Chocoladefabriken Lindt & Sprüngli AG

Ladies and gentlemen, good morning and thank you for coming again to our head office. And it's a great pleasure because last year we were alone sitting here, me and Mr. Hook. And now I have again the group that we are used to for 25 years. Now, it's not only you here. I think as well we went into a new mode that is a hybrid mode. So I welcome as well the online participants that we have today. And as you can imagine, not only you, but as well the online participants will be able to ask and to participate in the question and answer session at the end of that meeting. Now, we have, again, good results this year that are slightly above the and as well expectations and I'm very happy about that as well. But, you know, let me say one word at the beginning of my presentation. I think that is not because we did a great job and Martin did a great job and the group management, you know, behind us are 14,000 employees. And these employees last year, I can tell you, mainly factory health and as well health issues you know, were big ones. And I think, you know, I thank mainly as well all those employees that were producing our products so that we at the end could sell it. Same as well for administration. You know, we had huge hurdles to get across that we can produce, we can operate in view of all the difficulties that we had with the health situation. Now, Let me go into the agenda for today. Now I will take over the part one and two, financials and as well market insights. Then I will hand over to Martin with financial results and sustainability. Last then I get back with outlook and the question and answer session. Here are the key figures we have announced this morning. Now, the first line, I go by line, the first line is sales. Now, these sales we have announced already in January. It's 13.3 organic, and it is close to 4.6 billion. Now, the second line is a new line for you. Second line, we have an EBIT of 14.1%, 645 million. We have an EBIT margin, net income margin of 10.7, close to 500 million. And I think that is mainly for the financial analysts and as well for us a good result. We have a cash flow, free cash flow margin of close to 600 million. And that brings us then to an equity ratio of 58%. Now, the next line you see here, Other KPIs we are very happy and very proud on, that is the market share. In all markets, basically, we were gaining shares. We have online trade that was again doubling, not doubling, that was growing very fast, double-digit. And then what we did as well in the organization, we had a chance that we could, number one, acquire the minority share in Brazil from our joint venture partner. Second, as well, we were splitting from our distributor in Brazil, so we take over now wholesale distribution ourselves. And last but not least, and as well, we integrated Gaffarel in L'Indon Springli, Italy, and as well had an opportunity to acquire our franchise partner in Italy. Now, the last line you see here, we made commitments. For climate change, we made commitments for packaging improvements and as well for more sustainable packaging. And then as well, what we did is an increase in the dividend of 9% to a total of 1,200 Swiss francs per share. Coming to the global chocolate markets, just giving you an umbrella overview here. You know, where are we active and what happens in our main focus of chocolates around the world? I think I have good news for all of you. Number one, the chocolate market on a global basis is growing. It's growing roughly 3% in 2021. It's forecast to grow further as well in 2022 and 2021. years. And another point that is important, the premium segment is growing faster than the overall segment. Now, why this premium segment is above average? Because we see a clear trend to less but higher quality. And that goes as well in line with income per capita that is growing on a global basis and So that means we are well positioned. Looking then as well at Lindt, we had a strong comeback last year, mainly because in 2020, as you all know, we had lockdowns. We were suffering from lockdowns in our store. We had tourism that was missing and we had clearly as well lockdowns of even some wholesale customers and clearly duty free. Now, we were fighting still last year with ongoing pandemic-related issues, but I can tell you those happened mainly in the first half. Now, happening in the first half, you see kind of this year now we expect as well for the first half, always assuming no big lockdowns again, that we assume a good first six months. Coming to the trends, I mentioned already the premium chocolate. The premium chocolate clearly as well is a trend we see very strongly so. What we see as well, a second one that is more and more awareness of sustainability. If we were talking, when I came in here 20 years ago, we were talking raw materials, we were talking human rights, In the meantime, traceability was a big word for raw materials. In the meantime, we have three main areas. It's raw materials, human rights linked to that, and traceability. It is packaging, looking at packaging, recyclable packaging, very important. Demand from the consumers. And last but not least as well, and I think, you know, I even put that at the beginning, that is climate change. climate greenhouse gas emissions from our activities, we have today and as well for the next years a big, big demand and as well a big, big job to do that we are reducing greenhouse gas emissions in our activities. The last one, or the last two ones, what we see as well is a consumer that is becoming more and more demanding for individual needs of consumption. As you see, these two are mentioned here. Plant-based is one of them. Sugar-free, sugar-reduced is another one that we are clearly as well going and investing investigating and making sure that we get the best product in that area and the online trade another important trend that we are facing and we as well could use over the last two years in order to sell to consumers with maybe some hurdles getting the products now market insights and highlights at The split of our overall sales you see here, the biggest market, Europe, second is North America, and the third is our rest of the world. Good news, clearly, rest of the world growing close to 20%. A year ago, rest of the world was 11.7% of the whole sales, now growing to 12.4%, and I can tell you already now, before I go to the details, That will continue in the next years. Point is that we started over the last years to go into huge chocolate markets. That is China. That is Japan. That is Brazil, including as well as South Africa. And those markets, when you start, you start at a small base. Now, in the meantime, those markets become more and more a sizable market. to a sizable scale, and that, of course, will help us in the next years as well to bring that segment that is an important one to more growth. Now, North America growing 10.7%, details later, and as well Europe, you know, a very good 13.8%. If I get now to Europe, I think I go to Europe, then afterwards North America, and finally we get to the rest of the world. The market split in Europe, you see here, Germany, still the absolute biggest market, and not only in Europe, but in our whole group, Germany is the most important market, and they take 16.3% of the whole market. markets that we have and the whole sales we have as Lindt and Sprüngli. That is then directly followed by France, and the good news is the UK is already number three. Why do I say that? Because if you look at Europe and you look at the size of the markets, the German market and the UK market, they have about the same size of four to five billion in total. So that means there is nothing against that, you know, we continue growing nicely as well in the UK. And going now into the highlights of Europe, here you see Europe 13.3, market share gains. And you see the growth by company. And, of course, I just highlight two or three of them. Number one, Germany, 11%. Clearly, they benefited from the fact less closures of stores, a good Easter in 21, but nevertheless, you know, it's a great growth we have here. Then I highlight as well the UK. Now, UK, 18% growth last year, benefiting online, benefiting from less lockdowns, but benefiting as well, you know, just kind of a big demand from the consumers for our products, mainly Lindor and Excellence. Italy benefiting as well. Easter kind of closures in 20. Easter was open again in 21. And at the same time as well, we were then acquiring, as I said, the franchise partner in retailing. To mention as well, you know, we have Spain, Portugal, Austria, and the Nordics, all of them with good and great growths. Now, that all is possible thanks to marketing activities. That is possible to more investments into the market and clearly as well, you know, our new products that we brought to the market. Of course, the most important one, double chocolate, and you will see it just afterwards in Lindor. But at the same time as well, we are going to service the individual demands of of consumers becoming more and more demanding. So we have launched a hello vegan in the meantime as well a vegan product and at the same time in Switzerland we have launched a 30 percent sugar reduced bar milk bar. You know there will be attempts and as well not attempts and maybe the wrong word here. There will be initiatives in that area and I have to say they will remain small because what we realize is the consumer is always going, I say now, for the original. Because if you decide to eat a piece of chocolate, then you say, you know, I know what I'm doing, I deserve the best, and I eat the original. So our goal really is to make as well the alternative as close as to taste and texture of the original. And I think that will be a winning formula as well for the future. Now, another point that I'm sure you know and you have seen is Switzerland entered for the first time as well into Migros in distribution. I think that was as well a very big step for us here. And if we then highlight as well the investments we make in Switzerland, I think here as well, it's a clear commitment to Switzerland as a production location. We will invest over the next three years in Olten a total of 70 million or over 70 million in the new factory or additional factory to cocoa bean treatment. And I think that Alton factory will then as well service and supply Germany, Italy, and partly France. With that, I get now to a spot that, now to North America, sorry. North America is the market split we have here. is 31% is the U.S. alone, 5% of North America is Canada, and as you see, Mexico is still a little part of this whole market. When you look at this split, I just say very important is that U.S. is representing on a worldwide basis roughly 20% of whole consumption of chocolate. And you will understand now as well, while we were 25 years ago, we were mainly a European company, to conquer the U.S. was the main goal we had at that point. And we dedicated a lot of efforts and as well management time and cash in order to develop the U.S. And I think having 37% in total is now, I think, a good share. And I can tell you there is still a lot of potential, given our market share by brand, that we can further grow in that market. Going into the highlights in the North American market, we have a total sales of 11%. That is misleading to some point, because if we go into the individual growth rates of the companies, You see here, Linde USA, 16%. Ghirardelli, 15%. Russell Stover, unfortunately, was losing in sales. But I get to that just in the following chart in detail. Canada as well, nicely, 11%. Gross drivers, clearly Linde or Ghirardelli. We made retail. We could open again. That was mainly important as well for Ghirardelli. For instance, Ghirardelli Square, we talk about San Francisco icons here. And as well, at the same time, we are in Disney World. Disney World was closed over a big, long period in 20, opened, you know, step by step in 21. I would like to highlight as well the success of Ghirardelli in food service. Big, big success. segment and division within Ghirardelli. And then we have the Canadian company that as well, you know, made big progress last year and I think as well are well established in order to make that again in this year. Now, Russell Stover, I'm sure you're interested what happened here. Minus 5%. Now, if I go back, we acquired the company in 2014 We looked at the company. We made the right decisions. We upgraded marketing. It's mainly in assorted pralines where we went with new boxes, new products. We, as well, on top of that, have a very strong sugar-free business. And clearly, as well, we are very strong, if not the market leader, in valentines and in some Easter products. We strengthened from a marketing point of view all those areas. Now, job basically done. The second thing we did is we closed because we had to automate production. We closed one factory. We are now back to three factories. So as well, we did that during 2020. The third thing we did is we replaced a very old IT system coming from the 90s with a new SAP system. You know, we did that during 21. And last but not least as well, you know, what we had to do is making sure that the logistic is fully integrated into the Lint logistic, including Eurodaily and the Lint USA. Now, all done. So we were really high in expectations for 21. Now what happened? What happened was as well unforeseeable. We entered into a huge issue in the supply chain. The Russell Stover factories are in mostly isolated areas. The workers pool is not big, is reduced. As you know, There was big support from the government for the workers in the USA. So we had a total of 2,200 employees in Russell Stover. We had times where we were missing up to 600 employees that were not coming or no more coming to work. At the same time, we had packaging material that was missing. We had even raw materials that was missing. So we couldn't supply at the end the way we wanted our trade partners. And all that ended up in a, you know, minus 5%. The good news is that the trade partners we want to keep, we could service, but less than we thought so. And I think, you know, that is the result we entered into. We have taken the measures. You know, good news is workers are back. The second news is that all the measures we have taken now are starting to basically have an effect, and we are looking positively into 2022 so that we are improving rapidly in that area. Now, coming now to the rest of the world and the market split in the rest of the world. I mentioned already we were 11.7%. We go now to 12.4, and that will continue to grow, and mainly because in here we have huge markets. I mentioned shortly, you know, we talk consumer value. The U.S. market consumer value is close to 20 billion. Now, Germany, U.K., consumer value is 5, 6 billion, to give you an idea here. Now, if we are talking about the markets here, we have Brazil, 2 to 2.5 billion. We have Japan, close to 4 billion. We have as well the China growing nicely, 3, 4 billion. So we have here good markets, growth markets for us, where we still have a relatively low scale. And I think that will lead to the point that we in the future... will increase the size of this slice here in the chart. Going to the rest of the world and the highlights, close to 20%, you see again the same companies I mentioned before, Japan 23%, China 37%, South Africa 15%, and Brazil. I think those are the markets that in the row of growing, when you go back in the history of Lindt, stabilizing Europe, entering the USA, and in a third row now we are entering and we're entering those markets that now for the future definitely will have a good growth potential. Now stores in some of those countries are important because coming in brand awareness, brand equity, that are points that we still have to bring to those markets are And stores are an ideal vehicle that we can get, you know, to a higher brand awareness and know-how, knowledge of the consumers. So we have 70 shops in Japan, 58 in Brazil. Now, I mentioned the joint venture. We go further. Australia, the biggest market still in that segment. You know, they were still struggling with COVID. They had Melbourne, Sydney, store closures. We were struggling with that. Nevertheless, at the end, we came out with positive 4%. And the distributor markets, you know, they covered well. Duty-free, one word to that one, you know, we were falling back from, let's say, 100% in 19 to 19%. 20% of sales in 2020. We recovered from the 20% against 19 back to about a little bit over 30% in the 2021. Now, this year, we will find out the hope and expectation is that we can get up a little bit more than this. Now, The rest of the world I would like now to show you.

Make every little moment count. Fine chocolate. Luscious caramel. Introducing new caramel squares from the Lindt Master Chocolatier.

Now, I'm sure you will ask yourself, why do I show this TV spot? First, we are a marketing company, so I think you should get as well a little bit into the mood. But the second thing is, it's an important one because you see the product, it's lint squares, and I'm sure you know as well that we have Ghirardelli, Ghirardelli squares. So it is a test we have now ongoing, you know, a very... This decision, the test we have taken, we try in Australia. But as well, I'm sure you have seen as well the product that is back there in Switzerland on shelf. So we just say, why don't we try out, you know, on how a lint square in Australia and as well in Switzerland, you know, on how we can establish that product That is a differentiated product to our leader product, that is Lindor. Now, my last chart before I hand over is global retail and e-commerce, a very, very important pillar for us, mainly as regards to brand awareness and as well the consumer attachment to the brand. And last year, as you can imagine... You know, they had a huge sales growth against 20 with the lockdowns, of course, we had. And the whole growth, roughly one quarter of our growth last year, was due to the recovery of global retail. Now, the shop design we improved. And mainly, I think what comes in here, we have now e-shops operating in most of our countries. and they have a very important job within our whole setup. eSales is not kind of just the branded sales, or let's say lint.com or girardelli.com. That is one thing. We have then Click2Mortar. That is our retail partners that have as well their own retail shops. We have the platforms. Those are the Amazons and the Okados of the world, and as well in Japan and in China, very strong. And I think with the stores and wholesale, that has to work as one piece, as one umbrella, because we have to make sure that the consumer, we welcome the consumer on all those sales channels the same way, and we make as well the access across all those channels as easy as possible with the same message. And I think that is something that you will see even further in the future, and as well that is a big part of our future activities. Now, with that, I basically come... to the end of my part and I ask Martin to lead you and guide you through the financial figures. Thank you.