Chocoladefabriken Lindt & Sprüngli AG

Welcome to the presentation of the full year results 2024 of the Lind and Springly Group. I hope you had a good arrival here. I understand that half of you made some personalized gold bunnies. Is this true? I hope you had fun. It is our Chocolateria, which is very popular here, also with the visitors of our home of chocolate. And I can see that not only children are having fun with decorating chocolate and producing some nice gold bunnies. Well, I will dig into the agenda. I will tackle shortly the highlights of the 24 results. Then I will address the regional performance of the group. Then I will hand over to Martin Hug, our CFO, for the financial results in detail. and an outlook on the sustainability progress that we made. Then I will give you a short outlook for our future guidance. And then we are here for you, two of us, for a Q&A session. First of all, let me say that we are super happy that we can present good results for a year, which was really in a challenging environment. And I think you have all pursued what was going on in the chocolate market with an ever-increasing cocoa price. It came down nicely. Everyone expected that this would continue. And then to all of our surprise, it didn't. inclined again and is at record levels at the moment. So in this surrounding to achieve the results that we present is really a demonstration of the dedication and the resilience of our teams and I'm grateful for this. You know that we have a very experienced team out there. We have huge continuity in our management and I think this pays off in a year like this. 7.8% organic growth was published already in January. 16.2% EBIT, a 16% point increase in a year with dramatic impact from raw material prices, I think is an achievement. We are proud that volume was growing substantially. The volume mix in this case is even slightly misleading because we had a negative mix in this year, so our volume was growing even stronger than the 1.5%. And an improvement in free cash flow for more than 30% also shows that we navigated pretty well through this challenging year. We also made substantial improvements in our sustainability efforts. 84% of our COCOA is sourced through sustainable or responsible sourcing programs. An improvement of 12 person points. 82.2%. of all raw materials, including packaging material, is sourced by a responsible sourcing program, an improvement of 24 person points. And for all of these, we were awarded by the most reputed auditing company for ESG programs, EcoBodies, with a silver medal. So we find ourselves within the top 1% for sustainable procurement in the industry. 91.4% of our packaging is already designed to be recyclable today, so here we are ahead of our target, but we will not stop and we will continue to change packaging material to be recyclable. What are the global chocolate market developments and trends in 2024? We saw volumes decline by 3% globally. With the price increases, the value increased in the area of 4%. We outperformed the market in both dimensions, so we were gaining market share in volume and in value, actually being the only big chocolate company with a positive volume performance, also in the off-tech figures. Next to us, the big winner was Private Label. So we see two behaviors from consumers, those who are really burdened by the high prices and say, I migrate to private label, or those who decide and say, I will consume less and go for better quality. This is an ongoing trend. I explained before in individual talks, it's with the aging population, with the increasing middle class in many economies, we see an ongoing premiumization in the market. The cocoa price inflation, you all know what is driving this inflation. It is, on the one side, weather phenomenons. It is the climate change in general, you can say. So we see more droughts or more heavy rain occasions, which are not good for the plantations. And at the same time, we have a disease, a virus disease, the swollen shoot disease, which is spreading continuously in West Africa and is impacting the crops. that are achievable. So therefore the worldwide crop has substantially decreased and we had three years in a row with a deficit. And for this year, the predictions are varying between a slight deficit or a balanced supply and demand. We will see, in any case, the prices are sky high. These are really record prices. We expect in the mid-term a correction of these prices. In our opinion, it is too high. Probably it will not come back where we have seen it historically. You know that the prices have more or less tripled from the area of $2,000 up to $6,000, in the peak even $8,000. So we think somewhere in the middle it should be a fundamentally right level of the cocoa prices. I mentioned the ongoing premiumization, more mindful indulgence going together with an increased health consciousness. We play in all these roles with our premium products. We have products with high cocoa content which cater to this health consciousness and in general our products are not made to be consumed unconsciously in big quantities but it's really the small moment It is this treat or a gift product that you mindfully buy. Sustainability awareness is also increasing, and I think we are proud that we are on a good track here. Let me get to the regional performance. The biggest area, of course, still Europe. where our brands are established for decades. We have enjoyed very high market shares here and still demonstrate that we can grow nearly double digit in a very mature market with mature market shares. Our brands are well established. We have this strong retail and direct to consumer channel that contributes to grow our brand equity. At the same time, we are heavy spenders also behind our brands, and we did not cut back on the spendings behind our brand. So this all adds up to this nice performance of 9.5% in Europe. On the other hand, in North America, 39% of our total business, we were disappointed, to be honest, with 5% growth. It is, and Martin will explain it, if we deduct some one-time impact, it would be a 6% growth rate, but still this is below our expectations. Why? We have lower market shares in the U.S. We operate with three brands that are complementary in their portfolio, and we have seen double-digit growth throughout the last years. What happened? The market softened dramatically. We saw a decline of volume of 5%. in the US with a stable value growth, so there was no growth. The year before, the market was growing nearly 10% and this swing from 10% growth to zero, we also saw in our performance from a 14% down to 5%. Coming to the smallest segment, which is rest of the world, It stands for 13.2% in our portfolio, but it represents more than 30% in the global chocolate market, so we have a huge potential here. It is supposed to grow stronger than all the other segments, and it did with 10%, but it's also below our midterm plans, and we hope to get back on track in the years to come. Let me dive a bit deeper into Europe. Starting with Germany, Germany really saw a swing from traditional trades to hard discounters. That was the migration, how consumers tried to avoid the burden of price increases, etc. And despite the fact that we are not represented, purposely and consciously not represented in hard discounters, we managed to grow in line with the market. and kept our high market share in Germany, so this 5.6% in this environment is a good result. A tremendous result we enjoyed in France, where we enjoyed the highest market share growth in the whole group. The reason behind it, we are market leader in dark chocolate in France. They produce also most of our excellence, high cocoa rate chocolates. And they grew double digit. We, as a whole group, grew double digit with our excellence tablets. And so with a 12.3% growth, France is really an outstanding result. A similar story we experienced in the UK. The UK established the HFSS regulation two years ago, meaning that high-fat sugar and salt products were restricted in marketing, so no more placement in the entrance area, no placement in the checkout area. And everyone was really concerned that the categories would suffer massively. And of course, also us as a premium player, fact is that this is the second consecutive year where we grow double digit in the UK. So obviously not only our team managed to mitigate the risk of all these restrictions, but also consumers, as I mentioned before, tend to eat less but of better quality. And this trend is clearly to be seen in this figure of nearly 16% growth. Coming to Italy, 4.6 looks a bit weaker, but also here in modern trade, we defended our market share. But in Italy, we have a very strong position with Cafarell and with Lind in traditional trade. And traditional trade, unfortunately, has a negative trend. So many of these smaller stores are closing, don't find successors. And for this, also the 4.6% in Italy is a good result. defending, as mentioned, our market share. Switzerland, 6.8% growth, also in line or above the market average, benefiting also from the strong retail division that we have here. We benefit from tourism in Switzerland, which is getting back to levels that we have seen before the pandemic. So also a very, very encouraging result in the market that I have to mention with the highest market share in the world. So we have nowhere outside of Switzerland a higher market share and still we were able to grow nearly 7%. A real success story is CEE, Central and Eastern Europe. It is Poland, Czechia, Slovakia and Hungary. Here we could double our sales figure since 2020. So in four years, we could increase our market share significantly. And this is a story that is continuing now already for many, many years. Iberia, nearly double-digit growth. Austria, 8.5, far above the market average. Nordic, Benelux. So in all these markets, we performed pretty strong. Let me come to North America. Ghirardelli with a 9.4% growth also pretty strong in a weak market. Lindt US more or less in line with the market performance. Both brands growing strongly market share. as they also had a good performance in volume. Russell Stover, we had some issues with the price increases. And in addition, Russell Stover is still streamlining its portfolio, which also contributed to this result. But I would like to remind you that in the last three years, we had two years with a significant growth. This was the first year with a decline. If we add up the three years, we still are up 10%. versus 22, so that's also, or versus 21, that's also a good and encouraging result for Russell Stover. Canada, 6.8% in line with market, and Mexico, 9.3% ahead of market. We made progress, but our ambitions are clearly higher. We opened a store in New York City, the first store of Ghirardelli. If you have ever the opportunity to travel there to your headquarters or to your As I understand, you're all coming from big banks. So visit the Empire State Building in the ground floor. You'll find a nice Ghirardelli store, and you can enjoy your hot fudge sundae on the roof garden with a nice view. Rest of the world, as mentioned, the smallest of our regions with a 10% growth. We enjoyed a nice growth in Japan, 25%, Brazil, 18%, China, 17%. Also global travel retail, where we are market leader in the duty-free sectors of all international airports. We had a tough year in Australia, which is a big part of this region. I think we mentioned it already at the half-year presentation. The biggest customer in Australia did not accept our price increase. This is why we sustained promotions for several months until we solved the issue, and the result is a very weak growth of 2.5%. The same happened to the distributor business. Some of the distributors were hesitant to pass on the price increases we had to implement and also therefore a slightly lower sales growth than we would like to see. Direct-to-consumer business getting more and more important. Again, a year with significantly overproportional growth of 16.7%. And very important to mention a like-for-like growth. We call it com store growth of 7.6%. which substantially contributes to the increased profitability of this channel. And in addition, an expansion of 45 new stores that added up together to a 16.7% organic growth. 21 e-shops with double digit growth in additions. Here, we put a lot of effort to expand even more aggressively. We opened our first stores in Chile. We have a plan there to open quite a number of stores in Mexico, New Zealand. Then we roll out our loyalty program, MyLint, which gives us access to first-party data. Very important to understand the behavior of our consumers, not only for the retail division but also for wholesale, and also to state here it's clearly a unique feature that Lindt has versus other chocolate manufacturers, that we have a strong direct-to-consumer business and also a very close contact to our consumers in their own channels. We see an ongoing trend toward gifting and personalization that we can perfectly play, of course, in our own retail channels. With this said, I hand over to Martin Huck to give you a presentation on the financial results.

Thank you, Adelbert, and a warm welcome from my side. You probably have noticed all the seats are sold out here in Kilkberg. It's really great to see so many of you here in Kilkberg, and then as well a warm welcome to everybody who is attending this conference online. So I will start with a quick overview of our key financials, and I think the good news is basically we have either met or exceeded all our expectations. guidance is. Organic growth was 6 to 8. We have achieved higher end of the 6 to 8 at 7.8, mainly driven by Europe. As you have heard, then the EBIT margin, you have clearly exceeded, right? We're coming from 15.6, going to 16.2, so that's a 60 basis points improvement, which I think is a really good result in a very difficult environment. You shouldn't forget that, right? Cocoa bean prices are going through the roof, and I think it's really good to see that we have executed well in terms of managing this situation. Free cash flow is also at the record level of 635 million. I should add here actually, I don't know if you have noticed, that we had also a positive variation margin of 230 million, which is actually not included in the free cash flow number, right? So excluded 230 million. We have shown this in our alternative performance measures. So excluding this 230 million plus positive unrealized gain, we came in at 635 million plus 33%. We have a record new earnings per share of 2,917. I will show you later that's actually massively up compared to 2021, plus more than 40% compared to 2021. And net debt came in better than one year ago at $882 million. And I would say despite the share buyback that is running, and I think we have actually accelerated the share buyback in quarter four, the current share buyback, we have Bought back 300 million Swiss francs in total in 2024. So despite that, we are coming in with a much better net debt. And the net debt compared to the EBITDA is at 0.75. So still well below the 1, which is good. Organic sales. Basically, we had three years of double-digit close, 13, 11, and 10%, and now 7.8. Compound, including 2020, we are at almost 7%, which is right in the middle of our guidance of 6.8, including the COVID year 2020. Then in Swiss francs, we are achieving a total of 5.47 billion, and when we compare this Again, with 2021, I think it's the best base of comparison, not 2020, but 2021, we have added almost 900 million in sales, even though the Swiss franc strengthened basically each single year compared to the major currencies. The same happened again in 2024. And therefore, our growth was 5.1%. We had a negative currency impact of 2.7%. As Bertel already said, Volume mix in this very difficult environment was positive at 1.5 and it was actually driven by volume because mix was negative, slightly negative. So the pure volume performance was even better than the volume mix. And price came in at 6.3%. We have already mentioned this morning and also in the past that there are further price increases planned in 2025. It's difficult to say what the exact number is because it's kind of... Some of the plans have still to be decided in terms of promotions, etc., but we anticipate a double-digit price increase also in 2025. From a sales analysis point of view, Europe has been really the key driver. I mean, we have seen double-digit growth in the UK and France, very important markets, also in Czech Republic, in Poland, and in Benelux. And then in all the other European markets, we have grown between mid and high single digits, which I think is also a very good performance, considering that we have very high market shares in Europe. North America came in at 5%. We could exclude now this one-off effect by Easter, by the very early Easter in 2024. So without that impact, our growth in North America would have been at 6%. And that is actually considering a flat chocolate market. So in value in the U.S., the chocolate market was flat. In volume, just between minus 5 and minus 6 percent. So we outperformed the market by between 5 and 6 percentage points in North America. And you could argue the same in Europe, right? In Europe, we grew 9.5 and the market grew around 3 percent. So, we also outperformed the market by about six percentage points. So, in comparison to the total market, the performance in Europe and in North America has been very similar. Rest of the world at 10%. Going forward, we want to accelerate that. Australia brought some challenges with regards to the price increase implementation. I think we are particularly proud of the performance in Japan, in China. Again, China, super difficult environment, right, for fast-moving consumer goods in 2024. We grew double-digit in China. And then also in Brazil, we have successfully rolled out the wholesale model in Brazil, coupled with our successes in retail and opening more stores. Moving on to costs, no surprise. Material costs are going up by $200 million. Probably even more importantly, when you look at the ratio, it was more or less at 33% over the last three years before 2024, and it now went up to 35%. So in other words, we were not quite able, either by strategic choice or because of market conditions, to completely hand over or pass over the entire increased material costs through prices. We actually lost here 200 basis points. But I personally think, considering that the cocoa market has gone up so far, it made sense to do this kind of step-by-step price increase and also protect volumes and protect, at the end of the day, our total value growth. Cocoa bean price has been the big kind of volatile factor. It has made us all a bit nervous, of course. The total industry has been a bit nervous. You can see here that it started... sometime in 23, actually, the increase. I mean, if I showed you this chart for the last 20 years, it would be really flat at about 2,000. Then it started to go up in 23. And then it started to really go up in 24. And in 24, on top of it going up, you had a lot of volatility. So you can imagine that this kind of caused a lot of nervousness. We had another hike from October up to 8,000 or even above 8,000 in London. And then now in the last few weeks, it has come down again to about 6,000. And actually the month relevant for us, they are even below 6,000, right? Because it's probably from December 25 that is relevant for us into 26. So it is somewhere between 5,300 and 6,000 right now, which is still a tripling of the cocoa bean futures for us, right? So it's three times higher than it was in the long-term average. You should also bear in mind when you look at this chart, The 2024 P&L, normally you buy the cocoa in 2023. I mean, just simplified, right? A lot of the beans that we use in 24, we kind of price fix them in 23. So I think on this chart, it becomes very clear why the chocolate industry will go up further with price increases in 25, because you have to buy cocoa in 24 for 25. So whatever you did in 24, be it us, be it our competitors, Most likely will not be enough because it has gone substantially up in 24 versus 23 in terms of the cocoa future price. On the other side, cocoa butter ratios have come down, right? They were at more or less 3.3 in October last year, and now it has gone down to more or less 250. So this does not tell you the whole story. It tells you the story on cocoa beans. It does not tell you the story on cocoa butter. So slight improvement with regards to prices on cocoa butter. In terms of personnel expenses, we have some leverage here. It has decreased to 19.5%. Some reasons for this are the price increases, which have been higher than the wage increases. We have had very nice growth over the last four years. Three years double-digit, now 7.8%, so that brings some operating leverage. Then we have had successful projects to drive efficiency in the factories and across the organization. So there's really quite a few drivers of this improved ratio. And it has actually come down by 200 basis points when we compare it versus 2021. So I think it's a significant improvement here in the last four years. Operating expenses, that's a mixed bag. I mean, we have in here advertising, for example, brand support. That went up, actually, in dollars or in Swiss francs, so an increase in brand support. Absolute. We have in here supply chain costs, like logistics. I mean, we have had a huge benefit there. I mean, you remember that in the U.S., we actually combined the logistics between the three companies there a few years ago. And a lot of the benefits are still coming in from that. And then you have other costs in here, like maintenance, repair, et cetera, et cetera. The total cost has remained flat, as you can see, $1.4 billion. but an improvement of 140 basis points. I'm anticipating that this ratio will go further down in the next years, even though we will continue to improve or to increase our support levels in advertising. Depreciation has also come down in percent from 2021 from 6% to 5.4%, even though the total amount has gone up to 297 billion. And that's also something I've been speaking about in the last two years, so it shouldn't come as a surprise to you. I've always said CapEx is above 300 million, so sooner or later depreciation catches up with the average CapEx. So we are now getting closer to the CapEx of above 300 million with regards to the depreciation. But with regards to the ratio to sales, I'm also expecting that to come slightly down over the next years. Operating profit came in at a new record of 884 million, so we are roughly at plus 70 million, plus 8.7%. The driver for that, I would say, okay, from the regional point of view, it's obvious. I mean, the key driver is North America. It would have been nice even to show you the last five years in North America, starting in 2020, we're actually at 5.8% EBIT margin in 2020. Okay, you can now say this was a COVID year, fair enough. So in 2021, we were at 8%, or 7.8. So we have increased more than 500 basis points. We have increased the EBIT margin in North America by more than 500 basis points since 2021. So I think that's a very nice improvement. And we have announced it. I mean, we said our goal is to increase the EBIT margin by 50 to 100 basis points per year. And we have delivered, I mean, even slightly more last year. This is the key driver. In Europe, we have been flattish to slightly positive. I think a good performance, right? 10 points more from 19.2 to 19.3 at the high level. And then rest of the world, we have invested strategically behind the brands. We have built up organizations like Chile, et cetera, et cetera. It's a planned decrease of the EBIT margin in the rest of the world with the goal to really accelerate growth in that area, which is 30%. So it's a big chunk of the total chocolate market. It's 30% of the chocolate market. EBITDA also positive, the third time in a row, above 1 billion, plus 8%. The tax rate is at 21%, probably slightly lower than what we would have anticipated, but it's more or less aligned with the average over the last years. In 2023, we had a special one-off effect driven by the Swiss tax rules. So we had a 70 million benefit. So we are showing this here just so it's clear what was happening. So actually, the right comparison was the 23.6%. Net income also increasing by 11.8% if we exclude the 70 million, which I again think is the right basis. And oftentimes for these numbers, it's even better to look at the longer term. So compare it again versus 2021, and we are up by 180 million, which is a very good achievement, I think. CapEx at roughly 6% of revenue. That's also our guidance for the midterm, right? 6% of revenue CapEx. On average, it can be one year a bit higher, one year a bit lower. But assume more or less 6%. I mean, the big projects in the last couple of years were surely the Cocoa Mass facility in Switzerland, in Olten, which we have built out and expanded. And then secondly, our manufacturing in the US, in New Hampshire, which we have also expanded with regards to capacity. Free cash flow. I would assume this is one of the key highlights also for you. It surely is for us. I mean, that's something we have really been working on a lot, a lot of hard work. from lots of the colleagues, also in the subsidiaries. And we have increased free cash flow by 33%. We have a very strong operating cash flow on the one hand. If you look actually at the operating cash flow, always consider that the 230 million is in the operating cash flow, because following IFRS, we have to show it in there, this variation margin, the positive 230. But we have then excluded it here from the free cash flow calculation, just to give you a real picture. Didn't want to show us including 230 million because this is an unrealized game that we will actually not really realize, especially when the market comes down. So excluding that, we are still at plus 33% and 635 million. Networking capital management has been very successful. We've decreased inventories because especially on cocoa beans, we had a very long inventory one year ago, longer than you would normally have. with the intention to avoid any supply risks. And we have now been able to bring it down again to, let's say, a level that makes sense. And then on accounts payable, we have also had some successes. Non-diluted earnings per share, 2917. Again, for 2023, I assume that you would probably exclude the 300 one, which is driven by the tax benefit. Again, probably even a better picture when we look at this over the four-year period, coming from $2,000 to almost $3,000. So it's 42% or 44% improvement over the four years, which I think is very good. And then net financial position is coming down, which I think especially the bond analysts in here will be very happy about. And free cash flow and shareholder return was in line, more or less, with $630 million. We had the capital increase of $160 million. And most importantly, EBITDA multiple is 0.75 times, which is well below our maximum target, so to speak, of one. Equity ratio also high. When you compare this one with peers, it is still above 50%, 52.8%. It has come slightly down because of the share tax, but we still feel very comfortable about this level of equity. Also combined with the liquidity and the liquidity reserves, we are in a very comfortable situation with regards to our balance sheet. Then on the shareholder return, we have increased the dividend for the 30th time in a row. We are planning to increase it. It has still to be approved by the AGM. We are going up by 100 to 1,500. That brings us to a dividend yield of 1.5%. And payout ratio probably is 50%. We are now even slightly higher at 52%. And yes, I think going forward, the payout ratio goal is still at 50%. Then the market cap as per end of 2024 is 100,000 as the registered share price was at 23.3 billion. If you took today's value, of course, it has gone up. And it would basically be at the second highest level since 2021 as per today. So that's, in a very short summary, our financials. A few words about sustainability. Sustainability is a very important strategic pillar for our business. It is actually a driver of business value. As a chocolate manufacturer, cocoa is our most important ingredient, of course. And I'm just giving you a few highlights around cocoa here. So we joined in 2020 for the ICI, the International Cocoa Initiative. that will really support our collaboration within the sector to tackle child labor. We have also engaged ICI to redo our child labor monitoring and remediation system in West Africa to make sure that we are really best in class. We have improved our traceability systems. We had to improve our traceability systems further because of EODR. EODR has now been postponed by one year. Deforestation regulation has been postponed by one year, but we had to be ready basically in January 2025. We introduced Rainforest Alliance as a certification. We started a living income program, design of a living income program for 5,000 farmers. This is a pilot to be rolled out by 2027. And we also initiated an agroforestry program in Ivory Coast, which will help our emission targets related to science-based targets. Some farming program highlights. We have seen some of the numbers already. 84% is at the moment the number in 2024 with regards to sustainable cocoa. We will get to 100% in 2025. We have spent more than 33 million behind those programs in 2024. To give you a few examples of investments that we have done as such, or spending that we have done, we have built more than 250 drinking water systems in West Africa. We have built 75 schools. We have worked with almost 12,000 individuals on income-generating activities. So you can think about alternative crops. We help them to build so they don't depend only on cocoa. We have actually worked with more than 65,000 farmers since the initiation of the system on this specific point, on this income generating activities. And more than 115,000 farmers are part of the farming program as of 2024. So you can see this is really a huge program, right? More than 100,000 farmers participating in the program. So maybe just a quick update also with regards to science-based targets. In 2023, we started a project. At the end of 2023, the SBTI, so the SBT Initiative, which is an organization, approved our mid- and long-term targets. In 2024, we started to really work on getting our emissions down. We worked with all our subsidiaries. They submitted their plans. So in scope one and two, which is actually everything that happens within the factory, it is mainly about using renewable energy. It's also about becoming more efficient as regards to energy use. And if you analyze scope one and two, you can actually see that compared to 2020, which is the base year, we have improved it by 9% more or less, the emissions. So the emissions have come down by about 9%. And then scope three, which is logistics and everything that happens outside of our own facilities. Also our, let's say the cocoa sourcing is relevant there. So we are working on basically addressing deforestation as one area. We are also engaging with dairy farmers to improve sustainable farming processes. Then we are redesigning some of our packaging to make it more sustainable. Or we are also trying to improve our shipping efficiencies, which help these targets here, but also brings our costs down. So you can see a lot of things going on in scope three. We have been able to reduce our emissions in 2024 compared to 2023 by about 8%. We are a little bit higher than in 2020 because of the higher volumes. But I think we have good plans in place to decrease it further by 2030 and 2050. So I think it's a project that is progressing really well. So in summary, you can see 2024 was a very successful year. I've already just given you now an update on sustainability with regards to the financials. I think the two key highlights for today from my side is number one, the improved debit watching, 16.2% in a very difficult environment, 60 basis points more. Despite the fact that our material cost margin actually came down 200 basis points. I mean, that was a hurt, right? 200 basis points for material costs, but we have been able to offset it. And secondly, provision number one highlights the free cash flow, 635 million plus 33%. Good management, I think, from an operating cash flow point of view. Great management also from a networking capital point of view. So it's something we're quite proud of that we have really been able to further increase our free cash flow. So with that, I hand over to Adolbert now. We will talk about the growth agenda and also the outlook. Thank you.

Thank you, Martin. We come to the end of our presentation. Our strategy, how we want to... deliver the guidance that we are giving to the outside world and to the financial community. Expansion is of course the key word here. We want to expand geographically. We want to expand the footprint in retail. We have huge potential there and a very unique leverage compared to our competitors, strengthening the brand equity. But we also want to expand distribution in countries where we are already operating. And we also want to extend our portfolio into areas where we believe premium chocolate has a relevance and where we are not yet into. Customer or consumer centricity is the driver behind all our activities. This means we try to understand better the needs of our consumers. As mentioned, we do a lot of market research. We observe our consumers and monitor them in our own channels, be it in the e-commerce or in the physical stores. We track them also with our loyalty program. And we focus, of course, on indulgence and gifting, which is also something that is unique for Lindt compared to other mass market players. And it has also proven that these gifting occasions are more resilient also to price increases than self-consumption. Innovation and quality are key. Highest quality, best taste is super important for a product where you can experience the product performance immediately when you put it into your mouth. So we always try to stay ahead of competition in these areas. We try to strengthen the core, so our key franchises that we have determined also have to surprise the consumers regularly with new flavors, with new packaging, covering new demand moments, etc. If you take Lindor, we have it as an impulse item, as a stick or a trio. We have it as self-consumption item in small bags. We have it as sharing items. We have it even as a gift. And we have it in all seasonal variations from eggs to Christmas hangers. So this is how we also stretch our brand for every consumer demand or occasion. Yes, and continuous innovation, I will show you later an example, a recent example that you probably have also noticed. where we have also proven that we are very close to social media and close to trends that are evolving in the viral community. The fundament and the enablers is one, our entrepreneurial culture. Also here, I think we have a huge point of difference to our competition. We are a decentralized organization. We have experienced managers who are highly empowered. So we are agile, we are responsible, we are accountable. And this is a proven success model that we live for many, many years and decades. We have a clear commitment to sustainability. In this year, we celebrate 108 years of Linden Sprüngli. This shows already that in our DNA, we have this sustainable approach. We are here for the long-term success and not just capitalizing on short-term opportunities. Of course, also our business ethics is something where we are proud of and that we foster within the whole organization. Operational efficiency is something which is a competitive advantage. precondition and I think we make big progress probably also under the pressure of raw material prices to mitigate the risk of this increased cost drivers and not to force us to pass on the full amount in price increases to protect our volume technology at the beginning of our history there was an invention the invention of the conch so we were drivers of new technologies and also today we embrace new technological developments we are investing heavily into a new erp backbone for our for our group so we will have a worldwide uh harmonized uh backbone in in in the IT system and we are also cooperating with universities in AI in the production but also in our web shop. So we came up with a metric chocolatier on our web page with generative AI advising our consumers what to, let's say, proposals for the best gift or also providing information about allergens or whatsoever. This leads me to the outlook. Our clear ambition is to continue to grow faster than the market, so we want to gain market share, gain household penetration. These are key parameters to measure our success. The cocoa price hikes, as Martin has explained in detail, with the time lag due to the coverage of cocoa beans, will force us to increase prices in 2025. And these price increases will be higher than we have seen them in the past. So it will be double digit price increase. And we are on the way to negotiate it with our trade partners. We are on the way to implement it. So, the full dimension is not even visible at the moment because it is in negotiation different from country to country, different also in the time span. Some countries do it end of February, some countries do it mid-year, some countries do it beginning of the year. One thing we don't want to cut back is brand support. We believe that a premium brand like our brands, Lindt, Ghirardelli, Russell Stover, Cafarel, et cetera, needs top of mind awareness. And that's also probably the key measure to mitigate price elasticity. So we will keep the foot on the pedal in brand support. And, of course, also the expansion of our retail business is a strong tool to increase the brand equity. With this said, we increased our guidance for this year from 6 to 8 to 7 to 9% top line growth, 20 to 40 basis points bottom line, and mid to long term we confirm our guidance from 6 to 8% sales growth and 20 to 40% points EBIT margin per year. And with this, I come to one highlight that I announced already. I'm not sure if you have kids at home like me. She's 10 years. And in summer last year, she came already every day. Papa, papa, why don't we have a Dubai chocolate? And she was not the only one. The whole younger generation went nuts with this trend. And we said, what can we do with it? So it's a very complicated recipe. very high amount of pistachio cream, which is quite tricky, combined with this kadaif, which is a stripes from dough. So we soon found out it's impossible to produce it on our lines. So we said, okay, but we, Maître Chocolatier, we can do it also by hand. So we came with a handmade version, super complicated, super expensive. And then we said, where can we distribute it? Certainly not in a supermarket chain. They would be quite disappointed if we tell them that for that thousand supermarkets, we can provide them in ten markets the product. So we said, we have our own retail channel, which is a huge advantage. And we launched it as a limited edition in our top boutiques. And when we saw the reaction of our consumers, but also of media, We were simply overwhelmed. We did not expect this. And then we said, Jesus, we should better find a product that we can distribute to a wider audience than to these lucky few that found it in our retail stores. And we changed the recipe slightly. We called it also Dubai style chocolate to avoid any confusion with the handmade chocolate. We lowered the price because we can produce it now on our lines. And it goes live in these days as we speak on the 20th of March. It will be available in all co-op outlets in Switzerland. It is already available in Germany and it will be rolled out in the next weeks and months. I can say globally the demand is unbelievable. And I show you now a video with some impressions of this, I would say, dream come true for any marketeer.

It is the TikTok trend of the year, the Dubai chocolate. Lindt has now released a limited edition. The result? Nightly hounds in front of shop openings. In Duisburg, unknown people even hit a car window to get to the chocolate.

We didn't want to make you hot on Dubai Chocolate without preparing a small gift for you. And this is the way we presented the Dubai Chocolate to our customers in the store. So it was not just a tablet, but it's really an event. We had handwritten numbers of the limited edition, so... And what did we prepare for you? You get some of the few limited handmade chocolates. So one handmade chocolate, which is produced, by the way, here in the home of chocolate, is in this bag. And then one of the Lindt Dubai Style chocolate that you can find soon in the supermarkets. We will distribute it to you now. And, of course, I'm aware if you open it and eat it now, you might have some disappointed faces at home when you come and say, I got Dubai chocolate, but I was eating it. So you don't have to open it, bring it to your kids or your wife or whoever. You will find samples to degustate it at the Aperol. So you can try it there and bring this as a gift to your beloved ones. Thank you very much. We switch now to the Q&A and I invite Martin to join me on stage. Thank you.

May I start with a non-financial question? Yeah. Any lesson learned from this incredible experience on your marketing ambition, on the social media, on the young consumer?

I would say it was an eye-opener for the whole industry. Because this TikTok trend... It was not created by any big player. It was created by, I would say, a desperate housewife in Dubai. She was pregnant, craving for some goodies and didn't find her appropriate offer. So she started to mix her own dessert range and then she started to produce it and sell it. She wanted to close the business because there was literally no demand. And then there was one popular influencer discovering this product, posting it on her page, and suddenly the demand exploded. And then, you know, how it spreads. We had influencers in Europe and so on. So what we learned is, first of all, social listening is something that we have to put on the agenda. Because out there in the Internet and in social media, things are moving so quickly and so fast. And what was a failure yesterday can be a huge success tomorrow. And, of course, the other way around. So social listening is now something that we have established clearly in all our subsidiaries. Second thing, the response time to these trends. It has to be shortened in a way we cannot imagine. So we started even to produce content in-house. We have our own teams. It takes too long to call an agency. Can you produce me a video for the launch next week in our stores? We do it all in-house with our own people. And the third lesson probably is also we probably cannot... start a viral hype like it's done organically in the internet. But we have to play social media more actively. We have to address this target group in their language. Also when I showed you the video at the end, we are participating today in events where we have our own camera team, etc. And we have to think outside the box with our recipes. So who would have ever thought that an Arabian or Turkish recipe, actually this kadaif is known from the baklava and pistachio cream is in the Arabian kitchen, anyhow a standard filling. So we have to be more open. when it comes to innovation. And we, as Lindt especially, have the advantage. You know, we are a big confiserie. We can allow to have a variation of flavors which our competitors not necessarily can do with their production setup, etc. So, a lot of learnings, a lot of excitement.

Thank you. What is your best guess for the volume development for the chocolate market for the current year overall? Maybe also some ideas about regions, any thoughts would be very helpful. That's my first question. And secondly, we had an increase of the material cost of 200 base points in 24. What's your best guess here for the current year? Maybe also some hints on your hedging for the current year and next year. And last question, what is your best guess for the networking capital development for the current year? Thank you. Martin, you start with this last one.

Lots of questions on which we don't give any guidance. We don't see anything. So it's relatively simple, yeah. Look, I cannot give you a guidance on material costs other than COCO will go up a lot, for sure. And we will try to offset as much as possible surprise increases. I believe that material costs will... be unfavorable, again, slightly. I'm not expecting it to be at 35%, but I cannot give you a guidance if it's 36% or 36.5%, but it will go up. So, the second question, which was, because normally we can see it here, but I don't know why not. So, what was the second question? Sorry.

Related to that one, an info on the hatching point.

You know that we don't publish this because we don't – I mean, those are the cards we want to keep close to our chest because we don't want competitors to know how far we are hedged. But, I mean, there's rumors in the market that the industry is hedged somewhere probably around seven to eight months. It has been lower. It has been at five, I think, in the last few weeks. It seems the industry has increased the coverage a little bit with the decrease in – But that's, you know, that's more the rumors in the market. But you can see that probably not many players have hedged 2026, to put it that way, right? So 2026, I would assume, for most industry participants is still wide open.

The first question I would like to take. Volume, yeah, yeah, I'm fine. Volume. So... We've seen last year the figures that we read must also say might be also other figures because we read the chocolate market we are playing in. So there might be a bigger coverage, but we see a volume decline of 3% in 24. our best guess without having the glass ball here is that it might be a slightly higher volume decline because the price increases will be significantly higher than last year. So let it be between 3% and 5%. This would be my best guess. And also to be clear on this, it's a relatively easy math. As we say, we have to increase prices double digit and we give a guidance of seven to nine. We do also not exclude that we are also hit at one point in time by a volume decline. But of course, we expect to be less hit than the market. We still want to gain also in volume market share and I'm very convinced that we will. But at a certain point in time, we cannot exclude that the slight volume decline is also possible for us.

But it's fair to say that currently it's really difficult to have a clear view on what happens with the elasticity in general, for us and for our peers. It's one moment of time where it's really difficult to clearly see ahead, right? Because this type of price increases in this magnitude have not happened in the last 20 years, right? Because we are coming already, if you accumulate the last three or four years, it's already above 20%, right? So we're now on top of that another double-digit price increase. So it's really difficult to say. But this more than 20% price increase did not lead to negative volume. But it was basically over a time period of three or four years, right? So that's the difference that now it's basically in one go higher.

I mean, I'm sure this is the key topic that is in all your minds. We also see it's not only the price increase. The consumer sentiment is also influenced by other factors. For example, last year, the weakest market globally that we read was the U.S., but the price increase was the lowest. We had a 5% volume decline with a zero value, so it's only 5% price increase. So with the theory of price elasticity, this market should have had to perform better than the others. It did not. Why? Because other factors like high interest rates burdened the consumer in the U.S. and had a bigger impact. Today, what we see tariffs from left to right, uncertainty, how is it going on in Ukraine? So we don't know what is the impact on the consumer sentiment. And this has a similar impact on the consumer behavior than, let's say, a price increase. And anyhow, I would not trace back all the developments just on the price. Was this a question?

I did not arrive here. I'm expecting some. I mean, we are working on this, right? But to plan your balance sheet as a company is really difficult, right? Because especially at the year end, a lot of things, there are a few pieces that move around like accounts receivable, like accounts payable. Do you get the big customer payment in December? Do you get it in January? So that's why it's really difficult to plan the balance sheet. So it's probably a fair assumption that you assume a neutral kind of number for our free cash flow. Our free cash flow guidance is on average 10%, right? In the midterm, on average. But it can be one year a bit higher and one year a bit lower. I think that's probably the best number I can give you and the most accurate one.

Very good. Thank you. Jan from UBS, two questions. The first question is on your largest market. On the largest market, the U.S.? ? Maybe there's also an underlying consumer trend change happening. Is there anything you want to tackle regarding your portfolio adjustment product focus in the U.S. in 2025, 26, with more core content products? And in this question also, is a wafer rollout also planned for the U.S.? ?

So I will take this question. The answer is no. I mean, we have evaluated the impact of GLP-1, and obviously you refer to probably these consumer behavior changes thoroughly. And what we see is 12% of the U.S. consumers have ever tried GLP-1. Only 6% use it on an ongoing basis. So you have many... People who start and then interrupt. It's expensive. It is inconvenient. It requires a lot of discipline. And the impact on the chocolate consumption due to the information that we have is that these 6% of the population reduce their calorie intake by around 6%. So to achieve the results of 15% to 20% weight loss, of course, you have to consume less calories. And within this calorie reduction, different categories are impacted differently. And chocolate is one of the categories which is in the area of a higher impact, like soft drinks, et cetera. But what we see is within the category, premium chocolate is, again, less affected than regular chocolate, where you could say it's more unconsciously eaten. So if we try to do – I mean, only if you take 6%. Reduction from 6% of the population, it ends up in the area of 0.4% on total market. With our volume market share, this is something that we cannot even feel. And this is why we don't think that our growth will be harmed by the consumption of GLP-1. If you refer to other general health trends, yes, we see that our dark tablet range, which is in the market anyhow, is growing double digit across the globe, also in the U.S., but we have a sufficient offer in the market. But also Lindor enjoyed double-digit growth on the other side. And also here we say, you know, if you see the percentage of a daily intake of a Lindor, I don't think that it is going against any health concerns because this one ball makes you happy at the end of the day and you certainly don't count the calories of this ball. of this indulgence. So the answer is no, we don't plan to change our successful setup that we have in the US. And we also don't see a different shift or a different speed than in Europe, probably. I mean, these trends to more conscious consumption, more mindful indulgence we see across the globe.

And then the second question, if I may. On the price increases, do you expect that each player more or less has the same price increases in 2025, or do you see some major differences that peers like Hershey, Maas, or others who are really losing out on market shares and volumes in 2024 want to fight back, say, okay, look, we're not increasing price points. We want to have our volumes back. Do you see any dynamics here in your market diligence?

I mean, first of all, we are not so much focused on what our competitors are doing. They do what they do. We do what we do. What we see is that the recipes are composed differently from competitor to competitor. Take one of our fiercest competitors in the praline market is Ferrero. If you take the composition of a Rocher, it's a wafer, a hazelnut, palm oil, and a little bit of chocolate. So the wafer, the palm oil, the hazelnut did not increase in prices significantly. but the coating of chocolate. Our Lindoball is the opposite. It is a lot of chocolate, a lot of cocoa butter. Cocoa butter even increased higher than cocoa itself. So our recipes are... And then take our 70-85% cocoa tablet ranges. So our products are hit... more severely than most of the competitors because we use high quality ingredients and they sort in pricing. So it might well be that we have to increase higher than some of the competitors. Other competitors who sell on significantly lower prices might be forced to even increase their prices higher because their margins are lower. So we've seen everything. If they take the example of private label, we know from private label they are out with price increases. They are three, four times higher than we are because their margins are super small.

Hello, this is Ed Hawkin from JP Morgan. I wanted to ask on your volumes growth. So coming back to the question, you described outlook for the market and how it performed in 24. You gave figures that you have grown on average 7% over the past five years. But by my math, this is volumes of about 2% and is pricing led. So my question on 2025, where you've got some volume decline embedded in your guidance, is how much volume mix decline are you happy to stomach in 2025 versus then deciding to roll back your price increases? And what gives you the confidence that then volume mix can pick up again in 2026 onwards to be the main driver of your top line growth? And then my second question, please. is a bit specific on the modeling, but you had 80 million other income in 2025, which is an increase of 50 million year over year, so quite a contribution to the better margin performance in 2024. How should we think about this other income line in 2025 and the sort of other moving parts in the margin that can offset it? Thank you.

Can I start with the second question? Other income, and we have published this basically also at half year, we are not able to publish the exact number, but we had this legal case, a one-off legal case that we won in the US that was booked in that line basically. So all I can say is it won't be 80 million again most likely, so it will go down substantially. So yes, there we have a bit of a headwind in 2025 as regards to the profit, but be sure and be assured that when we went through our budgets, I mean, if you're giving a guidance of 20 to 40 basis points, it's because we have plans behind that, not just, you know, second guessing. We have real plans behind this 20 to 40 basis points, so we have taken that into account that will not be repeated, it is one of.

To your first question, with which volume decline would we feel comfortable and when would we roll back? we don't feel comfortable with any volume decline. So we are doing everything to fight against a volume decline, being realistic and knowing it could happen. But we do everything, and let's say that's the mission of all our management team, to protect volumes and to fully translate price increases into top-line growth. What makes us confident that we will outperform the market again? I think we have proven that we have strong confidence brand equity out there. Our support budgets have never been reduced, unlike also many of our competitors. Our recipes have never been touched and have never been deteriorated, like it also happened out in the market. We are continuously increasing, let's say, consumer demand also by creating experience centers like this Home of Chocolate or World of Chocolate out there. So I think we have a momentum and we have a business model and a role model how to how to generate more demand for our brands. And then we see megatrends. With the aging population, we see that these empty nesters and upwards are more into indulgence and into hedonism, and they strive more for premium chocolate. We see an increasing middle class all over the world. They're also striving for premium products. And this megatrend should help us to mitigate price elasticity that we might see also with no doubt.

I think in addition, when you look at many of our peers, they have full distribution. We are not even close to full distribution. I mean, there are so many countries on the planet where we have not even started. And, I mean, we have talked about the rest of the world where it's only about 13% of our sales and it's 30% of the total market. There are many markets where we have not even started with the distribution. There are a few European markets where we do have distribution. So a lot of the growth going forward is coming also from distribution gains, not just from the increase in velocity which is driven by brand support. So it's really a combination of the two things. So that's why we are very confident that he'll grow fully.

And in those markets where we don't have distribution potential, like in Europe, we have full distribution in most of the European markets. We have seen that the brands are so well established that we don't see price elasticity. This is why we grew 9.5% last year in Europe. So I think it's a good combination, distribution potential, regional expansion in the markets where we have a lower share. and a strong muscle and a strong brand equity in the established markets where we have a strong share.

Hi, Antoine Prevost, Bank of America. Quick question on retailer negotiation. You are passing double digits. Can you quantify maybe what percentage of your sales right now you have kind of like a price fixed for this year? And maybe, I mean, you are probably the only one that is protecting margin with pricing compared to some peers. Has this created some pressure from retailers or more like difficult discussion on that front? And maybe on current trading, I mean, anything specific you want to flag for the first two months of the year? And how is Easter selling today? going like anything specific you want to plug. Thank you.

So first part, price increases. You have pressure if you go out with a 2% price increase or with a 15% price increase. It doesn't make a difference. That's the name of the game. Every trade partner wants to get a good deal and wants to, let's say, make sure that he's better off than his neighbor. So we are used to deal with this pressure and I can tell you we are not nervous about passing on the price increase with our retail partners. Because all of our trade partners have their own private label in their portfolio. So they know perfectly and have full transparency of the cost structure of chocolate at the moment. And most of private label is increasing significantly higher than we do. So we don't feel a big resistance here. Where we are getting a bit more nervous, of course, is how does the consumer react? And therefore, we make sure that we invest a lot in, I would say, perfection on the POS, that we create emotional excitement and experience on the point of sale like we do in our own stores. I think we learn a lot from there. And we have seen in our own stores when the experience and the – The presentation is perfect. Consumers do not make the decision based upon price, but based upon their desires and about quality. Second part of the question? Easter. We have a good start.

Sorry?

We don't see this effect that we saw last year in the U.S., if you refer to this, because Easter is mid of April, so it's a date where normally trade partners don't forward the order, so we did not see this. Let's say the hour of truth for Easter is on Easter Monday, because it's relatively easy to sell in the products. It is harder to sell them out. And if you do not sell through the products in trade, you have to participate in sell-out participation or markdowns, as we call it. And only then you know the real success of the Easter business. But at the moment, it looks good. And in the past time, we have seen that price elasticity in gifting and in seasonal business is lower than in everyday consumption.

Yeah, John Cox, Kepler Chevro. Two questions. One of the pushbacks I get on Lint is this margin this year, 20 to 40 basis points, and you had this one-off already in 2024. You talked about personnel costs maybe coming down, the operating expenses coming down. Can you just talk about some of the initiatives you have? to maybe give the market some confidence that you have, because you've also said that materials will go up. It seems pretty difficult to square the circle in terms of finding the margin for this year. The second question is just on top line growth, looking into the crystal ball of 2026. We've seen cocoa prices almost half in the last few weeks. Is there a risk that you'll be cutting prices next year, which with volumes maybe coming back a bit, but maybe not being that strong, means that your top line growth in 2026 could be below your minimum 6% goal? Thank you.

With regards to the margin, I think we will have a lot of benefits from supply chain costs. I can give you an example of logistics. We are assuming that the volume is more or less flattish. or not very high, right, in terms of positive, or even slightly negative, we will transport the same amount of volume, but the pace against which we compare is much higher, right? Let's assume 7% to 9%, if you take 8% to 9% growth. So we have basically the same cost compared to a much higher sales number, so that gives us a lot of benefit in regards to logistics. And then, you know, we have started a big project. We call it fitness project, which looks at every stone basically within the company. We are turning around every stone. Which expense do we need? Which one do we not need? Obviously, not letting people go. I mean, we are a growing organization. But we are trying not to hire many additional heads at the moment because we don't need it. Volume is not growing. So we are trying to keep the headcount flat. So that gives us also some benefits. I think that's a good example. So overall, I think it will really come from personnel expenses. It will come from operating expenses. It will be coming from depreciation.

Retail.

From retail, which is growing above average, right? Bear in mind that retail by now has become an organization that is at company average profitability, and there is room for improvement. And if you look at the regions in the U.S., we are still quite far away from company average. So there's still a long way to go in North America, and if you can – improve debit margin by 50 to 100 basis points in North America, that is already bringing a lot of these benefits. And then you should also bear in mind in 2024, yes, we had the one-off, the famous one-off, but then we also chose to spend a big part of that behind our growth going forward. Right? It's not that we just made the 16.2. We were actually able to invest in the future as part of that money. Right? That's also one of the reasons why we never wanted to show it with one-off, without one-off, because we always said we will reinvest that into growth, which I think is actually also in the interest of the shareholder. So I think that's another important point when you look at 2024.

Giving you an emotional statement. what gives us sleepless nights, the 20 to 40 basis points or volume protection, then the answer is clear. So it's certainly the volume protection is the tougher one and the 20 to 40 basis points, we feel pretty confident. To your second question, cocoa prices have halved. I cannot really see this development.

Hypothetically, if it halved...

The position that we see did not decline. But let's suppose it would have. you should see that the cocoa price tripled on average throughout the last years. We did not triple our prices for chocolate. So you can see that the translation is with a much lower percentage. I mean, we increased, let's say, 25%, and cocoa price tripled because the input cost is just a fraction, plus we could mitigate with other cost factors. So even if it would have in 2016, we would probably not see an immediate impact, as Martin said, because for 26, we have to cover already in 25, and the prices at the moment are far away from halving and are very high. But in the long and mid-term, that's of course also a question that we ask ourselves. What we see is that in these whole input costs that we have, at the moment it's the COCO price that soared, But we see that also other raw material prices are fluctuating and that we have an overarching trend. And this is the whole cost for our sustainability program, for our decarbonization programs, for complying with all the regulations that we face, be it EUDR, etc., etc. Even if the cocoa price comes down, we see that these prices are coming up. And I'm not so sure how far, how fast and when we will see really decreasing chocolate prices in the future. So I'm not worried about this.

I have three questions. First one on that one-off to come back again. Just that everybody's here on the same page. So that's just impacting first half. And then there's no thing to consider for the second half. Correct. Okay. Then the second question is a strategic one. I mean, if I look, the cocoa future for December 26th is at 5,000 pounds. So that's two and a half times higher than, let's say, the 2,000 we used to have in the past. Now, with the exception maybe of the poor farmers in Africa, you know, the economics have significantly changed for the farmers there. in Latin America. I mean, is there a level where you would consider more backward integration, either going into farming yourself to secure the beans, or maybe cooperatives that guarantee you long-term agreements? And if not, I mean, if you maybe could discuss on strategic and financial perspective on your view. Thank you. And then I would have a third one.

Let me just – I think this is something we can answer jointly. A deeper vertical integration into farming is something we discuss time by time. We had projects also on the table from third parties where we were invited to participate. So far, we believe this is not our core competence. We are already relatively deeply integrated as we produce from bean to bar compared to many of our competitors who buy the chocolate as a component from third parties. So I think if we concentrate on this complex process from bean to bar, which is capital intensive and which requires a lot of knowledge and know-how that we have due to our long-standing history, I think this makes us stronger than now starting to dig into farming. To your point about living income, what we see is as the prices have soared so significantly that Every region outside of Africa is now motivated to increase or let's say to get into cocoa farming and increase the plantations. So we saw it, for example, in Ecuador. They have ramped up their crops dramatically, which helps to compensate the decline in West Africa. In West Africa, the situation for the cocoa farmers is also significantly better than it used to be a couple of years ago. before, because the farm gate prices, which are determined by the government, are substantially higher today than they used to be one year ago. What will happen with these farm gate prices in the next year, we don't know, but for sure the farmers are better off today. In addition, we are also preparing a living income program for 5,000 farmers as a project, and so we are also working on this, Martin.

I think I've seen three years, obviously, with the deficit, right? And this year, now, in this current crop, it may be more or less balanced. Sooner or later, it will turn around, right? And there will be actually an oversupply. I mean, let's not fool ourselves. This will happen because it's a good business right now for many people who think this is their core business to invest in farming. Because at 5,000, at 6,000, at 7,000, even at 4,000, this is really good business. So the market will play this out. And in the midterm, The market will come down. I mean, it's just a question. Will it be in the next six months or in the next, let's say, three years? That's the big question, right? And, of course, it will have an impact on our strategy. But now to think that we need to go into farming because otherwise we do not get enough cocoa, I don't think it's necessary. I think we have good contracts already with our suppliers. So we're actually confident that we'll get enough cocoa beans, right, going forward as well.

Yeah. We have an audio question from Warren Ackerman. Rahel, can we hear him now? Warren?

Yeah, hi, Adam, can you hear me? Yes, we can hear you.

Hi, Warren.

I've actually got two questions. The first one is just on innovation. Can you update us a little bit on how the shotgun wafer is doing in terms of the rollout and any other kind of areas where that you're focusing on innovation maybe dark chocolate um you know what nestle going out there with the new kitkat tablets which are they look a bit like the excellence but obviously lower price point but it's a big change in what they're doing with their key brand and what are you doing to You know, get the excitement. You talk about excitement. How can you get even more excitement, I suppose, in 2025 with a consumer that still feels under pressure is the first one. And then secondly, just on big picture, premium as a percentage of the total chocolate market, where are we today and where do you think that, you know, where does that go by 2030? Just trying to understand, it looks like premiumization is really accelerating right now. Do you share that view? And if so, what's driving it? Is it the higher price? Is it GLP-1? Is it EMs on the S-curve? You know, what is it that is driving this kind of, it looks like a bit of a step change in premiumization. Thank you.

Thank you, Warren. The first one, Shoko Wafer. You know, we have presented it last year here as a big launch, but we have also stated that we have limited capacity because we were starting with a third-party supplier because it's not our core competence. And after the initial success in the free pilot markets where we launched it, we decided to – to produce it in-house. So we are preparing now a new facility in Italy. We have ordered the machines. And until we have these machines up and running, we are not able to extend the footprint of Chocolate Wafer. But be assured, once we have the capacity, we will roll it out globally. It's a super attractive concept, well perceived by consumers. So that's point number one. Point number two, the creativity of our competition. Probably we don't mention it that dramatic to say we change things or whatever, but that's standard business. I mean, we grew last year nearly 15% with our Excellence tablets. One of the drivers was a new range called – it's, by the way, in the back room presented. It's called Excellence Pailleté Tablets. I wouldn't say that's a groundbreaking thing. That's standard business. We come in our wide assortment with every range, every year with innovation. On Lindor, the flavor of the year is tiramisu, also well perceived in our pick and mix bars. We have an immediate indicator about the acceptance of our products in our retail stores. After two weeks, I can tell you if a flavor flies or doesn't. if it is on average or whatsoever. So we are continuously innovating our assortment and trying to create this excitement. What was your questions? We lost them now.

The second one was just on premium. And maybe by region, what's happening to the premiumization trend in the U.S.

versus Europe? the rest of the world versus Europe and the global picture?

To address this or answer this question without precise figures, because I did not analyze it, but for sure we have the highest share of premium products in Europe, which is the most established market and with a high cultivation and also with a strong offer of premium brands. And certainly Lind as the market leader in premium also played a role in developing the premium market in Europe that far. In the U.S., I would say it's half of the size. So we are a small player there, and we also don't have the muscle to develop the market like in Europe. But for sure, with the growth rates, I see the future that it will be aligned between Europe and the U.S. And then you have... all the Asian markets and the rest of the world. And I think that they will even leapfrog because the consumers there are so addicted to luxury and to premium brands. And as soon as they can afford it, they normally don't go for mass market brands, but immediately go for the best. So we see the biggest potential there to take Middle East or also take China and other Asian markets. So I think your observation is shared by us, Warren. Premium is growing.

Thank you very much.

Thank you.

Any questions?

Sorry. Hello. Hi, it's Bing from . So I have two questions about the rest of the world, please. The first one is, in the presentation, you showed some new developments, like, you know, you opened new stores in Chile, Mexico, and also supply chain hub in China. It seems like you're really accelerating the growth in Breath of Water. Can you share more detail about the plan in 2025? And where do you see, you know, outside of Brazil, because you're, you know, rolling out the wholesale, outside of Brazil, which market do you see the largest long-term potential there? And then the second question, I think you said a few years ago, the global retail division is no margin diluted anymore. But when you accelerate the growth in the rest of the world and opening new stores, how do you think about the margin profile in the rest of the world? Would you sacrifice some margin in order to accelerate the growth? So just a question there.

Okay. So last question. No, that's not the plan. Not with normal retail stores, nor with flagship stores, nor with, let's say, experience centers like this. Our plan is to make money and be accretive and not dilutive with anything we do, because we don't think that an individual or single, let's say, a point of sale or whatever, can change the picture so that we would sacrifice profitability. To your question, where do we see the biggest potential outside of Brazil? So, certainly... If we take Latin America as a whole, it's a huge potential. We have a culture of attending shopping malls there, which are pretty similar than the malls that we see in Brazil. So only in Chile we identified, I would say, quite a number of stores. That's not the only one. Also in other countries in Latin America. Middle East, we just signed a joint venture for Saudi Arabia. We had today, I greeted in between the two conferences, our distributor from UAE. You know that we also have plans to replicate an experience center like this in Dubai, the best location. So this altogether will strengthen the presence and the equity of our brand in this area, which we will also leverage by spreading out the retail stores there. We signed a contract with a retail operator in Malaysia, Singapore and other areas, Indonesia in this area. We will open the first stores hopefully this year in India. Because in India, it's really tough for our premium products to find an appropriate distribution in the existing distribution channel. So we believe that we are better off having everything under control in our own stores. Yeah, and I could give you further examples, but believe me, we are really exploring every opportunity to accelerate in these emerging markets. The point is it takes time. You have to prepare. You have to do this analysis. You open the first, the second, the first, which is really tough because of logistics. You have a wide assortment. You have no volume. You need a hub and so on. So this is all in preparation, and we will probably harvest the fruits in a couple of years.

So I think we have one more online question in writing. I don't think people can see it here anymore. Should I quickly read it out from David Rue, Morgan Stanley? So what portion of Lindt's raw materials on its balance sheet relate to cocoa beans versus other cocoa products such as butter, et cetera? We do not store butter, basically, because butter is pretty much delivered just in time. So there's a very small amount of cocoa butter on the balance sheet. It is mainly cocoa beans. And then the second question, how would Lindt approach pricing? If input costs eventually became deflationary, would you cut prices or do you believe your brands can hold pricing if competitors cut?

I mean, it's clear. We had this question already before from John Cox. If... raw materials would be that deflationary that our calculation allows for price decreases. We would do it in whatever way, be it being, let's say, doing more promotions or also shifting within the portfolio. So we are certainly not overpricing our products. I don't think that this is a viable and sustainable business model. So we have to make sure that we stay competitive. There is a certain is a certain premium that we can reasonably charge, but we cannot charge a premium which is unreasonable. So therefore the answer is yes, but I would say today we are far away from a point to be so deflationary that it allows us to decrease prices.

Just one point before we close the meeting. And an important one, you know, H1, H2, EBIT margin. I think it's very important for you as a takeaway. We had one-offs in 2024 in H1 and we also had a one-off in 2023 in H1 because in H1 we had kind of a very favorable inventory carrying in 2023 and we increased prices quite early. So we kind of over-delivered in H1 EBIT margin. I think it's very important not to have wrong expectations about H1 and I don't want you to become nervous if we are actually below 2024 H1. So our guidance for H1 EBIT margin is somewhere between 10 and 12%. So 10 and 12%. That's our game plan to achieve the 20 to 40 basis points higher EBIT margin. I think it's very important for all of you to take this away. So there is no negative surprise if you see a decline in the EBIT margin in H1 2025.

With this, I would like to thank you for your visit, for your attention and for the lively discussion. And yes, leave us with a chocolate smile and be the hero at home with the Tuba chocolate. Thank you. Thank you.