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.

Yeah, hi, morning all. Thanks for taking... The questions, I'll have two, please. I guess, you know, overall, you know, you previously guided to double-digit PBT growth in fiscal 26 based on today's guidance. Is it fair to assume you're now expecting PBT and constant FX to decline at a sort of mid-single-digit rate for this year? And I guess if that's the case, you know, within that potential 15% plus downgrade, how much do you see as 26 specific or transitional versus perhaps more structural and put another way, how much of that do you think investors should reasonably expect to sort of bounce back in fiscal 27 would be the first one. And I guess the second one, some are related, but in terms of the commercial investments that you've talked about to restore competitiveness and gourmet, can I check, does this purely relate to price gaps or are you also potentially suffering from some of the service level issues highlighted in the presentation? Thank you.

Thank you, Alex, and good morning. First question on PBT and, you know, this year's guidance, I'll let Peter answer, come back to some of the points on structural, as well as take your second question on gourmet. So, Peter, first on PBT. Yeah. So, hi, Alex. Thanks for the question. We will have a significant reduction of finance costs over the year, up to 60, so 50 to 60 million versus last year, which means that a very significant part of the gap that we see on EBIT will be offset towards the PDT level. So, profit before tax will be down for the fiscal year to a lesser extent than EBIT because of that recovery of finance costs. And I think a few remarks on the structural nature of the guidance for this year. Look, you know, there are a few things that I would call pretty temporary. You know, these are, for example, the grenade positions that you talked about. The one is, you know, supply disruptions that we have seen as well as, you know, the volume declines that we've seen in the first half. I expect those to, over time, of course, to come back some of the, go faster than others. But, you know, more structurally, and Peter talked about that, our finance costs with a lower B price overall, the finance costs, you know, are not as high as in either definition, but, you know, they will come back and they will be neutralized on a PBT and on a net profit level. So some aspects are structural and some are temporary, but I wouldn't call it overall a rebasing of the company. I think your second question on Gourmet. Yeah, so we had long positions out there and in Gourmet, which is partially a price-based business, you know, we are seeking to retain market share. Obviously, we're going to drive volume. I think that's super important for us. You know, we have, of course, fixed costs, but also we want to retain our customers after, you know, having had some years of disruptions. So we're very keen to put the customer, you know, front and center for everything that we do. So that's something that we're investing in. But if you look at Gourmet, yes, there have been disruptions also for Gourmet. You know, some of that in the North American part. in Europe obviously from somewhat longer time ago, but we're still sort of rebuilding capacity and we're still rebuilding customer service. So this is something that we're now going to do, we're going to accelerate the pace. All the key factories are under hypercare. We've added some resources to make sure that we can deliver. We're also pushing some, you know, some practical investments through the sites. because the customers have evolved their portfolio needs. We were a bit behind. You know, we're stepping that, we're really stepping that up and going fast after that, and therefore I'm quite confident that in the second half of the year, overall as a company, we are going to return to growth, and that will then sequentially improve the volume picture by quarter, including gourmet, which of course is an important profit segment for us. Next question, please.

Thank you very much. Our next question comes from Jeroen Evert from UBS. Jeroen, is it open? Please go ahead.

Good morning and thanks for taking my questions. The first one would be, please, on the reinvestment needs to restore customer server levels. For how long do you think it will last, that this is more pronounced, and Do you think despite these reinvestments, there could be operating leverage benefits for EBIT in fiscal year 27? So just to get a better feeling for the timeline here. And the second question, please, a technical one. In the cocoa segment, I assume it is in particular the spread, not the combined ratio, which was beneficial in the first half. I mean, what do you expect as a more normalized profitability on the current cocoa bean versus butter and powder spread going forward from here? Thank you very much.

I'll take the first question, Peter, you can take the second one, that would be good. You know, on the, yeah, on the investments, look, as I said, there's a few different types of investment terms. So the first one, as I said, it's around evolved customer needs of, you know, what they need in their portfolio. And I think whilst we have an overall capacity that is sort of sufficient, given, of course, the volume reductions that we have and the existing capacity that we have, You know, on a line basis, the capacity wasn't always, you know, keeping pace with the changes of what customers really wanted. And therefore, you know, we're doing a number of tactical investments predominantly in North America to keep pace and, you know, to satisfy the evolving customer needs. Some of that is in compound production. You know, some of that is in inclusions, for example. We need to step it up there. And so that's part number one. And, you know, that's partially CapEx, but, of course, it all, you know, with quite a number of changes that we're doing. And these are happening literally today. That was in North America in the last couple of days and witnessing it, you know, firsthand. of what we're doing to step up that customer service in change portfolio. So that's number one. And that, of course, comes with some extra cost. The second one, given the disruptions that we have, we absolutely want to make sure that food quality and food safety is paramount so yes we are investing a bit a bit extra also in manual operations to secure to secure that and we've had incidents over the last couple of years we simply cannot repeat that the reputation of the company is you know it's essentially you know what safeguards the value of the company so I'm very very keen to focus on that as well You know, and then thirdly, as I talked about investments, you know, when it comes to the loan positions that we, yeah, and we already mentioned that a few times, the loan positions that we've had on COCO and the impact on price listed business. So, you know, we're making here the right tradeoffs, but we want to stick with our customers and we prioritize volume and we prioritize markets here now. And that's the third area of investment that we're making. Yeah, I think those are the main ones. Clearly, again, customer centricity and starting up our efforts to evolve our capacity to that, to the exact needs of the customer, that for me is really a priority now. And, you know, that's pretty short term. But I think in the midterm, that means that, you know, we need to continue to evolve our network, our supply chain to change in need. And I think, you know, we can do that. Obviously, more to come on that in June. Peter. Hi, Gert. Thanks for your question on COCO. We've seen a strong EA growth on COCO in the half year one, year on year in local currencies. very much linked to the fact that we're able to profit in cocoa and benefits from a more favorable margin environment and also the market volatility considering the speed of the market will be seen some time ago already with higher butter, higher powder prices and we're able to capture that. We expect this to normalize in half year two going forward because the butter ratios have continued to drop in line with the criminal market solutions and butter is now zero powder butter and trading at a discount actually to CBE which means that some of those benefits that we've seen linked to that volatility and the whole market that we captured in half year one and to some extent a bit as well in half year two last year. is at least for the short term not coming back and then of course we'll see how the market evolves further to be more specific about that. Thank you. Next question please.

Thank you very much. Our next question comes from Ed Hocken from JP Morgan. Your line is open Ed.

Please go ahead. Morning. Morning. Hi. Thank you very much for taking my questions. Thank you, Hein, for your preview on your focus for growth strategy that I look forward to learning more in June. But on the focus for growth strategy, what I wanted to clarify a little bit following on from the last question is on some of these initiatives that I mentioned on capacity investments, on focus and scaling of innovations, whether these are a refocus of existing resource or whether these are incremental investments. And within that, how we're thinking about the cash flow, should we be therefore presuming that capex is higher for longer? And of your higher safety stocks in H2 that you mentioned, should we also expect that this is something longer lasting? So will you be holding higher inventory levels as a norm going forward, or is this specifically an H2 comment? And then my second question, please, is on your volumes outlook for H2 and the return to volume growth. The industry, as you noted, is currently tracking minus 6.5% volumes. So to return to volume growth in the second half of the year, can you try and help me to bridge that? Is it that the industry volumes you should expect some improvement in the second half of the year? How significant a contribution should the actions you're taking in Gourmet have? Is it some reversal of shrinkflations or some reversal of the temporary insourcing that you've seen in previous years? Just if you could help me bridge that gap between the current industry volumes and an improved picture for your volumes in the second half. Thank you.

Thank you, Ed. And let me, you know, take first go at it and Peter, please, ask where you see fit. So, I mean, first of all, this is not about incremental resources. I talk very much in Focus for Growth around, you know, galvanizing and rallying our people, and that is certainly a people's component, but also, indeed, capital expenditure, as well as cost behind less essentially six to eight initiatives in the company right now to focus our resources on. You know, we've been looking at many, many process improvements as a company over the last couple of years, you know, ranging from HR processes to supply chain processes to you know, potentially covering absolutely everything. What I'm really keen now is to focus our resources behind those processes that touch the customer first, and that is planning. So, you know, demand planning, supply planning, and making sure that we link up with our customer seamlessly and that we optimize our planning processes. So that means also digital efforts behind that. So that's the number one. Number two, customer service. Over the last year, customer service has been pretty much standardized and in some cases has been moved from a decentralized model to a more centralized global shared services model for customer service. That was a decision taken. It didn't always go well, so we absolutely have to nail it now and be there for the customer and make sure that that customer service process runs extraordinarily well. So, you know, this is not about incrementalism. No, it's about from everything that we were doing under the next level program is to choose those things that are meaningful and impactful and putting our people behind those. So that's very much the mantra. Not an extra, you know, we're not going to expand on that. When it comes to capital expenditure, also for this year, we're not increasing the guidance. We have redirected some of the capital expenditure spent through the tactical investments that I talked about. and on the medium term, you know, whether that's going to lead to a higher level, I'm going to come back to in June. However, we are very, very committed to deleveraging the company, as Peter has talked about, so that will remain an important priority. We will live within our means, but at the same time, I want to make sure that we spend the capex behind tangible, thought-through, thorough growth initiatives in a select number of markets in our most meaningful segments, gourmet, I talked a few specific categories, for example, and then, of course, in customer processes related to our food manufacturing, you know, segment. So more focused, clear, and not incremental. So that, I think, hopefully answers your first question. When it comes to the volume picture in the second half, a few comments. Obviously, with lower lean prices. What we're seeing is that customers ordering, you know, for longer, that's clear, and that's helping the volume picture for us. We also see that customers, and we said that in the presentation, customers themselves are going for growth, and we've seen a number of initiatives from Hershey, for example. We've seen initiatives from Nestle, and, you know, I think that's really important. You know, we are seeing an enhanced growth picture in some of our key markets. In ice cream, for example, in North America, we're seeing, you know, overall an increased demand picture. And again, I think the lower bean prices help. At the same time, and I think this is very important for us, when I talk about our efforts to restore growth, we believe that, you know, we are in the recent, you know, the very recent months, we are growing a bit ahead of the market with a reinvigorated focus on growth. And if we, you know, if we keep the pace, we make those necessary investments, we restore I'm actually very convinced that we will continue to do that in the very near future. So that's going to help us. So with less disruptions, we should see some growth. There's one important caveat, and that's of course the situation in the Middle East. At this moment, and that's the latest one this morning, we believe that, you know, in the next week or so, business activity in the Middle East will resume somewhat, but obviously it's very, very volatile, so that's something that we need to manage. So that's more on a high-level basis, I don't know if Peter here want to make some further comments. I'm risking to repeat a lot of what you said, so no. Okay.

Thank you very much. Our next question is from John Cox from Kepler Shepherd. The line is open, John. Please go ahead.

Good morning, guys. Thanks for the call. I have two questions really. Just on what's happened in the last couple of years and what you're doing now to sort of maybe unwind some of that, maybe it went too far. I think under the first program, you laid off about 20% of your workforce and did a couple of factory closures and that sort of stuff. Just wondering, should we assume that maybe you're going to unwind the staff by about 10%, so maybe going back a little bit or halfway from what you've done? As an add on that, do you think there's anything more that needs to be done in terms of a factory network, or is it more, as you mentioned, it's more about quality issues and maybe some lines are not working as well as you want to. So that's the first question. The second question, more on the top line outlook, I'm quite surprised that we're not really seeing volumes recover, given the fact that the cocoa prices have declined. I know there's a lag and so on and so on, but in terms of, I'd imagine the whole industry is short chocolate in various places. Are you worried that maybe structurally the chocolate market's changed in the last few years, you know, maybe with GLP-1s and we see various data points suggesting that maybe chocolate demand volume growth won't come back to that, you know, on average 1% or 2% we've seen historically, maybe it's going to be closer to flat going forward. Any thoughts on that sort of long-term chocolate market outlook? Thank you.

I mean, first of all, on the next level program, as I said, you know, in the plan, on the focus for growth plan, look, I think that the next level program, again, the intentions to standardize more in the company, to reduce our cost by progressing our network into fewer, bigger sites, into doing more with digital, intentionally definitely the right program. But what I'm saying is therefore we will build on that. And I have no intention to unwind necessarily what was going on. But I feel that efforts in the company were quite diluted. We have lost a lot of people. We have had quite some incidents and disruptions. And we have left customers down and customer service. So, hey, I'm just very keen now to restore that confidence. go back behind the number of core priorities so that means that we're not going to unwind but we're going to face and face it we'll go deeper we're going to finish a number of initiatives and we're going to do it well but always with the customer in mind so yes you know we will continue to evolve our network and that may end up in less factories but before you close the factory you need to make absolutely sure that the volumes that you provide to a customer from that factory are then of course transferred to another place and you can help the customer to succeed. So I'm very keen to progress, but again in a thoughtful manner. There's no point in adding necessarily resources. As I said, we are making some selective investments now in the supply chain, particularly in North America, as well as in quality assurance. But overall, I do not foresee that we're, you know, we're sort of, you know, adding cost on a structural basis. That is definitely not the intention, and I don't want to talk about unwinding. I want to talk about focus, and I want to talk about fewer, bigger, and better. with a strong focus on operations, discipline, and customer centricity. I think when you talk about the volume, actually, we are pointing towards a volume recovery in the second half. So, you know, of course, you know, progressively, quarter two was a little bit better than quarter one in terms of volume, still negative. But going forward, as you sort of follow the algorithm regarding to minus one to minus three, And that means, you know, mathematically that, you know, we're going to have to see, you know, a positive territory in half two. Now, where does that come from? And I talked about that lower bean prices. Yes, you know, from our end, a better competitive position, a strong focus, and of course, with the caveat that I already talked about in the Middle East. But overall, we are actually seeing good signs of restored volume. So in that sense, certainly on the midterm, we're looking more positively. On GLP-1, I think, you know, yes, I mean, several of our customers have also talked about that, and I just wanted to highlight that, you know, quality chocolate, the more premium-style chocolate, we believe that's actually, you know, benefiting in some cases. We're seeing that also in interest for our gourmet products. So, you know, I think, yeah, look, there will be some impact, but at this point, it will not be significant for the company. And maybe just to add, there's some reassurance, of course, from the past on the market rebounding. I mean, the market pricing has been significant, of course, this time. But also a few years ago, on the back of COVID, there was a 20% pricing up in the market. And you could see the chocolate category bounce up well after that. And maybe last, as you said yourself, I mean, there is this lack, right? We had ourselves for the first time now a quarter in Q2 where our pricing was negative year on year. So we had our peak pricing plus 70% a year ago. We had still plus 25 pricing from us to our customers in quarter one. Quarter two was the first quarter where it started to come down. So there is this lack that the market needs to cycle through before it starts hitting the consumer. I think, Peter, there's also, and I think that on your question, or the question before, I want to come back on one point, which are inventory levels. You know, we've obviously seen inventories coming down, and that's partially deemed price, but also operationally our inventories are showing a healthy development. What I do believe for the, you know, towards year end, again, tactically and particularly on what I call the runners in our portfolio, gourmet products that are pretty standard, we are, you know, we are increasing the inventory levels somewhat to make sure that we have a very positive start into the new year. I believe by the end of last year the inventory levels were You know, we're very, very low and it's hampered us a bit in satisfying customer needs and with, again, with the positive signs that we're seeing in the market, we believe there is room, again, practically and in a few areas to increase the safety stocks a bit to safeguard service. Again, a major priority for us going forward.

Next question, please. Our next question comes from David Roo from Morgan Stanley. Your line is open, David. Please go ahead.

Good morning, Hyman and Peter. I just want to come back to Alex's question on the guidance. Can you perhaps quantify how much of the cut in the PBT guidance was attributed to the investments in Gourmet, Middle East conflict and then other factors? And then my second question is on global chocolates. On the food manufacturer client cohort specifically, do you see any need or any risk here that you need to invest in pricing here? I appreciate there's a mechanical cost plus model with this cohort of customer, but I mean, how robust are these agreements? And then just my follow-up question on global chocolate is, where do you see manufacturer inventory levels at the moment? Thank you.

Can you take it first? I'll come back on the all food manufacturing. Yeah. So, hi, David. The first question on the moving parts on EBIT and then PPP overall and versus the guidance that we now put into the market. Overall, as we said, there's a still for the full year, there's a positive on COCO considering the high and the strong that we took on volatility and the increases of the market in the past, normalizing half year two, as I mentioned. Now, if we look at then where the Delta comes from in terms of the negative impacts, you could basically argue that about 70% or two thirds is triggered by this very rapidly declining bean price, which had an impact on, first of all, our financing costs that has passed or has reversed Basically on the debit line. Secondly, the impact that we've seen on Doumen, where our long position and high price list forced us to do some commercial investments to secure the volumes that we have. So two-thirds is really coming from that rapid decline of the bean price. The remaining part, basically there's two components. One is volume that over the year will still be slightly negative. And secondly, some of the increased costs that we are taking to manage through the supply disruption, making sure that we can deliver our customers despite some of those disruptions that we've seen. So this is basically the different blocks that you should be considering within our guidance. When it comes to the food manufacturing segment, you're right, I mean, most of our contracts, you know, they follow the price of cocoa. So I'm not overly, you know, from everything that I'm seeing margin-wise and so forth, I don't see major volatility in that. You know, I feel pretty confident about the segment going into the second half and, you know, we will move with customers and of course based on the contracts that we have. So, you know, when I talked about the major impact from the loan position and that is more related to price listed businesses. When it comes to global stock levels, as I said, you know, I think there are some, we see customers buying a bit longer. I can't comment on exact stock levels. I'm not long enough here to give a really educated answer on that, but it's a fact that at this point with the current bean prices, there is room for some increases globally. That's all I can say at the moment. Unless, Peter, you would have further comments.

Our next question comes from Tom Sykes from Deutsche Bank. Your line is open, Tom. Please go ahead.

Thank you. Morning, everybody. Firstly, on the capacity expansion that you're putting into North America and your comments to the earlier question around longer-term demand, I mean, if you're investing into compounds, which is the majority, I believe, of your food manufacturing business, are you not just signalling that there is a permanent reduction in cocoa demand, even if it's not chocolate demand, and that's coming from compound growth rather than cocoa content, if you like? And then just on gourmet, where was your gross profit per unit be or some be versus 12 months ago and are you saying that you're going to be cutting that even more because if you do have this shift towards more compounds and we're in a sort of excess capacity I suppose are we not just going to see a rebasing of gourmet pricing and indeed is it still going down? Thank you.

Thanks, Tom. You know, I mean, first of all, in investing in North America, as I said, I think, you know, the network overall probably didn't keep sort of the pace with the evolving customer need. So I think it's more that we were a bit behind. And, you know, we were very, very keen to fill in some of the blanks. You know, we have very good relationships with You know, many customers obviously in North America, we are the market leader, but I want to make sure that, you know, for particular needs, and indeed there could be compound production, that they don't go to alternative suppliers. So, you know, what we're doing is we fill in tactical needs, and I believe that that will strengthen our position with customers significantly. At this point, you know, with the bean price where it is now, we don't see compound necessarily growing faster than chocolate. We see, you know, we're seeing some movement that chocolate is actually back, and we're seeing some customers, you know, going back to chocolate. And again, with the current bean price, I believe that is overall probably even beneficial for them. at that inflection point so no i don't think that compound will continue to always gain i think what is more important for companies like us is that we're agile and that we can fill in the blanks for of the portfolio that customers need you know and they will have a need for compound for particular parts of what they what you know in their portfolio and they have a need for chocolate and of course there's the volatility of the bean price so what i think what is important for us Given our role in the industry that we are agile that we have the ability to supply what is needed and that is exactly What what we're going to do in in North America with a number of shorter term investments So that I would say for the next four to five months or so I want to come back in June as I said with a more midterm picture for North America as well as you know coping with growth in a select number of of large emerging markets, and I'm talking mainly Brazil, Indonesia, for example. India, we have ample capacity that can continue to grow, and we've done that double digit, and I feel that's going to happen, that's going to go, that will happen going forward, but I want to choose a few of the bigger markets where we have an emerging presence, where I think we can succeed, but where we have some bottlenecks that we need to resolve. So I hope that answers the first question on investment. On gourmet profit, I wasn't exactly sure on the precise question, but, you know, if I would say, you know, there's no rebasing on profitability as such. As I said, you know, there were long positions out there, and then you need to determine what you do, what is your priority. And, you know, we feel that retaining customers, driving growth, Whilst at some point, you know, these positions will unwind, there will be, you know, and we will be returning to normalized profitability on gourmet. That's at least what I'm seeing going forward. But in the meantime, we want to make sure that we keep the customer connection, that we can compete in our geographies. And, yeah, and that's what we're doing. maybe just one addition because I think I might have understood in your message that for compound production we need entirely new setup for factories which is not the case right we can we can produce more existing factories as a few intervention you need to do in terms of thanks but overall I mean we can convert our line so it's not that if any move happens to compound that is an entirely new network that we need thanks next question please

Thank you very much. Our next question comes from Antoine Prouvoir from Bank of America. Your line is open.

Please go ahead. Hi, Peter. Good morning, everyone. Thank you. So I have two questions, please. First, on proteins. So we've been talking about chocolate. Could you quantify the volume growth of protein versus real chocolate? And especially considering that now CBD is more expensive than cocoa butter, are you seeing maybe some pressure? there overall, especially because it was a pretty good buffer for the basket projects. And second, on gourmet, so could you classify a bit how much of your profit comes from the gourmet side? It's about 20% of your volume, but I would suspect it's much higher on the profits. And considering the reinvestments and the price changes that you're doing to H2, how quickly do you expect a situation to improve their own volume.

Thank you. Thank you Anton. I think Peter takes the second question, composition of the profit, if I got it right. I think on your first question, you know, overall on compounds, by the way we call it cocoa coatings, We saw flat growth in the first half, but with a double-digit growth for particular super compound products. You know, don't forget that, you know, I'm talking about investments in compounds, and yes, we need to follow the customer that we are the leading actually, the leader actually globally in cargo coatings. And we have quite a few R&D projects with, you know, many of our customers along the way to continue to compete in that well. So, you know, if I sort of take a step back, you know, as a company, what we are offering, we're offering the chocolate solution, we're offering the cacao coatings, but also non-cocoa solutions. And in that sense, you know, we are partnering with... We have a, you know, we're working on what we call Zulviva, which is a non-copal product, which also has its own cost structure, and we will continue to invest in those type of alternatives. So we're very keen to provide the whole portfolio. Now, again, flat growth in the first half with, you know, particular double-digit growth in a sub-segment called what we call super compound products. Yes, it's about 20% of our volumes and it's over-proportional in terms of our profit split. We're not really disclosing a lot of details on it, but as you mentioned, it's a lot more accretive than the FM business. Volume-wise, the 20%, it's still actually, despite the challenges, it's still performing relatively better than the FM business, so as we speak. And also in H2, I mean, we will invest, as we said, some of that long position, but it does mean that we'll be cutting even more. We expect actually positive evolution in our business in chocolate, both on the FM and the Gourmet side going forward in the second half. Yeah, I think that's where we are on the Gourmet side and everything else I think we said before. We do expect, as it is linked to the very steep decline of the bean price, we do expect this to be a temporary phenomenon. Next question, please.

Our next question comes from Samantha Derbyshire from Goldman Sachs. Your line is open, Samantha. Please go ahead.

Good morning, everyone. Thanks for the really detailed responses to everything so far. My first question is just around the end markets. It would be really helpful to get some context from you around how you're expecting them to progress from here. You've got pretty good visibility on the order bucket scenes. How much of this is kind of... because your customers are innovating, having to bring out new products to kind of support that volume growth, and how much of it is that you think that consumers are adjusting to the price levels of chocolate products right now? And kind of along those lines, are you starting to see any appetite from your customers to reduce prices or increase promotions, increase pack sizes to kind of get the volume coming back in the markets? And if there's any regional context as well, that would be super helpful. And then just switching tack, just thinking about your service levels, can you perhaps contextualize where they are versus history? I know that it's been quite volatile. There's been a lot of disruption. But if we think about where Barry Calliver used to be, say, five years ago, how significantly below that are we? I know that the company is below industry levels. But any kind of indication of the delta would be really helpful. Thank you.

Thanks, Anne, for the questions. But first, I would like to talk a bit about the market and our customers and what consumers are doing. Let me just, you know, make a few points here. So first, and some of it will be repetitive, I hope you don't mind, but, you know, obviously there has been, there are lower bean prices and we're seeing a flattening as well of the future curve. So there are some early signs, as I said, of market stabilization for our customers. So customers are therefore also, you know, willing to book further in advance. As I call it, these are longer positions and there are some room for higher inventories overall. I think, you know, we're seeing that customers are pricing through to some extent. Obviously, that's a customer decision. I don't want to go too deep on that, but I'm very encouraged by what I'm seeing with some of our large customers, and particularly North America. You know, Ferrero, and we said it in a presentation, they launched their go-all-in promotion last week from April through July, and that's backed up by significant investments. They've made a very public statement about that 100 million investment. you know, Hershey's, sorry, that was Ferrero, Hershey also making significant media investments in this year with a very big launch around Reese's and Hershey. You know, it's the first launch for them since a number of years that is sort of at this magnitude. So we're seeing restored confidence. Obviously, the margin profile for, you know, will help given the lower bean prices. So, you know, these are, I think, very positive signs for recovery going forward. We're also seeing, therefore, some increased innovation interest from our CPG customers. And, you know, as I said, that we do across the whole portfolio. We're seeing, particularly in Western Europe, we're seeing interest in the non-COCO solutions, as for , the brand that I had talked about before. but also the high flavanol opportunity, the high flavanol innovation in AMEA, and this is gaining really good traction in Japan as well as in China. So, you know, if I sort of summarize, low bean prices are therefore, you know, long, customers going a bit long. big initiative from some of our large customers that will help the market. And third, we're seeing if we are focusing our efforts behind scalable innovation platforms, we believe that particularly on a regional basis we're seeing increased interest. So these are, I would say, you know, these are very positive signs and therefore we believe that the second half we can return to a broad picture. On customer service levels, look, Yes, I looked back to a number of years ago. you know, particularly in the last one and a half year or so, we have been below our historical averages. I don't want to call out one customer service level because you need to drill down a little bit. And customer service can, for example, become low if you, you know, if your portfolio is not exacting the customer needs. So, you know, are you, can you deliver against an unconstrained demand? That's a question. And in many cases, we haven't been able to do so. And that's why we're making these investments. The second one is, you know, due to disruptions, do you need to cancel contracts or cancel deliveries that the customer has asked for? So, in some of our key segments, we've seen customer service levels even, you know, somewhat below 80%. They are now improving fast, and again, that's where we're laser focused on to get them to the highest possible level now, and I think that's something that we do progressively well. Without, you know, calling particularly percentages too much, I would say we weren't at the level that we were a number of years ago due to disruptions, due to, you know, many process changes, due to the whole transformation impact. We're now going back to fewer initiatives, restoring customer service on those areas where we really need it, and preparing for a mid-term picture. And, you know, obviously I'd like to come back to you in June on what that looks like. I think that concludes the overall, if I'm not wrong. This was the last question?

Correct.

We currently have no further questions. Thank you everyone for spending time with us this morning. We are looking forward to come back to you in June with a full update on the on the Focus for Growth program and to have more interactions with you in the next couple of days as well as after the June conference. Thanks a lot and speak soon.