Barry Callebaut AG

Good morning, everyone, and welcome to Barry Calabar's Half Year Results presentation for 2025-2026. I'm Sophie Lang, Head of Investor Relations, and today's session will be hosted by our CEO, Hein Schumacher, and our CFO, Peter Vanessa. Our presentation today will start with Hein's initial reflections and observations, then Peter will go into the Half Year Results and the outlook, and finally, Hein will conclude with a preview of the Focus for Growth plan. Following the presentation, we'll have a Q&A session for analysts and investors. Please do limit yourself to no more than two questions. Before we start, take note of the disclaimer on slide two, and I'd also like to inform you that today's session is being recorded. And with that, I hand you over to our CEO, Heinz Schumacher.

Thank you, Sophie, and good morning, everyone. It's my pleasure to be speaking with you as part of my first results presentation here at Barry Calabar. And I'm now approaching my first 100 days and I wanted to start by sharing my initial observations and reflections before I hand it over to Peter to cover the results. So far, I've been in a listen and learn mode and spending a lot of time across the business to gather a broad range of perspectives from our people. And I've had the opportunity to visit a number of our factories and offices around the world and gain insights into our operations and the culture of the company. What has stood out most to me is the passion, the expertise, and the resilience that defines this organization. I've also met with several of our key customers, which has sharpened my understanding of what truly matters for them and how we can support them on their growth journey. Back in February, we formed the Growth Accelerator Coalition, which is a diverse group of around 30 deeply experienced colleagues, talents from around regions, functions, and nationalities, and this working group from within is designed to advise, challenge, and co-shape our path back to volume growth. And through a series of focus sessions, this group has developed a unified view of where we stand today, identified key bottlenecks that hold us back, and is helping define a set of high-impact priority initiatives. And collecting these insights from across our organization is enabling me to shape a clear and decisive action plan that will sharpen our strategic direction and set our key priorities. Now, I will come back to that later in more detail. But first, let me share some initial observations. Over the past years, the company has been navigating a very turbulent period marked by transformation, significant industry volatility, as well as supply disruptions. The Barry Callebaut Next Level Program was launched with all the right intentions. However, the sheer number of initiatives proved too ambitious for the organization to absorb at once, and particularly against the backdrop of unprecedented industry disruption. And frankly, without sufficient course correction in priorities, this created a perfect storm. Now, that said, several important steps were taken on the Next Level. because the program did deliver savings of around 150 million, and these enabled much needed capability investments in core fundamentals, such as digital, quality and supply processes. But at the same time, these savings were more than offset by the impact of volume declines, higher operating costs, particularly from the cocoa market and supply disruption, as well as from a more competitive environment. And the combined effect was an organization that had become overstretched and quite internally focused. And with too many quality incidents, the business also began to lose market share. And as a result, we find ourselves in a position today with clear improvement areas that need to be addressed. I'm calling out three areas. Our manufacturing network, we do have capacity constraints in key growth areas with site upgrades that are still work in progress. A lot has happened, but it's still work in progress. It has contributed to quality incidents with longer recovery times due to limited business continuity plans, and we have made progress on the next level without a doubt, especially in strengthening quality foundations, but more work is to be done and our service levels are currently below industry benchmarks. We need to improve. Second, our digital transformation. A good direction, but initiatives were decoupled from core business priorities, and the scope was very broad. We moved very quickly before core processes were sufficiently stabilized and before our data and operating systems had reached the required level of maturity. And then third, our operating model and the organization. Historically, Barry Callebaut was highly decentralized. And the intention of Next Level was to introduce a greater degree of centralization and standardization. And that was the right direction. But in some areas, for example, in customer service, we went too far and probably too quick. In others, we ended up with a hybrid central regional model and that has created an ambiguity in accountabilities. It added complexity to the organization and it limited regional empowerment where essentially the customer is, where the market is, and where we need to drive local decisions. Because I believe that food is fundamentally a local business and our regions should define the what whilst global functions should support the how, with scale, expertise and obviously consistency. And that makes the value of the cooperation essentially bigger. Now importantly, while there is work to be done, as I said, we are building from a position of strength. Because Barry Callamout has strong and solid foundations and I'm confident that we can return to growth and reinvigorate ourselves as a reliable industry leader. because we have a truly unique market position with leading relationships, strong customer relationships, and a strong portfolio with benefits from our integrated end-to-end cocoa and chocolate model. Very important for our group. And in turn, this gives us deep expertise across R&D, innovation, cocoa and sustainability, and these are capabilities that are highly valued and appreciated by our customers around the world. And my conversations with CEOs of our largest customers have reinforced this view. And they see Barrie Callebaut as an important partner and they want to grow with us. They expect us to step up and play a key role in unlocking and supporting their growth agendas. And let's not forget that we operate in a fantastic category with strong underlying fundamentals. And as a market leader, we are well positioned to capture significant long-term growth opportunities. And underpinning all of this in our people, as I said in the very beginning. People with deep commitment and passion for what we do. And that's critical to ensure that we can fully deliver on the fundamental opportunities ahead. Now, bringing all of this together. Clearly, we have strong foundations, from our unique market position to the depth of our expertise. And that positions us to win in this industry. And at the same time, to fully deliver on the opportunity you have, we must refocus behind a reduced set of priorities. To stabilize key fundamentals, as well as to step up execution. And in turn, if we do that well, it will unlock sustained profitable growth, and it will reinvigorate what we've talked about as a reliable, innovative global leader. And that is the objective of our Focus for Growth Action Plan. And I will share a preview of the plan later. But before I go there, let me hand it over to Peter to walk you through the first half-year results. Peter, here you go. Good morning, everyone. Let me walk you through the half-year performance first. And I'll start with a short summary. Cocoa bean prices have decreased strongly in H1, and especially in the last few months. And this is surely positive for the recovery of the chocolate demand. On volumes, we saw a sequential quarterly improvement to minus 3.6 in the second quarter, supported by double-digit growth in Asia and continued momentum in Latin America. Recurring EBIT decreased by 4.2%, and strong cocoa profitability was more than offset by the impact of lower volume, supply disruption, and a highly competitive overcapacity environment. In Grumet, margins were pressured with the context of the very rapid drop of bean prices, and I will come back to that a bit later in the presentation. Despite the decrease in EBIT, however, we grew recurring profit before tax and net profit thanks to lower finance costs and income tax. And very importantly, despite the peak harvest and heavy cocoa buy-in season, we generated strong free cash flow and furthered the leverage to 3.9 times that over EBITDA. Let me get into some details now. Starting with the cocoa markets. The cocoa bean prices have decreased very, very rapidly, falling by 53% in just eight weeks in Jan and February, and closing at 2,057 pounds at the end of February. And that's driven by good main crop arrivals in West Africa over the past few months, and favorable recent weather conditions that are supporting output for the mid-club. At the same level, the market is still seeing some demand softness, so global stocks have replenished to healthier levels. Overall, this means we expect a surplus this year for the second year in a row. Importantly, the structure of the cocoa future markets has also improved significantly. We now have a carry structure, meaning that the cost of buying spot cocoa today is cheaper than buying cocoa in the future. This means it is less costly for the industry to carry physical stocks, and it's indicative for a more stable outlook. In the short term, given that this is demand-driven surplus, we expect bean prices to remain in the 2,000 to 3,000 pound range. That said, we continue to monitor the market very closely as demand recovers and as we assess potential supply risks linked to El Nino and potentially speculative volatility, as we have seen in the past. Over the medium term, depending on supply and demand dynamics, we believe prices could move back into the 3,000 to 5,000 British pounds range. Lower cocoa bean prices are certainly positive for the future recovery of both the cocoa and the chocolate markets. We're seeing indications of this through our forward bookings. As you know, we contract several months in advance for our customers, and in recent months we've seen a greater willingness to book further ahead again. At the end of February, our futures booking portfolio was much, much higher than at the same time last year when cocoa bean prices were spiking. At the same time, our customers have prized through to their end consumer. As a result, consumer pricing and the rate of end consumer volume declines have started to stabilize. In the most recent quarter, Wilson global chocolate confectionery volumes decreased by 6.3%, with plus 13.7% pricing. And importantly, we're now seeing our customers gradually shift their focus back towards category investments to stimulate growth. I'll just quote a few examples. In North America, Ferrero launched their Go All-In promotion from April 1st, backed by a $100 million investment. It marks their first portfolio-wide campaign and largest marketing commitment in the company's history. Another example is Hershey, who's boosting media investments by double digit this year with the new quarter one media campaigns on Reese's and Hershey's. The first launches of this nature. We're also seeing increased interest in innovation from our customers. In half year one, we saw a significant increase in number of projects in Western Europe for Tovida, our non-cocoa chocolate offering. as well as the growing traction on Vitacoa, our high flavanol solution, especially in Pamea. Beyond these benefits, the magnitudes and the pace of the decline in the cocoa bean prices, as mentioned just now, more than 50% down the last eight weeks, helps, of course, the demand and the cash front, but has also created some challenges on the short term as well, and mainly on profitability. And that's five key impacts I just would like to highlight. First, in the past few months, we've seen very favorable margin environment for cocoa. In half year one, this helped to offset some headwinds we saw in chocolate. Looking ahead, we expect this cocoa margin tailwind to normalize in the second half as market conditions have become less favorable. Second, as we just saw from the Nielsen data, demand has been down for some time. And given the high prices that have been put into the market in the past, This has resulted in some industry overcapacity, which is intensifying competition with more aggressive pricing and commercial actions. In this competitive environment, we've seen a temporary margin effect in Goumet. The Goumet business typically works with a three to six months price list, where forecasted sales are covered, and then a price list is determined. Given the unique speed now we've seen of the cocoa bean price decreases in half year one, the result was a long position in a declining market, creating a high price list, with not all players following the same approach. And this impacted our volume and profitability through the need for some short-term commercial investments. Also, next to that, there's a more technical effect related to the shift between EBIT and profit before tax due to lowering financing costs. The opposite, if you want, of what we've seen last year. This is a reversal of the finance cost pass-through, again, as we saw last year, and we now have lower finance costs as the green prices come down, and it also means then a lower pass-through at the EBIT level. But it is, importantly, it is neutral at the profit before tax level. Finally, there's also a disease-specific headwind in supply disruption. We had operational incidents in North America in the St. Hyde factory, resulting in some volume losses and higher operating costs. Before we move to the half-year-once figures specifically, I'd like to spend also a moment to highlight potential implications from the Middle East situation. As many, many industries, the primary impact for us is on the supply chain side. It includes shipping disruptions, increased transit times resulting from port closures or limited container availability. And of course, as we all know, there's a sharp increase in energy prices. In some markets, fuel rationing has been introduced, combined with higher freight and insurance costs, and all of that is adding complexity and costs across our supply chain. Next to the supply side, we've also seen some regional demand effects. The Middle East and North Africa cluster represents about 10% of the volume there. This cluster has specific high exposure and is experiencing, therefore, disruption to imported premium products. Clearly, horeca, food service segments are negatively impacted by the tourism levels in both areas, as well as the closure of the schools, offices, rules on working from home, and so on. Beyond directly in the Middle East and North Africa, we also see an indirect impact in India where we have an important business where LNG imports are disrupted and constraining the energy availability for food manufacturers, commercial kitchens has been impacting their operations and therefore also ours. Overall, this obviously remains a highly dynamic and uncertain situation that we are monitoring, obviously, as per the latest developments every day. Now, let me get into the numbers in a bit more detail, starting with volume. Overall, the group saw a sequential volume improvement in the second quarter to minus 3.6%, meaning we landed the first half with a decrease of 6.9%. Looking to the left of the chart by segments, food manufacturers continue to be impacted by negative market dynamics, with our customers adapting behaviors in the context of high prices and low demand, and there was the supply disruption in North America that impacted this segment for us. Gourmet, while more resilient, our competitiveness was temporarily pressured by the high prices in a sharply declining bean price environment, as I just explained. And also here there was some impact of the same high closure we saw in the first quarter. Global COCO declined as a result mainly of a negative market demand, especially in AMEA. In fact, we also due to our choice to prioritize higher profitability segments, which did have its impact on volumes in certain areas. This business, the cocoa business, saw early signs of market improvement in the second quarter with a sequential volume improvement of minus 5.2%, so significantly better than in the first quarter. Now moving to the right-hand side of the chart, to global droplets. Globally, we've seen droplet volumes decline by 5.1%, which is ahead of the 6.5% decline of the market, as reported for Nielsen. In Western Europe, we saw a 4.2% volume decline as demand continued to be impacted by market softness. Central and Eastern Europe declined for us by 3.6%, way better than the market as our local accounts saw solid growth, especially in Turkey. North America decreased by 12.6%, impacted by a strongly declining market as well, but as well as the network supply disruption we've seen from the temporary closure in Shanghai in the first quarter. Importantly, though, North America saw recent months' improvements as the business is rebuilding inventories and meeting increasing customer orders. Latin America grew by 1.5%, well ahead of the markets, driven by a strong momentum in Gourmet that we've seen multiple quarters in a row now. Finally, volumes in AMEA grew by a strong 8.5% and reached double-digit growth in the second quarter, driven by strong market share gains in China, momentum with key customers in India, and additional businesses that we secured in Australia. Moving to EBIT now. Recurring EBIT decreased in local currencies by 4.2% to 316 million Swiss francs. The image on the page shows the respective moving parts. COCO, first of all, the green block on the chart, saw strong profitability in half year one, given a more favorable market environment, margin environment, sorry, and market volatility, where we're able to capture the volatility and increases of the prices and because of the prices that we have seen. In half year one, this has helped to offset some of the other headwinds that we're facing in chocolate. The impact of the half-year one volume decrease was meaningful. This is clear when we look at our EBIT per ton as well, which increased by 3%, whereas our EBIT and absolute declined by 4%. So the impact of volume was meaningful in the first half, and this is something that we'll see turning around in the second half. Next, there was an impact of the intense competitive environment and particularly within Gourmet. As I explained earlier, our high Gourmet price list and long position in the context of this very rapid decline of bean prices required temporary commercial investments. In addition, supply disruption resulted in higher operating costs to maintain service and deliver products to our customers. Finally, we also saw the shifts between EBIT and profit before tax that I explained as a result of a lower financing cost year on year and therefore a lower pass-through on the EBIT level. And this effect will get bigger in the second half of the year. While our recurring EBIT decreased, it's important to note we're able to grow the absolute profit before tax and our net profit. And to be more precise, as you can see on the left-hand side of this chart, our recurring EBIT in local currencies was 14 million lower than last year. This is the minus 4%. In the middle, our profit before tax increased by 2 million Swiss francs, or plus 1.3%, as a result of a 16 million decrease in financing costs in local currencies, driven by our actions to reduce debt and, of course, in the lower bean price environment. To the right, our net profits increased even further by 42 million Swiss francs, all by 66%, given a significantly lower income tax expense compared to what we saw last year. Recurring income tax expense decreased to 29.6 million versus the 69.4 we saw in half year one last year. This corresponds to an effective tax rate of 21.4%, which mainly resulted from a more favorable mix of profit before taxes and much lower non-tax effective losses in some of the countries. Free cash. Free cash flow delivered strongly in the half year at 802 million across the six months, despite the peak buying season that we're having always this time of year. Now, when we look, as always, at the moving parts behind this cash generation, we saw, and that's the black bar, we saw 1.5 billion positive impacts from the cocoa bean price this half year. Bean prices decreased significantly in the half year one, especially in the second quarter, as I mentioned, and this has benefited us during the peak buying period, particularly in non-West African origins, which do not have the same forward contracting model as Ivory Coast and Ghana have. There was, next to that, a 472 million negative impact on operational free cash flow, as you can see in the green bar. This is all got to do with the peak buying season. Half year one is always operationally like that, with a negative cash out for the green buying, given the timing of the cocoa harvest. This was offset, however, partly by continued operational benefits from actions on the cash cycle reduction that we explained largely already in the previous communications. We continue to do so with our efforts to diversify our origin mix, reduce forward contracting, and so on. As a result, actually our inventory was now this time of year in February 10% lower than February last year. So that also helped to generate the cash up to this level. And finally, there was 183 million CapEx investments, as you can see in the yellow bar in the chart. Leverage. Leverage came down strongly to 3.9 times, and that's significantly below the 6.5 times we saw in February last year, and also well below the 4.5 times we saw last August, despite, again, the seasonality we always have in half year one. With an important net debt reduction of $2.5 billion enabled by the strong cash flow that I've been talking about before. So leverage landed at 3.9 times. But in fact, if you would exclude cocoa bean inventories from the net debt, and I'm talking only cocoa bean inventories, so not even correcting for cocoa products or chocolate stocks, our adjusted leverage RMI would be 2.7 times. This progress mostly came from a lower inventory value given significantly lower bean prices, which is about 1.3 times leverage in this decrease, but also through the actions to reduce our inventory volume, as I talked about, which made up about 0.6 times in this reduction of leverage. In terms of gross debt reduction, we repaid 263 million euro terminal in September 25, so a few months ago, and 191 million in February on the short term. We've also reduced significantly our commercial paper and bilateral facilities over this time. Obviously, all of this has been an important contributor to the lower net year-on-year finance costs that we've seen in the first half already. And we will certainly continue to focus strongly on the bill average in half year two. It remains a key priority. We want to end much lower than where we are even today. So, with the further actions that we're defining on the cash cycle will bear further fruits going forward. This could be, and this will be partly upset to some degree because of the safety stuff that we will be watching and potentially reinforcing a bit in a few key segments. then back to the support we need to have on the service levels following some disruptions that we have seen over the last month. So before I conclude the half year one section and staying on the financing, earlier this week we signed a 2 billion Euro sustainability linked Borrowing Base facility. The Borrowing Base is linked to our underlying inventory asset base and represents an important step in the diversification of our funding sources. The facility strengthens our funding flexibility, particularly in periods of prolonged higher or lower bean price environments. It increases our agility and the agility of our capital structure and our ability to actively manage financing costs more in sync with COCO price moves. Just to share a few additional details, the facility comprises of a 1.6 billion Euro of committed financing, complemented by a uncommitted tranche of 400 million Euro, which is providing additional liquidity flexibility. So, moving now to the outlook of the fiscal year. We've updated our guidance, reflecting our focus on volume and leverage while taking short-term action to protect our market share and drive growth. We have first raised our expectations on volume. We now expect a decrease for the group between minus 1 to minus 3%. This implies a return to positive growth overall in the second half. We've also raised our guidance on leverage. We now expect net debt below three times using a working lean price assumption of 3,000 pounds. So with a continuous high focus on this and further progress despite our updated profit assumptions. At the same time, we've lowered our outlook on EBIT. We now expect a mid-teens decrease on a recurring basis in local currencies, and this reflects short-term actions to protect market share and prioritized growth in the context of the rapidly-declined co-copying prices. It's important to note that a significant reduction in financing costs in half-year two is an important factor in the reduced EBIT guidance. We expect to recover more than half of the absolute decrease in EBIT at the profit before tax level. Clearly, this outlook is subject to potential impacts from the ongoing disruption in the Middle East that I commented on a little bit earlier. Now, before I hand back to Hein, I want to take a moment to explain the half year two moving parts on EBIT. A return to positive volume growth will be a clear tailwind for half year two. However, this will be offset by a number of factors. One is short-term actions in global chocolate. We are prioritizing restoring Gourmet share following this unique and temporary long-position impact that I talked about. We're also taking some temporary customer-centric interventions to restore service levels, and Hein will talk about it a bit more later, but action is needed to stabilize supply after a number of incidents that we've seen. Customer centricity is our number one focus going forward and we're taking action to reclassify lines, increase spent on staffing, maintenance and quality. Second, as already discussed, cocoa profitability is expected to now normalize in half year two following an exception on half year one. Third, we are taking further actions to reduce finance costs. This means significantly lower year-on-year pass-through in finance costs at the EBIT level, while neutral on profit before tax. And finally, we have the uncertain and volatile situation in the Middle East, which is bringing additional cost and supply chain disruption, depending on how it will evolve further. Finally, the uncertain and volatile situation in the Middle East brings additional costs and supply chain disruption. And I will now hand over to Hein to share more of our focus for growth. Thank you, Peter. Now let's talk about focus for growth. And this has been shaped, as I said before, by the insights and learnings from our Growth Accelerator Coalition that I mentioned earlier. And at this stage, being in the company now for two months plus, the plan is directional as we continue to refine and deepen our assessment of the actions as well as the opportunities ahead of us. And I'm looking forward to sharing the full detailed update with all of you in early June. And in the meantime, I wanted to be transparent and therefore share the direction that we are heading in. Now, before we go into details, let me start with why focus is so critical for Baritel About, because what really struck me when I started engaging with the team on our business portfolio is actually how concentrated we are. As you can see here on the chart, a few examples. So if we look at our top seven, top seven markets represent 56% of our total volume. And of course, if you would extend that to 10 markets, the concentration increases even further. Similarly with customers. Our top seven global customers are approximately a third of our volume. In our gourmet branded business, our top seven brands or top seven propositions generate 85% of our volume and on the sourcing side, 90% of our cocoa is sourced from our seven origin countries. And finally, Although we operate around 30 specialty categories around the world, the top 7 represent approximately 90% of the growth opportunities that we see today. So, as we focus on stabilizing the fundamentals, which we talked about, and focusing our resources behind reduced priorities, Getting these top seven really right already moves the needle meaningfully. And this is why focus sits at the heart of our growth agenda for the future. Now turning to our focus for growth action plan. We do see that compelling need to increase focus across three areas. First one is commercially. So concentrating on a defined set of distinct growth opportunities and prioritizing key markets and segments where we see the greatest potential. Second, operationally, by restoring fundamentals. I talked about that, and particularly in the areas that matter most for our customers in terms of reliability, quality, and service. Customer centricity is absolutely vital. Third is organizationally, by prioritizing a reduced number of the most impactful initiatives and restoring that customer-centric winning culture. And by driving focus, restoring fundamentals and putting the customer firmly at the center of what we do, our objective is to reinvigorate the company and return to sustained profitable growth and market share gains and therefore unlock strong financial performance going forward. Now, let me share some details on each. I'm starting with commercial focus and we are defining a clear and distinct set of growth opportunities. where we will intentionally concentrate our resources and our attention. And it starts with markets. And as we discussed earlier, our top markets truly move the needle, not only in terms of volume, but also in profitability. Let me start with the US, our largest market, representing approximately 70% of our revenue. And ensuring the right level of focus and execution in such markets is critical to deliver growth. but also other markets stand out with clear growth potential. For example, Brazil, where we have a meaningful presence, Indonesia, India, Peter talked about that, and China, where we're experiencing strong growth right now. And it is therefore clear that our resources need to over-proportionately support these priority markets, a distinct set. And importantly, this focus must be actionable, value added, defining a set of focus markets within AMEA, rather than spreading our attention across that vast region thinly. The same logic applies with gourmet and specialties, where we need to concentrate on the right segments and opportunities. And I will come back to that in some detail in the next charts. In itself, we see clear opportunities to unlock growth by increasing our focus on high value-added powders, whilst ensuring that we have the right growth capacity, of course, in place. So across all of these areas, a key enabler will be strong innovation platforms. Not many, but a few strong platforms that will allow us to lead in the market and that we can leverage across the portfolio to drive growth, greater level of differentiation versus our competitors and, of course, to support our customers around the world. And let me talk about gourmet, such an important segment for our profitable growth. And we are reintroducing here a clear brand hierarchy and customer propositions. Calabar, masters of taste, that will continue to be our group commercial identity. And then we have a clear brand tiering after that to serve the different customer needs with a greater impact. And as you can see here on the top of the pyramid, we anchor the portfolio around our super premium global brands, led by the Calabaut Signature Collection and Cacao Barry. Now, Calabaut brings over a century of Belgian craftsmanship and unrivaled bean-to-bar expertise. And Cacao Barry brings two centuries of cocoa origin mastery and French pastry heritage. important brands on top of the pyramid at a higher price level, strong quality focus. Now, beneath that, our core roommate portfolio is firmly positioned in that premium segment with the call about core section. And here, the focus is on delivering consistent quality, reliability, and strong performance for professional customers in their day-to-day operations. Complementing these, we continue to develop strong regional propositions. Typically, one per region, such as Sikao, Djokovic, or Van Houten in Asia, for example, ensuring that local relevance. And across all these tiers, our brands are supported by end-to-end services, from the chocolate academies that we have around the world to innovation and technical expertise. These help our customers to succeed. And the objective is simple and clear. a more focused gourmet portfolio with clearly differentiated propositions and price tiers that enable to serve our customers better. And it will allow us to allocate resources more effectively and drive for profitable growth in this important segment. Now let's turn to specialties. Our plan here is to be a bit more selective, focused on a defined number of margin accretive specialty categories that we believe we can integrate in the company, in the core of the company, and by doing that, scale them first regionally and then globally. And while the final list is currently being defined, we already see clear and compelling opportunities in a number of areas, such as Filled and baked inclusions, which you find in products like ice cream, where we have a very strong presence in that segment. But also both chocolate decorations, including toppings for bakery applications, and fillings and coatings. For example, solutions with reduced sugar functionality. And once this prioritization is finalized, the intent is to bring these selected specialties much closer to the core under responsibility. including therefore a tighter system integration. At this moment, they're not that fully integrated in our operating system. And that means we will invest behind them to ensure there is sufficient growth capacity. Clear ownership, P&L ownership within the region, and stronger category management. And we believe that this more focused approach will allow us to scale what really works, it will simplify the specialty portfolio, and it will concentrate resources where we see the strongest combination of growth, margin expansion, and of course, customer relevance. Now moving to operational focus, where the clear goal is to restore some of the fundamentals. And Peter talked about the disruptions. Our number one priority is to restore service levels and on time in full performance. that we are now measuring consistently every day, every week, every month, and absolutely determined to get us there and to improve on that particular KPI. And as I mentioned earlier, a combination of transformation complexity, industry disruption that we have, and many operational incidents, This has taken our focus a bit away from the basics, and as a result, service levels have been below industry standards. Now, that's something that I'm keen to turn around for the company. We have to get this right. Now, beyond service, we also need to ensure that our network, our factory network, is fit for purpose, both for the portfolio that we operate today, but also where our customers will go tomorrow. And at the factory level, we see currently mismatches between line utilization, so specific line utilization, and the overall capacity available in our network. So in the short term, that means we will make targeted and tactical adjustments to unlock available capacity. On the mid-term and the long-term, we will invest selectively behind those growth capacities that I talked about, where we talked about the focus areas, for example. ensuring that we deploy therefore our capital towards the right opportunities. And finally, restoring the fundamentals also means strengthening the core processes and enablers of the organization. Very much the intention of Next Level, and we will build on that. We do need better data visibility, more effective end-to-end decision making on a number of processes, and therefore the priority for us is to focus on the core process of the company first, get them really right, such as the overall demand and supply planning processes, customer service processes, and of course the quality and usability of our data. We made strong progress, but now we need to finish it behind those few big priorities. Going into more detail, there are a few areas where we need to focus operationally. So North America, as I said already, this region contains our largest market, the US, and we need to get it right. And as Peter has described, we've seen broad supply disruption across the network, and that resulted in longer lead times for our customers and capacity constraints in several high demand product categories. Network investments under next level were there, but some of them were postponed given the macro backdrop. Now, there's an immediate need to stabilize the network and rapidly improve service levels, focusing over the coming months on increasing staffing and adapting shift patterns at relevant sites. as well as targeted initiatives to stabilize critical facilities, particularly across maintenance, quality, infrastructure, and planning processes. In parallel, we are reclassifying and redeploying existing product lines across the network to better utilize the available overall capacity. We're developing a midterm plan to future-proof the network in order to sustainably support future growth. On emerging markets, here our focus will be on a select number of key growth markets. Large markets, though, where we have a meaningful presence already and where we intend to invest to support evolving customer needs. Think of countries like Indonesia and Brazil. On this, we will update you in much more detail in June. Service and OTIF. on time in full. We are taking targeted actions not only in North America but also in Europe to immediately improve reliability and to step up our safety stocks in selected categories. Peter talked about that. This will stabilize our key business processes and in turn it will improve customer service in the months to come. And then finally, core processes. I talked about digital efforts before. We need to focus our digital efforts and investments behind those core processes, such as planning as well as customer service, driving better data visibility and transparency, and this will therefore strengthen these processes and therefore increase service levels for our customers. Now, turning finally to organizational focus. Our objective is to reestablish that winning culture with customers at the heart of everything that we do, while refocusing the organization, as I said, on a set of impactful initiatives that truly matter. And a key priority here is to increase the empowerment and accountability of our commercial regions, because these regions, are the closest to our customers and our markets, and they should clearly drive what needs to be done to win locally. And of course, supported by global functions. They provide the how. They provide the scale, the expertise, and the consistency behind those core processes that I talked about. By doing that, we need to be therefore more disciplined on prioritization. Because the organization, as I said, has been overloaded by a significant number of initiatives during a time of also intense industry disruption. And that in itself dilutes the focus and the execution capacity. So by intentionally reducing the number of priorities on the table, we will free up time, energy, and resources. And this will allow us to focus on what truly matters. That's what we're going to do in the next couple of months. Before closing, let me briefly highlight some of the initial steps that we have already taken as we start to put the Focus for Growth strategy into action. We've reduced the executive leadership team. I had a team of 20. We've reduced it to 12 members. This creates a smaller, more agile, and more importantly, a more commercially focused leadership team in the company, which will enhance the speed of decision-making that we need. We also removed the global transformation office related to Next Level and significantly reduced our consultancy spend for the months to come. And this reflects a shift away from a separate transformation office towards a more integrated business ownership and execution. And as such, we have fully integrated the remaining Next Level initiatives into our global functions as well as into our regions. And that has stopped a standalone program tracking savings, for example, and therefore we're now much more focused on the bottom line delivery and therefore the net impact of these changes. We've also strengthened our global customer account alignment. And the global seven accounts that I talked about before are now reporting directly to me. And this is designed to reinforce regional execution, actually, but also to accelerate the deployment of global innovation, where it matters most for our customers. Now, these are early but important steps. Obviously, there's more to come, but the momentum in the company has started. So that concludes my preview of Focus for Growth. And we're not reinventing our strategy, as you've seen. What is different is the level of focus, the level of energy, and depth. supported by clear choices and strong resource prioritization. So to summarize, our priorities are clear. Drive focus and discipline and put the customer back at the center of everything that we do. And I'm confident that our unparalleled industry leadership that we have and our truly unique business model will provide that strong foundation to sharpen that customer focus and return to profitable growth. I'm looking forward to coming back to you in early June with a more detailed plan and to share our financial ambitions in parallel. And in the meantime, this concludes today's results presentation, and we are delighted to now take your questions. And with that, I will hand over to the operator to open the Q&A.

Thank you, fine. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind, please press star followed by two. And to answer your question, please, your device is unmuted locally. In the interest of time, we ask you to please limit yourself to two questions per person. Our first question comes from Alex Sloan from Barclays. Alex, your line is open. Please go ahead.