerated in Q4. Excluding the diluting effects of acquired businesses, we would have reported a slight margin increase. Pricing had a positive effect and was mainly coming from emerging markets, Derma, Healthcare and La Prairie in 2021. The strong La Prairie and Derma businesses, the recovery in sun and the push into skin care with innovations like LUMINOUS630 helped improve the quality of our gross margin. Cost of sales and logistics were significant negatives due to rising material prices, transportation costs, energy costs and headwinds from operational effects.

As already mentioned in our half year presentation, we are very pleased to see our working capital management paying off. We reduced working capital significantly also in the full year to 5.3% of consumer sales. There is significant improvement in all components of the working capital and it demonstrates once more our strong dedication to this topic throughout the organization.

Turning to the tesa business segment, the fourth quarter had a strong prior year comparable leading to a decrease of minus 2.6% in Q4. However, the full year 2021 performance of 13.6% is outstanding, especially in view of the difficult supply market for semiconductors, just to name one major bottleneck. This growth is broad-based and coming from various business areas and regions, clearly led by the electronics business in Asia and the global recovery of the automotive industry. Additionally, the building industry in the U.S. showed strong momentum. The Direct Industries segment generated growth of 16.6%. tesa’s trade market business finished the year with growth of 9.1%. The business around general industrial markets performed well throughout the year. A positive contribution also came from Consumer & Craftsmen and its e-comm business.

On the back of these very strong results and with continued headwinds from input costs, we expect a challenging year 2022. We have a special focus on the following three business fields. After 2 consecutive years of growth in the consumer part of tesa, we are looking to further strengthen our portfolio and the business. We have set up a new management unit and a dedicated Board member at tesa for this business. We are expanding our online presence on third-party platforms as well as in our own D2C shop, which was launched in Germany last year.

The automotive business is a fast-paced industry that benefits from two major trends: e-mobility and automation. Going into 2022, we will be ready to serve our customers once the bottlenecks in the semiconductor industry are resolved. The electronics business remains one of the most important growth drivers for tesa. This part of the business is very much project-driven with major customers. To remain competitive in this area, we are keeping our high innovation power. We are in a top position when it comes to bonding of smartphone covers and we will make sure to defend this position also in 2022.

With these remarks, I am closing the review of our financial results 2021 and the tesa business. I’m handing back to Vincent.

Vincent Warnery

Thank you so much, Astrid. To give you an idea of the priorities we are setting for the coming financial year, we’d like to take a more detailed look at the following three topics. First one, our activities in the area of selective skin care; second, our efforts related to the further development of NIVEA; and third, our activities to strengthen our innovation network and grow our markets in the U.S. and China.

And with that, I will hand over to Patrick Rasquinet who will take you through the most important development in selective skin care. Patrick?

Patrick Rasquinet

Thanks so much, Vincent and good morning from my side as well. And as you have most likely already noticed our range of premium skin care now consists of two brands: La Prairie on one side and Chantecaille today.

Before I get to a new Chantecaille brand, I’d first like to highlight the key developments at La Prairie. As Astrid just pointed out, financial year 2021 was very successful for La Prairie. After a very difficult 2020, La Prairie was able to navigate successfully through the COVID crisis and accelerated in Q4 versus Q3. This resulted in a full year net sales growth of above 20%. But more remarkably, it translated in a growth of 26% in terms of retail sales, performing more than twice as fast as the market. Most importantly, the net sales of Q4 2021 showed an increase of 30% versus the same quarter in 2019. This is due, on the one hand, to the very consistent execution of our luxury strategy of focusing on a very selective distribution, refusing to engage in dilutive promotional activities and offering our consumers the highest possible level of service.

On the other hand, we were also very successful with 4 strategic initiatives that we further accelerated in 2021 and that will be the key pillars for a successful financial year 2022, which we started strongly, recording a significant growth versus last year in the current trading. In China, our first pillar, we continued our highly selective expansion focusing on the boutique channel, which is becoming extremely important. As a result, our sales in Mainland China outpaced the market average with a jump of 70% over 2019 and over 30% versus 2020.

The travel retail business, one of the sectors most severely impacted by the corona pandemic, as you all know, recovered significantly in the past financial year. In China, sales in our travel retail business increased 73% over 2019 and doubled versus 2020. This growth was largely driven, of course, by Hainan, where we selectively expanded our presence. The selective expansion of doors in Hainan will continue in 2022 and will strengthen our footprint over there. Through a cooperation with Tmall, the third pillar, we have achieved a considerable online presence in China and we have been able to drive the e-commerce business with very strong growth rates. This allowed us to reach to a lot of new and younger consumers. We are currently laying the groundwork for further partnership of this kind in all the major markets around the world.

Our highly selective sales presence has enabled us to enter in groundbreaking agreements with our major retailers to collect client data across all channels and across all markets. This makes it possible for us to communicate with our clients even in time of lockdowns and other restrictions. To this end, we will load a new app and a very powerful CRM program that we can use to build and intensify relationships with our local client base all over the world and in all touch points.

So allow me – now to turn to Chantecaille, our newcomer in the portfolio of Beiersdorf. Founded in 1997, Chantecaille is headquartered in New York and has a global presence with a very strong foothold in North America and Asia. The company offers more than 100 innovative skin care, cosmetic and fragrance products based on botanical ingredients, combining effective formulas with a very strong focus on sustainability and philanthropy. We acquired Chantecaille Beaute this year, and for us, this acquisition is another very important milestone in the execution of our CARE+ strategy. We want to win with skin care while unlocking growth potential. Chantecaille ideally complements our premium skin care range. While La Prairie is positioned as a very high-end luxury brand, Chantecaille serves consumers in the prestige cosmetics segment and is therefore aimed at a wider consumer group.

With Chantecaille, we aim to further accelerate our growth in the North American and Asian markets with a very particular focus on China and South Korea. Chantecaille is very well-positioned in these markets. Additionally, we are very pleased with its strong e-commerce position, which drives nearly a quarter of total sales. We will manage Chantecaille within our Consumer Business as a complementary selective brand, and aim to make Chantecaille the market leader in natural beauty.

So I really hope that my brief overview of key developments in selective skin care provides you with some good insights into the very exciting opportunities we are pursuing. And now, Vincent will talk about our plans for NIVEA.

Vincent Warnery

Thank you. Thank you, Patrick. We have a clearly defined goal at NIVEA: we want to reinvent our flagship brand as a leading global skin care brand. This is the reason why we appointed Grita Loebsack to the Executive Board in December 2021. In as position as President NIVEA, she assumes global responsibility for the brand and will play a key role in making NIVEA an even more global, digital and sustainable brand that inspires our consumers around the world.

To accomplish this goal, we’ll take the same approach that I already used for successful brands, Eucerin, Hansaplast and La Prairie. We introduced a new operating model for those brands a few years ago, a model that embraces a much stronger global focus while allowing highly successful product innovations such as Thiamidol to emerge. Part of this approach also involves an even stronger positioning of the brands, both online and off-line. The result is double-digit growth for all 3 brands despite global economic challenges.

We intend to apply the successful approach to our iconic NIVEA brand as well. For this purpose, we are beginning to take a more global approach to product launches and marketing campaigns for NIVEA range. We want to implement fewer, but better and larger product launches and campaigns. In specific terms, this means that in the future, innovations and campaigns will generally be implemented in all markets that are relevant for us. A good example of the NIVEA’s potential is a LUMINOUS630 anti-pigment spot face care range launched in 2020, a product that is now a global success story and a major source of growth. It contains a highly effective active ingredient and in-house development that reduces pigmentation and age spots.

Last year, we rolled out the successful care range and entered new product categories. With our serum, we are present in more than 40 countries and we successfully established ourselves as a market leader in 8 countries in Europe, thereby assuming the position of market leader in the anti-spot serum throughout Europe. The serum is our most expensive product in the entire NIVEA assortment. We intend to build on this success even further in 2022. We will expand this range in the hand care and the sun care segments. And I have also a very promising launch into the eye category. Our goal is to double sales of the range this year and thereby expand growth in the face care segment and broaden our market leadership beyond Europe.

Digitalization has a key role to play in these efforts. We view it as an increasingly important component for the success of our business and in the development of our brands. For this reason, we are pressing ahead with our digital transformation. We invest extensively in digital media to engage with consumers all over the world and to meet their individual aspirations. Thanks to our precision marketing programs and our team’s effective work in the market, we are increasingly personalizing content. We strive to deliver the right message at the right time.

In 2021, our digital media grew 43%. Through our precision marketing campaigns, we have delivered an outstanding performance in 2022. We will roll out over 30 precision marketing campaigns in all top markets including the NIVEA LUMINOUS630 campaign. In the U.S., we are increasingly using social media channels to communicate since this is not the best way to reach our target groups. We have also had very positive experience working with influencers, viral campaigns and extending user-generated content, for example, on TikTok. To leverage this potential, we will monitor and invest in social platforms even more closely in the future and intensify our partnerships with influencers as well as digital technology providers such as MikMak, Google and Amazon.

Sustainability is, of course, a crucial driver of innovation for us. Looking back over the past year, where do we stand? We launched our first climate-neutralized NIVEA product. This marks an important milestone in our product transformation towards sustainability. With optimized packaging and formulas, we decreased our carbon footprint and made our climate engagement tangible on the product level to consumers. We reduced the amount of plastic we use where possible. The packaging of our NIVEA Naturally Good body lotion, for example, uses 50% less plastic than our other body lotion bottles and marks a true lighthouse in the context of material reduction. We plan to extend our lightweight packaging approach to other assortment this year. We have broken new ground by using recycled aluminum in our aerosol products, one of the first companies in industry to take this step.

So where do we go from here? We can achieve the most significant impact in terms of reducing CO2 emissions by revamping existing and especially product – popular products. After all, this is how we enable millions of people to make their skin care routines more sustainable having their own contribution to climate protection. I’m proud to announce today that we will be relaunching one of our classic products during the course of this year, our NIVEA Soft. This represents a major step forward in our climate engagement, especially as we will be able to climate-neutralize NIVEA Soft due to its improved environmental footprint.

Now let me talk about our activities to strengthen our innovation network. We want to invest in our ability to develop innovations earlier and more successfully than the rest of the market. We are convinced that the global presence of our research and development is key to empower impactful skin care innovations that touch people’s lives. We have assembled a global research and development network centered around our skin research center in Hamburg, Germany. Here, we conduct important application-oriented research. As we gain a better understanding of the skin’s own metabolic processes, we’re able to develop high-impact products tailored to specific needs. With our Innovation Center in Shanghai, which opened in 2020, we are leveraging the potential from the growth and innovative power of the regions and also promoting local skincare innovation through strong partnership. I will come back to this later.

Our newly built state-of-the-art Innovation Center in New Jersey in the United States, is our first global center of excellence for sun care products outside of Hamburg. Since the U.S. represent the world’s largest sun care market, a strong R&D presence in North America and an enhanced position in skin and sun care is crucial to growing our business in the region. Our outstanding performance with Coppertone in the U.S. demonstrates the potential of the region. In the U.S., we achieved strong double-digit organic sales growth with Coppertone in 2021, both offline and online. This was particularly driven by successful launches of new products in the last year. We have successfully complemented the acquisition and integration of the brand. Coppertone has gained market share for the first time since 2012. We intend to build on the success in 2022.

As part of these efforts, we have taken a number of important steps to strengthen Coppertone’s brand positioning. We realigned the portfolio, developed innovative products in the key application areas of family and sport, revamped the packaging and expanded digital consumer communications. We also want to leverage our high level of R&D expertise at Coppertone to other brands. I would point to Eucerin Sun as one such example. We recently launched Eucerin in the sun category in the U.S. We introduced seven sun products that combine advanced sun protection and skin care benefits. In the face care category, for example, this includes a product specifically designed for oily and acne-prone skin. Developing collaboration with dermatologists, the products have clinically proven efficacy and benefit from Coppertone’s extensive sun expertise.

While our main focus in the U.S. is the sun care business, we see significant growth potential in face care in the Asian market, especially in China, the world’s largest face care market. In recent years, we have succeeded in establishing ourselves in the premium segment with La Prairie and Eucerin, thanks overall to our skin care expertise. We are currently in the process of registering a patented active ingredient against hyperpigmentation in China. We hope this will make us the first company, after the introduction of China’s new cosmetic regulation last year, to receive approval for the use of such an effective ingredient in a domestic market. We are convinced that this will open up significant growth potential for us.

Chinese consumers can currently order Eucerin and NIVEA with this active ingredient, W630, through a special cross-border e-commerce channel. We are receiving such positive feedback from consumers that we will expand the range of products in the NIVEA LUMINOUS630 series in 2022. These cross-border e-commerce channels currently covers only 10% of the total online market potential of this range. Once we receive the registration, we can expect a dynamic growth trajectory. Our focus also includes the development of face care products for Chinese consumers that are specifically designed to meet their needs. In this connection, we have high expectations for our cooperation with the Tmall Innovation Center, TMIC, which began in 2020. TMIC helps brands develop new strategies and channels to reach the Chinese market. In collaboration with TMIC, we have developed and launched a number of products in 2020 and 2021 that are specifically designed to meet the needs of Chinese consumers. For example, the NIVEA Men Eye Gel and NIVEA Tone-up Cream. More than 10 additional products have already been agreed for 2022.

In the years ahead, we want to accelerate our pace of innovation in closer cooperation with our external partners such as Tmall and thereby make Eucerin and NIVEA as successful as La Prairie in China. That concludes our overview of Beiersdorf’s most important development: our ambition to accelerate growth with selective skin care to reinvent NIVEA as a global skin care brand and to empower impactful skin care innovations with a special focus on the U.S. and China.

At this point, I will shift back to Astrid, who will take – talk to you about the outlook for the current financial year.

Astrid Hermann

Thank you, Vincent. In our last call, we gave you a high-level outlook for the year 2022, which already reflected rising input costs at the time. Since then, input costs have risen even more than forecasted. Raw materials, transportation and energy costs increased to new highs. At the same time, we continued to invest significantly in digital and sustainability, in line with the investment program introduced earlier. All these factors are reflected in our guidance for the current year.

We expect the Consumer Business Segment to reach mid-single-digit full year sales growth. Regarding operating profitability, we continue to aim at slightly improving our Consumer EBIT margin for the full year 2022. While achieving this will be a significant challenge and will depend on the development of the market and commodity environment, we have specific plans to help us get there. One major contributor to this margin improvement will be consistent pricing action throughout all regions. Another important factor for mitigating input cost inflation will be our brand channel and category mix. Further growth in the high-margin businesses of La Prairie, Derma and the sun category is essential. We will leverage additional potential for pursuing even more skin care and premium innovations. In addition, we will work on operational efficiencies.

tesa faces strong comparatives from an outstanding year 2021 on both the top as well as the bottom line. Nevertheless, we expect mid-single-digit full year sales growth. Looking at the margin development, 2022 will be a challenging year at tesa. We have seen significant input cost inflation as well as bottlenecks in the supply chain affecting our results already in the second half of 2021 and going into this year. tesa will partially offset these factors with pricing actions. Moreover, profitability will be affected by more investments in sustainability, innovation and digital. We, therefore, expect tesa’s full year EBIT margin from ongoing operations to be noticeably below the previous year.

On a combined basis for the group, we are calling for mid-single-digit growth and an EBIT margin from ongoing operations at the level of previous year. I thank you for your attention and hand back to Vincent for the closing remarks.

Vincent Warnery

Thanks so much, Astrid. Ladies and gentlemen, looking back, 2021 was a very successful year for us, a year in which we made excellent progress in all areas of our capital strategy. We unlocked substantial new growth potential primarily in selective skin care with La Prairie and Chantecaille. We outperformed the market in the face care area. We enhanced our innovating capabilities through the creation of a global R&D network as well as through partnerships. We achieved all the milestones we defined as part of the digital and sustainable transformation of our company despite the many adverse circumstances that we faced, particularly as a result of the corona pandemic and higher material and transport costs.

The fact that we managed to do all this is due in particular to our employees. I would, therefore, like to end my remarks by expressing my sincere gratitude to them. In an extraordinary year, they achieved results that were truly remarkable. It is thanks to their commitment, discipline and flexibility that we can look to the future with great confidence.

We thank you for listening. I would now be happy to answer any question you may have.

Question-and-Answer Session

A - Jens Geissler

Well, these were the priorities for this year and the review of our full year figures ‘21. At this time, we will begin the question-and-answer session. [Operator Instructions]

The first question is coming from Guillaume Delmas. Hello, Guillaume.

Guillaume Delmas

Yes. Good morning, Vincent and Astrid. So my two questions are, first, on your cost structure. Astrid, at the last conference call in November, you mentioned that you were expecting a low triple-digit basis point impact on your gross margin for Consumer from higher costs in the first half of 2022 and then some easing in the back half of the year. So could you provide maybe an update on this as I’m imagining things have changed since November. And still on the cost structure on A&P, if you could also tell us your level of A&P spend as a percentage of sales in 2021 and whether you are planning to increase A&P spend faster than sales this year? And then my second question is more on 2022 for your Consumer division. 2022 should be another year of recovery facing the travel retail channel or for the sun care category. So maybe could you give us a sense on how the year has started for your travel retail operations? And for sun care, probably too early to say, but can you tell us how far below your 2019 levels you were with the NIVEA and Coppertone businesses last year? Thank you.

Astrid Hermann

I think I’ll take all of those questions, Guillaume. Thank you so much. On the cost structure, yes, I did mention that we were at a low triple-digit impact and that we would see easing in the back half. As we’ve presented to you, we did quite a good job managing the pressures in 2021 despite seeing a significant acceleration in the fourth quarter. In terms of this year, we do not currently expect an easing in the back half. We do think that this will be holding through the entire year, and we now see a multiple of that triple-digit impact that I mentioned before. In terms of A&P, our A&P spending increased by 30 basis points to 27.0% in 2021. This was primarily driven by digital investments we’ve made with a focus on skin care; also by investments in our Derma business, primarily focused behind the growth markets: U.S., Germany, Brazil, China and Russia. And in the fourth quarter, we didn’t take a foot off the pedal in terms of investment. We really wanted to make sure that we supported the business and drove it into 2022.

In terms of your question on Consumer for this year, absolutely, we do think that assuming markets return to normal, there is significant potential for recovery. Obviously, travel retail, as also Patrick talked about, sun, that you mentioned, but also other categories that were impacted such as lip, men and so on there is significant potential. We have started the year well – really well actually, and we see a real acceleration of growth in Consumer for the first quarter. All brands are contributing to this growth with NIVEA and La Prairie actually accelerating the growth while Derma and Healthcare are growing at a high level.

Jens Geissler

So we move on. You’re fine, Guillaume? We move on to the next caller, please. We have Iain Simpson on the line. Iain?

Iain Simpson

Good morning. Could we start with NIVEA, please? Looking at the Nielsen data, it looks like market share gain accelerated here towards the end of the year. You’ve said that, that’s started well. Could you give us a sense of exactly where the market share gains are coming from in NIVEA, whether by kind of category or country what’s driving the outperformance? And then secondly, Chantecaille, you are clearly quite excited about the opportunity there. Could you perhaps give us a little bit of a sense of what you plan to do with it? Is it the case of doing stuff with the innovation or putting more money behind marketing or dropping it into your distribution platform? What do you see as the opportunities for Chantecaille that makes you sort of better owners for it?

Vincent Warnery

Thank you, Iain. I will take the first question and Patrick will answer the question on Chantecaille. On NIVEA, we are overall gaining market share, and you saw that we grew at plus 5.5% last year. What is particularly important is the growth in face care. I mentioned already in my first – in my speech, we grew, in face care, 10x faster than the market versus 2019. And that’s particularly strong in emerging markets, has been the case over the year. But also since 6 months, we are overperforming the market in Europe, which is, as you know, the most important part of the business. And I can tell you also that in a country like Germany, I got yesterday the news that we got in January the best-ever market share of NIVEA. So that’s giving us a lot of hope. What is also interesting is that while we are gaining market share in face care, while we are also gaining market share in sun care, we are also progressing on the core category of body and deo, which are obviously essential for the penetration of the brand. Patrick, Chantecaille?

Patrick Rasquinet

Yes. So indeed, we are very excited about the potential of Chantecaille and we strongly believe that it offers a lot of opportunities in many different areas. And maybe to answer directly your question, we clearly see a lot of potential in terms of geographic footprint, but also in terms of distribution footprint. As I said earlier, they are excelling in e-commerce and we want to expand this expertise that they have in other parts of the world. As I said, they have a presence mainly in North America and in Asia and we want to expand this business in this region. Of course, we want to support them and I mentioned it quickly in my overview. There will be still a stand-alone business sitting into the overall Selective & Pharmacy brands division. They will be operated independently. However, we want to work on potential synergies with La Prairie and in some very specific areas like R&D, supply chain or even production.

Jens Geissler

So we move on to the next caller. I can see we have Celine Pannuti on the line. Hello, Celine.

Celine Pannuti

Yes. Thank you very much. Good morning, everyone. So my first question is on China. Can you tell us what was the growth in China in 2021, and whether you’ve also experienced a slowdown in the fourth quarter? And what is your outlook for 2022 for the market, but it seems that you have a lot of activity. So we’d like to understand how you see your performance versus maybe a slower market in ‘22 there.

And my second question is trying to understand the bridge. Astrid, you provided 0.3 – 30 basis point pricing benefit in ‘21. What should we expect for ‘22? And equally, for the mix, which was a 40 basis point benefit to gross margin in ‘21, how much catch-up we still have to do from what you mentioned in terms of recovery of travel retail, La Prairie and sun to understand that? And just sorry, on pricing and if you could talk about how your pricing negotiation are happening, that would be useful. Thank you so much.

Vincent Warnery

Thank you, Celine. I will take the first question on China, but perhaps you also ask Patrick to add some color on La Prairie. Celine, in China, we grew in 2021 by 30%, 3-0. So very, very strong performance on all our brands, so not only La Prairie, and Patrick will talk about the figures, but also on Eucerin and NIVEA. You might remember that we launched Eucerin 3 years ago and it was the fourth attempt to launch Eucerin and the very good news that we are overperforming the market. We are absolutely in line with our business plan. We gained last year, for example, more than 500,000 new users. Big success of Thiamidol, mainly on cross-border, and this is where the potential registration of Thiamidol in local China will make a huge – will be a huge game changer, but – so overall, plus 30%. Patrick, on La Prairie, we are also extremely happy with China.

Patrick Rasquinet

Yes. Absolutely. Maybe I can split China topic in two distinct topics. One is Mainland China, obviously, where we are performing extremely well and much faster than the market and the competition. I can give you some numbers to give you a flavor, but we grew by over 30% in 2021 versus 2020 and we are even at a pace of over 70% versus the year 2019. This is mainly driven by the opening of boutiques, but again, very selectively. As you know, we have a very selective distribution. We remain extremely scarce, let’s say, in our distribution even in Mainland China. And of course, thanks to Tmall, that was a real growth provider and allowing us to reach out to new consumers. We managed to increase our client base by around 10% in China only through Tmall, and it also allowed us to target younger consumers because we noticed that the consumers going on Tmall are 3 to 4 years younger than the average consumer group that we have in China. And then the second bucket of China is, of course, the travel retail China. No need to tell you that Hainan for us is booming, but also travel retail China in general, and I’m thinking of the airports like Shanghai or Beijing. So they are also very impressive growth. We even doubled our business in 2021 versus 2020.

Vincent Warnery

And to conclude your question, Celine, the prospect for 2022, we are extremely optimistic. Obviously, on Eucerin, NIVEA, we have a lot of things to do. But I can share with you, Patrick, that we saw, for example, in January that we tripled our business in Hainan with La Prairie, so absolutely no slowdown and on contrary, very hope – a lot of hope, also including Chantecaille in China for 2022. Astrid?

Astrid Hermann

Celine, on your question related to the margin bridge. So the pricing impact shown there, of course, was the impact on margin, not on sales growth. The impact on sales growth would have been a multiple of that number and we are expecting that to accelerate in 2022. As I mentioned, both in my speech as well as in replies previously, we are trying to really accelerate pricing in all regions, whereas this year – or sorry, in 2021, we took pricing primarily in emerging markets as well as our Beyond businesses. La Prairie, Derma and Healthcare, we are looking to take pricing globally this year and likely in two rounds. So we should see a significant acceleration of that both in the first half as well as in the second. In terms of mix, similarly to what I just replied to Guillaume, there should be significant upside to mix and we are planning for that. It does depend somewhat on the recovery of, let’s say, the COVID-related categories – impacted categories, travel retail, sun, lip, men and so on, but we do think we have some significant opportunity on mix as well still in 2022. And then pricing negotiations are going well. They are always tough, of course, but they are going well. We don’t foresee, currently, any challenges there.

Jens Geissler

Okay. So we move on to the next caller. I can see here Bruno Monteyne. Good morning, Bruno.

Bruno Monteyne

Good morning, everybody. Just one more remaining question, if I look at the 2-year sort of growth CAGR versus 2019 to take out the noise from COVID, the last three quarters that are sequentially slowing down every single quarter and so there doesn’t seem to be a sort of ramp-up or sort of further acceleration in growth. Is there any reason for that? And sort of what gives you the confidence that you said it will be back up to 5% or mid-single digits for 2022? Is that largely on the back of pricing, or is there anything else that we should look forward to in 2022?

Astrid Hermann

So, while the comparisons, obviously, in the fourth quarter or in the back half period versus ‘22 become just more challenging, we are very happy with the development of our business. We did mention that NIVEA was impacted in the fourth quarter by COVID-related lockdowns still in many parts of the world, including in emerging markets in Europe and in Japan. We did see very, very strong dynamics from the rest of the business, double-digit growth in healthcare and derma, very strong growth in La Prairie, as we mentioned, versus 2019. We are talking about 30% growth. So, we do think we have good momentum and even stronger acceleration into Q1.

Jens Geissler

So next, in our line, I have Olivier Nicolai. Olivier hello.

Olivier Nicolai

Hi. Good morning. Just got a couple of questions, please. First, a follow-up on the La Prairie brand, which had a very strong growth in Q4. You gave us some indication about the trend in China, but can you give us an idea of the underlying demand for La Prairie in Europe and in the U.S.? And then just secondly on NIVEA and more for 2022, we obviously hear a lot about consumer disposable income in Europe or in the U.S. becoming under pressure because of inflation. Are you concerned that it could have an impact on NIVEA’s demand? Thank you.

Vincent Warnery

Patrick will take the first question. I will take the second one.

Patrick Rasquinet

Yes. So, concerning the underlying demand, so first of all, I want to give you another number concerning the Q4. You have seen the net sales growth of 6%, but I would like also to mention to you that a very important indicator for us is the sellout figures. And we have seen sellout figures or retail sales, if you want, of above 20% in the fourth quarter of 2021. Obviously, this is still related a lot to China and to travel retail. But we had also very nice growth in the United States. So, we ended the year also with double-digit growth, above 20%, in the United States, so showing really an acceleration of the sellout figures in the United States. In Europe, it’s still a mixed bag of figures, especially that the first half was still impacted by the COVID to a still reopening, lockdown and so forth. But we start to see an acceleration of course, on a much lower basis in Europe in the last quarter and as well now at the beginning of this year.

Vincent Warnery

Olivier, on your question on NIVEA, yes, you are absolutely right for a brand like NIVEA, which is really the value-for-money brand. We might feel – we might face some issue when we increase prices. What is very interesting, in fact, that first, we didn’t see any elasticity, which is a good news. And the second good news that, as I mentioned, the best ever launch of NIVEA is Luminous 630. This is also the highest ever consumer price we position in the market. We are selling Luminous 630 for around €20, which is 4x the price you could find for basic moisturizer of NIVEA. And we saw absolutely zero issues. So we are, as Astrid was saying, we are running price increase. We are doing that, obviously, not on one-size-fits-all approach. But we believe that, especially in those new categories, which are the priority for the brand, face care, sun care, we have some opportunity to increase our penetration despite increased prices.

Jens Geissler

So we move on to Deutsche Bank and Tom Sykes. Hello Tom.

Tom Sykes

Yes, good morning and good morning everybody. Firstly, just on derma, please. You did say that, that was driving a lot of your e-com sales. Could you just remind us how much of your derma business is in e-commerce? What channels are – and perhaps what geographies are particularly driving the e-commerce at the moment? Obviously, you highlighted the opportunity in China. And then just you seemed to draw the sort of the link in some of your mass products between using – increasing the sustainability credentials and then driving the growth there. So, I just wondered where you had sort of increased those sustainability credentials and then putting the green flash on the product or something? What sort of uplift in sales or share that you have seen in some of those mass products when you had done that, please?

Vincent Warnery

Patrick, you will take the first question?

Patrick Rasquinet

Very good. So I mean, Eucerin is the brand with the highest share of e-commerce within the portfolio of our brands, very close to La Prairie. So, it’s above 20% share in e-commerce, so very strong. And this is coming mainly from two key markets. In fact, this is on one side, the United States and on the other side, China, where we have excellent results in terms of e-commerce, and of course, through the usual platforms like Tmall on one side, Amazon on the other one, but also through the retailers. So, this is to answer your question on e-commerce for Eucerin.

Vincent Warnery

Very good question on sustainability. What is interesting, it’s to see indeed the impact on purchase. We have a very good example, which is close to my heart, which is France, a difficult country for NIVEA. We had a very good success with this range I was mentioning in my speech, which is Naturally Good where we have in the Yuka app, which is extremely key in France, which has green – which is green. And this is one of the best launch we have ever done in France. We clearly saw that the new target consumers – a younger target was interested in this product, which is a range which is on multiple categories face care, body, deodorant, shower. We saw clearly the interest of consumers and we saw that being green on this app was essential. This is why also we have been courageous enough to change our number one product, NIVEA Soft, and to come with the renewed formula, which is much more sustainable, changing some critical ingredients, also working on the plastic, working on all the elements of the product. And we feel that we will not only keep our existing consumers, which is essential for a core SKU like this one, but also recruit new consumers. I could also mention the MagicBAR that we have launched. So, we see clearly, especially for the young targets, especially for Europe, that this is appeal for sustainable products is really bringing a lot of new consumers and a much better equity to the NIVEA brand.

Jens Geissler

Next on line would be Emma of Royal Bank of Canada. Emma, please go ahead.

Emma Letheren

Hi. Good morning everyone. You mentioned Russia as one of the biggest contributors to your growth in Eastern Europe in 2021. So, I am wondering how big is Russia for you. Is it about 3% to 4% of group sales, would that be about right? And what growth rate are you assuming in your sales guidance for these regions? Then my second question is that how are you feeling about prioritizing meeting that guidance margin improvement in your consumer business if the environment – macro environment deteriorates? Are you concerned that this might constrain your ability to make the necessary investments behind your brands? Thank you.

Vincent Warnery

Astrid, do you want to take the questions?

Astrid Hermann

Sure. In terms of Russia as a percent of our business – actually, Russia and Ukraine, let’s take that together, but it’s not a material part of our financial results. It reflects less than 3% of the top line and less so on the bottom line. Therefore, we are, at the moment, in terms of pure business results, less concerned, obviously, very much concerned with our employees on the ground and making sure that they are safe. In terms of your question on advertising and margin guidance, we obviously look to continue to support our business strongly. We have talked about the innovations that we have and what we are trying to achieve. So clearly, that also requires the right advertising. At the same time, as we have continued to expand where we do advertising, on which digital platforms, precision marketing and so on, we also have opportunities to streamline and create more effective advertising than maybe in the past. So, it will be a good mixture and we will keep that quite flexible to ensure that we drive business.

Jens Geissler

So, we will move on to Société Générale, David Hayes. David, good morning.

David Hayes

Good morning. Thank you. So, my two questions, one on operational efficiencies and one on the new NIVEA head. So, just on the operational efficiencies, I think you talked about having operational efficiencies in the plan in terms of margin delivery. I just wonder whether you can quantify that, or is that just a generic sort of comment in terms of being focused on costs generally? And then the second one on the head of NIVEA, you have obviously employed an external hire in the last few months. So question there, why external? And what are the objectives that are being laid out for the new hire in terms of taking NIVEA forward? What might be different with NIVEA under that new leadership? Thank you so much.

Astrid Hermann

David, I will take your first question and then I think, Vincent, you will take the second one. On operational efficiencies, we have both concrete plans on what we will drive. I will not, at the moment, share obviously, the exact impact for you, but there are concrete plans. At the same time, we will also continue to look everywhere as obviously the very uncertain volatile environment requires us to do so.

Vincent Warnery

On your question on NIVEA, David, important to know that Patrick, my neighbor, which was the last promotion to the Board has been 27 years with the company. I could mention also our Head of R&D, Gitta Neufang being with the company for 17 years. But indeed, also, we recruited Oswald Barckhahn in charge of Europe and North America and Grita Loebsack, in charge of NIVEA brand. Grita has been managing the skin care global business of our top two competitors. She is German, and she has a very respected expertise in skin care. So, the mandate is pretty clear. And I mentioned that in my speech, we want to – not develop, we want to reinvent NIVEA as a global skin care. I am convinced that the future of the brand and the path of the brand is much more in skin care, in face care than in, for example, personal care. So, the mandate of Grita is to drive this transformation of NIVEA into the leading skin care company, to have a much stronger drive on the business. She is not a CMO. She is the President of NIVEA, which means that she has the last word regarding any kind of NIVEA activity in the world. She is also – she has a very strong digital savviness and we are already implementing our first thoughts on how to be even more aggressive digitally. So, she is really be – the one transforming NIVEA with the full support of the Board.

Jens Geissler

Okay. So next, I can say we have Karel Zoete, Kepler. Karel, good morning.

Karel Zoete

Good morning all. Thanks for taking the questions. I have two questions. The first one is basically a follow-up on the last one. You seem to get a more centralized approach with regards to your brands and NIVEA in particular. What does this mean for the organization, and for example, for the go-to-market model more locally? And the second question is on the growth outlook provided for consumer. You sound upbeat on the momentum in skin care, there is still more pricing coming and there is an easier comparison base in sun and in travel still in H1. So, why just mid-single digit growth? What is the – and what is striking the growth down, if you like? Those are the two questions. Thanks.

Vincent Warnery

Thank you for the questions. I will take the first one, and thank you so much for asking it. The interesting thing with NIVEA, we used to have 100 CMOs. So, everybody in the country is reinventing the wheel and adapting the global launches to their all local consumers, but not in a very scientific way. I think together with – and you are absolutely right, the stronger centralization of decision-making, we are also defining better the roles and responsibilities. We are asking the countries to activate, to be winning on the market, to spend their time meeting retailers, driving the brand into the stores, being sure so that they report consumer insights. Together with the globalization of marketing, we are also creating center of excellence in the U.S., in Korea, in France, in Brazil, in Thailand in order to be sure that we have also these insights coming from the country. But I think it’s really about defining properly who is doing what in a company, which has been perhaps a little bit too much decentralized in the past. Astrid, do you want to take the second question?

Astrid Hermann

Sure. Thank you, Karel. I think you have captured our growth drivers quite well. They are the ones that we are absolutely driving and now that could lead to more than mid-single digit growth, and certainly, our ambition is to drive as much growth as we can. At the same time, we have highlighted that we continue to live in a very volatile world and that’s primarily also the impact of that. We need to see how it goes. Our ambition is to grow certainly above market.

Jens Geissler

So next in line, we have Berenberg. Hello, Fulvio, good morning.

Fulvio Cazzol

Yes. Good morning. Thank you for taking my question. I just have two quick ones. The first one is on the €300 million investment that you announced 12 months ago. Can you tell us how much of this was spent in 2021 and how much is included in the guidance of ‘22? And then also, apologies if I missed this, but anything you can say in terms of CapEx spend for 2022 and beyond, please? Thank you.

Vincent Warnery

Astrid?

Astrid Hermann

So, both of those go to me. Thank you so much. So, as we announced in February 2021, this €300 million investment behind digitalization, sustainability and growth markets. We had at that time announced that it will be front-loaded investment, essentially more so in the first two parts of the – or two first years of that 5-year period, and that we have been executing. We did spend a double-digit million amount in 2021 and expect to spend the same or a similar amount in ‘22, though we will keep that flexible as well. For CapEx, we did have one of our strongest year in terms of CapEx in 2021 – actually, the strongest year in the group history. We spent more than €400 million on CapEx, really driving our manufacturing, logistic network and we – and that was up €133 million versus the previous figure. And we continue to be quite ambitious about investing in CapEx. As you know, we have manufacturing footprint investment and the high of that will be now in 2022. We will see then also benefits from that in coming years in terms of costs.

Jens Geissler

I can see that Redburn is next with Chris Pitcher. Hello Chris.

Chris Pitcher

Hello there. Thanks for the questions. A couple for me. Firstly, on tesa, could you give us a sense for what happened in costs and the margin performance in 2021? And when you talk about down margin this year, are we talking a sort of return to 2020 levels? And within that, could you explain some of the benefits you expect to come from the governance changes you discussed? You mentioned a dedicated management unit. Does this mean we could expect perhaps more acquisition capital to be allocated to tesa? And then secondly, an encouraging performance on margins on the outlook, haven’t had the chance to read the annual report yet, but have margins and cash flow become embedded in long-term remuneration yet or – just to understand how the look is longer term on that? Thank you.

Astrid Hermann

Chris, I will take your question on tesa and there were quite a few questions actually hidden within that, but let me explain it as follows. 2021 saw a significant increase in costs for tesa in the back half, similarly to what we have experienced in consumer as well. Tesa was partially able to offset that through pricing, but did feel the effect of that very clearly. In terms of versus 2020, our margin guidance does not go down to that level. We are more ambitious than that for 2020, but we are – as we are saying, tesa will be impacted by material costs and the investments in 2022. And in terms of governance and the related acquisition, tesa, similarly to consumer, is looking obviously for the right acquisition targets that fit from a strategic and financial perspective, and we are absolutely open to that. In terms of remuneration…

Vincent Warnery

I will take this question. The Board as a long-term remuneration, it is a plan ‘21, ‘24, which is really split into two big areas. One is performance, so net sales, market share and delivering the EBIT. And the second one, which is the transformation of the company with four big buckets. The first one is digitalization with very precise KPI, white spaces with a focus on China, U.S., emerging markets. Sustainability, we have very important milestones to deliver and this is one of them being, for example, the transformation of NIVEA Soft. And last but not least, also diversity. As you might know, we have the pledge, the engagement of having 50% of our management position occupied by female leaders by 2025.

Jens Geissler

So, next in our line here would be Stifel, Rogerio. Hello.

Rogerio Fujimori

Hello. Good morning. Thanks for taking my questions. I have two follow-ups on La Prairie. The first one, just wondering if you could talk about the magnitude of the global price increase taken at the end of last year for La Prairie? And the second is I was wondering if you could elaborate on the market growth momentum that you see in China looking at Jan and February together, given that the earlier timing of Chinese New Year obviously flattered the January numbers. And actually, if I could squeeze a quick third on La Prairie, how does the planned space contribution for La Prairie from selective openings this year compared to ‘21, i.e., should we expect a similar contribution from space for top line for La Prairie this year? Thank you.

Vincent Warnery

Sorry, may I ask you to repeat the second question? I didn’t get it on China. If you don’t mind.

Rogerio Fujimori

Just talk a little bit about the market growth momentum in China because I think January was strong because of the earlier Chinese New Year obviously helped January. But if you could talk about Jan and February combined, it will be great. Thank you.

Vincent Warnery

Good. Let me start in the opposite orders of your question. So, let me start with the opening of distribution. In fact, when we talk about opening of doors, we are always talking about very low-digits opening. So as you know, we probably opened last year, in 2021 close to 10 doors and not more and we intend as well probably in 2022 to also go in the area of 10 doors, and again, mainly in the countries or the channels that are really booming like Hainan or like Mainland China. In terms of trend in the market in China, you are absolutely right that January was very positively impacted also by the Chinese New Year. We see a lesser growth in February, but we see a pickup again in the last week of February. So, no signs that the market is cooling down, so still having some nice high single-digit growth. And very interestingly, we are trending, of course, by far beyond this market trend. In terms of magnitude of the price increase, so we will continue our usual price increase. Obviously, I cannot communicate in detail of this, but this is something every year we act upon very carefully. And we continue to increase the price depending on the external factors.

Jens Geissler

Okay. So, we have the last caller. We have Pinar Ergun of Morgan Stanley. Pinar, good morning.

Pinar Ergun

Good morning. Thanks for taking my question. A follow-up on NIVEA, please. You have talked about the impressive improvements in face care. How do you think about the rest? When can we get to a point with all categories powering ahead in NIVEA? And then a second one on cash, very strong working capital improvement this year, do you view this new level as sustainable? And how is the company is thinking on cash use is evolving? Thank you.

Vincent Warnery

Thank you for your questions. Not all categories are priority for NIVEA. I mentioned face care. This is by far the most important category. And even within face care, I would mention even skin categories, Luminous and the anti-age category, where we are growing 12x faster than the market. We have also as a key priority, sun care and body care. Sun care, we gained market share on NIVEA. We have also the fantastic success of Coppertone. This is clearly a priority for NIVEA and the year is starting very well, but we have also the body market. Body is our penetration market and we have the re-launch of some iconic products in the all-purpose cream, as I am mentioning, but also some re-launch on Naturally Good. What is also important for us is deodorants. This is a business, which is particularly important in emerging markets and particularly in countries like Brazil. As I said, we managed to gain market share despite the fact that clearly the investment was much more on face care than on the other one, proving that the strength of the brand. And it’s true that the new innovation, the sustainable innovation, will help us in maintaining this kind of market share. What is less a priority is categories like shower, like soaps, where we have few local businesses where we maintain the sales. But this is clearly not an area where we have a strong opportunity to win and this is not where we want to develop the NIVEA brand in the future.

Astrid Hermann

In terms of your question on cash and working capital, so on working capital, obviously, we are very excited about the strong results we have achieved. We do want to hold or improve those, but let me be a little bit more specific there. We absolutely want to hold and improve strong levels in terms of days sales and days payables outstanding. In terms of inventory, we will manage that quite flexibly to ensure that we have very strong supply. We might want to, depending on the situation in the market, increase our inventory to be very reactive and be able to service our customers and consumers. In terms of cash use, we are obviously very happy about the acquisition of Chantecaille and think that was a very good move forward, and we will continue to look for other opportunities as well.

Jens Geissler

Okay. This concludes our Q&A session. Thank you for having joined our conference call. We appreciate your interest in Beiersdorf. So thank you, and goodbye.