Barry Callebaut AG

Good morning, everyone, and welcome to Barry Callebaut's full year 23-24 results presentation. I'm Sophie Lank, Head of Investor Relations, and it's my pleasure to welcome those of you in person today at the Sixth Convention Centre in Zurich, and also welcome to those of you online joining us via webcast. Our session today will be hosted by our CEO, Peter Fels, and our CFO, Peter Vanesta. We're, of course, going to cover the full year results, as well as some strategic updates and progress on our BC Next Level Transformation Programme. Before we get started, of course, just draw your attention to the usual disclaimer and to remind you that today's session is being recorded. And with that, I hand you over to our CEO, Peter Feld.

Thank you very much, Sophia, and good morning to all of you here in the room as well as online. Thank you very much for joining our full year results conference today. Let me start in saying a big, big thank you to my entire organization at Barik Kalebaut. The past year has been probably a year of the biggest disruption, as you all are aware, in the global sourcing of cocoa, as well as the pricing fallouts that we have seen. And in addition to that, we continued and we built out our first year on our next level investment program to set Barik Kalibaut up for the future. As I shared with you a year ago, we are literally still a young company. We're only 25 years young. And with these investments, we are really preparing for the next decade of unparalleled profitable growth for Barry Callebaut. Now, when you sum up what we're sharing with you today and what Peter will detail later, then it's clear that we're confirming our growth strategy that we've shared with you in November 23. We, on the other side, have delivered in this year of biggest disruption in the cocoa supply, as well as in the first year of our next level transformation program, solid results. The milestones that we've achieved in Next Level are manifold, and I will have a separate chapter to take you through the key achievements that the organization has been delivering over the past 12 months, and obviously an outlook into the next year as we unfold all of the other activities that we have. Looking forward, we will continue to navigate a disrupted supply environment on the COCO side as we move in the second year of our Next Level investment program. Just on our growth priorities, we have mapped out last year to you four growth priorities. In fast-moving consumer goods, we want to win two of three outsourcing deals. We need to earn the right to do that, and that's why we're investing into the company. I will share more about us going from an ingredient supplier really to become the recognized provider of chocolate solutions globally for our customers. We've made good progress on that, initial progress, despite the headwinds that we actually had in the past 12 years. On gourmet, we had set out the ambition to double our business and, again, hear good progress. We want to scale up the specialties business as this is helping to sweeten the margins, both in the FMCG side as well as in the gourmet side. And then in Asia, where historically we have just been starting late, we want to go to fair share. Now, when we announced that growth strategy to you in November, we have articulated what we call OGSM for our group, objectives, goals, strategies, and measures. We have then asked all of the 20 new country cluster managing directors to come forward and explain how, for example, Turkey fits into this role and how China fits into this overall concept. And that has all been assembled together, and we built a midterm plan for the group That obviously also entails the new capabilities that the next level investment program is bringing us. So we now have a machine that is well set up and that we will continuously deliver as we go forward. In terms of results, you see that we have in every of those elements made good progress going forward. We've won the first key deals that we wanted to have in FMCG environment, just to name a few. We had a major win in ice cream in Europe. We had a new customer agreement in North America and an expansion on our Tony Chocolony one, both internationally and in the U.S., which is a new country that they're entering. So we have good first progress. We're not where we want to be yet. But on the other side, this is the first year where we're going, and we're happy that we're seeing traction in this environment. I want to also, and Peter and I will talk about that more, We are currently in a discussion phase that our customers in FMCG have with their retailers. Following the high inflationary environment in 22, obviously there was significant price action of our customers in retail. And as you know from the press and from your other customers, from your other companies that you're tracking, there's obvious discussions that still need to happen to actually move the cocoa price into the consumer hands. And that's a short-term disruption that we think we will continue to see going forward. But I must tell you, I'm also absolutely convinced that chocolate consumption will prevail and continue to carry up as we've shown you last year, as it has been in the past 50 years. We showed you that it was consecutively growing with 2.5% over the past 50 years, despite wars, financial crisis, and other activities in the market. So we're fully convinced that with 2.5 billion new consumers entering the category, we will see more growth coming in that area. That's FMCG. In Gourmet, I'm very happy to say that we regained the market share losses that we had in fallout of Visa. We're nearly growing double-digit, so that's a big step forward here in our non-packaged goods side. And I'm also very happy to say that we've just launched our first direct-to-customer webshop literally yesterday in Germany. So for the first time, our end customers, not the distributors we've been historically working with, have now access to source product, And by the way, subscribe to products from Barik Kalibao in the future. It's a little first step. We're obviously expanding that with our next level investment program. In specialties, we have undertaken a major analysis on all the things that we've acquired in Barik Kalibao over the past 25 years to really focus on what matters most for our chocolate customers globally. And with that, we have now a clear understanding in the portfolio of of the products where we say this is what we want to retain to take forward and scale internationally and this is what we will probably not drive forward and this is what we will not expand as we go forward. So very clear strategy now in this specialties area that will help us improve our mix in both the FMCG side as well as with our Gourmet customers. And then And Vamsi Mohantati has done a great job with this organization in EMEA, Asia, Middle East, and Africa to already deliver a double-digit or increase of double-digit growth in the past six months, which is quite amazing. So, you know, we've invested in resources. It is delivered that despite the headwinds that we have in China, which, as you know, in China is still an ever-lowest consumer sentiment at this moment, obviously dragging the entire industry back, including us. But again, here, great opportunity for us to go forward and seeing that progress that WAMSI has unlocked through increased penetration in Asia. Let me say a few words before Peter also starts on the cocoa crop outlook 24-25. You know that we're entering right now the biggest harvesting season, and we put a few dimensions together to explain it. The weather conditions in Africa are certainly better than a year ago. Hence the pot count that our teams are doing and you know that we have a very thorough work underway to really understand how is actually the blossom going into the pots and then actually developing in a full harvest. We see a significant improvement versus last year, however still not at the 22, 23 levels. And that's very simply driven by certain legislation that has been put in place in West Africa in 2018 for example, prohibits farmers to replant trees. At that point in time, the government was concerned about expansion and erosion of prices. We now obviously have an opposite situation. But the farmer currently, and that's speaking to the diseases when there's an area of swollen shoot, is not allowed technically yet to actually replant trees. So we're having significant discussions with the government in Ghana as well as in Cote d'Ivoire. I've been last time in July in Cote d'Ivoire and I will be back in two weeks to work with the government and we have a strong activity that I will explain later in conjunction of the next level program of how we want to actually enhance productivity in smallholder farming and work together with the government to actually change that paradigm of not replanting. I do think the message has landed with the governments, both in Ghana as well as in Cote d'Ivoire, but we need to put it in legislation. We need to continue to get allowance to actually go for seedling planting again, and that's the journey that we're on there with the government. So what you can see in farm investment on this slide, we have a bit of a split world. Where we have farm gate prices, that is actually where the state... dictates the price that goes to the farmer, which is the case in Cote d'Ivoire and in Ghana. We have no improvement in productivity yet because the increase to go to $3,000 has only been implemented literally six weeks ago or eight weeks ago. And so from that perspective, we can't assume that for this harvest, we would have an improvement in productivity based on more money with the farmers and investment into fertilizers, into replanting and other activities. That's different outside of Cote d'Ivoire and Ghana, for example, in Ecuador, where the farmer has actually benefited from the high cocoa prices and where you can clearly see an investment going forward into productivity in the farms. So it's a bit of a mixed picture. As you know, Cote d'Ivoire and Ghana account for the vast majority of the cocoa from around the world. And that's obviously important that we spend time there with the government to make the right changes in legislation to actually bring that product back up. I can tell you that I've met In my last visit, the Minister of Industry, the Minister of Forest, the Minister of Agriculture, and we had very good discussions. As everybody knows that cocoa is the biggest GDP contributing element in Cote d'Ivoire at this point in time. Obviously, they're interested to also bring other things into Cote d'Ivoire. But that productivity step up is very clear for everybody that that has to happen. Demand, as I mentioned earlier, will continue to go up. We do believe that we have this short-term discussion going on between our customers and their customers, i.e. the retail partners, but we think it's a short-term phenomena and we're convinced that the overall chocolate consumption continues to go up as 2.5 billion Asian consumers are entering the market. So speaking a bit about our strategy, I've announced in May The Future Farming Initiative, after we signed our first partnership with a large high-tech farm in Brazil. Steven Retzlaff, who has been building the global cocoa business for Barre Calibao for over 25 years, has become the executive chairman for that endeavor. It's literally an investment vehicle where we will bring modern high-tech farming large scale to life. Since Steven has taken on his journey, he has made significant progress in to map out the playbook, how to do that. We've onboarded a new CEO for this legal entity and this concept, Jorge Costa, who has joined us from Louis-Dreyfus, where he actually headed up as a chief operating officer, the largest citrus operation for Louis-Dreyfus in Brazil, high-tech modern farming. And before that, he actually worked for Cutrale, who is the other large-scale high-tech farm company. that actually has done that. So we're building the team to really get going on that. And you will hear more about that as we go forward. Customer reaction is highly attractive. I want to tell you that Future Farming Initiative is a competitive discussion. So this is something that Barik Kalibao unlocks for the industry with investors and maybe a few selected customers, but that's it. We want really to see that we bring this to life. The scaling of high-tech farming has not happened in this industry yet. We do think we know it because we have spent the past eight years to actually define all the details of how to do that in Ecuador, in our own farm, and we're bringing it to life with the Future Farming Initiative under Steven Ratzlaff's leadership. On the other side, on smallholder farming, and as I was already explaining before, Alain Frimont, who now heads up the global cocoa business, has been working with Stephen for the past 20 years, and since April is heading up the global cocoa for Baricalabout, has worked on how to improve smallholder farming. And that is pre-competitive. That is something we want to do together with our customers, and we want to do together with the associations, and probably also with competitors. It's something where we need to influence legislation at the country level, And that's the journey that we're on here to radically transform farming in the smallholder farming area. Put more money with the farmer, hence have more productivity in the country, but also be clear on the capabilities that we can bring to the country from Barikalabout to really improve productivity in smallholder farming. So that's the two legs that we have built that we're standing on to build the future of our supply. And I can tell you that our customers are thrilled by doing that, by us doing that. It's a very good response that we're seeing from them. And stay tuned, there's more to come on both sides. So when you think about the journey that we've mapped out to you last year, then we are well underway with the first implementation of our next level foundational activities. This fiscal year, 24, 25, we need to bring it to life. There's a lot that is happening there. Really start delivering. And we've just had a conference with 250 top leaders from around the world. The third one that we've been doing since the announcement of Next Level in Rotterdam this time, where we said, look, Next Level was step one. Step two is the journey that we're entering for customer experience. That's fundamentally important. It's interesting that, and I said that already a year ago, and we'll speak a bit more, if we're not creating the right value for our customers, the right service for our customers, the right and the best sustainability in food safety, then we have no reason to play. If we do it right, we should get more market share and we can carry on that business. That's why we're driving this journey forward. And I want to share with you that Amar Arafa, who's our new chief digital officer since January, with his team have built a full digital agenda that based on the reset of Barikalabout and the simplification and standardization of our work processes, we have a full agenda on digital, how we can actually collaborate better in Barikalabout, but also open the doors for better collaboration with our customers. So I think the journey is running here very clearly, and that's the message here. that I want to give to you from an ingredient supplier to become the recognized chocolate solutions provider for the world. So for that, we have also taken the customer experience element of which we say the KPI is actually the net promoter score to really make that the core KPI for Barik Kalibao's doing. We are here to serve our customers. That's why we're here. Only if they give us a reason to play, only if they give us more of their supply chain, they believe we can do a better job than they are doing today. Only then we have a reason to play, and that's why we're taking this very seriously. We have taken the first global assessment for net promoter score with a customer base around the world. We've not done that with personas yet. We want to do that next time with personas. So what is the CEO thinking? What is the brand president thinking? What is the R&D leader of the customer thinking? And what is the procurement leader thinking? So we need to have that persona focused by customer globally. That will be the next step, and you will see us embedding that deeply into Barry Kalibow's culture as we go forward. Best value, which is price and innovation, the right innovation that wows our customers. Best service. which is on time and full delivery. And I speak to my organization a lot that we want to create an Amazon-like customer service experience. We do not want to become an Amazon, but what we want to create is the same seamless and ease of working that an Amazon and other digital platform is actually giving to us. That's what we should give our customers, and that's what we're building with Next Level. Best sustainability, quality, and food safety. So I will speak more to those four elements when I explain a bit more about Next Level and what we've already done in that journey. But I want to leave that to Peter now to first talk about financial results. Thank you.

Thank you, Peter. And good morning, everyone. I'll walk you through the financial results. But I do have to say that my first year at BC has been memorable, going into a major transformation program, facing a market that's in decline. facing also 1.8 billion cost inflation. So it's been quite a year, as no surprise to you from the previous conferences. So it's been memorable. And in that highly volatile environment, both on supply side, both on the demand side, we've been delivering flat overall volume growth and slightly positive on chocolate in a declining market, as I said. which does demonstrate our resilient business model that we have. We have delivered strong EBITs on a recurring basis, which is here really showing that our cost-plus model, even in the most extreme environments, is doing its job and protecting profitability. And finally, our free cash flow, and I will talk a lot more about that because that's, of course, the biggest variable in our numbers this year, has been majorly impacted by the cocoa bean price acceleration. And that has more than offset the good underlying operational free cash flow improvements that we've also realized this year. So we are progressing well on the things that we control, but obviously the mechanical impact of the bean price, especially on our inventories, as you will see, has been quite impactful. Now, before going into the results in detail, I wanted to share a bit more context and background on the market of cocoa in the pricing. We've seen all-time record cocoa futures prices over the last 12 months, driven by supply and weather challenges, as Peter has been talking about, reaching a peak in late April. We've seen some recent signs of stabilization, as you can see in the chart. But still, the year ending was at the price of 5,332 British pounds, which is still 80% higher, 8-0% higher than when we started the year. So despite some normalization, prices do remain well ahead of the long-term averages, and this has impacted our performance in a few ways. First of all, free cash flow. I will talk about that later. Profitability, largely protected through our cost-plus model. And top line, basically two things. First of all is a customer mix shift, so private label performing better than large food manufacturers. You see that in the Nielsen data as well, but also in our business. And also a channel mix shift. where we see a greater resilience and strong performance of our Goumet business. Moving to the demand side, we are, and Peter talked about it as well, we are operating in a highly attractive and growing category, has been resilient over the last 50 years through crises, wars, and everything. because there are some clear favorable dynamics underlying that that are still there. First of all, there's emerging markets, and especially Asia, where we see a lot of new consumers entering to the market, a lot of new product applications, which is already helping to generate our growth, as we've seen already this year in the region. Second, chocolate is being used in a broader range of product categories as consumers continue to prefer the taste of chocolate over other flavors. protein bars as an example. And finally, the trend of premiumization and innovation, sustainability is a big one and continues to be a big one for chocolate. Having said that, in the short term, we do expect to see continued market pressure, largely related to our customers pricing through those prices to their retailers. We do expect anything between 5% and 15% pricing hitting the market after, as you've seen last year, some General inflation, now it's really bean price-triggered inflation, 5% to 15%, depending on the product category. These negotiations, discussions taking place as we speak, they will go into the start of the next calendar year, and some of that might have a temporary knock-on effect on our business. To be clear, we do believe that, first of all, this is going to be a temporary effect for the reasons that I mentioned, and secondly, we're also convinced that we are well-positioned, as Barry Callebaut, to face this, considering our customer mix diversity and also the diversified channel gourmet food manufacturing, product applications, chocolate compound and so on. So we are well armed to go through that. But it's fair to say that short term, we expect some pressure on the market. Now, looking at our results and first volume performance in more detail, our sales volume was year-on-year flat for the full year, which is in line with the guidance that we gave you in the beginning of the year. Chocolate grew slightly in a declining market. And we saw positive growth in the first, and you can see here by quarter on the page, we saw positive growth in the first half of the year and a slight decline and especially phasing in the second half of the year. And there's a few reasons for that. One, between Q3 and Q4, there was a phasing impact in Goumet, where customers purchased ahead of time in Q3, with the significant price increases that we passed through between the quarters. So there was some more purchasing in Q3, and then we saw the reverse of that in Q4. So there's a Q3, Q4 phasing. And secondly, we stepped up our interventions from a quality perspective. You know, we took proactive action on specifically a site, a Toluca site in Mexico, to temporarily shut it down after some incidents that we had. Our teams have been working very closely with our customers, of course, to minimize the impact on their business, leveraging our broad network of factories that we have across North America. Still, there has been some impact on Corte Fora, We also expect still a bit of impact in quarter one of this fiscal year. Focusing on chocolate and by region, first of all, AMEA has been a strong contributor, growing 5.2% over the full year. It was double digit in the second half of the year as a total region. Supported by India all year long, very structural, strong growth. Also an improved performance in Indonesia in the second half of the year. The growth was, if I forget about China for a second, I don't forget about China, but just for a second, we would have been, without China, we're double digit in the region for the entire year. So China has been holding us back a little bit because of the broader macroeconomic elements, as Peter has always been highlighting. Thank you. which has been putting pressure on the food manufacturers in China. Western Europe was solid at almost 1% growth, again in a declining market. The growth in Goumet, the recovery and private label, has been offsetting some of the pressure on food manufacturing. A decline of 1%, 1.2%. These markets are often a bit more price sensitive, and we've seen a more significant impact on the large manufacturer customers. North America reported minus 1.8, driven by a slower demand by the large food manufacturers again, which are very prominent in the region. So we've seen an overall drop more outspoken in North America because of that. Now, our regional accounts and our Goumet saw a very strong momentum, which made our numbers be better than what we've seen in the market overall, thanks to that Goumet and the regional account performance. Latin America, strong growth, continued 7%. Same messages as I gave them before. Gourmet doing very well. Brazil leading the pack there. Moving to profits and the EBIT bridge. Recurring EBIT, as you see to the left of this chart, has been growing by almost 13% in local currencies. There's a number of drivers. First one, mixed shift with a strong business in growth in almost double digits in Gourmet. Second, the first BC next level cost savings. I will talk about those a bit more detail later on. Third, it also reflects the strength of our cost plus model. Of course, passing on the increased, I'm saying of course, but it's important, the increased bean price, but also particularly the impact of the higher financing costs as we have higher debt to cover the working capital. We pass on the higher cost of debt, cost of financing to our customers. Reported EBIT at the right of the chart was at 446 million Swiss. This, of course, includes the corrections for the one-off items for next level, 258 million, the big red bar on this chart. Important to realize that 93 million of that is non-cash relevant, which is impairment write-downs that we've had throughout the year, actually mostly in H1. The other half, the other part, the 170 million, I will talk about a little bit later when I talk about next level. To net profit, you've seen or you still see on this or to the left of this chart that our EBIT in local currencies increased by 84 million year over year. Our recurring net profit in local currencies to the right of this table went down, slightly down by 9 million to 434 million Swiss dollars. Now, this net profit line includes, of course, the full impact of the higher financing costs that we have on our net debt. And on that net profit, again, back to the drivers, the positive impact of what I explained before, the positive mix, Goumet, the next level savings were offset by two things. First of all, a longer pricing cycle that we have in Goumet. So in Goumet, we price every six months. So we have price lists to distributors, which means that it takes a bit more time to price through the entire cycle. cost inflation to these customers. It's a question of phasing, so there's a bit of that. Secondly, also relating to some of the higher quality and intervention costs that I talked about before, the actions we took and we are taking to significantly step up our quality discipline with higher testing, higher controls, and intervening thoroughly when we deem it's necessary to solve a hiccup, like in Toluca earlier. VC, we delivered in short, I think we have delivered on the milestones that we set out for ourselves, and Peter will talk a lot more about the whole program and on the content of that. I will just talk here a bit about the numbers. We have delivered on the milestones so far. At the same time, we still have a significant journey ahead, but we're on track. If I start with the cost savings to the left of the chart, we have delivered 18 million of savings in fiscal 23, 24, which mostly in the second half of the year at a run rate of 15%, so 15% of the total of 250 cost savings realized this year, which is what we guided at. Coming from planning improvements, we simplified the supply chain footprint, closure of the Malaysia side shift, partly a shift already to GBS, especially in North America with the opening of the center in Monterrey, Mexico. For 24, 25, we do repeat our expectation to deliver 70 to 80 percent of that 250 as a run rate by the end of the fiscal year. It is likely going to be more H2 weighted than H1 weighted because some of those dialogues, social dialogues like in Belgium that are still ongoing, which obviously we want to respect fully and allow the discussions that are needed to get the necessary comfort. On the one-time OPEX, we've been spending, you saw that on the previous page, 171 million, and this excludes the 93 non-cash that you saw on the previous page. Essentially, on restructuring, 110 million and then 61 million program costs. In CAPEX, we have more than 200 million that has entered now the investment funnel, which means that these projects have been approved. They are entering the implementation phase. At the same time, considering the cash pictures that you will see later, but as you know already a little bit, we also have been very disciplined on the cash side, so we managed to keep the cash out limited to 25 million in the fiscal year. That also means that there will be significant cash out next year, which we estimate we plan at 200 to 250 million cash out on CapEx related to next level in 2024-2025. Capital benefits, finally. We have delivered 100 million, again, supported by these planning operational excellence initiatives, days of inventory improvement. If you look at our inventory value, you wouldn't see it, but I will come back to that. But we did improve the DIO through these initiatives, better planning. Next year, we have planned for another 80 million improvement, and that's then the next step to, if you remember, the 280 million investment. capital benefits that we set out as a target for the total of next level program. Cash flow. Our overall fee cash flow for the year has been 2.3 billion. You can see those in those black numbers on top of the bar charts. So minus 2.3 billion, which is obviously quite a change, a brutal change versus what you've seen in the previous years. Now we need to look at the different components to really understand what's happening there. So if you look at the red bars on the charts, this is showing our operational free cash flow. So coming from the EBIT delivery, coming from the days, inventory, payables, receivables, evolution. So what we really control operationally on a day-to-day basis. We've seen there that we deliver almost an 830 million, 830 million operational free cash flow, which is well ahead of the last year's. Again, thanks to the initiatives that I've already been mentioning, the first benefits of next level and the discipline we had on that area, considering also the pressure on the cash flow in general. But what we controlled, I think we delivered quite a good result. The brown bars on this chart is the investment CapEx next level spent, which increased, of course, as we ramp up our investments in next level. Next year, this bar will also be higher, still even higher than this year. It's the investment plan of next level. No surprise. We're implementing as we proposed. But the key driver, obviously, is the black bar at the bottom, which is the impact of the bean price on our working capital and essentially inventory. I'll come back to that. You will see it's almost the easiest way to explain this is actually inventory. So that's a 2.8 billion impact of the bean price. which explains or more than explains the full correction, the full 2.3 billion that we have on our free cash flow in general. So let me spend a bit of time on that in the next two pages. We are, and we talked about that before, we are operating as a company with a long inventory cycle business. There's easily 12 to 18 months in between the moment that we source our beans in Africa or any sourcing country. and the moment that we basically sell those beans in chocolate to our customers, so 12 to 18 months. With the sharp increase in those bean prices as we've seen, the plus 80% over this year, the value of our inventories has obviously increased significantly. We'll see that in the next page. Second, as we hedge our long bean exposure with short futures to protect the cost plus model, We face, if the cocoa bean price increases like this year, we face very important margin calls that negatively impact our cash flow. And that's already the case before the beans actually enter our inventories. Third, and that's a particular thing for the second half of this year, the initial margins. Initial margins is the amount of money that the futures exchanges receive. ask, require, to pay up front when you buy or sell a cocoa future. Now this has been, and you can see that with the chart to the right, that's the evolution of that initial margin, and the line in the middle is between H1 and H2. In H2, that requirement, that cash out, multiplied by a factor of nine. And that's, again, it's linked to the volatility of the exchanges. You can imagine that will go down if the volatility fades out. But at least the peak of that has been certainly in H2, and that's a key driver of what we've seen happening in the second half of the year. A final element to mention on this is the fact that we sometimes use liquidity swaps. I've talked about that in the beginning of the year, in the middle of the year. We do that to better allocate our cash flows to the business cycle that we have, that we can phase some cash out further at the moment that the revenues from the higher bean sales and higher chocolate cost sales come in, so it's a question of phasing. We also did that in this fiscal year, actually we did it also the year before, but this year we also did it for the year after, which means that there will be some cash out coming in the next fiscal year, the first half of next fiscal year, which is linked to the liquidity swaps and the phasing we've done on that this fiscal year. Now, net debt, the increase of our net debt as a result of the higher working capital needs, can be actually fully explained by the higher value of our inventories. I mean, this is what this page is trying to do. You can see on the chart to the right that our total inventory value has increased by 2.7 billion to 5.6 billion. These are big numbers. So because of two things, I mean, many things, but you can see the red bar is the stock of cocoa beans, the beans itself. The brown piece in the bar is the finished goods and semi-finished goods. So both of these, of course, the cocoa component in the chocolate has also gone up. So you see a $2.7 billion increase of the value of our inventories. This is corrected for this is not about market-to-market valuation. This is not about volume. This is a value effect, $2.7 billion. And you see our net debt going up by $2.5 billion. So it's pretty simple and clear to see that this increase of net debt really sits in the value of our inventories. Now, we have, as you know, we've been proactively securing our liquidity throughout the year. We raised over $2 billion with three bond issuances over the years in time to make sure that we can continue to focus on executing our next level plan, continue to focus on playing our strength on the bean sourcing, and we provide the liquidity for that. Our capital allocation priorities continue to be Two-fold, first is to drive growth with a focus on the four strategic pillars that we are executing since we announced the next level plan, outsourcing, gourmet, specialties, and Asia. And second, to execute our next level transformation, which is going to deliver important savings for this business and an important step up in our EBIT level. Those are the two big priorities we'll continue to focus on in terms of our capital allocation, When it comes to the dividend, which this year will be 29 Swiss, we are also committed to ensuring this is not lower than the 2022-23 level during our transformation program. It is our intention to focus on the leveraging. Obviously, we had a step up in our leverage because of that bean price effect, as you've seen. Obviously, over the midterm, it's clearly a very big focus by us to leverage bring that down back below the two times, working on pricing, working on making that step up in EBIT and net profit as next level is targeting to do. Of course, the speed and the quantum of getting there at that point is going to depend, as many things these days, on the bean price. And just maybe to close off and then I hand over back to Peter a bit more on the free cash flow expectations for next year, which is not an easy area to just understand and model. We do get that. There's a number of moving parts to take into account. First and foremost, of course, is the bean price development we've seen this year. It's a massive driver of the free cash flow. We do hope to see some relief in the bean price over the next However, we still see and expect the bean price not to get anywhere close to the historic levels that we've seen over a year ago. So that's going to continue to be a driver of the free cash that we have. Secondly, we will see some of the fruits, continued fruits of the BC Next Level initiative with an 80 million next level capital benefit to come through next year. At the same time, I have talked about that, 200 to 250 million CAPEX benefits. cash out next year in the context of next level. As mentioned earlier, we used some liquidity swaps in 23, 24, which will have a sizable cash outflow also next year. And finally, from a phasing perspective, it's good to keep in mind H1, H2. H1 is the peak season. That's where the inventory levels are usually higher, are always higher than at the end of the fiscal year. So there will be some phasing here. on the cash flow for next year from that front as well. That's what I wanted to share. Happy to have questions later. But on that note, I will hand back to Peter to go a bit deeper on the BC Next level. Great. Thank you, Peter.