Haleon plc

Good morning. Thank you for attending today's Hellion 2025 Part 3 Trading Statement. My name is Sarah and I'll be your moderator today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to ask a question, press star 1 on your telephone keypad. I'd like to pass the conference over to our host, Joe Russell, Head of Investor Relations. Please go ahead.

Good morning, everyone, and welcome to Halion's conference call for our third quarter trading statement. I'm Jo Russell, Head of Investor Relations, and with me today is Dawn Allen, our CFO. Just to remind listeners on the call that in discussions today, the company may make certain forward-looking statements, including those that refer to our estimates, plans, and expectations. Please refer to this morning's announcement and the company's UK and SEC filings for more details. including factors that could lead actual results to differ materially from those expressed in or implied by any such forward-looking statements. Following Dawn's remarks, we'll take your questions. Those listening to our webcast who would like to ask a question, you can find the dial-in details on page three of today's press release. And with that, I'll hand over to Dawn.

Thank you, Jo. And good morning, everyone. We've made good progress in the third quarter, driven by strong in-market execution of and the continued rollout of our innovation pipeline, leaving us on track for our full-year guidance. We delivered 3.4% organic revenue growth in the quarter, with a good balance between price at 1.8% and volume mix of 1.6%. Looking across the regions, we saw consistent growth and sequential volume improvement across EMEA and LATAM and Asia Pacific. With emerging markets in both these regions up 7%, led by India and strong growth in a number of smaller markets, including Thailand and Malaysia. In North America, despite the challenging consumer backdrop on consumption, we have outperformed the market each quarter this year with particular strength in oral health, respiratory, and digestive health. Oral health was once again the standout performer as Sensodyne continues to drive penetration with strong growth in a number of key markets, including the US, India and China. In India, we are continuing to make good progress by expanding our reach through expert coverage, which is up 70% since the start of the year. And we are bringing new innovations, including Sensodyne Pronamel to market, Our Sensodyne offering for lower income consumers is now in over 500,000 outlets across 10,000 villages. From a strategic perspective, we are making great progress against our objectives as outlined at our Capital Markets Day. From a growth perspective, we continue to focus on driving category growth through Innovation-led premiumization with a number of new market launches in Q3. Closing the incidence treatment gap. An example is Otrovin Nasal Mist, which is seeing an over 80% repurchase intent amongst users. And expanding reach to lower-income consumers with household penetration gains in India and Brazil. We also continue to deliver against our value creation framework. Our supply chain productivity agenda continues to move at pace. We have made significant progress across service, cost, and inventory. And since the beginning of 2024, we have reduced the number of our SKUs by 19%. And we have improved overall equipment effectiveness by double digit. This improves both gross margin and results in better working capital and improved cash conversion. On A&P, we continue to invest at healthy levels, as well as making progress on effectiveness and efficiency, where we are focused on improving both contribution to revenue and ROI. We are also continue to be disciplined in our cost base and are on track to deliver the remainder of our £300 million target savings this year. All of this provides us with flexibility and agility in our P&L, enabling healthy investment in our brands and further strengthening our innovation pipeline to drive future growth. And finally, we are delivering on our capital allocation principles, having completed in the quarter the £500 million we allocated to share buybacks for 2025. Now let's look at the quarter in more detail. Organic revenue growth was 3.4%, balanced between 1.8% from price and 1.6% from volume mix. Volume makes a sequential improvement in the third quarter in EMEA and LATAM and Asia Pacific. Reported revenue grew 0.7% in the third quarter, impacted by the drag from divestments of 2.3% and 0.4% from foreign exchange. It's worth bearing in mind that this is the final quarter with a drag on reported revenue growth from announced divestments. Now let's look at the growth drivers, starting with our performance across the categories. Oral health continued to deliver strong growth, up 6.9% in Q3. Growth was underpinned by innovation-led premiumization and geographic expansion, The key drivers of this were penetration growth in more than 80% of our major brand market combinations, high single-digit growth on Sensodyne, more than two-thirds of which came from volume and innovations, including the Sensodyne Clinical Platform and Pronamel Kids, and continued double-digit growth on Paradontax, driven by innovation and our continued successful rollout in China. With exciting plans for continued innovations across our oral health business, the runway for future growth is strong. BMS grew 4.9% in Q3, with double-digit growth in Centrum. Key highlights were premium innovations, including Centrum daily kits in China and Korea, strength in Philippines from increased distribution of lower-income consumer packs, and expanding distribution of local brands such as Caltrade in Latin America. In pain relief, we grew 3.7% for Q3. Panadol was up high single digit, underpinned by outperformance in UK and Southern Europe. Improved consumption in Voltaren, supported by innovations including Voltamed, a new natural herbal product. Growth in these brands was partly offset by Advil. Whilst consumption continues to improve following the activation of new campaigns, performance was impacted by short-term supply constraint on liquid gels, which has now been resolved. Respiratory health declined 1.8%, lapping elevated COVID cases in Q3 last year. The impact of declines in smokers' health moderated in Q3 compared to Q2. Otrovin continues to perform really well. with nasal mist bringing new consumers into the spray category in markets including Sweden, Poland, and the UK. Ahead of the start of the cold and flu season, we saw the selling of cold and flu products in Q3 at relatively normal levels. And digestive health grew 2.1%, including growth in Tums thanks to innovations including Tom's Gummy Bites Plus, a strong performance in Benefiber from our Grow What Feels Good campaign, and an improved performance from Eno in India. This performance overall was partly offset by a decline in Nexium. And finally, therapeutic skin health and other declined 1.1%, with strength in Batraban in China, offset by a decline in Fenestil from a weak mosquito season in Europe. Turning now to the regions, starting with North America. In North America, we delivered organic revenue growth of 0.4%, driven by 0.7% price, with volume mix down 0.3%. In the quarter, we continue to drive market share with our consumption outperformance widening as we progress through the year. Organic revenue growth was driven by continued strength in oral health, driven by innovation, including pronamel clinical enamel strength and successful activations, including gum expert on parodontics. a better VMS performance with centrum growth, and a strong performance from Benefiber and Tums. All of this was partly offset by respiratory health, which declined due to the continued weakness in smokers' health and from pain, with growth in Voltaren offset by a decline in Advil that I mentioned earlier. As we shared at half-year, We feel there is more growth to be had from our North American business. We are focused on a number of initiatives which will drive stronger results. These include further strengthening our innovation pipeline, accelerating net revenue management through strategic pricing, price pack architecture and channel mix. and reinforcing our relationships with partners through key activations. And collectively, these actions, combined with our focus on ensuring inventory is in an appropriate level by the end of the year, sets us up well to return to growth next year. Turning now to Europe, Middle East, Africa and Latin America. Organic revenue increased 5.3% with sequential improvement in volume mix of 1.8% and price at 3.5%. Growth was driven by innovation-led premiumization across the clinical platform on Sensodyne, Pronamel Kids, and Otrovin Nasal Mist. A strong performance in VMS. with Centrum up double digit underpinned by a number of new launches, including Centrum Vital Plus Nutrient. And in pain relief, you know, growth came from higher consumption of Voltaren and Panadol from innovation launches like Voltamed that I mentioned earlier. Looking across the region, Europe performed well. with particular strength across the pharmacy channel, which makes up the majority of our revenue in the region. Whilst category growth slowed, we continue to outperform given our innovation and excellent in market execution. Latin America grew double digit, driven by Colombia and Mexico. This was partly offset by weakness in Brazil. given a softer macroeconomic environment impacting category growth. And finally, turning to Asia-Pacific, organic revenue increased 5.1%, with strong growth across India and Southeast Asia and sequential improvement in China. Across the region, volume mix, which was up 4.4%, and price was up 0.7%. With a relatively stable consumer market backdrop, we continued to drive category growth and expand our offering to lower-income consumers. India delivered double-digit growth. This was largely driven by strength in Sensodyne as we further increased distribution and drive penetration. We expect continued strong growth in the fourth quarter, driven by a Salesforce investment and an improving macro environment. Also in the quarter, China saw mid-single-digit growth with continued strength in oral health and VMS, supported by key innovations, including Caltrate for Kids, Voltaren 2%, and Fenvid Gold. Across China, consumers continue to invest in health and wellness, and we are well-placed to capture on this trend, given our focus on building trusted brands, closing the incident treatment gap and innovation-led premiumization. Our products are available across different channels, including pharmacies, hospitals, and digital platforms, ensuring we can effectively serve a wide audience with different shopping habits. Digital has been a particular strength, growing 20% with our online to offline platform growing 25% and representing a third of our e-commerce business. We have now fully integrated the OTC joint venture and are realizing the benefits of a more efficient route to market. We expect growth in China to improve further in the fourth quarter, helped by distribution and increased investment in the faster growing e-com channel. Turning now to our 2025 guidance, We expect organic revenue growth of around 3.5%, assuming a normal cold and flu season. In North America, we expect growth in the second half to be broadly similar to the first half, with Q4 reflecting further action on inventory at slower growing channels. We expect this to be completed by the end of the year. In Asia Pacific, we should see an acceleration in Q4 driven by strong growth in China and India. And in EMEA and LATAM, we continue to expect a good performance driven by Europe with market share gains offsetting a slightly softening macro picture. And in Latin America, we are closely watching the macro environments given the consumer pressures in the region. Finally, the pace of progress on our supply chain productivity initiatives provide a strong underpin to our expectation of high single-digit organic operating profit growth. So, in conclusion, we delivered a good performance in Q3 and remain on track to deliver our full-year guidance. We are pleased with the actions we are taking in the US, which sets us up to return to growth next year. We're continuing to invest behind our brands to build flexibility and agility in our P&L by unlocking productivity savings. Altogether, this should give us confidence in delivering against our value creation framework and our medium-term guidance. Now let's turn to questions. Operator, please can you open up the lines?

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. To remove your question, press star followed by two. Again, to ask a question, press star one. And as a reminder, if you're using a speakerphone, just remember to pick up your handset before asking a question. Our first question comes from Guillaume Delmas from UBS. Please go ahead.

Thank you very much, and good morning, Don, Joe, and Rakesh. Two questions for me, please. The first one on North America. Don, I was wondering if you could talk a bit more about your performance in the region in the third quarter, which was clearly better than expected. I mean, what were the main drivers behind this sequential improvement? And were there any one-offs, restocking benefits we should be aware of that may have flattered your performance in the region in Q3? And still in North America, looking ahead, So your guidance for the second half to be similar to the first half seems to suggest around minus 1% organic cells goes in Q4. So maybe if you could talk a little bit about the reasons for this anticipated slowdown sequentially. And last question on North America. I know it's early days, but for 2026, what would be your expectations? Because looking at the last three years, you've been growing by an average of, let's say, 1.5%. wondering if your ambition is to materially accelerate next year versus this 1.5% run rate. And then the second question, shorter one, I promise, on Asia-Pacific, strong but decelerating sequentially despite India being in double digits. So it would be helpful if you could shed some light on the main moving parts behind this slowdown. You sound confident about a Q4 uptick. Do you think you can maintain this momentum going into 2026? Thank you very much.

Thanks, Guillaume. And good morning to you. So let me take your three questions in turn. And I'll start with North America. So as we said at the half year, we expect half two to be broadly similar to half one. And we're tracking in line with our expectations. As we know, it's a challenging environment in the US. We have outperformed the market in terms of consumption every quarter this year with particular strengths across oral health and digestive. And that gap has actually widened as we've moved through the year. Obviously, in our results, that's been masked by the inventory movements, the difference between selling and sell-out, as retailers have managed their inventory and working capital. And if we look at Q3, there's a few moving parts. So of the 220 basis points swing from Q2 to Q3, there's two main things to call out. The first one is the drag from smokers' health has halved. So in Q2, this was 160 basis points drag. In Q3, it's now 80 basis points drag. And the remainder of the difference comes from better performance in oral health and digestive health, as I mentioned. If we then look forward to Q4... If we're working on the assumption that we expect half two to be broadly similar to half one, that implies, as you said, around about a 1% decline in Q4. And that reflects tough comparatives from the prior year. Obviously, we're lapping the launch of Eroxon and we have some further action to do in inventory. So I think when we look towards next year, as I said, we expect the region to return to growth. You talked about where it had been historically. We would expect to get back to that level. I think as I referenced in the overview, we feel really good about the actions that we're taking in North America. Obviously, next year, we won't have the drag between selling and sell out. We would expect that to be, you know, we would expect that drag to kind of disappear. But as I said, I think, you know, with Natalie, I mean, Natalie is bringing deep consumer expertise and execution. We're focused on net revenue management, you know, got new innovations coming to market. So I think we feel good. about return to growth next year. So if I step out of North America and the U.S. and talk about AsiaPac, I'd say overall we're really pleased with our performance in AsiaPac. We've got double-digit growth in India. We've got mid-single-digit growth in China. And actually in those markets, we continue to perform incredibly well. Yes, we are lapping some phasing in the prior year in terms of North Asia, particularly given the price increase phasing that we put through in Japan last year. But actually, given the momentum in that region, given that we expect the macro environment to improve in India in Q4, you know, on the back of GST and on the back of tax changes, as well as our activations and expanded distribution, I think we feel really good about that. And I'd say the same in China as well.

And Dawn, just to follow up and to confirm, so no one-offs in the third quarter in your performance in North America?

Yeah, I wouldn't say that. I mean, I'd say in Q3, that's the quarter where we sell ahead of the season. So we're obviously shipping in in terms of the season. We have a price increase that goes live early November in the US. But I guess quarter three, there's still quite a big time lag between those two pieces. And if you remember... In terms of tariffs, we always said that they were in the low tens of millions, and we're taking supply chain actions to mitigate that. The other piece, obviously, that we see is the pricing action that we're taking.

Thank you very much.

Thank you. Our next question is from Oliver Nicolai from Goldman Sachs. Please go ahead.

Hi, good morning, Dawn, John, and Rakesh. Just two questions, please. First of all, at group level, you had a strong pipeline of innovation across many categories this year, in 2025. Looking at next year, how do you see the strength of the pipeline, and is there any Rx to OTC that we should expect as well for full year 26? And then just going back to your guidance, I know it's early stage, but you did mention that you assume a normal cold and flu season? I know that the US does not provide data at the moment, but perhaps anecdotally, how do you see things for the coming cold and flu season?

Yeah, so let me kind of take the innovation pipeline question first, Oliver. So, you know, as I said, across actually all of our categories, we've seen real strength in terms of our innovation pipeline. From an oral health perspective, the clinical range on Sensodyne continues to perform really well in terms of bringing new users into the category. We're actually, you know, gaining or holding share in more than 80% of our brand market combinations on Sensodyne. And actually, if you think about on clinical, we've got five variants. On average, you've maybe got two of those variants in a market. So actually, there's huge, huge runway in terms of oral health. I also talked about, you know, nasal mist in terms of respiratory, in terms of Otrovin nasal mist. We are, that innovation is recruiting new users. into the category. You know, I referenced purchase intent is now over, you know, 80%. And we've obviously got further rollout behind that. And maybe just to mention another one in VMS. So on Centrum, you know, we have a new claim in terms of slowing cognitive aging that we've just launched. as well as Centrum Essentials and Daily Kit. So actually across all of that, I could talk about that across all of our categories, we have an incredibly strong innovation pipeline that's actually performing really well, not only for us, but it's also growing the categories where we've launched it as well. I think in terms of switchers, You know, we've always said that, you know, that would be on top. We don't need switches to, you know, in terms of our growth forecast. So, you know, I would focus more on the innovations that I've talked about in terms of driving growth. We have, you know, we have two that we're progressing, but, you know, I mean, it just continues. It continues to progress. I wouldn't take that into account in terms of our growth. at the moment. I think if we look at the second question, your question in terms of cough, cold and flu and our guidance, I mean, it's fair to say we have a great portfolio in cough, cold and flu. It's an attractive and relevant category for consumers. As you know, it's more seasonal. We have shared in the pack, you'll see in the appendix, we've shared our normal chart that we show for the US in terms of incidences. What you will see from that chart is obviously no two years are the same. It depends on the size of the peak and the timing of the peak. Sometimes it can be in Q4, sometimes it can be in Q1. If you remember about a third of our business for cough, cold and flu is in North America. We've got about half in Amir Latam. And the thing I would say about that is, you know, the variability of when that peak happens and the size of the peak, that's the variability, you know, around 3.5%. guidance for the year. So we plan for a normal season, but we obviously stay agile from a supply chain point of view in terms of is it better or worse.

Thank you very much.

Thank you. Our next question is from David Hayes from Jefferies. Please go ahead.

Thank you. Good morning all. I'm just going to follow up on Guillaume's question about Canada and the US just to sort of maybe quantify or get the dynamics a bit more. So just to be clear, you're saying there wasn't really any pre-buying into the price increases that you've taken in Oral and Coffin Cold in the quarter. Is that a fair summary? And then just in terms of the channel dynamics, can you talk us through maybe the growth rate comparisons in new channels, if we call them that, like Amazon and Walmart, versus the pharma channels? And is there an element of... As the shift continues to happen, Amazon and Walmart are stocking up more as they're getting more of the market, or is there no really offset in that sense? And then the second question is just on the supply chain cost savings all running to plan and very extensive. Is there any incidence or evidence that that affects the service levels, the sales performance at all? Is there inevitability that as you go through some of those changes, there are some hindrances that will dissipate, or would you say it's a completely separate dynamic? Thank you.

Yeah. Hi, David. So I think, you know, I obviously talked about the pricing piece coming early November. Let me talk a bit more about some of the other moving parts in terms of inventory and the and the channel dynamic. So, as you know, we work closely with our retail partners on inventory levels. There isn't a one-size-fits-all, and it obviously depends upon consumption. So, for example, in the drug channel, our inventory is down double-digit compared to this time last year. But obviously, in faster-growing channels like decomps, You know, actually our inventory levels have increased, as you would expect, on the back of more traffic and stronger consumption trends. And just to say there's obviously more work to do in Q4 on inventory, as I referenced, and our objective is to exit the year in a clean place on inventory and you know, and obviously grow on the back of that next year. I think from a, you know, channel dynamic, I mean, we continue to see really strong growth in the U.S. actually on digital. You know, we're growing, you know, kind of double digit on Amazon now. And I think, you know, we continue to partner, continue to partner really well. In terms of your other question, in terms of supply chain, I mean, as I talked about in the brief, we're actually making progress across service cost and inventory. And the reason that we're doing that, A, we're working closely with our customers to but also we're rolling out new supply chain, you know, new systems and processes in terms of improving our forecast accuracy. And that's also helping us not only to reduce inventory, but also to improve service.

Thank you. Thank you. Our next question is from Jeremy Fialkow from HSBC. Your line is open.

Hi, morning. Thanks for taking the questions. I know we've had quite a lot on the US, but I wanted to ask one more, but more a general question on the consumer, because it feels like it's a very advocated environment where you've got certain things that are doing well, certain things that are struggling. So perhaps you could break your business down a bit and explain from a consumer standpoint what stuff is going well or what things are going badly and why that's the case. And then secondly, you could talk a bit more about China. As you say, you're kind of most of the way through this merger of the sales forces from the two businesses that you've brought together. So perhaps you could just talk about the progress that you've made there and how you think that you can be more effective over the coming quarters as a bigger combined organization. Thanks.

Yeah, thanks, Jeremy. So let me talk about the US first. So I think, you know, from a consumer perspective, I mean, we have seen consumption in the market, you know, track down this year. As I said, we are outperforming the market on consumption and that gap has widened. So in Q3, you know, we're outperforming you know, around 100 basis points versus the market. So I think, you know, we're tracking well. I think from a consumer perspective, what's important for us is that we are across all channels, which we are, so that we are where consumers are shopping. We have seen, you know, types of behaviors that we're seeing. We're seeing consumers buy either larger packs where the unit price is lower. We're also seeing consumers buy lower price point packs, for example, from dollar stores. So we're seeing them adjusting their purchasing behavior across the piece. And as I said, what's important to us is that we are across all channels so that we can cater for that behavior and also that we have a variation around our price pack architecture. In terms of China, we're really pleased with the joint venture. We have integrated the sales force. That means that we are able to optimize our visits to retailers. It also means that we are expanding our distribution. to more tiers in terms of cities in China. And we continue, you know, we continue to invest in that space. And I'd say, you know, I referenced it in the brief. We are across all channels in China. And we're actually outperforming the market across every channel. So I think, you know, there's a real... underpin in terms of excellence in execution in that market.

Okay, thanks very much.

Thank you. Our next question is from Celine Piety from JP Morgan. Please go ahead.

Thank you. Good morning. So I have two questions, but I'm sorry, I just want to clarify something on the U.S. So first of all, thank you for providing a clarity on Q4 expectation. But, you know, just to put it simple, you basically are getting at minus 0.5 for the U.S. this year. And I think sellout is somewhere between minus one and minus one and a half. So And you think that you are... So, like, it seems that your sell-in has been better than your sell-out, yet you talk about easy stock levels for next year. So, I just want to understand this part. Thank you. And then my two questions. First, on Latin American EMEA, if you can talk about the pricing evolution. We've seen that pricing has been a bit weaker, and you were commenting about softness in consumer there. So... We've seen sequential pricing deterioration. Should we expect that to continue? And maybe as well, whether that pricing in APAC you were mentioning, like in Japan, would improve or not in the fourth quarter. So that's on pricing. And then my second question is on the outlook for the year. So if I look at what you said for Q4, minus one U.S., EMEA good and then an acceleration in APAC, I get to a growth rate that's lower in Q4 versus the nine months. Is that the right level?

Thank you. Yeah, let me take the middle question first in terms of pricing. I think what we always see when we see a softer consumption environment, there's always the competitive pressure increases, the promotional activity increases. And as I talked about, we see a shift in terms of consumer behavior, either buying larger packs, cheaper unit price, or smaller packs in terms of smaller initial outlay. And that obviously impacts impacts pricing. The other thing I would say is actually in a mere latter, we have seen sequential volume improvement this year, which I think is good. The other thing to say is whilst, you know, we are seeing softness in consumption, actually in Europe, we're pretty resilient. You know, I'd say we're holding our own and oral health is the one category, you know, that is not seeing the same level of softness. And the other thing to say in Europe is given our strengths in pharmacy channels, you know, we've also got the resilience around that as well. I think when, you know, when I look at the outlook for the year, you know, I talked about an acceleration in Asia-Pac, particularly in India, and strong continued growth in China. In Europe, I talked about challenging consumption in some categories, but actually a resilient performance from us in terms of holding up. LATAM, we're obviously monitoring the macro environment. Whilst we had a good performance in Q3, driven by Colombia and Mexico, you know, that macro environment, we're watching that closely, you know, and obviously I've talked through the moving parts in North America and what's important there is that half two is, you know, broadly similar to half one. In terms of consumption in the US and sell in and sell out, I think what I would say is, you know, we said at the beginning of the year, we had, you know, roughly 200 basis points difference between sell in and sell out. We've seen that gap narrow as we progress through the year. And as I, you know, as I talk, that's been different across different channels, depending upon the consumptions in those channels. I think the other thing to say within that, I mean, you know, oral health continues to be strong consumption. We continue to see strong growth. And in DCOM, you know, I talked about our continued strength. I mean, our top 18 brands, you know, that, for example, that are on Amazon, 16 of those, we have a higher share online than than we do offline. So I think that reflects the strength in that channel. And as I said, Q3, we always have the selling of cough, cold and flu. But as we look to Q4, you know, we want to close that final gap in selling, sell out. You know, I probably think about that depending upon consumption. It's probably broadly another week, I think, to come out. And as I said, what's important for us is that we exit the year clean and that we return to growth in North America next year.

Thank you. Thank you. Our next question is from Carl Zoot from Kepler Shebrooke. Your line is open.

Yes, good morning. Thanks for taking the question, Alex. I have a follow-up question with regards to the contribution of innovations in the third quarter and how that might look going forward, because you highlighted a lot of things that you're enthusiastic about, partly already answered on it. But can you quantify a bit more the contribution during Q3, some of the listing of it, and then how that might develop in the quarters thereafter? And then the second question is on pain. The paying franchise looked better, but the U.S. was quite soft. So can you speak about your paying franchise, what goes well, and how should we look at the U.S.? Thank you.

Yeah, let me take the paying question first. I think, look, we talked about Advil. We launched our No Pain, More Gain campaign. you know, in July this year. That has, you know, we have seen improvement in some of our key metrics. So purchase intent is up. The messaging around relevancy is also up. And actually ahead of the benchmark, yes, we did see some supply issues in the third quarter in terms of Advil liquid gels. but that has now been resolved. And I think, you know, on Advil, what I would say is whilst it's early days, we are seeing green shoots in terms of, you know, in terms of some of the metrics on Advil, you know, and I think that should give us confidence, but it is, you know, it is early days. I think when we look at innovation, You know, I talked about it. You know, we had a number of new market launches in Q3. You know, that's making a good contribution in terms of our growth and market expansion. I talked about some examples earlier, you know, in terms of our clinical range, O-tubin nasal mist. You know, if I give some others, I mean, you know, across pain, If I reference pain a bit more, I mean Voltaren 2% in China and natural Voltamed products in Germany, you know, and also on Panadol, you know, in terms of whether it's dual action or whether it's our Panadol 4-CAM in Indonesia. So actually what you see is across every category, innovation plays a really important role in in our growth strategy, not only in terms of reaching lower income consumers, but also in terms of driving premiumization through innovation. And I think that the science and the strength of the product differentiation is also what's setting us apart in terms of driving growth. So this is a really important growth lever The contribution to growth varies across the categories, but we have significant headroom in terms of continued rollout across all of the pipeline of innovations that we have.

Thank you.

Thank you. Our next question is from Mitch Amanezi from BNP Paribas. Your line is open.

Morning. Thanks for taking my questions. I have two, please. So the first one would be on how you view the category in general terms. From the moment that Helion came to market, you were saying that consumer health is relatively insulated from downtrading pressures. This is a category where brands matter a lot. Has 2025, and particularly the U.S. market, the evolution there, changed your view in any sense on this category being not so much affected by down trading? And I guess a follow-up question on that is that do you, in the plus 46 million term growth target, has the regional composition of your growth expectation changed compared to 2022? do you expect less growth to come from North America and more growth to come from the other two regions or not? Thank you.

Thanks, Misha. So I think, look, I think in terms of consumer health and in terms of our categories, I mean, there's incredible growth opportunity across all of our categories that we talked about at Capital Markets Day, whether it's broadening our reach to lower income consumers, whether it's driving premiumization through innovation or whether it's closing the incidence treatment gap. So I think we continue to see huge, huge headroom in terms of category growth. Consumers are increasingly more aware in terms of health. They're more focused on health, you know, and improving kind of daily lives in terms of health. So I think that continues. I think I would say also compared to other categories, we are a lot more resilient. I mean, you see that. And if you think about oral health, it's been pretty resilient this year in particular. Obviously, we're not immune to the macro environment. Of course, that will have an impact. But I think what's important is the relative resilience versus other categories that's important. So I think that would be one thing to say. I think in terms of our regional expectations, I mean, we continue to see runway in terms of emerging markets growth, and you see that in our performance. In terms of North America, I mean, the size of the North America consumer health market, the consumer trends that underpin it, we, you know, we do see growth potential in North America. We have said that we think there's more runway to go in terms of what we've seen versus our historic performance. And that is the proactive actions that the team are taking to ensure that we unlock that growth and that it plays an important role in terms of our 4% to 6%. So I think we feel really confident in terms of our medium-term guidance of 4% to 6% growth.

Thank you.

Thank you. Our next question is from Tom Sykes from Deutsche Bank. Please go ahead.

Yeah, thank you. Morning, everybody. Sorry, I'm going to flog the U.S. horse again. But just in terms of the drag from the drug channel in Q4 versus Q3, are you expecting that drag to be similar? And then in terms of the budgeting for next year on the drug channel, are you saying that your inventories are in the right place for the existing drug channel footprint? Or are your inventories below where they would normally be because you're expecting the drug channel sellout to be worse next year? And then please, just on China, sorry, I may have missed what the offline, online exposure you have is. And sorry, whether you gave the sort of old e-com versus sort of dealing live streaming, new e-com split. If it's possible to have that, please. And just, are you targeting 11.11 in a different way to last year? Because that seems to be quite important to the Asia-Pac or China pickup, please.

Yeah, let me take the China first. So as I talked about, we are present across all channels in China. e-com represents broadly, you know, a third of our business. Within that you know, in terms of the different parts of that channel. Obviously, Doyen, we're growing, you know, that channel is growing very fast and we are growing, you know, incredibly fast on the back of that. Online to offline actually also continues, you know, we have strong presence there that also continues to drive strongly double-digit growth, you know, and the same on e-coms. So, I think we're across, you know, we see growth across categories driven by innovation on periodontics and VMS in terms of DCOM in China. And I think, you know, we're well placed to unlock that growth. And in terms of 11.11, you're right, it is an important event. It's a good growth driver. We are increasing our investments. in the quarter. And that is one of the reasons that underpins our confidence in terms of Q4 growth in China. I think in terms of the US, I mean, I talked about it. We're working closely with retailers across every channel in terms of ensuring that we exit the year with the right level of stock so that we can grow next year. Obviously, it's not an exact science because it depends on consumption. But I think what we're demonstrating is that we're working closely, you know, we're being agile to what's happening in terms of the different dynamics. The other thing I would say is this dynamic is not new. We have been dealing with this dynamic for a quite successfully and we will continue to work with that dynamic in terms of where we're seeing stronger growth in some channels and where we're seeing less growth in other channels. And as I said, I think what's important for the US is that we expect to see a return to growth next year.

Yeah, and sorry, Dawn, just on that, just the drag from drug Q4 versus Q3, is that viewed as being similar in the US?

Yeah, I think as I referenced earlier, you know, in Q4, we still got more work to do in terms of ensuring that inventory lands in the right place. And, you know, I talked about depending upon consumption, The way to think about it is broadly another week to come out in terms of inventory.

Okay, thank you.

Thank you. Our next question is from Warren Ackerman from Barclays. Your line is open.

Yeah, good morning, Dawn and Joe. It's Warren here at Barclays. So I got kicked out for a little while, so I didn't catch everything that was being said. But can I just clarify a couple of things? On the oral care business, the 6.9% in the quarter, that was a bit lower than consensus, Dawn. Is there anything weird going on with Aquafresh and the denture business outside of Sensodyne that's worth calling out this quarter as the first one? And then secondly, are you able to say something about the kind of promo environment that you're seeing in, say, USVMS and maybe in Germany? Our data's showing... Both are ticking up quite substantially. Just wondering whether you've got any comment on that. And then finally, on the inventory side of things, you said that the... And again, you might have answered this already. You said that you're outperforming the market in the U.S. by 100 bits. I think you said 100 bits. But we can see that the U.S. sellout this quarter is down 1.5. So if you're outperforming by 100 bits, are you saying that the U.S. market sellout this quarter is down 2.5%? And if that is the case... Are you able to maybe highlight where the market in the U.S. has slowed sequentially? I'm still not 100% clear on that piece. Thank you.

Yeah, so let me talk about oral health. I mean, you know, I think you're right. We have seen a softer performance from Aquafresh, from Denture Care, and obviously we're lapping oral. We're lacking the phasing pricing from the prior year in Japan. But as I said, I think we feel really positive about oral care. We're performing incredibly well. Yes, in markets, as I talked about, where you see increased competition, and promo, we're seeing some of that, particularly, you know, you referenced VMS. So when consumption is soft, competitive intensity increases and alongside that, you know, often promo increases. We are seeing that in VMS in the US. In terms of the inventory piece, I mean, yes, you're right. The consumption has continued to continue to drop, you know, in North America. So, you know, the number that you quoted in Q3, that would be broadly consistent with what we're seeing. And as I said, we, you know, we are outperforming the market by, you know, around about 100 basis points in the quarter. The main, you know, the main drag that's coming from, I mean, you talked about it. I mean, VMS, You know, we're seeing increased promo. That's one of the main reasons why the category is coming down. The other category to talk about would be respiratory. Because if you remember, we're lapping a COVID spike last year. So I think between those two categories, they're probably the biggest drivers, you know, in terms of why would the total market consumption drop. be lowering Q3 or worse in Q3 than Q2. But as I said, in terms of our performance, we continue to outperform in terms of consumption, and that outperformance has improved every quarter this year in the U.S.

Okay, thank you. Can I just clarify one other thing, Dawn, just quickly? So just the sell-in, sell-out thing. So the sellout we think or we can see was down 1.5%. This calls on a scanner data, but you've printed 0.4% organic growth. So that looks like a 200-bit restock compared to a 200-bit destock in the first half. So sequentially, that's 400 bits. And that includes the farmer destock. If you actually look at the kind of grocery stock, it's probably even higher than 200 bps, maybe 250, 300 bps. And you're saying, I think, that a lot of that is not one-off. It's due to the fact that your inventories are naturally going up more in the faster-growing retailers like Amazon. So can you just clarify that, that actually that is the case rather than there's been buying ahead of pricing or any kind of weird kind of really early ordering? I'm still not quite clear on that piece. Thank you.

Yeah, I think there's a couple of things to say. I mean, I referenced that different channels were in different spaces. I talked about, you know, we'd reduced inventories in drug channel versus the prior year. And we'd also seen an increase in inventory in growing channels like Amazon, you know, which is a double digit in the quarter area. The other thing to say, obviously, in Q3, you've got the selling of cough, cold and flu. And I think that muddies the water a bit in terms of selling and sell out. And obviously, as that stock sells through, as we progress through Q4, and then obviously depending upon the season, then we'll see the restock. But I think the important message around this is that we are making progress in terms of, you know, in terms of reducing the gap between sell-in and sell-out. We expect to finish the year in a clean position, and we expect North America to return to growth next year.

Got you. Thank you.

Thank you. Our next question is from Edward Lewis from Rothschild & Gold Redburn. You may ask your question.

Yes. Thanks very much. Just two quick ones from me, I guess. Just looking at volume mix growth in Asia-Pac, I think it was up 4.4% this quarter and a 7.1% growth in the prior year. I guess there would have been some headwind potentially from GST in India. So it would be interesting to hear, Dawn, just sort of the difference there between vol mix breakdowns. And then just on the SKU reduction, I see that's down to 19% now against minus 16, I think it was at H1. How much impact would that have had in the quarter on volumes, if any at all? And is that, do we expect more SKU reductions going forward?

Yeah, so if I take the volume mix, the volume mix question first in Asia PAC, I mean, at You know, if you look historically, three quarters of our growth, two thirds to three quarters of our growth in Asia Pac is volume led. So I think it's a strong, strong quality growth. And we continue, you know, we continue to see that. And that's an important piece in terms of reaching, you know, lower income consumers. broadening distribution, and that is driven by India and China, and we see double digit volume growth in China. In terms of the SKU piece, you're right, we are making really good progress on this, and that is a key driver in terms of our productivity agenda. What we are doing as part of that exercise, whilst we are reducing the number of SKUs, what we're also thinking about is how do we ensure that for the consumer and for the shopper, a few things. One is that we have the range of our portfolio in terms of what consumers want. The other thing that we're doing is ensure that we're improving the shoppability of our displays, and our products are easier to find on shelf. So yes, there's an efficiency play with the SKU reduction, which is helping to take costs out, remove complexity in our supply chain, reduce inventory. But there's also a consumer benefit in terms of shopability, improvement on shelf, you know, and being really clear in terms of what are the range of our products. So as I say, from a volume perspective, I think we're managing that, you know, we're managing that really well. You know, and as we're taking SKUs out, what we're seeing is increased, you know, sell out of kind of our main runners or our top SKUs, which is what you would expect to see. And I think in terms of GST in India, actually we didn't see a negative impact from that. It's an incredible job that the Indian team have done in terms of managing the execution of this across all of our packs at short notice. It's a reflection of the close partnership that we have with our customers, with our distributors. And the team have managed it incredibly well. And as I said, you know, we would expect that, we'd expect the benefit from that in terms of consumer offtake as we move into Q4 and as we move into next year as well.

Thank you.

Thank you. We have a follow-up question from David Hayes from Jefferies. You may ask your question.

Hello. I'm going to just flog this North American horse one more time if I can, just in terms of just getting into the fourth quarter guidance of minus one and some of the context that you said. So broadly speaking, I know I'm trying to simplify it probably too much, but broadly speaking, is the assumption that consumption will be basically flat year on year and then the one week reduction in the farmer channel will be, let's say, 100 basis points of headwinds and that's how you get to the minus one if you're thinking about the offtake shipment levels. Is that broadly the picture? Thank you.

I think consumption is quite difficult to call and I think there's a few moving parts. The first thing is obviously we've got a price increase, a modest price increase going live early September. We obviously need to see how the season plays out you know we've talked about the variability in the cough cold and flu season and what we've said is you know globally on a full year basis that could be you know in terms of the variability either side of a normal season that could be in the region of 50 to 100 basis points so I think that you know that that's probably a big swing factor I think you've got the price increase You know, we could assume, you know, in that number, no change in consumption. But honestly, you know, depending upon what happens with cough, cold and flu, as I talked about, there could be some variability around that. You know, and as I said, I think the important message on North America is that we expect to end the year with clean inventory levels and get North America back to growth next year.

Thank you.

Thank you. We have a follow-up question from Warren Ackerman from Barclays. Your line is open.

Hi, Dawn. Again, it's Warren here. Just on pricing, are you able to kind of indicate to us, Dawn, roughly when your pricing lands in North America, how much pricing you're taking, and how you feel your pricing is timing I guess relative to peers and are you building in any kind of elasticity assumptions on that on that on the volume elasticity assumptions on that pricing that you're taking that's just a one one follow-up and then the second one you may have mentioned this already on Brazil did you did you break down or can you break down what you're seeing in Brazil by by category in terms of like the market's obviously slower but is there any kind of specific kind of category call-outs where you're seeing kind of more local competition or any other kind of sort of change in trend in that country? Thanks.

Yeah, I think in terms of the pricing, so as I said, the pricing goes live. It's effective at the beginning of November. You know, it's across parts of our portfolio. It's kind of, you know, it varies across SKU, but I'd say kind of local low single digits. You know, it's mainly across oral health and cough, cold and flu. I think we, you know, given that the market has moved and the others have taken pricing, you know, it's hard to call on elasticity, but I'd say given that the market is moving and then, you know, you would expect to see a lower level of elasticity. And as I said, the strength of our brand, so why do consumers, you know, buy our brands? They're buying it in terms of the science, the strength of formulation and the differentiation in terms of, you know, the delivery of our brands. And obviously the pricing is related to tariffs. You know, as I said, we're mitigating the tariffs through supply chain initiatives. And then there's a small amount of mitigation coming from price. If I think specifically about Brazil, I mean, it's well documented in terms of the macro environment in Brazil, in terms of interest rates and the challenge for consumers. I think in Brazil, you know, we have a strong performance. We're outperforming the market in terms of pain and VMS, but the market is soft. I think the area of weakness is specifically coming from Eno, actually, in Brazil. But as I say, I think across LATAM, we have a strong performance in Q3, up double digit. We continue to outperform, but we are watching... You know, we are watching the macro environment in LATAM because it is changeable. But, you know, I think long-term LATAM remains, you know, and will remain a key growth driver, you know, for us.

Super, Dawn. Thank you.

Thank you. There are no questions waiting at this time. So I'll turn the conference back over to Dawn Allen for any further remarks. Okay.

Well, thank you, everyone, for your time and interest in Halion. We look forward to meeting a number of you at our up-and-coming conferences. Our next formal update will be our full year results in February. If you have any further questions, please contact our investor relations team. Thank you.