Beiersdorf Ag

ladies and gentlemen thank you for standing by welcome and thank you for joining the q3 results 2023 conference call for best of ag throughout today's recorded presentation all participants will be in the listen only mode the presentation will be followed by a question and answer session if you would like to ask a question you may press star followed by one on your telephone Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Jens Keisler, Head of Investor Relations. Please go ahead.

Thank you, Zico. And welcome to Biostoff's third quarter conference call. Here with me this morning is our CEO, Vincent Warnery, and our CFO, Astrid Herrmann. We would like to share with you Biostoff's business results of the first nine months of 2023. We will start with the presentation and the business review. But before we get going, let me make some technical remarks. Throughout today's presentations, all participants will be in listen-only mode. The presentation will be followed by a question-and-answer session. When you register for Q&A, please remember that there is a limit of two questions per caller. And with that, I will now hand over to Vincent.

Thank you so much, Jens, and good morning. It is my pleasure to welcome you to today's conference call regarding our business performance for the first nine months of 2023. This is the first time I'm talking to you from the Biosdorf campus, our beautiful new global headquarters that we officially opened in September and where we have now united over 3,000 employees at one site in the heart of Hamburg. We accompany this move and milestone moment for us with a dedicated corporate advertising campaign all over the city and in parts of Germany with a campaign centerpiece at the port of Hamburg. This is what you see on today's cover. Astrid and I will now take you through our financial figures and further strategic key development for Biosdorf. Let's start with our exceptional sales performance. Thanks to a continued strong performance in the third quarter and impressive dedication of our teams, we were able to deliver outstanding double-digit sales growth of plus 11.2% at the group level in the first nine months. The main driver of these remarkable results was the powerful momentum in our consumer segment. With 13.6% organic sales growth in the period from January to September, we are confident that we will outperform our previous four-year guidance and have therefore raised our guidance today. While the TEZA business faced another quarter with difficult market environments, especially in the electronics business, this was more than offset by the very strong performance in the automotive and consumer business, leading to organic sales growth of plus 1.3% in the first three quarters. Now to a more detailed look at the results in the third quarter. At group level, we maintained the growth momentum and achieved dynamic sales growth of plus 9%. The TESA segment contributed here with a slight growth of plus 1.5%. Similar to the results for the first nine months of 2023, the main driving force behind the overall strong group results remains our consumer business. Even though the situation for La Prairie and the luxury market continued to be difficult, the outperformance of the other brands helped sustain double-digit sales growth of 10.9% in this segment. Particularly impressive were again the extraordinary performances of Nivea and the Derma business with 15.8% and 22.2% organic sales growth in a quarter. In summary, this specific performance in Q3 is a perfect showcase for the success of our balanced and previously explained four-wheel drive dynamic. Buyers' Dove successfully and steadily moves forward, even if one will temporarily lose its traction. Our derma brands continue to drive the strongest net sales growth in the consumer business. The established recipe for success with e-commerce, dermatological innovations, white spots, and digitalization continue to pay off in Q3. We achieved growth of plus 28% in the online business. This was fueled, for example, by focusing our digital efforts for Aquaphor on TikTok advertising, leading to strong top-line growth and increased market share. Usurinson is performing extremely well and is winning significant market shares for the fourth consecutive year on a global scale with strong new innovation, as well as the existing core range. At the same time, we managed a very successful relaunch in the anti-edge category by extending or TI Middle range. We are now the fastest-growing anti-edge franchise globally, driving our market share growth and strengthening our leadership position in this area. Following the significant success in FACE, we will now also launch our very first TI Middle body product range. While all regions have been contributing to the strong demo performance, the tremendous results in LATAM, with a plus 43% sales increase, are particularly noteworthy. This underlines that our continuous focus on white spots proves to be highly successful. For example, we achieved outstanding results of plus 61% sales growth in a dynamic Brazilian market in the third quarter. Let's move to the La Prairie business. As already expected during our last presentation, we faced another difficult quarter with strong headwinds from various directions. First and most impactful was again the effect coming from the reduction of the Daigo business. As discussed last time, we think this is the right change in the long term and will help our brand equity, but in the short term, it is hurting ourselves. Additionally, we are still facing a negative market in domestic China and see substantial destocking in 2009. But at the same time also, we record sell-out growth there of more than 30%. Despite these challenging factors around the Chinese ecosystem, we see highly encouraging Q3 results in the rest of travel retail, which grew by plus 50%, primarily driven by Hong Kong, Macau, Japan, and Europe. Additionally, local markets in the rest of Asia accelerated further in Q3 and grew strongly. Hong Kong grew by 40% and Japan by 50%. We are also happy to see the U.S. back to growth figures. Although those results are not enough to cover the missing sales from China, they are clearly showcasing the strong equity of the brand and the continuously strong consumer appetite for La Prairie. I would like to note that our net sales performance is also strongly impacted by our decision to clean up and strongly reduce inventory at our retailers, particularly in travel retail. If we look at sellout, we see a turnaround in Q3, which is up mid single digit versus the prior year and shows an encouraging trend. This cleanup will allow us to start 2024 from a healthy base and accelerate particularly in the second half. On top of that, we'll be able to drive the business forward through a much stronger innovation pipeline, the opening of TikTok social commerce, continuous expansion of new physical stores in China, and our global flagship store strategy. Now turning to one of our strongest growth drivers in the last quarter and the last years, our emerging market region. Emerging markets with Usurin and Nivea continued to perform exceptionally, leading to an 18.3% increase in sales in Q3. Since 2019, Nivea has been the strongest growing brand in emerging markets, and since 2021, we have been the clear number one skincare brand in the region. Furthermore, we are now also the number one brand in face in Brazil and Mexico, with the latter leading the way with an impressive 48% overall sales growth in the third quarter. LATAM in general is our fastest growing region worldwide. Let me highlight the key success drivers of the last years on the example of Mexico. Firstly, we upgraded our manufacturing infrastructure in the region, leading to an impactful 60% capacity increase of our Mexican production site. Secondly, we focused on driving face care with a holistic combination of distinctive innovations, higher investments, especially into digital, and effective and strong execution. Year to date, we achieved an outstanding face care market share growth of plus 400 base points. Thirdly, our increased digital capabilities particularly in precision marketing with a full funnel focus, helped us to almost double online sales in Mexico in 2023. We are taking full advantage of the fast-developing e-commerce and digital environment in this important region, and we will continue to invest in the emerging markets. Moving to our European business, I am particularly proud to report the best sales growth quarter for Nivea in our history. This translates to double-digit sales growth year-to-date and an impressive 16.8% in a single third quarter. Top market positions, strong brand equity, and successful innovations are the main growth drivers behind these amazing results. We are proud to share more details now on the impressive performance of France and Germany in the third quarter, which both grew by 24%. The 24% sales growth for Nivea was the strongest quarterly growth ever in France as well. We're happy to see that our strategic investments are paying off with outstanding sales results. Powered by strong digital campaigns, our e-commerce business, especially with big pure player, is booming, and we achieved plus 72% online sales growth in the third quarter. Another focus in France is skincare. and especially face care, with 60% sales growth for our luminous series, our innovations around the hero ingredient W630 continue to outperform the market. Moreover, our core portfolio builds a strong foundation in the country and remains the main driver of total growth. We are happy to report broad-based success as all key categories are fueling this growth. The face category around the Q10 and cellular franchises are performing very well. The body and deodorant categories are also growing on the back of improved in-store presence and media activities. Coming to our next positive story, our home market in Germany. I am very happy to report that we have also seen the strongest sales growth quarter for Nivea in Germany in recent history. 2023 marks a tremendously successful year with stunning third quarter growth of 24% for Nivea. We achieved broad-based momentum in Germany by activating our innovations with greatness and growing our core portfolio of established products. On the innovation front, our most prominent example is the anti-spot treatment range Luminous 630, which outperformed behind the activation of our new line extensions and grew by 68%. This year, we also relaunched our repair and care line with new and improved formulas, packaging, and communication. The consumer response to our relaunch is outstanding, and we have increased sales tenfold versus our former repair and care line. At the same time, we have strengthened our best sellers. Some outstanding examples are Nivea's soft franchise. We'll come back to this success story in a second. And our Q10 series, which achieved sales growth of plus 42% with its core products complemented by the new wrinkle filler innovations. In general, Nivea has incredibly strong brand credentials in Germany. We have more than 50 million consumers purchasing our products every year. They love Nivea, and they have voted us the most trusted brand for the 23rd consecutive year. We enjoy number one positions in seven out of eight top categories. The German market is also our home market, the place where Biosoft was founded over 140 years ago. We have strengthened this commitment and the importance of Germany in our global infrastructure with a significant investment of over 500 million euros. On the one hand, into our new global headquarters, the Bioshoff Campus in Hamburg. On the other hand, into our new state-of-the-art production site in Leipzig. Both sites were officially opened in the third quarter of 2023. Why did we invest in our new campus? because only from exchange and inspiration, innovation and growth emerge. This is precisely what has made us and our brands, such as Nivea, Usurin or Aquaphor, so strong and unique for decades. Therefore, it was our goal to create an environment with a new campus that even better supports and fuels this exchange. At the same time, this new headquarters and the expansion of our research center on an area of 51,000 square meters in Hamburg also positioned Biosdorf as one of the most attractive employers in the global skincare industry. The Biosdorf campus is a new global heart of organization connected to all affiliates worldwide. Our new production center in Leipzig, which I also briefly touched upon in our half-year presentation in August, was officially opened in September. At almost 300 million euro, it is the largest investment Biosof has ever made in a production site. With a capacity of up to 450 million products per year, the site in Leipzig is already one of the largest Biosof plants, fulfills the highest environmental and technological standards, and creates the capacity for long-term sustainable growth of our brands in Europe. In short, We believe in Germany, wir glauben an den Standort Deutschland. Both these investments reflect the significance of Germany in our global plans. In a section of the German business, I touched on one of our global icons, Nivea Soft, which has gone through a significant transformation to enhance its sustainability profile. Before we launched Nivea Soft in 2022, the objective was to keep the performance and the sensorial profile while reducing the footprint and increasing renewability and biodegradability. And we achieved exactly that after four years of extensive development, 2,000 prototypes, tests with 10,000 consumers, and 100 sensory panels. The result, we managed to reduce the CO2 impact of the formula by 40%, increase the moisturizing effect from 24 to 48 hours, utilize 95% naturally derived ingredients and create a 98% biodegradable product, ultimately resulting in a more sustainable and a vegan formula. The results on the financial side was similarly impressive. We began to relaunch this iconic product in summer 2022 in nine countries, which resulted in very strong organic sales increases. As an example, Nivea Soft grew in Germany by 51% in the third quarter of 2023. The full global rollout in all markets will follow throughout 2024. Moreover, the general sustainability aspect, along with our new sustainable packaging, was an integral part of our communication strategy, which has been leveraged via a digital-first approach to also attract Gen Z to Nivea Airsoft. The outstanding numbers, for example, on channels such as TikTok, with 126,000 new followers and over 16 million views, highlight the success of this strategy. Right next to ambition and commitment in terms of sustainability, we also aim high on topics focusing on diversity, equity, and inclusion. Alongside international and cultural diversity, equal career opportunities for all genders are a particular focus area for us. To create an inclusive workplace and promote the target of gender parity, we offer a wide range of flexible working arrangements. On International Women's Day in 2021, we announced our Biosoft gender parity ambition. We committed to achieving a 50-50 gender balance leadership across all management levels worldwide by 2025. With this target in mind, I am partly thrilled to share today that following the already achieved 50-50 balance within my executive committee, As of September 1st, 2023, the representation of women in management positions worldwide increased to 50.3%. We achieved our gender parity ambition 18 months early, a great success and important steps. However, we are not done yet. We must maintain our commitment, continue our efforts and ensure that achieving 50-50 gender balance remains not just a milestone, a lasting legacy. An important contributor to this significant achievement is also the Bias of Initiative Female Leadership in Finance of my colleague and our CFO, Astrid Herrmann, who will now take you through our detailed financials of the first nine months.