Kerry Group plc

Good morning and welcome to Kerry Group's Q1 2022 results call. Today's conference is being recorded. At this time, I would like to turn the conference over to William Lynch, Head of Investor Relations. Please go ahead, sir.

Thank you, Operator. Good morning and welcome to Kerry's Q1 2022 IMS update call. I'm joined on the call by our CEO, Edmund Scanlon, and our CFO, Marguerite Larkin. Today we'll start with a brief presentation which is available on our website. Edmund will begin with these opening comments before handing over to Marguerite for the performance overview, and we will then open the lines for your questions. Before we begin, please note the usual disclaimer regarding forward-looking statements. I will now hand over to Edmund.

Thanks, William. Good morning, everyone, and thank you, as ever, for joining our call. So beginning with slide four and my overview comments. We're pleased with the strong business growth we delivered in Q1 of 12.9% organic at a group level. Group like-for-like volume growth was up 6.3%, driven by our taste and nutrition business. Within the retail channel, we continued the good overall growth levels we've been tracking, and we achieved strong double-digit growth in the food service channel. which we were seeing strong business momentum, having already surpassed pre-pandemic levels at the back end of last year. We also had excellent growth and significant demand for a range of food waste solutions, as this is an area that our customers and their consumers were already focusing on from a sustainability perspective, and now given the current inflationary environment, the benefits of tackling food waste have even been further elevated. This brings me on to pricing of 6.6% at group level. And as expected, our pricing stepped up in the first quarter of the year. Over the last six months, our teams within our business have been working hard to actively manage through this inflationary environment in close collaboration with our customers. Now moving on to the strategic front, we made a number of important developments in the period. The acquisition of Selecta in Leipzig, Germany was a very important step in enhancing our biotechnology innovation capabilities, and we're very excited about the potential that we see here. Within the AFMIA region, we expanded our local presence in Malaysia with the acquisition of ALMER, and we also made a number of investments in the Middle East and Africa. The Middle East and Africa has been a very strong market for Kerry in recent years, and these investments significantly enhance our ability to deliver sustainable taste and nutrition solutions across the region. Finally, on our markets, and what was very pleasing for me was the resilience of Kerry's overall growth in the period against a highly volatile market backdrop. The inflationary environment and supply chain challenges that were a feature of our markets in the first quarter have been compounded by events in different parts of the world. Firstly, the restrictions in China, which has had an impact on performance in the quarter. And secondly, the war in Ukraine. And just to spend a moment on this, we continue to be horrified by the tragic events we're all seeing. and our hearts go out to the Ukrainian people in what is a truly devastating humanitarian crisis. From the outset, we've done our absolute utmost to take care of our Ukrainian colleagues and their families right across the group, as well as supporting humanitarian efforts. Having initially taken measures to scale back our operations in Russia and Belarus, we took the decision to suspend our operations following extensive consultation with our stakeholders. This was a very complex decision to make with many factors taken into account and not one that was taken lightly. In the food manufacturing sector, we all have an important responsibility across every market in which we operate, given the critical role our sector plays. Our aim, as we said when we announced the suspension, is to do so in a responsible and orderly manner, by fulfilling our legal obligations. We have taken significant steps in reducing operations with one manufacturing line already shut down, and we continue to work through the process in conjunction with the relevant parties and our customers. We'll update you further at our half-year results as we work through the various phases involved. So with that, I'll hand you over to Marguerite.

Thank you, Edmund. Turning to slide five and the summary financial overview. Group volumes were up 5.6% on a reported basis and 6.3% on a life-for-life basis, excluding the consumer foods, meats, and meals business, which we sold last year. Group EBITDA margins were up 10 basis points in the period. This was primarily driven by accretion from recent portfolio developments, operating leverage and mix, offset by the impact of recovery of input cost inflation. And net debt was 2.3 billion at the end of the period, reflective of acquisition activity. Turning next to slide six and the group revenue analysis. Overall reported revenue increased by 8.1% in the period, driven by the components, as you can see highlighted here. Firstly, in the center of the slide, you have organic growth. Overall group volume growth was 5.6% and price was up 5.8%. On a like-for-like basis, this volume and price growth equates to 6.3% and 6.6% respectively. On currency, we had a 5.4% tailwind on revenue driven by a weaker Euro against the major currencies. And on acquisitions and disposals, there was a net decrease of 8.7% in the period, which we have split out here. Acquisitions contributed 4% to revenue, driven primarily by NIASET, and the effect of the meat and meals business disposal, as I mentioned, was 12.7% in the period. So moving next to slide seven and the taste and nutrition business review. Volume growth of 6.8% was driven by strong growth across most developed markets, while recognizing a number of these had slightly lower prior year comparative. Pricing of 4.6% reflected high single-digit increases across our raw material basket in the period. Within our food and juice markets, we had excellent volume growth in meat in particular across all regions, with very strong overall growth in bakery and snacks. From a channel perspective, growth levels in retail remained strong, while growth in food service represented continued momentum well above 2019 levels. Overall volume growth in emerging markets was 7.9%, This represented excellent growth in LATAM, the Middle East, and Southeast Asia, partially offset by China. And now turning to the regional overview on slide eight. Starting with the Americas, which had overall volume growth of 6.7%. This performance in North America was led by meat and meat alternatives, with strong growth through increased demand for food protection and preservation, taste innovations, and increased production levels at our new Rome, Georgia facility. We also have strong growth across bakery and meals, particularly in the food service channel, with further innovation activity in reducing backup house complexity and an increase in seasonal menu offerings. In LATAM, we delivered strong growth with performance in Brazil led by meat and ice cream, while Mexico was driven by meat and snacks. In Europe, we had overall volume growth of 8.5%, driven by new launch activity in meat and dairy, while growth in the beverage and juice market was driven by innovations in the nutritional and low no-alcohol categories. Growth was strongest in the UK, Central and Southern Europe, while recognizing softer prior year comparative. In apnea, overall volume growth of 6.2% was driven by strong growth across the Middle East, Southeast Asia, and India, partially offset by negative volumes in China as a result of the local restrictions introduced in the period. In snacks, we had excellent growth with regional leaders, while growth in meat and bakery was strong across both the retail and food service channels. Moving now to slide eight and the business review for Dairy Ireland. We had solid overall volume growth of 0.7% in the period, with increases across both dairy consumer products and dairy ingredients. Pricing was significantly up versus the prior year at 18.7%, reflecting increased dairy prices and raw material costs. Within dairy consumer products, we had good volume growth right across the dairy snacking range, led by cheese strings, partially offset by lower volumes in spreadable butter due to reduced promotional activity. And in dairy ingredients, overall performance reflected significantly higher prices, resulting from constrained global supply dynamics. Turning to slide 10 and other matters, beginning with raw materials and looking at these by business. In taste and nutrition, we expect the high single-digit inflation we saw in Q1 to rise to double-digit levels in the second quarter. And at this point, we are looking at the second half continuing with inflation at double-digit levels. In Dairy Ireland, we expect prices to remain firm while current supply constraints persist. On Ukraine, Russia, and Belarus, overall, the region amounts to circa 1.2% of group revenue. We will incur exceptional one-off costs associated with the suspension of our business in Russia and Belarus, both of a cash and non-cash nature. And we are currently working through the details and we will update you further at our interim results. And finally, on currencies, which continue to be highly volatile, we are currently expecting a tailwind of circa 6% for the full year. To sum up, before I hand you back to Edmund, I am pleased to say that we delivered strong business growth through the first quarter, and we continue to actively manage the inflationary price environment with our customers. So with that, I'll hand you back to Edmund.

Thanks, Marguerite. So finally, and moving on to slide 11 and the outlook and future prospects. Our markets are highly dynamic and currently there's a good overall demand environment despite uncertain market conditions and places. We remain confident we will manage through this current inflationary cycle with our well-established pricing model and cost initiatives. As we begin our new strategic cycle, the progress we've made in recent years positions us strongly for growth, and we have a very good innovation pipeline. And today, we are reiterating our adjusted earnings per share guidance for 2022 of 5% to 9% growth on a constant currency basis. So with that, I'll hand you back to the operator, and we look forward to taking your questions.

Thank you. If you wish to ask a question at this time, please press star one on your telephone keypad. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, please press star one to ask a question. We will now take our first question from Kaho Kenny from Davie Research. Please go ahead, sir.

Good morning, all, and thanks for taking my questions. Two questions from my side. Firstly, on margin, The 10 basis points increase in margin in the quarter. Could we get a breakdown between TNN and Dairy Ireland? And the related question, margin, just in the context of pricing, how should we think about margin for FY22? My second question relates to food service, looking for commentary around performance of the food service channel by region in the quarter, and just a comment then on the outlook for that channel as well for FY22. Thank you.

Good morning, Cahal. I might take the food service question, and Marguerite will take the margin question. Just on food service first, like I said in the prepared remarks, we're very pleased with the progress that we've made through the first quarter, which, you know, basically was carrying forward the momentum that we had in our business in Q4. With strong double-digit growth, you should think about it in the mid-teen zone. And I think in terms of, let's say, where we are now versus 2019, well ahead of those levels, maybe to the tune of our own, maybe high single digits. So from a regional perspective, Europe had a very strong performance here in the quarter, ahead of the average performance for T&N. America's was in line with the overall performance and APMIA tracking a little below primarily due to China. In terms of the outlook, we do expect to continue to outperform our markets. We're seeing more and more innovation coming through the channel. I think the I think we're seeing the benefit now really of the engagement that we had right through the pandemic. And I think we've been gaining market share right through that period. And I think for us right now, that's really coming to fruition. The channel will still be volatile. Those constraints that I talked about previously in terms of Labor, particularly, is still a factor in the industry. And the innovation pipeline, as we look out, still continues to be primarily driven by reducing complexity in the Macca house. But overall, it's a challenge that we're very well placed in. I believe we're winning market share, and we see that continuing here in the medium term.

So, good morning, Kyle. A couple of parts to that margin question. So, I'll take each of those in turn. So, firstly, our overall group margins improved by 10 basis points. And we're pleased with that margin performance in the context of the current inflationary environment. The expansion of the 10 basis points reflects primarily the positive effects of the recent strategic portfolio developments, as well as operating leverage and mix. And then, obviously, that is offset by a significant mathematical pricing effect, given the recovery of costs in the current inflationary environment of circa 80%. basis points in the period. So they're the moving parts within the overall group margins. I think then if you look at the margins by segment, firstly on taste and nutrition, I would say again in the context of the current inflationary environment, we are pleased with the resilience of the margin performance. So while overall taste and nutrition margins were lower, circa 60 basis points in the quarter. Again, this is driven by the mathematical effect of pricing, which was circa 80 basis points at the T&M level in the quarter. And that was partially offset then by margin expansion due to the positive effects of the recent strategic portfolio developments, again, as well as operating leverage in the period. So, in other words, for taste and nutrition, excluding the mathematical impact of pricing margins, they would have been up circa 20 basis points. And then in relation to dairy Ireland margins, dairy Ireland margins were lower in the quarter on the like-for-like basis, and that was due fully to the mathematical pricing effect of passing through input cost inflation. And excluding this impact, the margins in Dairy Ireland would have been flat in the period. So that gives a perspective of the performance in Q1. And then on the second part of your question in relation to group margin expansion for full year 22. Obviously, there's a number of moving parts, as I mentioned in February, particularly given the current inflationary environment. But to give you some context, and again, using the framework that we outlined at the Capital Markets Day, firstly, I would say that we will be looking for some operating leverage and mixed benefits. as well as a substantial improvement from the portfolio development that we completed last year in the zone of 60 basis points. Then again, given the current inflationary environment, there will be a meaningful mathematical denominator impact on margins. And as I said in the prepared remarks, we'll update you on this as the year progresses. But again, just to give you some context, if, as you know, pricing got to 6%, this would have a mathematical effect on Group EBITDA of in the zone of 90 basis points. So it is a meaningful impact in the overall year. And as we normally do, we will have cost initiatives and we will reinvest in the business. So in summary, I would say there are a lot of moving parts, as you can appreciate right now, but hopefully that gives you a sense of how we're looking at the overall evolution of margins in the current year and also the performance in the quarter.

Thanks, Marguerite. That's very helpful.

We will now take our next question from James Charget from Barenburg. Please go ahead.

Hello. Good morning, everyone. A couple of questions. Firstly, just on cost outlook, thanks for the colour on the raw material cost inflation development. Two questions on that. Could you just talk about... any particular areas in the supply chain where you're seeing material constraints, which could be a problem to your ability to fulfill customer orders or anything like that. And then, you know, you talk about raw material inflation, but anything you can talk about overall cost inflation outlook for the year, including things like, you know, energy and logistics, et cetera, that would be very helpful. And then my second question is on, Edmund, you mentioned a very strong innovation pipeline. Are you seeing any signs that in inflation, the consumer pressures on consumer expenditure, is that impacting the type of innovation or the appetite for innovation at all? And is there a difference particularly between what you're seeing in retail channels and food service channels when it comes to demand for innovation? Thank you.

Thanks, James, and good morning. I might take maybe the supply chain questions and demand and innovation, and, Margaret, maybe you can come in with some comments then on costs. So maybe on the supply chain side first, James, I would say that – There's nothing I can really point to that would suggest that we're going to face some issues later on in the year. I think on raw material availability, yes, there are a few, let's say, well-known factors and some well-known raw materials that come from the Russia-Ukraine region, but they're not a major impact on Kerry's business. Sunflower oil, for instance, is one in particular. And let's say what we've seen there actually is some of our customers coming to us wanting to replace sunflower oil in their formulation that subsequently leads to a situation where maybe the product has emulsification issues, maybe it has some taste or some performance issues, and we would work on that. as it relates to Kerry in terms of raw material supply, I wouldn't be calling out anything major right now. The logistics side is something we're keeping a very close eye on. China is a major supply hub for everyone in our industry. We have all seen, let's say, the significant backup of containers and container ships in ports in the China region. So that is something we're keeping a very close eye on. We are taking some steps and we have been taking some steps for the last several months. to try and de-risk what we've been seeing there. So, there's no complacency here at all whatsoever. It's something we're keeping a very close eye on, but nothing specific I could call out right now beyond the logistics issues that I just described. In terms of innovation, strong innovation pipeline, You know, let's say maybe on food service first, you know, we're seeing the return of LTOs and seasonal products. That reduction in back-of-house complexity continues to be there. We see plant-based becoming more mainstream. So a lot of activity there in food service. on the retail side, nutrition on the one hand, and let's say healthier products on the one hand, and indulgence on the other hand, are both driving the innovation pipeline. In terms of that, let's say, let's say customers looking at and consumers looking at trading down or you know let's say looking for let's say you know value value opportunities we're seeing some let's say some elements of that but you know today i would say demand is proving highly resilient um you know that innovation for value hasn't hasn't really increased in any significant way. So there seems to be a fair bit of resiliency out there. We are seeing some maybe family deals and things like that appearing on the food service side. But as we sit here today, the inflationary impact on demand is not something that we're really seeing coming through the system right now. But of course, it's something that we're keeping a very close eye on.

And then maybe, James, on your question on inflation on non-raw material costs, it's fair to say for the other non-raw material costs, we're continuing to see material inflation, probably most notably, I would say, on the energy and distribution costs. And on distribution and energy costs, we've seen strong double-digit cost increases in 2021 and into 2022 and it's difficult to call it for the full year but we do see that continuing. Labour is a bit more varied depending on the local market dynamics. I think what is important though in the overall context of the inflation on non-raw material costs as well is that we're managing these costs and we continue to manage these costs via combination of pricing and cost initiatives. So there is a very significant amount of work underway right through the business in terms of managing the inflation as we pull various levers to recover the cost increases. And again, what I would say here is that As we said in the past, our objective is to maintain our cash margins just as we move through what is an exceptional inflationary period. And we're pleased that our pricing model is proving quite resilient in the context of that inflation.

That's great. Thank you very much.

We will now take our next question from Jason Mullen from Goodbody. Please go ahead.

Hi, good morning. A couple of questions, if you don't mind. Just in terms of the pricing recovery, are you managing to get pricing recovery faster than normal, or is it pretty much where you've normally been? And just layering on from that, are you noticing any changes customer reaction in terms of their purchasing? Are they necessarily bringing forward purchasing? Are you allowing them to do that? That's my first question. And then secondly, just around food waste performance, you call that out as a driver in the period, maybe just a bit more colour in terms of your portfolio there and what you're seeing. Thanks.

Thanks, Jason, and good morning. Maybe firstly on the, let's say, pricing and the impact there. Clearly, the level of pricing that we're at at the moment is unprecedented in my time. But I would say that I'm very pleased that at the I suppose the way we are executing in terms of, let's say, passing those price increases through, obviously, we've had to lean heavily into the models we have in place. We have to lean heavily into the relationships we have. And this is something now that's been going on steadily for more than six months. So I wouldn't call out any, let's say, major change, of course. The big change being the scale of pricing, but no major change in terms of how we're, I would say, executing on price increases itself. Your point on, let's say, customers potentially, let's say, ordering ahead and things like that. It's something that is, let's say, hard to measure, but it is something we're keeping a very, very close eye on. We have seen it at, let's say, in different places, but not to a meaningful level that I would call it out as something that, you know, let's say we need to be flagging. So it is something that we do engage with customers on if we feel that they are overstocking. I mean, the supply chain still is tight, so it's something that we do keep a very close eye on, ensure that, let's say, that we're not seeing too much overstocking. So it's not a factor, but something nonetheless that we're keeping a close eye on. Then in terms of food waste, We have seen a step up there on the level of innovation, I would say. It is a heightened focus. And I think... You know, of course, the sustainability, let's say, impact of reducing food waste clearly is a factor, but there's also a cost factor here as well. So certainly for customers, we're seeing a renewed focus. It has been there, but I would say a step up in focus on food waste, yes, driven by sustainability, but also driven by, you know, cost mitigation initiatives at customers. And I think we're extremely well-placed to engage with customers there. We have seen a step up in the pipeline. I think the acquisition of Nyaset in combination of the previous investments we've made has enabled us to develop hybrid solutions for customers to help them to continue to make progress on the whole area of food waste. So an area that we continue to be excited about and a step change in terms of the level of engagement with customers.

Thank you very much.

We will now take our next question from Farhan Bak from Credit Suisse. Please go ahead.

Morning, guys. Thank you for the question. I have two or three, but pretty quick ones, I hope. With food service growing mid-teens, if my math is right, you're growing in retail at around 3.5%, which is still pretty resilient given the you suggested that you are now at a high single-digit percentage ahead of pre-pandemic levels when it comes to food service. Could you kindly help us understand that despite food service recovering well into pre-pandemic levels, how you're able to continue to maintain the growth in retail and the outlook there going forward as well? Secondly, I want to come back to... to plant-based. Now, we're seeing a slowdown when it comes to the market growth across a number of categories. I know it's still a very small percentage of your sales, but could you give us an outlook for that category? And if you also expect it to slow down or you remain optimistic for various reasons that you can see in the market. And then one final one, could you remind me your sales exposure to China within TNN and whether you've needed to close facilities in the region that could impact sales going forward in the year. Thank you very much.

There's a lot there. I'll try and get through them as fast as I can. Thank you for the questions. Maybe just taking China first. You should think about it in the zone of 5% to 6% of group revenues. Like we said in the prepared remarks, volumes were lower in the first quarter in China. Volumes were lower in the zone of double digits zone in the first quarter as a result of the impact of the restrictions. No, we did flag that we did see some softening in China as we were turning into the year, and we did indicate that at the full year results. We have quite a geographic spread in China, Fahim. We have five manufacturing facilities, all of them outside of Shanghai. And I would say, as we sit here today, despite the lockdowns that are quite severe in parts of China, Four out of the five of those facilities are actually performing quite well, very well. And one of the facilities is running maybe at 50% to 60% capacity, and that's more driven by supply chain issues rather than anything else. So I would say certainly we're not insulated from the lockdowns or anything like that, but there is a resiliency there based on the geographic spread and based on the breadth of portfolio that we do have in China. Then back to retail. Yes, your mathematics is there, thereabouts. We came in on the retail channel just under that 4% target that we have there. And I think it's important to note that this is something we've been flagging for the last year or so, that we will outperform our historic growth rates in the retail channel. I just talked previously on food waste. Emerging brands continues to be a factor here. We've seen a lot of innovation coming through, especially in North America. Retailers are continuing to be very open to giving retail space, shelf space. to innovation. We've had a number of new launches. You asked me about plant-based. We actually had a number of new launches in plant-based in North America. Actually, a new emerging brand launched plant-based offerings across four categories in meat snacking, in meat alternatives, in beverage and prepared meals. And we were their key partners as they launched into North America. Which brings me on to the plant-based question. I think whenever there's a new category emerging, and plant-based still is a new category, there can be some ups and downs, pluses and minuses. But fundamentally, consumers want to eat healthier. Consumers want to consume less animal-based proteins. And they're absolutely open-minded as it relates to trying different options in the plant-based space. When we look at our pipeline, when we look at our customer engagement, plant-based continues to be, we see it as being an important opportunity for Kerry going forward. Still growing double digits, yes, absolutely, off a low base, but there continues to be challenges there in terms of the taste of the product, the quality of the product, the label of the product. And these are all things I feel we're very well positioned to be able to help that sector to move forward. So yes, there'll be some ups and downs, but in any new category, but it continues to be an area that we're optimistic about and feel we're well positioned to enable the industry to move forward.

Thank you, Edmund.

As a reminder, to ask a question, please press star 1 on your telephone keypad. We will now take our next question from Lauren Mullocks from Citi. Please go ahead.

Hi, thanks for taking my question, yeah, Lauren Mullocks from Citi. A couple of questions, please. So, firstly, just on your expectations for pricing in H2N1, TNN, I was wondering if you can give a bit more color on that and whether you're seeing any more visibility compared to when we last spoke. And then the second question would just be around M&A. Obviously, there's a lot of volatility on the backstrap, and I was wondering whether this means any more opportunities for you and just what you're seeing there and expectations. Thank you.

Good morning, Lauren, and I might take the pricing question before Edmund comments on the M&A question. So as it relates to pricing, we had overall like-for-like pricing, as you would have seen, of 6.6% in the first quarter, with taste and nutrition pricing of 4.6%. It's quite difficult to call the pricing for the second half just in the context of the uncertainty in relation to the inflationary environment, as I mentioned. But given that we expect raw material input cost inflation to be higher in Q2, we're also looking at – and that continuing into the second half – we're also looking at pricing being a little higher in as we move through the year. It's just too early to be specific for the second half, as we have to see where we are with new crops and we need to complete out the pricing for the second half of the year with a large number of customers, which is very much in progress. A couple of key points, though, that I would give you. We expect pricing to be similar or higher in the second half. We'll obviously update you further at the interim results when we have firmed up much of the pricing for the second half of the year. So hopefully that gives you those comments in combination with the comments earlier on our outlook on raw materials gives you an indication of pricing as we move through the year.

Good morning, Lauren, and thanks for the question. Just briefly on M&A, I would say we haven't seen any meaningful change in our pipeline. There continues to be good opportunities coming in our direction. At the best of times, it's hard to predict timing of transactions. And like you said, there is uncertainty there. It makes it even harder to predict timing. But I'm not calling out at this stage any meaningful change in the landscape as such.

Thank you. As a reminder, to ask a question, please press star 1. We will now take our next question from Heidi Versteinen from BNP Paribas. Please go ahead.

Good morning. If we step back, so your guidance is unchanged despite losing 1% from the Russia situation and China is probably a longer drag than you would expect it. So what parts of your business are you more optimistic about now that enable you to maintain guidance every year? That's the first question. Second question, could you talk about your outlook for the emerging markets, please? I wondered if you see any risk of trading down or price elasticity effects in these regions. And then lastly, we talked a lot about raw material inflation. Could you talk more specifically in terms of what are some of the key raw materials which are impacting you most? Thank you.

Good morning, Heidi, and I'll take maybe the first couple of those questions, and Marguerite can have her comments. Maybe just on the outlook first, as you know, as everyone knows, there are always many moving parts when it comes to the outlook of the year, and we have called out that we have reaffirmed our guidance. We do see a good overall demand environment. I would particularly call out the North America market, as you well know, is a very important market for us. But that demand environment continues to be strong. I suppose then in terms of China, yes, we did call it out in February. We are seeing impact of restrictions and we had factored that in at the beginning of the year, not to the extent that we've seen now, but we did have it baked into our guidance at that time. And like you say, Russia, Ukraine, the war in Ukraine, we have factored in that impact into our guidance as well. But clearly, we have had a good start to the year, and we do have a strong innovation pipeline, and food service is coming back probably a little bit ahead and a little bit stronger than we expected and any areas like food waste also have ticked up. So, you know, a lot of moving parts, but looking at everything, we feel comfortable reaffirming the guidance. In terms of emerging markets, you know, it's 27% of our overall business. Overall emerging market growth in the quarter, you know, at 7.9%. You know, usually that's more in the double-digit zone. Obviously, there's a China impact there. But that emerging market growth you know, does represent excellent growth in that time. And Middle East, India, Southeast Asia, they are offsetting, you know, let's say to some extent the impact of China.

And then Heidi, just on your raw materials questions, I guess my first comment I would make is that right across the categories, all categories, we're seeing inflation, very limited decreases. Maybe perhaps vanilla is an example where we're seeing the most significant increases are natural oils, spices, dairy ingredients, and cereal crops. And then obviously on the non-raw material side, predominantly on the energy side.

Thank you. As there are no further questions at this time, I would like to turn the call back to your speakers for any additional or closing remarks.

No, just to say thanks to everyone for joining us on the call this morning. If there are any further follow-ups, reach out to myself and the IR team here, and we all hope to wish you a good day. Thanks very much.

Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.