Feb 23, 2022
Disclaimer*
This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear.
The machine-assisted output provided is partly edited and is designed as a guide.:
Operator
00:04 Good day, and thank you for standing by. Welcome to the 2021 annual results conference call.
At this time, all participants are in a listen-only mode. After the speakers presentation will question-and-answer session.
Please be advised that today's conference is being recorded. 00:31 I would now like to hand the conference over you speaking today, Mathilde Rodie, Head of Investor Relations.
Please go ahead.
Mathilde Rodie
00:41 Good morning, everyone. Mathilde Rodie, Head of Investor Relations at Danone.
Thanks for being with us this morning for Danone's Full-Year 2021 Results Presentation. I'm here with our CEO, Antoine de Saint-Affrique; and our CFO, Juergen Esser.
They will go through some prepared remarks before taking your questions in a second step. 01:03 Before we start, I draw your attention to the disclaimer on Page 2 related to forward-looking statements and definition of financial indicators that we'll refer to during the presentation.
01:14 And with that, let me hand it over to Antoine.
Antoine de Saint-Affrique
01:17 Thank you, Mathilde. Good morning, everyone and welcome to our full-year 2021 call.
I’m delighted to be back with a number of you and certainly looking forward to meeting many of you in person in not too long. 01:35 Before we turn to the presentation, let me flag two things: Firstly, we will be focusing today purely on our reported results for 2021.
We will be speaking to you again in less than two weeks, about our future strategy, and our guidance at our CME, which I hope most of you will be attending either virtually or in person. 01:57 Secondly, you will see that we have changed the format of our presentation.
It is simpler and hopefully easier to read and understand, giving more room to our brands, our innovations, and our products. It is still work-in-progress and we will keep improving on it, but I'm sure you get a sense of what I am saying.
02:20 This is obviously my first set of results as Danone’s CEO, and I want to be clear from the start that we will always aim to be prompt, transparent, and clear. Those of you who know me, will know that I’m someone who wants to gather a team, set a plan and then focus endlessly on execution and delivery.
So, we will celebrate the wins, but we won’t hide also from outlining where we need to perform better. 02:51 Since September, we have done lots of listening as a company.
And we have done lots of internal assessments. We've also completed assembling a strong leadership team that will ensure that the right capabilities and conversation can happen at level.
We have been spending time together to then work through what the plan for the company should be for the next cycle, but all of this is for when we meet again at our CME on March 8. 03:23 Now, back to the results.
As you will have seen from the press release this morning, Danone delivered in 2021, what is a good set of results in the context that could hardly have been more challenging. Challenging externally with the COVID-19 crisis continuing to impact people's lives, mobility, also supply chain in almost all geographies.
03:50 Challenging internally with a very public governance crisis in the first half of the year, and with a significant organization, local first, touching almost all quarters of our organization. Against this backdrop, we saw true leadership and dedication from our management team.
04:09 There, I want to start thanking three people in particular: Véronique, Shane, and Juergen for the way they led the company through the storm and together with the team, managed to deliver a year in-line with what we have promised. This is, if anything, a proof of the resilience of Danone and of the quality of talents we have within the company.
04:36 Now, moving to Page 4. We delivered a solid top line performance in 2021 at plus 3.4% and we closed the year with a very strong fourth quarter, up 6.7% on a like-for-basis.
Beyond the number itself, I am particularly pleased with the composition of this quarter four performance with volumes back to growth at plus , while mix remained the main contributor and pricing stepped up to plus 2.5%. 05:10 I'm also happy that all categories are contributing to the full-year solid performance.
EDP delivered broad based growth and sustained solid momentum in Europe and Noram, resulting in a plus 3.7 like-for-like sales growth in 2021. produced a 1% like-for-like growth with a sequential improvement quarter-after-quarter to earn at plus 6.4% in quarter four.
This reflects notably the progressive recovery of our Chinese business. 05:45 As for Waters, we saw an explanation at the end of the year to reach a total of plus 7.2% like-for-like for the year.
This confirm our continued recovery in Europe and Latam, in addition to return to positive growth in China and Southeast Asia in the last quarter. 06:06 Now, moving to Page 5.
Over the last five months, since I’ve joined I’ve been digging into what works and what needs to change. And I will give my view on both at the upcoming CME, but I can already tell you that there are few things we can be proud of in 2021.
06:26 Juergen will come back later in more details on the performance by category, but let me say that I'm very pleased with the performance of our dairy business. It delivered sequential improvement quarter-after-quarter in 2021 led notably by strong performance in Noram.
This clearly demonstrates the potential of the category. 06:49 What is also pleasing with this performance is that it comes with a mix of factors.
Firstly, we have been developing our core brands equities like Actimel, which maintain a strong leadership position, and delivered low-double-digit growth in 2021. Secondly, we have been catching up where we were late and there I'm pleased with the very strong performance of our Greek platform in the U.S.
07:18 We successfully restaged the Oikos brand, we drove real innovation at scale with brands, delivered another great year of performance. Thirdly, another source of product is the continued strength of our IMF brand Aptamil globally.
This is especially true in China, where Aptamil market shares remains resilient in both domestic and international levels. And where the brand ranked the number one in the IMF category during the 11/11 online sales.
07:53 To burns recognition and strength, it's ability to renovate and innovate based on our distinctive research and development capabilities in that field is one of our major assets on the Chinese markets. 08:07 Last, but not least, Waters as well delivered the stronger year of recovery, especially in Europe, where Q4 was ahead of our 2019 levels, and where are all countries registered another year of market share gains.
08:23 evian and Volvic delivered a strong preference in 2021, driven by small formats recovery, but also by a strong pipeline of renovation and innovation, and there is more to come. 08:38 I'm now on Slide 6.
As I mentioned in my opening remarks, 2021 was also for us a year of major transformation with the rollout of our local first program. Let me start with something I've said to the teams the day I joined the company, something, which has been a guiding principle, as we execute our transformation with discipline, but also with pragmatisim.
09:04 Local first, doesn't mean local only. As we deploy local first, we have been looking for the right balance between local centricity, which gives us agility and speed of execution, but also cost efficiency and global scale and expertise where leverage gives us a benefit.
Social consultations now have been closed and local first is in place. North America was the first region to switch in April 2021 and we are already seeing the benefits of it.
09:41 The new organization enabled us to put in place a consumer and customer focused culture. And allow the team there, under Shane’s leadership to deploy across category growth strategy, which is starting to deliver.
Our North America platform grew plus 4.7% in our 2021. We switched Europe progressively over quarter four to end with France at the very beginning of this year.
10:09 In parallel to what is happening in the countries, we have also started strengthening functional expertise on some core capabilities such as our HR, Research & Innovation, and operations where you have seen new appointments over the last five months. So, things are moving and there a number of things that, I know, should be proud of starting with a solid set of numbers in especially challenging context.
Budget doesn't end there, and there is also a lot we must still improve on. 10:43 Moving to Slide 7.
While we delivered a solid growth with a good mix contribution, our growth model remains somewhat unbalanced as our volume were down again this year at . While short-term market shares are looking better, we continue to lose market shares in too many place.
In other words, we do not fully capture the potentials of our markets. 11:10 As our , we are not yet where we should be.
In a context where global supply chain are disrupted, we assured overall business consumers, but we have suffered from service level issues that prevented us from serving customers and consumer demand in key geographies and categories translating in and sometimes market share erosion. 11:35 With higher inflation, we shown pricing power and we managed to progress deeply step-up productivity during 2021 to reach more than 5% in H2, but and .
Our margins from operation is down 81 BPs in 2021. 11:56 Finally, when it comes to A&P, we maintain our absolute level of spending.
We were more selective in our location, we put on some really good campaigns, but as a percentage of sales, we were down 22 basis points versus last year, which means that even if we stop the bleeding, we kept under funding our brands. 12:17 We are not spending what we should, which is not supporting our brands at the level needed and there are growth opportunities we are not seizing.
So, all-in-all, a solid set of members and plenty to be proud of, movement and progress on a number of fronts, but still a lot of improvement opportunities. And as I said, I will update you on our plans to address these gaps also the opportunities at the upcoming CME in a few weeks’ time.
12:47 So, for now, let me hand it over to Juergen for the 2021 financial review. Juergen, over to you.
Juergen Esser
12:55 Thank you, Antoine, and good morning to all of you. I hope you are all safe and well.
Let me start the financial review with net sales bridge on Slide number 9. As Antoine was saying, we are very pleased with the strong finish of the year 2021, very pleased with the plus 6.7% like-for-like net sales growth in Q4.
13:16 Looking at the building blocks of this Q4, volumes have been contributing positively with 0.4%, notably led by positive volumes for EVP in Europe and North America, by the continued volume recovery in Waters as well as by positive volume dynamics for specialized attrition in China. 13:36 Having said that, value was obviously the main contributor to growth, is plus 6.3%, reflecting a step-up of our pricing initiatives to around 2.5% in this Q4, while we were benefiting from a continuously solid geographic and product mix, something I will come back to later on.
13:57 Outside of the like-for-like, currency and others had a positive impact of plus 4.2%, mostly driven by a plus 2.6% tailwind from currency effects, reflecting the appreciation of several currencies with the Euro, including the U.S. Dollar and the British Pounds.
14:15 Hyperinflation geographies also had a positive organic contribution to growth of 1% in this quarter. All-in-all, reported growth stood at plus 10.9% for the quarter, bringing our quarterly net sales to roughly €6.2 billion, up from €5.6 billion last year.
14:35 On the next page, Page 10 gives a bit more perspective on the quarterly sequence, which is resulting into our 3.4% full unit sales growth, reminding that we are indeed back to solid growth since Q2 of last year. Being back to growth is obviously important for us, especially the fact that we have been back to like-for-like growth also with the pre-COVID year on a 2019 base for each of the last three quarters.
15:06 Looking at the drivers of our full-year performance, we want to recognize that our growth was driven by important mix effects of plus 2.4%. The majority coming from product mix that was benefiting from our premium innovation in specialized nutrition, but also from the recovery of small formats in the Waters division, as well as from our premium more functional dairy ranges.
And on the other side, the geographical mix, especially driven by the relative outperformance of our China business in this Q4. 15:41 Pricing contributed by adding plus 1.6% to the full numbers with the shift for the year from rather selective to more broad based pricing actions with price increases and revenue growth management initiatives across all geographies, notably to manage the impact of an accelerated COGS inflation in the second semester.
16:05 And finally, and despite the recovery in the fourth quarter, we need to recognize that our volumes were negative for another year. In year 2021 with minus 0.6%.
They have been down especially in more developing markets in the rest of the world, while volumes were overall positive in Europe as well as North America. 16:29 Let's go a bit deeper into the performance by division and I will start on the next page, Page 11 with Essential Dairy & Plant-based.
Our EDP business closed the year with revenues up plus 3.7% on a like-for-like basis with recurring operating margin slightly down at 9.8% in a very challenging supply and cost environment. 16:51 Zooming into the fourth quarter, EDP maintained its solid momentum growing at plus 4.3% with a similar growth composition as in the previous quarter.
First, the dairy part of our portfolio, which has delivered sustained solid growth led by probiotics protein and . 17:11 Even if there is still a lot to do, it demonstrates the rejuvenated activity of this category, the relevance of our brands and platforms also in the post-COVID context.
And secondly, plant based that reduced a solid mid-single digit growth like in Q3. We are operating here in a continuously dynamic, even though momentarily slower category context that is recycling the consumption peaks of year 2020.
This segment is exposed to a strongly challenged supply chain, particularly in North America, but recently also in Europe, which has prevented us in some instances from servicing customer and consumer demands. 17:56 Looking at geographies, Europe and North America posted another quarter of solid sales growth with positive volumes.
In Europe, let me highlight particularly the performance of Actimel that delivered another quarter of double-digit growth translating into market share gains, while Activia pursued its good momentum in the UK and Germany with resilient market shares. 18:19 Also to mention the high protein in part of our portfolio with Yopro and Alpro, that posted both, again the stellar performance, thanks to an impactful rollout across geographies and channels, and finally Alpro that posted high-single digit growth in Q4 protecting its leading market share position in Europe.
18:40 In North America, we delivered another record quarter of net sales, sustaining mid-single-digit top line growth momentum as accelerating competitiveness. Sales were driven by a stellar performance of yogurt, led by our Oikos range, Antoine was mentioning it before, but also by Activia and too good, leveraging the winning positions in the protein and probiotic segments.
19:04 Our Coffee Creamers brands international delight posted another quarter of very solid growth and share gains. Plant based sales started to sequentially recover from previous quarter.
This recovery was enabled by a conscious prioritization of core SKUs, meaning that we still have some catching up to do before fully recovering from supply and logistic disruptions. 19:29 Platforms in the rest of the world posted strong sales growth led by private mix, while volumes were down.
The CIS region grew low single digit and tightly driven by pricing mix in the macroeconomic context that continues to be challenging, while Latin America and Africa continued to show further sales recovery. 19:50 Moving to specialized nutrition on Page 12.
Specialized nutrition closed the year with organic growth up 1% on the like-for-like basis, while recurring operating margin decreased by 105 bps to 23.5%. While you will remember that H1 was strongly penalized by negative country mix and lower volumes, H2 margin sequentially improved, notably led by strong product and geo mix, as well as volume recovery in the last quarter.
20:22 Looking at the fourth quarter, sales sequentially improved with the previous quarter, reaching plus 6.4% on a like-for-like basis with slightly positive volumes. Going through the segments, Infant Nutrition posted very strong growth this quarter, driven by China and the Rest of the World.
China delivered growth in the mid-teens growth, with resilient market shares. 20:46 Our Domestic and International Labels, which are sold through cross-border platforms maintained their growth and market share momentum.
Yes, we would like to emphasize again the outstanding performance of our Aptamil brands during the 11:11 Chinese online event, where we were ranking again the Number 1 brand in both leading e-commerce platforms. 21:09 Our sales of International Labels sold through indirect non-controlled cross-border platforms were slightly negative against the low base of last year with travel, as well as client activities to very limited with Mainland China.
21:26 In Europe, road was slightly negative in the category still penalized by decreasing birth rate and working from home. However, we saw recently some first encouraging signs of the stabilization.
21:37 And finally in the rest of the world, you remember that Q3 was negatively impacted by some phasing effects. As expected, growth was back to strong mid-single-digits in Q4, led by both volume and value, as well as global market share gains.
21:53 Moving to a diet nutrition, sales were week in the fourth quarter to some inventory management amid supply challenges, while demand and sell-out dynamics remains very solid. We will be back to the usual growth dynamics as soon as from the first quarter of this year.
22:11 Finally, on Page 13, our Waters division, sales increased here by plus 7.2% in the full-year 2021, while recurring operating margin was up plus 194 bps to 8.9%. This margin recovery was driven by the operating leverage, as well as a strong product mix improvement combined with record high productivities.
22:35 Looking at the fourth quarter most specifically, the sales were up plus 17.3% on the like-for-like basis. This great performance was led by the sequential recovery of small formats, as well as a good continued momentum of large pharma for in-home consumption.
Also worth noting that all geographies contributed to this growth. In Europe, sales reached mid-teens growth on a like-for-like basis closing the quarter above 2019 levels.
23:05 In addition to the sequential recovery of mobility, we are very happy to report that we are consistently winning market share across all key markets, including France, the UK, Germany, Spain, and Poland. 23:19 Moving to the rest of the world, Latin America registered another quarter of recovery, led by plain bottled quarter, as well as our home and office delivery business.
And in China, Mizone was back to positive growth with stable market shares. 23:34 Finally, Southeast Asia posted low single digit growth sequentially improving compared to Q3 with mobility showing first signs of recovery.
Before diving into our margin bridge, let me quickly come back on Slide 14 on the current supply and cost environment. 23:55 2021 has been clearly a year of strong inflationary pressure for our sector.
We experienced in the second half of 2021, an acceleration which was exactly in-line with the expectations we shared with you a few months ago. 24:10 We mentioned back in October that we expected input cost inflation to sequentially accelerate from 7% in H1 to 9% in H2.
The second half of 2021 confirmed indeed those assumptions with a further increase of raw materials, logistics, and transportation cost, as well as an increasing challenge to some part of our supply chain, especially in North America, but also in Europe. This finally led our input cost inflation to reach around 8% on a full-year basis.
24:41 In that very challenging context, we put a greater focus in the second half of the year on the delivery of additional productivity and pricing. On productivity, we accelerated the already initiated cost category synergy programs delivering another record of more than 5% productivity in H2.
24:59 And on pricing, we sequentially moved from a rather selective pricing in H1 into much more broad based pricing and revenue growth management, leading to a full-year impact of plus 1.6% while we posted as mentioned earlier, a price increase in Q4 of as much as plus 2.5%. 25:19 Let's now move on to the margin bridge on Slide 15.
We closed the year 2021 with recurring operating margin at 13.7% in 2021. Looking at the building blocks of the year, it was mostly impacted by the decrease in margin from operations down minus 81 bps and I will come back to the drivers of this decrease in the next slide.
This decline in margin from operations was partially offset by a positive contribution from investments in overhead, but we also benefited from the reversal of some of the COVID related costs, which we incurred last year. 25:55 The plus 31 bps from overheads are reflecting both a strong discipline in fixed cost management and that is the first benefit from the local first implementation.
The program which is fully on track in delivering the expected savings over the next two years. 26:10 The plus 22 bps from investments reflect the fact that we spend in 2021 the same absolute A&P as in previous year, translating into a positive relative contribution.
We’ve been more selective in our allocations increased support behind our winning brands and segments, which indeed translated into market share expansions in those areas. Advises means that we stopped the bleeding, we kept under funding our brands something we can't be happy about.
26:39 Let me now zoom a little further on the building block on our margin from operations on Page number 16. As you saw the previous chart, it decreased by minus 81 bps in 2021.
The top line acceleration in 2021 had a significant positive impact of plus 120 bps led by mix and price. 27:00 However, despite the very agile management by our teams around the world, this could not totally offset the incremental net inflation, which we had to face on raw materials manufacturing and logistics throughout the year.
27:13 Cost inflation had a negative impact of as much at minus 480 bps on our margin, representing a gross negative impact of minus €1.2 billion on our P&L. This was partially offset by a new record in COGS productivities, which had a positive impact of around plus 280 bps, representing around $700 million.
27:36 Now, looking forward to year 2022, we see another year of challenge and disruptions, and expect input cost inflation to sequentially accelerate in the low-to-mid teens range compared to the 8% we experienced in 2021. To navigate these headwinds, we will further step up our productivity and we will leverage broad based pricing.
28:02 Moving now on to the EPS bridge on Slide 17, the current EPS reached €3.31, slightly down by 1.1% versus last year. The improvement of our operational performance had a positive impact of plus 4.3% on the EPS.
This was notably offset by a negative effect of minus 3.1% from scope, mainly due to the disposal of our stakes in Mengniu and Yakult and the negative impact of minus 4.1% from currencies. 28:33 It's worth noting here the positive contribution of the financing books with plus 0.7%, reflecting the continued decrease of our net acquisition.
And finally, reported EPS that decreased by minus 1.7% to €2.94 and let's move to the next page, Page 18 to dive into the key . 28:57 The evolution of our reported EPS has been impacted by two important non-recurring events.
On one hand, the one-off costs related to the implementation of Local First, which impacted our earnings with minus €0.7 billion in 2021. 29:14 As Antoine was already sharing, this project is on track and the metrics in terms of costs and savings are confirmed by some of the cost bookings and cash outs moved from Q4 2021 into early this year.
29:28 The reported EPS was on the other side, positively impacted by the capital gain of around €0.6 billion, rising from the disposal of our stake in China menu dairy, finalized in Q2 last year. Those two elements are almost offsetting each other, which lead a reported EPS of €2.94 relatively close to the recurring EPS of €3.31.
29:55 Let’s now move on to the next page, Slide 19. Free cash flow reached €2.5 billion in 2021, reflecting a disciplined capital allocation, as well as our reinforced focus on cash generation.
30:10 Also, and as mentioned before, Local First did finally impact our free cash flow 2021 to a lesser extent than initially foreseen. Moving some of the cash outs into early this year, without changing the phasing of the P&L savings.
30:26 Working capital stood at minus 4.8% of net sales showing great progress in the context of sequential normalization of channel mix and payment terms, while CapEx stood at €1 billion representing around 4.3% of net sales. 30:43 Moving to the next page, it's worth noting that our debt closed at €10.5 billion, down €1.4 billion from the end of 2020.
Thanks to our strong cash flow generation. This translates into a healthy returns of debt on the EBITDA ratio.
At the same moment, we are reporting our ROIC 8.7%, slight improvement versus the 8.5% reported end of year 2020, certainly another level where we wanted to be. 31:13 And finally, we will propose the dividend of €1.94 per share in cash at the next AGM in April 2022, which means a stable dividend, compared to last year in absolute value.
Before handing the mic back to Antoine, let me remind some of the highlights of our ESG achievements in year 2021. 31:35 And here let me start with our health and nutrition ambition as we are ranking Number 1 in the product profile assessment according to , rewarding that 90% of our volumes are sold in healthy categories and this for the third year in a row, and this 83% of our volumes sold without any added sugar.
31:56 On environment, we are proud to have been awarded for the also, equivalent a scoring by the CDP, highlighting our continued progress on the fight against climate change, preserving our forests and driving water security. We reduced our full scope carbon emissions by around 3% in 2021, down 0.8 million tons of CO2 equivalent on a like-for-like basis, which resides into our carbon adjusted EPS growing by 2% versus year ago.
32:27 On our social ambition, Danone has been recognized for the first time in the whole by the Bloomberg Gender-Equality Index, which distinguishes companies committed to transparency in gender reporting and advancing women’s equality. We are also very proud of having fully deployed of our FutureSkills program, which aims to better prepare our employees who require new skills for the jobs of tomorrow.
32:53 Last but not least, we are making great progress on our B Corp journey with now 62% of our revenues covered by the B Corp certification fully on track towards our 2025 ambition to become a global B Corp. 33:08 This is concluding the financial section of all full-year presentation and I'm now handing it back to Antoine for the conclusion.
Antoine de Saint-Affrique
33:16 Thank you, Juergen. Before we open the line to questions, let me conclude with a few key messages.
The first one, and I hope you share our views is that there is a lot to be happy with this 2021 performance. We delivered a better growth dynamic.
We reached our productivity targets and delivered a good level of cash. 33:41 The second, and we are clear about this is that there is still plenty we can improve from our growth model to the quality of our execution and investment model.
This will require a greater discipline on the basis, greater focus on execution, strengthening step-by-step, some of our capabilities and driving what Danone was known for, with consumer centric and a brand and innovation driven model. I look forward to developing more on the topic during our CME in a few days’ time.
34:19 Moving to the next chart, and on Chart 23, having said that, and I'm sure all of you are noted, we have not been standing still in the last months and have already moved into action or have been with executive committee hitting the ground visiting many countries, despite COVID and meeting with hundreds of Danoners with customers and with consumers. We intend to keep this rhythm with an executive committee that we spend much more time on the ground, close to the markets and the teams and less in the headquarter.
34:57 As I told you earlier, we closed the social consultation process and implemented local first. The new organization is now in place.
At our board level, you will have seen the appointment of Valérie Chapoulaud-Floquet, who brings with her extended and disputed FMCG and CEO expertise. There is obviously more to come, and she will address the topic at the CME.
35:25 At our company level, we have been focusing at strengthening core capabilities bringing to the team a number of internationally recognized leaders. Late last year, we split the roles of General Secretary and Chief HR Officer and recruited Roberto Di Bernardini, a top class professional, to become our new Chief Human Resource Officer.
35:50 Another top class professional, Vikram Agarwal, joined Danone in January, as Chief Operation Officer and will help us raise the performance of Danone’s operation and make it future ready. As I said, Danone is about brand and innovation.
We decided to bring innovation back at the core of what we do creating a position of Chief Research Innovation Quality and Food Safety Officer that Isabelle Esser will assume starting from April. 36:23 We also entrusted the sustainability functions to a business person, with strong experience in Danone.
Henri Bruxelles, has become our new Chief Sustainability and Strategy Business Development Officer, with the objective to bring sustainability back to the heart of Danone’s business delivery and performance. 36:43 So, as you see from this, and from the results, we are moving forward with space and we do intend to keep doing so.
36:55 And with that, let me hand over back to Mathilde, who will introduce our questions-and-answer. Mathilde, over to you.
Mathilde Rodie
37:03 Thank you, Antoine. Thank everyone one.
We're now opening the floor for your questions.
Operator
37:10 Thank you. The first question comes from Guillaume Delmas from UBS.
Guillaume Delmas
37:33 Thank you, Mathilde. And good morning Antoine and Juergen.
Two questions for me, please. The first one is on your volumes in EVP in the fourth quarter, it seems the volume decline was entirely driven by emerging markets, probably getting to volumes down mid-single digits in the quarter for emerging markets.
So, my question on this is, was the price there higher than you anticipated in the quarter or not? And how should we think, I guess more importantly about the volume development going forward, as you will probably have to implement additional pricing actions over the coming month there.
38:21 And then my second question is on the plan base? Second consecutive quarter of mid-single-digit like-for-like sales growth seems to imply flat to low single digit like-for-like in North America.
Now, at the top of your Q3 training update, you saw relatively a bit about the supply chain issues being resolved. So, wondering wasn't it the case and are these issues as the lingering, are these issues also affecting your shelf-space market shares and if so how long do you think it will take before you can get back all your shelf space there?
Thank you.
Antoine de Saint-Affrique
39:02 Thank you. Guillaume, we'll do a bit with Juergen on that.
On volumes in EDP in Q4, it is in some ways a tale of two cities. I mean, as we said, we are very happy with our premium rangers that are growing pretty fast.
On the more commoditized ranges, we went on for price and are making clear trade-offs between our profitability and volumes. So, this is partly what you are seeing.
39:38 Moving forward, obviously, we will have to go forward a broader pricing. I mean, given what you're going to say about the inflation or – and the elasticity will depend also from what everybody around us is doing, but Juergen, maybe you want to complement on that.
Juergen Esser
39:56 Yeah. Good morning, Guillaume.
As you were saying we have been doing more best pricing across all geographies and what we have been observing in 2021, including in the last quarter is that, for example North America, the vast majority of our has seen pricing of our volumes we are holding very well. 40:19 To the point of Antoine in other more emerging royalties we had a more mixed picture.
Russia was describing, via Russia we have been growing in Q4 in net sales, their volumes were down and this the effect of two realities where our modern dairy portfolio has been holding very, very volumes, but we are a more low priced traditional dairy portfolio has seen short-term volume impact, which has not been a to us. 40:48 And so, moving forward as Antoine was saying, as we are agreeing to more broad based pricing also in Europe, we can see here and there also some volume elasticities in the short-term.
41:00 So, on plant based we share number of famous at – we see number of networks. We've seen markets are slowing down and probably a bit of balancing between plant based and dairy base.
And this is where by the way playing on two our legs is a good news because we offer the choice to the consumer. 41:23 So that's one dimension.
We kept having service issues. And I think we will keep seeing some of it in the coming quarters.
So, not totally out of the . If you talk of service, in general, and not only on our plant based, what you see is a number of dynamics at work.
I mean, you see a that remains on everything that has to do with our ship transportation, with issues obviously in the China harbor with issue in particular in North American harbor as well. There are not enough dockers.
42:05 So, you are people that are queueing to enroll the containers. You see a huge pressure on trucking in the U.S., in the UK, and/or to some extent in Europe.
And you see as a result of that and as a result of an increased demand, quite a bit of pressure on the supply chain. I was in the U.S.
a couple of weeks ago, you see holes in the shelves from about everybody as there is pressure on our transportation and availability of materials.
Guillaume Delmas
42:47 Thanks.
Mathilde Rodie
42:49 Thank you very much. The next question comes from Warren Ackerman from Barclays.
Warren Ackerman
42:55 Good morning, Antoine, Juergen, Mathilde. Hi, Warren here at Barclays.
I also got two questions. The first one is, can we perhaps begin to the strong performance of China in for formula and market share of Aptamil, I'm particularly interested in the Q4 growth by channel, if you were able to give it to us between direct, in-direct and cross-border, that will be useful and was there any kind of stocking benefits or one-off distribution gains that benefited the quarter?
I'm just trying to get a sense of what you think the Chinese formula growth could do when your budgeting for 2022? That's the first question.
43:29 And the second one is just on this topic of inflation versus productivity, I know you'll give us more at the CMD, but I think Juergen you said that you expect low-to-mid teens inflation for 2022, if I heard that correctly. I was wondering whether you can give some of the components of that maybe between dairy and packaging, and maybe some – what visibility do you have on that in terms of hedging cover?
And then related on the productivity side, it does seem like the productivities did actually slow a little bit in the second half versus the first half. I'm just trying to understand the phasing of design for delivery maybe rolling off at local first savings coming in, that would be helpful?
Thank you.
Antoine de Saint-Affrique
44:11 Good morning, Warren. So, Juergen will check the bulk of the answer, but I would just start with, I mean there was no stocking benefit in China to be on it and we actually, we are seeing good performance overall in China.
I mean, we saw it with consumer take on that 11:11. 44:31 We see it was the distinctiveness of our brands.
We will talk a little bit about the China team. It is actually at the forefront of good practices when it comes to direct-to-consumer digital marketing and those kind of things.
So there is a real pocket of excellence that have discovered in the last couple of months, really impressive. But Juergen, go for it.
Juergen Esser
44:54 And good morning, Warren. Looking at the I think a stellar performance of our China business deriving mid-teens in Q4.
Of course, important to remember that last year, Q4 was significantly down. So, we are running on a relatively low base, but when you step back and look more at the fundamentals, there's probably a few dimension.
Dimension number one, yes, the category in the moment is slow as we all know, impacted by birth rates in the baby pool decrease. However, and that's the good news within the overall context is that we see continuous deeper capita consumption and premiumization continuing, which is not totally offsetting the birth rates pressure, but still adding a little bit to mitigate part of it.
45:39 You were talking about channel performance Warren, you are absolutely right. What we are calling our control channels, which is for China label as much as for international label is now making up slightly more than 80%.
And here, we are seeing very good competitive growth. We are winning share on the China label part.
We have winning share on the International label rate. Antoine was mentioning the outstanding performance of up during the 11:11 e-commerce event.
46:07 So, I think we are well set from a competitive stance. Our uncomfortable channels are now below trends below 20% of our Chinese IMF Business.
So getting smaller and smaller, it has been declining also in Q4 and as we have been discussing at separate moments already, we believe that this is a structurally declining channel. And so we are putting all our emphasis on the control channel where we are seeing very good progress.
46:34 Last but not least to mention that we saw in Q4 good momentum of our , but even greater momentum of our special pediatrics, which has been outperforming when the product mix in specialized nutrition is not only above the premium hedges, but it's really also about this special pediatrics on allergy, but also increasing on challenge . So overall, I would say, good set of results, but let's remember that Q4 was also on a low basis.
47:07 On the second point, on inflation, yes, I confirm we expect the inflation to be in the low-to-mid teens. So, quite obvious with the average 8%, which we saw in 2021.
We do expect broad based inflation on various dimensions, first see high level of inflation in all geographies. A little bit more in emerging markets, but still deserve very strong impact in developed markets in North America and Europe.
47:41 We see inflation also broad based when we materials, logistics, or manufacturing having said that, we have the strongest impact coming from materials and here especially from packaging including plastics and paper, but also to make and make ingredients. 48:01 We have still also strong inflation, which we are seeing on logistics for all the reasons Antoine was describing on sea and land transport capacity shortages and the manufacturing with energy prices continuing to increase really a broad based set.
Now, visibility is low and this is why we are today discussing the range of low-to-mid teens. 48:28 And probably the actually inflation will be a function of the duration of global supply chain disruptions, especially on the aforementioned land and sea transport, as well as on the evolution of the cost of the barrel of oil, which has been reasonably very, very volatile.
48:48 Maybe, not, USA on hedging, yes, we have been hedging it 2021 part or OPEC as we . We are continuing to do hedging, but obviously it will have less impact, lesser protection than in 2021.
And finally on productivity, I want to confirm that productivity in the second half of the year 2021 has been higher than in the first half of the year. 49:11 And we are targeting to increase our level of productivity also in year 2022 going for a new record.
So basically leveraging all the good works, which the team has started in 2021, leveraging the cost category synergies, taking benefits of the carryover of the SKU rationalization program that were saying if you want to cut 20% of our SKUs and this is where we are today, but also maximizing all the other synergies we see on cost category procurement of services and goods as much as driving our digital supply chain programs to the max.
Warren Ackerman
49:50 Okay. Thank you.
Antoine de Saint-Affrique
49:50 We will double down on productivity. We will do what it takes on our pricing also within the reason because we will have to manage the balance between competitiveness and pricing.
And we intend to keep supporting our brands, not at the expense of investing behind our rents, which is important.
Warren Ackerman
50:13 I mean, real quickly the reason for the question was productivity of 320 bps in H1, but only 280 for the full-year, it is a little like in the second half of the product obviously was lower in basis points, compared to H1 that was why I was asking a question.
Juergen Esser
50:28 No. The of productivity is on cost of goods sold.
It is indeed that we has as almost 5% in H1 and more than 5% in H2, so we saw a sequential acceleration on. And we do expect a good step up in 2022.
Of course, not at the amplitude of the step-up we are seeing in the level of inflation, which goes from 8% well into the peers.
Warren Ackerman
50:53 Okay thank.
Mathilde Rodie
50:56 Thank you, Warren. So next question is from Celine Pannuti from JPMorgan.
Celine Pannuti
51:02 Yes. Thank you.
Good morning Antoine, Juergen, and Mathilde. First of all, I wanted to thank you for the added disclosure on volume mix and pricing, and I do hope that this will be a recurring disclosure.
My first question is on your point about understanding of your brands. I presume that maybe a topic of the CMD, but I just wanted to know where you see that you are understanding, maybe by divisions or brands, if you can say that, and why is it that you have not yet started to correct that in 2021?
My second question is, on Waters. I was a bit surprised that the Southeast Asia did not rebound more in H2.
And I saw that had flattish volume. Can you talk about, what do you expect or what is the situation as we look into 2022?
And would it be fair to say that you have any comparative in the first half, I mean the first quarter, anything that you can tell us about how the quarter has started for the whole – for the group as a whole? Thank you.
Antoine de Saint-Affrique
52:16 Thank you, Celine. Juergen will take the question on Waters.
I will take the one on brands. Just a reminder, I've been there 3.5 months or 4.5 months in 2021.
So, I'm trying to move as fast as possible, but you don’t change the brand plans in the last minute or in the last moment. 52:40 The reality is to the heart of your question.
The reality is, if you look at our share of voice versus share of market, I know you've done the exercise. We are structurally underpinning our brands.
So, the work that we are currently doing is of true nature. 53:03 First thing that was done actually are – this year in 2021 was to make choices and to invest where we thought we had strong assets from a brand standpoint, strong assets from a communications point, and therefore shouldn’t be .
And you’ve see that in a number of instances in Europe, you’ve seen that on the Waters, you've seen that in some instance on and so, I mean, we started making some selective choice. And making sure we invest where we think we have the assets and the dynamic and putting through to the fire.
53:45 The second thing is obviously making sure that we have the quality of all assets on which to invest, be it on advertising, be it on our innovation and there we will work in a very discipline way, and will share a bit more of it in 10 days’ time. But we've working in a very disciplined way and you don't invest in the same way.
When you are trying to push showing us, when you are trying to protect your core, and we need to do more on the core by the way, while there are things that needs to be fixed and the fix is not necessarily, all doesn't stop necessarily. 54:22 With I guess, as you can start with the mix, it can start with the distribution, can start with a number of things.
So, our under investors structurally, choices made in short-term also choices in the long-term and raising the floor in what we’re keeping with discipline between working and non-working, those who focus on the places where we are going to invest.
Juergen Esser
54:49 Good morning, Celine. First, thank you for your comment on disclosure.
It showed that for us being vocal also about the mix component we see as the product mix component we see is important and important to share with you guys because you've seen product mix has been delivering very well in Q4. But this is not only Q4, it has been consistently over the fourth quarter and looking forward, obviously, it's also an important element of our toolbox in front of the very important inflationary pressure we see.
55:23 When it comes to waters, maybe first on Mizone, what I would say on Mizone if fact is that we have seen a good growth in Mizone in Q4, in fact pretty total in Mizone in Q4, but you have to know that – and this is true for volume and value with market shares, which continue to be stabilized, which is very good news. 55:48 Knowing that Q4 is a smaller quarter, but then I think is the reassuring component here, which confirms what we have seen over the last two quarters.
When it comes to Southeast Asia, the reality is that the teams are just as we speak coming back to office. So, many of the lockdowns implemented especially in adjust about to be released.
And so in that sense only over the last two weeks we saw rebound in terms of mobility. 56:19 And so, as we have seen quite a bit of stop and go over the last couple of months, we are careful with the outlook.
I think what is important Celine is that as soon as mobility is coming back, and I think that Europe is a very good example of that. You see also that the consumption of the small format is coming back to us.
So then all the rest the visibility is and is remaining low.
Mathilde Rodie
56:46 Thank you, Celine. So next question is from Bruno Monteyne from Bernstein.
Bruno Monteyne
56:51 Hi, good morning. My question is, sort of going back to your low-to-mid teens cost inflation and sort of what’s offsetting that.
I mean, already in 2021, you have 31 basis points of the local first benefit, could you just quantify in basis points how much more local first you would expect in 2022 is the first part? And the second one is coming back on the productivity.
I remember from H1, you made it clear that the productivity seem to have gone faster than expected, you know the SKU did actually went faster. You have an impressive 5% productivity gain this year, and I hear you saying, you're going to do more, but clearly given these, sort of early quick wins, you'd expect the additional rate of productivity to slow down?
I mean, if you did continue that way, you would have 10% productivity by 2022. Am I right to expect that the additional level of productivity gains won't be of the order of another 5%, possibly still an impressive 2% to 3%?
Thank you.
Antoine de Saint-Affrique
57:54 Thank you, Bruno. I would wish that our team has the capability to double the level of productivity.
So, I confirm your reading that we did 5% of productivity in 2021, which was a record in our company. We will continue to post the record also in 2022, so you make the next step in the journey, but I think that doubling it would not be possible unfortunately.
58:20 What do we put in front of this, I would say, unprecedented inflationary context we see in 2022 is not only the COGS productivity, but it's also all we have been describing in terms of price where we want to be ambitious, but at the same always be pragmatic, which means yes, if we grew for important, these price increases, but we will be extremely careful to make sure it doesn't hurt our level of competitiveness. And it maintains the necessary flexibility to promote back whenever we see at our competitiveness is at risk or when we see that inflation should to at a certain moment as we go through the year 2022.
58:59 Beyond price and productivity, we have mix and I was talking about it. We are to continue the journey on product mix momentum and this of course all our categories and geographies.
59:12 Local first will be a contributor in 2022, definitely, I confirm what we have said consistently since the launch of the program is that the majority of these savings will come into the P&L of 2022, but we have also said that we want to use part of the savings to reinvest into our brands. It will be, as you can imagine exactly the topic of the CME discussions and the mid-term guidance and also the way we want to set this strategy for the next years to come.
59:45 I think that's probably the main components of the way we got to treat the inflationary context.
Bruno Monteyne
59:52 Thank you.
Mathilde Rodie
59:54 Thank you, Bruno, the next question comes from .
Unidentified Analyst
59:59 Yes. Good morning Antoine and Juergen.
My first question touches on in 2020 done on generated roughly 6% in the country and it's important for the EDP business. What risks do you see there?
Do you more or less produce locally and sell locally or do you also export, import what are the risks there? And then my second question is on market shares, you mentioned some of the products that won market shares, what are products categories where you have seen declining market shares and what percentage of total portfolios or market shares in 2021?
Thank you.
Antoine de Saint-Affrique
60:44 Hey Pascal, let me start with Russia I’m sure will do probably address. On Russia, as you said, Russia is selective about 5% of our sales.
The vast majority of the business is local for local. So, it's dairy business.
We source locally, we make locally, we sell locally, so we will be on the vast majority of our business impacted as any other Russian company, but there are more things that are going cross-borders. 61:20 We have been obviously managing the thing for quite a while taking care of our teams, making sure that the people are safe, making sure that the – I mean all the measures are in place so that we can navigate the crisis, but once again, it's very much for the majority of the business is local for local in the local setup.
61:45 On our market shares, we have seen a number of good news. I mean, certainly good news in waters where we are gaining shares in Europe, where we have stabilized our shares in China with Mizone.
So, dynamic there that is overall positive. We saw certainly also in the last quarter a good dynamic in SN.
I think our shares in there are . 62:24 I think that one of the several points is spend based, where we have been losing shares.
You remember that we were late on the board on all, we are gaining, but our mix is there playing against us. So, if you look at the last three months all altogether the share picture is heading in the right direction.
62:52 Is it we are likely to be? No.
Will we be looking internally at the market shares? Yes in some of you see look at externally, so I will leave it to you.
Mathilde Rodie
63:08 Okay. Thank you Pascal and next question is from Martin Deboo from Jefferies.
Martin Deboo
63:14 Good morning everybody. Martin Deboo from Jefferies.
Want to come back to specialized nutrition complementing some of Warren’s questions, but this time more from a bottom line point of view. You've delivered 23.5% margins for the year, I think 24% in H2, big improvement in H2 and obviously, you don't need me to tell you that there was extremely bearish sentiment playing out in the market in the second half about your ability to sustain these margins, which is the cornerstone with profit to the whole company.
So, I just like to take a step back and maybe ask, maybe Juergen, just are you confident you can sustain well into 20% margins in specialized nutrition as a division? Secondly, why you have that confidence?
What set you apart from a record earning mid-teens, margins and their residual intra-formula business? And just a very specific one, can you just explain to me why the reported margin change is a lot bigger than the like-for-like, I assume it's something to do with FX in China versus everywhere else, but if you could just clarify that Juergen that would be helpful.
Thank you.
Juergen Esser
64:21 Yeah. Good morning.
Good morning, Martin. You are absolutely right, our margins were holding well in and for the year, down a bit more than 100 bps, but in like-for-like 25 bps and you are absolutely right, the gap is explained by currency.
So, the teams are doing a stellar job here. Also seen that as well as very different dynamics, where we are significantly down in , which was a consequence of the volumes, which were down in , but also the geographical mix and we know have seen exactly as expected in reverse of this.
So, we were up by around 250 bps in H2. 65:01 So, coming to what we were describing, which is a quite solid margin there is.
When it comes to the, let's say margin situation, including of our China business, I can just repeat what I said over the last couple of months, which is that, we are continuously managing our prices in China, the cost challenge is a very high level of discipline. And this is extremely important in the context, where probably some of our competitors see some cost channel price disruptions, especially with a very strong shift quarter-by-quarter between e-commerce and offline, especially, mum and baby stores in low tier cities.
65:44 So, I think the fact that we have our B2B platform in China accessing directly to a mum and baby stores in far is really easy to make sure that we controlled prices. In the past, but also in the future.
And this was the big asset moving forward. The second asset and this is not neutral as you can imagine is the fact that we are growing.
And so, defending our margins, obviously is easier on the context where we are doing a very solid job in the competitive setting and this also what we will discuss in the CME and how we can make sure that also in 2022, and beyond we defend and expand our competitive setting in China.
Martin Deboo
66:29 Thank you for that Juergen, thanks.
Mathilde Rodie
66:34 Okay. So next question is coming from Jeremy Fialko from HSBC.
Jeremy Fialko
66:38 Hi, good morning. Jeremy Fialko, HSBC here.
A couple of questions from my side. Could you just elaborate on the adult nutrition business, give a bit more detail on some of the supply challenges there?
Is that something that's quite temporary to this quarter? What was the hit on sales and what might come back in the early part of next year?
And then just one other parts on the P&L, you mentioned in the bridge that some of the COVID costs came back in 2021, what are the remaining COVID costs that might also come back during the course of 2022? Thanks.
Antoine de Saint-Affrique
67:23 Maybe starting with the COVID-related, of course Jeremy good morning. Yes, you saw that we had a rebound of something like 80 bps remember where in 2021 from a COVID-related cost.
Look, I mean, as we are continuing to implement very important hygiene measures, especially everything, which is our supply chain, I would not expect big improvement nor big extra cost in 2022. 67:53 I think we are now operating in this new context, but this is probably a new reality we need to accept.
On the second question on the , you are obviously right. I mean, we have been posting quarter-by-quarter very decent performance of our business.
68:10 And you know that our business we speak mainly about our Chinese and our European business. In Q4, we have been basically managing our inventory to make sure that we are maintaining a healthy inventory set.
It means, yes, some supply chain disruptions because you can imagine that whenever you have a delay in the material sourcing or a transportation in the fast growing segment, and that is a very fast growing segment for us, as much as . 68:40 It creates description in the supply chain.
So, yes, Q4 we are impacted by it. You will that as soon as Q1 will be back to the usual growth pattern.
It was what we are seeing is that the underlying demand from consumers is extremely stronger. And we are so confident that we have been resolving by that moment, the supply chain challenges.
Jeremy Fialko
69:00 Okay. Thank you.
Mathilde Rodie
69:02 Thank you, Jeremy. So, next question is from John Ennis, Goldman Sachs.
John Ennis
69:07 Yeah. Good morning, everyone.
My first question is on infant formula. There been reports from the World Health Organization, talking about potential clamp down on marketing practices for these products?
I guess my question is, what would you make of these reports and do you see that as a risk or an opportunity if the marketing efforts become more level between International and Local players? And then my second question comes back to the supply chain disruption point.
I think you've said a few times that this resulted in some market share erosion, which implies that you've been, I guess more heavily impacted than peers in certain places. I mean, why do you think that is the case and Antoine, as you look at the supply chain Antoine, what are your key learning so far when you compare and contrast with some of the best practices you’ve implemented at Barry Callebaut?
I appreciate, they are very different businesses, but interested in your thoughts. Thank you.
Antoine de Saint-Affrique
70:01 So, I'll go for the first and the last. I’m sure, Juergen will manage the middle.
On IMF as you are as part of what we do are sustainability we have been actually at the forefront of taking commitments. 70:22 We are supporting breastfeeding as the most important option.
And we were extremely clear about that. We have a strict policy where we do not advertise or promote for children aged zero to six months and we extend the restriction to our 12 months in our countries with high rates of nutrition.
So, making sure, I mean legislation that would align everybody through the good practices that we have, would be rather good news than bad news, if I may say. 71:04 And this is by the way, one of the places where you see that if you leverage sustainability in the proper way, it becomes a competitive advantage because we are better prepared than other people on that one.
71:21 So to be followed, but we feel are quite comfortable, we feel quite comfortable with that and we’d be happy to see a level playing field across all geographies. 71:36 On your last question, I'll leave the middle to Juergen on supply chain.
I think one of the thing of – learned all of the not only in the Barry Callebaut, but especially in Barry Callebaut. You need to be absolutely obsessive with a few things.
One is the quality of your products day-in day-out. And we are on that at all at our quality.
But competitive quality making sure that because you're better than competition. And as – I mean, literally are in your genes, is something we will be more focused on.
72:20 The second thing is customer service. If you do deliver a day-in and day-out to your customers, you are simply not many of opportunities, you let down customers and you get into employee discussion.
72:36 And there to be honest, we are not where we should be. And then it is a game of permanent improvement at our factory, and it is not only a matter of network, but it's also what you do from the start, so from the planning through the source to the to the deliver, which is why our and which is why we're going to have a significant drive for our capabilities and this spot of the business, as if we are not bad, we are not in the best in town by a distance.
Juergen Esser
73:21 And so, Antoine has already describing the action plan moving forward, when it comes to the situation of the last two quarters. It’s true that on the cloud-based segment, and especially in North America and in some instances, we have been losing some sales and here and there also a bit of shares as a result of that.
73:43 The reality is that we have a very large portfolio of plant base especially in U.S., you know that we are not already adding meaning, but go and others. And so what we have been doing in order mitigate the situation we having this really to prioritize our what we so the largest just product SKUs, which are rotating the most on the share in order to make sure that we are limiting a disruption factor in our supply chain and as a shape it does to show the first good signs.
74:16 And so, we will continue to do so, but I don't expect it will take us another a couple of this before we are back to business as usual, situation because we still see a supply chain disruptions on both on some of the material availability and here we speak about the packaging and particularly paper, but also especially you have on some of the tuck-in capacity and availability. So, we are not yet out of the woods.
John Ennis
74:44 Okay. Thank you.
Mathilde Rodie
74:46 Thank you, John. So, next question is from Morgan Stanley.
Unidentified Analyst
74:51 Good morning. Thank you.
Are you seeing any signs of down trading as your pricing accelerates? And what are some of the actions you're taking to preserve volume momentum in the quarters to come given the relatively high private label presence in some of your categories like yogurt?
Thank you.
Antoine de Saint-Affrique
75:07 I mean, the answer to that is, I mean it depends. Knowing the number of categories, we don't see down trading.
We've seen actually relatively little impact in places like North America. And it goes back to our differentiation of products, it goes back to unity of the product, it goes back to the strengths of the brand.
75:31 On something that are more commoditized, we grew much stronger on our price to preserve as much as possible of our margin. And there you see a volume impact in some cases down trading, but once again, so far what we’re seeing in America is no down trading.
And America was a bit ahead of the curve. We do see volume impact on things that are more commoditized, but it is also choice that we are making.
Unidentified Analyst
76:06 Thanks.
Mathilde Rodie
76:09 Okay, thanks. Next question from .
Unidentified Analyst
76:14 Good morning. Just a question for Juergen, I realized that you're not giving guidance for 2022 of this structure, but can I assume that if year-over-year on profits was materially addressed from , you would have a sort of regulatory duty to come through the market at this moment?
Thank you.
Juergen Esser
76:36 So, what, it's true and morning, it's today, we are not giving guidance in 2022 for as we said it is a provision that we will two weeks from now. We will share with you the mid-term strategy and of course 2022 is the first year within this mid-year strategy.
76:57 And so this is why today we are referring from giving a clear outlook. I think what is very clear is that in the end, when we talked 2022 and you look at the key is all the elements we have been discussing, which is input cost inflation, lots of mid-teens, this is productivity which is going to step up versus 2021, which is about pricing, where we will continue to accelerate on the days of the 2.5% we did in Q4 and finally volumes as Antoine was discussing it.
77:27 Then there's a big – there's of the big topic of how you're going to drive the portfolio and reinvestment? Thanks to the savings of Local First and all of these basically will be the discussion points in two weeks from now.
So, I would ask you a little bit of patience on that one.
Unidentified Analyst
77:44 Okay, thank you.
Mathilde Rodie
77:47 Okay. Okay.
Thank you very much. So, I think it comes to the end of the Q&A.
Antoine de Saint-Affrique
77:52 So, thanks everyone. Thanks for a good set of question and I – from all your interaction very much looking forward to fully as many as you as possible in our in less than two weeks’ time.
And looking forward to a fruitful discussion, also looking forward to review meeting, a large chunk of the management team. I think it's very important that you as analysts get a sense of the people that are on the table and will drive the business to the next stage.
On that, be safe, very good day to everyone, and we'll talk soon.
Juergen Esser
78:36 See you soon, guys. Bye.
Operator
78:42 That does conclude our conference for today. Thank you for participating.
You may all disconnect.