Glanbia Plc Ord

Good morning and welcome to the Glambia 2024 full year results call. During today's call, the directors may make forward-looking statements. These statements have been made by the directors in good faith based on the information available to them up to the time of their approval of the Glambia full year 2024 results announcement. Due to inherent uncertainties, including both economic and business risk factors underlying such statements, actual results may differ materially from those expressed or implied by those forward-looking statements. The directors undertake no obligation to update any forward-looking statements made on today's call, whether as a result of new information, future events, or otherwise. I'm now handing the call over to Hugh Maguire, CEO, Glambia PLC.

Thank you, Liam. Good morning, everyone, and welcome to the Glambia full-year 2024 results call and presentation. I'm joined on today's call by Mark Garvey. I will give a business review of 2024, and Mark will then cover the financials and outlook. At the end of the call, we will be very happy to turn the call over to you for questions. I'm pleased to report that the group delivered a strong performance in 2024, with adjusted earnings per share growing by 6.8% to $0.140. This was driven by strong consumer demand for our better nutrition brands and ingredients, with good volume growth across our portfolio. The group delivered revenues of $3.8 billion, representing an increase of 5.8% on a pro forma constant currency basis. In Glambia Performance Nutrition, we continue to see good consumer demand for our performance and healthy lifestyle brands, and we're particularly pleased with the continued growth momentum in our Optimum Nutrition and Ice Pure brands, which both delivered double-digit volume growth in the period. In Glambia Nutrition Solutions, we saw good customer demand across our end-use markets, delivering volume growth across our pre-mix and proteins businesses. The group delivered pre-exceptionally with a DA of 551.3 million, represented an increase of 11.8% and EBITDA margins of 14.4%, an increase of 80 basis points with margin expansion across both GPN and Nutrition Solutions. We continued our strong track record of delivering returns to shareholders by raising the dividend by 10% and returning 102 million in 2024 via our share buyback program. We currently have a 50 million program ongoing And we're also very pleased to announce today that the board has approved a further 100 million share buyback for 2025. As well as delivering a strong operation on financial performance, 2024 was a year of strategic evolution for the group. We progressed our M&A agenda with the acquisition of Flavour Producers, which was completed in April 2024. And in November, we announced a group-wide transformation program to drive efficiencies across the group's new operating model and support the next phase of growth. In 2025, the group will operate three segments, performance nutrition, health and nutrition, and dairy nutrition. The new structure is designed to further simplify our business, increase focus on high-growth, end-use markets, and provide greater insight into Glambia's value drivers and growth opportunities. We have made significant progress on our transformation program, which will deliver across four work streams as we optimize our operating model, unlock supply chain efficiencies, accelerate our digital transformation, and optimize our portfolio to ensure we are focused on the highest growth opportunities. As part of this evolution, we have made the decision to exit the SlimFast brand and our body and fit direct to consumer e-commerce business, and I will speak more on this and the broader transformation program shortly. As outlined at our quarter three trading update in November, we've seen a significant increase in high-end weight costs, reaching unprecedented levels. As a group, we have to navigate this in the second half of 2024 with increased weight costs impacting the GPM business and benefiting the nutritional solutions business. We believe these headwinds are transitory and are determined to navigate these with resilience and agility. We have identified a number of initiatives to somewhat offset this inflation in 2025, and I will speak more about this shortly. But first, turning to performance, GPM delivered revenue growth of 0.5%, EBITDA growth of 8.3%, and an EBITDA margin of 16.9%, which represents an increase of 120 basis points versus 2023. The revenue growth was driven by a 2.9% increase in volume, a 4.2% decrease in price, and a 1.8% impact from the 53rd week in 2024. Excluding Slimfast and Body & Fit, GPN delivered constant currency revenue growth of 5.2%. From a regional perspective, America's revenue is marginally down versus last year due to the weight management headwind and increased competition in the second half of the year. Our international business delivered growth of 2.3%, driven by strong volume growth in the optometrician brand across key markets, particularly across Asia Pacific, offsetting some competitive dynamics in the online channel in Europe. The growth in our international business continues to be supported by increased investment and the scaling of our in-market capabilities. We're pleased with the continued growth momentum in Optimum Nutrition and iSuffure, both delivering double-digit volume growth, which was offset by challenges in our other portfolio brands. Pricing declined by 4.2%, driven by our promotion activity, which continued into the fourth quarter, and some specific tactical pricing initiatives which saw a good volume uplift. We continue to invest in our brands, prioritizing the protein growth brands, maintaining a double-digit marketing investment. We're pleased with the EBITDA progression, with GPN delivering EBITDA of $305 million, an increase of 8.3% constant currency over a prior year. EBITDA margin was 16.9%, representing an increase of 120 basis points. This expansion was driven primarily by lower way input costs in the first half of the year, and a continued focus on operating efficiencies and margin optimisation. Optimal nutrition continued its global momentum, delivering revenue growth of 7.5%, including volume growth of 10.4%. This volume growth is marginally ahead of our expectations and was supported by continued promotion activity and marketing activation in the fourth quarter. U.S. consumption grew by 0.4% as we continued to see good growth in the FDM channel, offset by continuing softness in the specialty channel and increased competitive dynamics in the club channel. We continue to increase our retail distribution, and I'm pleased to say that we've seen good growth across our key distribution metrics in our USFTM measure channels, growing our TDP and ACD. The brand's household penetration also grew, supported by the increased marketing activation and visibility. Our focus continues to be on driving recruitment and conversion, broadening the brand's appeal through increased campaign reach and education. The Optimum Nutrition brand enjoyed increased visibility via its partnership with the McLaren Formula One team and its strong digital engagement via online educational tools such as the Optimum Coach and the Protein Calculator that both provide personal advice for consumers. In terms of innovation, we've launched a number of line extensions in the year across our protein and energy offerings, including new flavors of Guaico standards, creating amino energy and multiple smaller pack sizes, including stick packs. addressing affordability. We are particularly pleased with the performance of creating, which is delivering good growth globally, driven by distribution gains and key channels as energy sets continue to expand. And we're also working on Wago Standard 2.0, targeting additional attributes as extensions to the brand. Looking into quarter one, while we expect competitive dynamics to persist, particularly in the club channel, we have strong new marketing campaigns, such as Pretty Damn Good in the US, featuring women's basketball star Cameron Brink, and mid-busting in international markets, featuring a range of elite athletes. March sees the start of the 25 Formula One season, and Optimal Fishing will be continuing its partnership with McLaren with activation at the Australian and Chinese Grand Prix. Turning to our healthy lifestyle portfolio, Isofure Pink and Amazing Grass Brands delivered revenue growth of 2.3%, and US consumption growth of 3.3%, building on a strong comparison. Isofure, Our high-protein, low-carb brand, grounded in purity, continues to do well delivering double-digit volume growth in the year. The brand continues to resonate with nutrition-conscious consumers who value purity, high quality, and clean ingredients to support their healthy and well-balanced lifestyle. And our Add Less, Do More campaign has continued to roll out in digital channels and through social influencers. We continue to drive distribution, and while off a low base, We're pleased by the good growth we've seen in ACV and TDP, and it's also positive to see household penetration grow strongly. From quarter one, 2025, a new look master brand and formula for IsoPure will be launched, increasing brand visibility, improving flavor appeal, and connecting across the different product groups. I think approaching bar business continues to compete in a bar category with a large addressable market, but a highly competitive environment. Innovation in this category is important, and we continue to extend Think Innovation with Crispy Squares and leverage the brand's partnership with Girl Scouts USA. We are currently rolling out our new marketing campaign, Don't Think Think, which went live at the beginning of 2025. Amazing Grass, the smallest part of our Healthy Lifestyle Brands portfolio, delivered software volumes in the period against heavy promotional spending from new entrants to the category. We just relaunched Great Taste in New Formula of our green superfood, And in the coming weeks, we'll be launching a new innovation with our new Sweet Greens line, with efficacy and sweeter taste to appeal to mainstream consumers. Moving to our second growth platform of nutritional solutions, revenue grew by 14% in the year on a constant currency and pro forma basis. This was driven by a 3.6% increase in volume, a 0.4% increase in price, a 7.7% increase from the impact of acquisitions, and a 2.3% increase from the 53rd week. The price increase was driven by strong dairy market pricing, somewhat offset by negative premix pricing. Volume growth was fueled by a good performance in our premix and protein solutions businesses. Demand remains strong in our priority end-use markets, with sustained demand from customers for vitamin and mineral fortification and high-protein healthy snacking. The functional beverage category continues to experience strong growth internationally, particularly in the EMEA region, and we're continuing to see good demand for our high-protein crisp products in bar and cereal applications. We're continually investing in innovation and expanding our capacity to provide the best solutions for the evolving needs of both consumers and customers. Flavor Producers, our recently acquired flavors business, continues to perform well with the integration on track. Nutrition Solutions' EBITDA was $200 million, up 27.2% constant currency. EVDA margins are strong at 19.8%, an increase of 200 basis points versus full year 2023 pro forma. Margin expansion was driven by strong dairy pricing with the protein solutions business. Turning to 2025, we've made a change to our operating model as we separate Lambion Nutritionals into two new segments to allow greater focus on our higher margin growth priorities, further simplifying our business and better serving our growing customers and end-use markets. The healthy nutrition business comprises the pre-mixed solutions and flavor platforms and focus on priority high-growth end-use markets such as vitamin minerals and supplements, active lifestyle nutrition, and functional beverages. The average growth rate in these markets is approximately mid-single digits. We partner with both established and emerging brands in product development, offering a unique proposition by combining flavors with key function ingredients and application science. This is a business we've grown organically and via acquisitions in recent years to become a scale operator. And we will continue to target acquisitions to further grow this segment. The dairy nutrition business combines our US cheese and nutrition solution protein portfolios. The business will operate as a standalone business with dedicated leadership team from 1st of July with the goal of optimizing profits and returns as a leading dairy business. This platform is largely one integrated manufacturing footprint with a high supply and operational interdependency, and is also the route to market for a joint venture supply of whey and cheese ingredients. This business provides a scale leadership position in dairy as the number one producer of whey protein isolate and the number one producer of American-style cheddar cheese. This new structure will also provide enhanced visibility on the impact of whey across our ingredients and consumer businesses and give better visibility to the different margin and growth profiles of both businesses. I would now like to give an update on high-end weight, which, as a reminder, is a key input cost for GPN and a significant component of the revenue and profit in dairy and nutrition. As we have previously outlined, high-end weight prices trended upwards in the second half of 2024, and this has continued into 2025. This will be a net negative to group earnings, as the impact in GPN will only be somewhat offside by upside in dairy and nutrition. For GPN, at the time of our quarter three results in November, we procured until approximately April at elevated prices. As we've been recently engaged in wage suppliers for further wage procurement, it has become clear that the market prices for high-end wage have continued to increase to unprecedented levels beyond what we had previously planned for. For perspective, high-end wage prices are currently over 20% higher than the peak prices we saw in 2022 when wage prices were last elevated. Given the new supply of high-end whey coming online in late 2025 and through 2026, which will be approximately 15% to 20% of global supply, we expect whey prices will normalize going into 2026 as supply and demand dynamics rebalance. So while we believe these elevated whey prices will be transitory, we currently expect them to result in a double-digit increase in GPN's costs of goods sold, representing a headwind of almost $200 million in 2025. Through a range of initiatives, we expect to be able to mitigate approximately three quarters of the impact on our P&L in 2025. However, the scale of the increase is such that it cannot be fully mitigated and results in margin dilution in GPN in 2025. These levers include RGM initiatives, primarily price increases, the right price pack architecture, and trade and promotion effectiveness. Product reformulation, where we will look to reduce and reformulate with other proteins. And marketing spend effectiveness, where we believe we can reduce marketing to levels we traditionally spent at. As part of our longer term strategy, we're exploring initiatives to mitigate high end wave volatility, as it's critical that we reduce the extremes impacting our margins. We plan to ensure we have new supply coming on regularly and we're investigating alternative protein sources as part of our innovation strategy. And lastly, investing in additional capacity in our own joint ventures. As we know from previous weight cycles and our dairy insights, high-end weight prices soften as new supply becomes available, and this will be a positive impact on our margins in 2026. As I referenced earlier, we're making good progress on our group-wide transformation program to drive efficiencies across our new operating model and support the next phase of growth through three focus divisions. Overall, the transformation program is a three-year initiative, and as well as supporting future growth, the program is expected to generate annual cost savings of at least 50 million by 2027, which will be utilized across reinvestment of the business and profitability improvement. The program will deliver across four areas. The first is the operating model optimization, where I've already outlined as we've separated our Glambia Nutrition's business into two new segments. The second pillar is to unlock supply chain efficiencies, as we've identified efficiency opportunities to be delivered by building a global supply chain organization, particularly across manufacturing, procurement, and quality. The third pillar is about accelerating our digital transformation, which has been underway since the middle of last year. It's all about finding a better way a better way to run our processes across our back office, make better use of master data technology and AI across our enterprise, and build out our commercial excellence across our front office. This program will also centralize and outsource the delivery of certain support functions and support improved business processes. The final pillar is our ongoing portfolio evaluation. We're focused on simplifying our group structure and optimizing our overall margin. As part of our ongoing portfolio review, and in order to ensure focus on high growth opportunities, we've decided to exit our weight management brand, SlimFast, and our body and fit direct-to-consumer e-commerce business in the Benelux region. As we've discussed previously, following strong growth post-acquisition, the performance of the SlimFast brand has been challenged in recent years, driven by a fundamental change in the diet category of the U.S. and consumer attitudes to weight management post-COVID. While we will continue to stabilize the brand performance, we bright-sized our investment in the brand and have made the decision to exit. For body and fit, given the continued prioritization of optimum nutrition, which has seen very good growth in the Benelux region, and the pressures on the economics of the direct-to-consumer channel, we have evaluated the role of the business and have made the decision to exit. We will continue to evaluate our broader portfolio with a focus on delivering long-term sustainable and profitable growth. And with that, I will hand over to Mark to take you through the financials.

Thank you and good morning to everyone on the call. I will take you through the key financial highlights for 2024 and our outlook for 2025. 2024 group revenue was $3.8 billion, which was an increase of 5.8% pro forma on the prior year. Volumes were 2.3% higher, primarily due to a strong performance by our ON and Isopure brands, in GPN, as well as good growth in premix and proteins in nutritional solutions. Pricing was 0.5% lower due to promotional activity, as well as tactical pricing reductions in GPN, mostly offset by higher dairy market pricing in Glambia nutritionals. The 53rd week contributed 2% to revenue growth, and the acquisition of flavor producers during the year also contributed 2%. Group EBITDA pre-exceptionals was $551.3 million, an increase of 11.8% cost in currency due to strong EBITDA growth across both GPM and GM. We saw good progression in group EBITDA margins from 13.6% to 14.4%, with margin increases across both GPM and Nutrition Solutions, where margins increased 120 basis points and 200 basis points, respectively. Adjusted earnings per share was 140.03 cents, an increase of 6.8% in constant currency and in line with our guidance of 5% to 8% growth. Adjusted EPS growth in 23 and 24 is ahead of our capital markets day average target range of 5% to 10%. We have strong operating cash flow of $485 billion with an operating cash flow conversion of 88% ahead of our 80% target. Return on capital employed for the year was 12.4%, an increase of 20 basis points from 2023, and at the higher end of our capital market state target range of 10 to 13%. Cash flow generation was strong in 2024, while operating cash flow of $485 million compared to $446 million in 2023. Operating cash flow conversion was 88% compared to 90.4% in prior year. Operating cash flow was enhanced by a strong increase in EBITDA, as well as disciplined working capital management. Free cash flow improved from $390 million to just under $403 million due to the improved operating cash flow performance. At year end, left debt was $436 million, up from $249 million prior year, with the increase predominantly as a result of the acquisition of flavor producers completed in April. The closing net debt balance represents a net debt EBITDA ratio 0.8 times, interest cover in 2024 was 16.7 times. The group is operating well within its financial competence. The group has $1.3 billion in committed debt facilities with a weighted average maturity of 3.8 years with no facility due for renewal prior to late 2027. Now turning to our capital allocation framework, The group spent just over $58 million on strategic capital expenditure in 2024, including ongoing capacity enhancements, business integrations, IT investments to drive further efficiencies in operations. In 2024, we acquired Flavor Producers, a leading flavor platform in the US for $300 million. This acquisition significantly expands our flavors offering in the attractive and growing natural and organic flavors market and is performing well. They were producers for us part of our new health and nutrition division. The group continued to return capital to shareholders with $104 million returned via dividends. And today we announced we are increasing the 2024 final dividend by 10%. So the total dividend for 2024 will be 38.97 euro cents, representing a payout ratio of 30.1%. And in the middle of our guided payout ratio range of 25 to 35%. the Group is committed to a progressive dividend policy. In addition, the Group returned €102 million to shareholders via share buyback programmes in 2024, acquiring and cancelling 6.2 million shares at an average price of €16.51. We currently have an ongoing €50 million buyback programme which commenced in December 2024, and today we announced that the Board have authorised a further €100 million buyback programme for 2025, which we expect to commence during the second quarter. Exceptional items amounted to a net after-tax charge of $145.6 million compared to a gain of $46.4 million in the prior year. As Hugh discussed, we have commenced a group-wide transformation program, which we expect will generate annual savings of at least $50 million by 2027. During the year, $18 million was incurred related to this program. which primarily related to further streamlining and preparing for outsourcing of certain back office functions. In total, we expect the implementation of the transformation program will incur between $70 and $80 million of costs through 2027, and we will provide further details of the phasing of these costs at our Capital Markets Day later this year. Acquisition and integration costs related to the flavor producers acquisition amounted to $5.7 million. We've decided to exit our Benelux direct-to-consumer e-commerce business body and fit, and have classified the business as held for sale at year-end, resulting in a fair value adjustment of $46 million. Also, a non-cash impairment charge of $91.4 million has been taken in respect of SlimFast, and as part of the group's continuing portfolio review subsequent to year-end, we have decided to exit the SlimFast business. Some other financial matters to note are as follows. The share of profits from joint ventures was $12.4 million lower than prior year, largely driven by higher input costs not fully recovered in milk price and unfavorable market pricing dynamics, which did not recover as expected in the second half. Looking to 2025, the joint venture will benefit from federal order reform. At this point, we would expect 2025 performance to be more in line with 2023. Net finance costs were $26.8 billion, $14.5 billion higher than prior year due to higher average net debt levels as a result of the acquisition of flavor producers and higher average interest rates. The effective tax rate for 2024 was 16%, and we expect the group's effective tax rate to be in the 14 to 16% range in 2025. And in 2025, the group expects capital expenditure, including business-sustaining capital expenditure, to be in a range of $80 to $90 million. As announced at our Q3 results, and as Hugh has spoken to earlier, we have commenced a group-wide transformation program and have created a new operating model as part of this. Glamby Nutritionals has been split into two segments, Health and Nutrition and Dairy Nutrition in 2025. We have provided 2023 and 2024 pro forma financial information for these new segments. Health and Nutrition had 2024 pro forma revenues of $558 million. This increased 12% from 2023 due to growth in our pre-mix business and the acquisition of flavor producers in April 24. Health and Nutrition EBITDA was $98.7 million, up 9.2% on prior year, and EBITDA margins were 17.7%, a 40 basis points decline due to some lower costs which were passed through. Health and Nutrition operates in attractive categories, growing in the mid-single-digit range, with high teens' EPA-DA margins, and we are confident in the long-term growth of this division. Dairy Nutrition delivered 2024 pro forma revenues of $1.5 billion, up 10.4% from 2023, due to strong performance in the protein solutions business and pass-through dairy market pricing. EPA-DA was $147.2 million, up 22%, benefiting from strong protein markets. EPTA margin in dairy nutrition was 10%, a 100 basis points increase from 2023 as a result of strong dairy market pricing. We are focused on standing up the dairy nutrition segment and a standalone business which will be optimized for future returns. Now I would like to turn to outlook for 2025. Performance nutrition, like for like revenues are expected to be broadly in line with prior year excluding the impact of SlimFast and Body and Fist. Total performance nutrition revenues are expected to be down in single digits, primarily due to the 53rd week comparison, and the drag from SlimFast and Body and Fist, as well as increased competitive dynamics in the club channel, which will impact the first half. As a result, we expect quarter one revenues will be down high single digits, with sequential revenue improvement expected in Q2 and the second half. EBITDA margins are expected to be in the range of 13% to 14% as a result of unprecedented increases in input costs. As Hugh has discussed, weight costs have continued to trend higher in 2025, and we expect these costs to remain elevated versus our original expectations for much of the year. We have not anticipated this dynamic when I spoke to you last year on our Q3 earnings call, and this has led to a revision in our margin expectations for performance nutrition in 2025. EBITDA margins are expected to be lower in the first half as we expect price increases will mitigate the impact of higher rate costs somewhat in the second half. In response to increased input costs, we are taking several actions to mitigate this, including utilizing all levers within our revenue growth management playbook, including mid to high single digit price increases. A reduction in marketing spend as a percentage of revenue from low double digit to a more normalized mid to high single digits and careful control of other operating and administrative expenses. We have contracted waste supply to cover our costs through most of Q3, and we have made a prudent assumption for weight costs in Q4. We have line of sight to an additional 15 to 20% capacity in waste supply coming on stream at the back end of 25 and through 26. Based on historical patterns, we believe this will lead to a reduction in these input costs in late 25 and into 26, and we will see this benefit our performance nutrition margins in 2026. We expect to deliver mid-single-digit like-for-like revenue growth in health and nutrition with EBITDA margins in the range of 17% to 18%. Revenue growth will be volume-led and will be delivered through a combination of our premix and flavor solutions businesses. We expect profit growth across our dairy, nutrition and joint ventures combined. We expect operating cash conversion to be over 80% and returning capital employed to be in line with our medium term targets of 10 to 13% outlined in our capital markets day. For 2025, we expect to deliver adjusted earnings per share in the range of 124 cents to 130 cents, second half weighted, which will be led by revenue and EBITDA growth in health and nutrition, continued optimization of EPA and dairy nutrition at our joint venture operations, offset by a decline in EPA and performance nutrition, primarily as a result of higher input costs, which we expect to be transitory. I would note that this guidance excludes the potential impacts of tariffs as the environment remains uncertain. We are carefully monitoring the various announcements on tariffs and are working on plans to mitigate some of these potential impacts. And with that, let me hand it back to Hugh.

Thank you, Mark. Just to close, I'd like to reinforce our conviction that Glambia remains well positioned for growth. This is an important year for the group as we deliver the final year of our current three year strategy and work on our next strategic steps. In terms of our focus, we're clear. We will navigate the current transitory high end way headwinds, taking decisive and proactive action both short and long term to mitigate as much of the COGS inflation in GPN as possible without negatively impacting our brand performance. We will see benefits from this in 2026. We will continue to execute initiatives as part of our transformation program across our four pillars, delivering efficiencies and positioning the group for the next phase of growth across performance nutrition, health and nutrition, and dairy nutrition. We operate in exciting growth categories with market-leading positions, and we will continue to invest in our key capabilities and drive growth across our great portfolio of better nutrition brands and ingredients. We're closely monitoring and planning on several near-term themes, including potential changes in trade policy, consumer confidence and consumer spending, all against the backdrop of unprecedented way inflation. But with very strong teams, strong financial capacity, and lots of prior experience navigating these challenges and cycles, so remain focused on executing against our long-term growth strategy. And we plan to hold a Capital Markets Day later this year to update you on the progress. And with that, I'd like to hand it over to the operator for questions.

Thank you. We will now begin the question and answer session. As a reminder, if you ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. We will now take our first question from the line of Patrick Higgins from Goodbody. Please ask your question, Patrick.

Sorry, excuse me. Thanks. Morning, everyone. A couple of questions for me, if that's okay. Firstly, on 24, could you just talk through the performance in Q4? I guess just surprised to see pricing remain or kind of become more negative into Q4. know i can understand why it was negative in h1 given the lower cost backdrop but i would have thought that it would unwind and h2 as way costs started to rise and i'm kind of related to that you know the h2 margin was was actually stronger in gpn than i was expecting as well you know what what's driving that strength is it pulling back on marketing maybe a comment on that please um and then my second question is just on the on the guidance the like for like revenue guidance um I might have missed it in your remarks, Mark, but how are you splitting the like-for-like number for GPN between volume and price? And I guess, you know, given the strength of the demand backdrop, you know, what's holding you back taking more prices? Is it the competitive dynamics that you mentioned in Costco or is there other things you could flag to us on that? Thank you.

Thanks very much, Patrick. I take the first and the third question, and Mark will take the second question. Maybe just to the last question. Look, we are planning on taking price this year. We've actually executed price in our international markets. That's already in place, and we'll execute on price in half, too. I think it's a little bit of a competitive environment, but more fundamentally, it's trying to plan our way through what is a very volatile cycle in input costs. And if they're to turn, as we believe, in 2026, we just need to be careful on our pricing actions, particularly in terms of consumer engagement and confidence in the US market. So it's something we're carefully watching, but we will be taking price. But we'll also, as Mark said, we have a significant RGM playbook. So we'll be ensuring this year as well that our trade promotions return are effective. So we'll be pulling back on a significant amount of trade promotions in quarter two and quarter three as well that just given the input cost headwind we're dealing with won't be returning. I think in terms of quarter four, look, we were more optimistic on price, maybe too optimistic. We're happy, though, with the investment levels and returns in terms of volume, you know, happy with ON performance in quarter four, but it was primarily driven by three things, the continued tactical pricing reduction, but that's in the energy category where our margins are strong and we're comfortable that we get the right return on that. And secondly, was across the Americas, you saw promotion of club. And lastly, online promotions continued to be competitive. And that was a global issue. So that wasn't just in the US, it was also an international, particularly in Europe, as we saw competition in that online channel, which we've called out.

Yeah, so Patrick, good morning. In terms of our guidance around how the year will play out here, as I said in my remarks, we are going to be down in the first quarter. We're lapping a number of things in the club channel regarding pallets we had last year. We won't have this year, for example. There's also some private label competition, which will be lapping through the first half. So you'll see volumes negative starting the year, but that will sequentially improve as we actually go through the year. And pricing you will see turn positive as well in the first quarter. low single digits I would say in the first quarter but then begin to accelerate again as we go through the year. I did mention that we are taking mid to high single digit price increase. We've already done that in our international operations and we're working with customers right now in our US operations. A lot of that will hit more towards the second half. So we are of course watching elasticity carefully around that Patrick as well but that's what we expect as the year plays out.

Makes sense. Thank you very much.

Thank you. We will now take the next question from the line of Joan Lim from BMP Paribas Exame. Please ask your question, Joan. Hello.

Thanks for taking my questions. I just wanted to ask, usually there's a new year, new you program for Gambia, and that usually sees a benefit at the start of the year. What are you seeing in terms of current trends at the moment? That's my first question. And in terms of the competitive environment, just to follow on from the first question, are you seeing increased promotional activity by competitors? Because it was stronger towards the end of last year. Do you expect the same for 2025, or will this be better given the way cost increases? Thank you.

Yeah, good morning, Joan. I'll take both questions. I think in terms of New Year, New You, yeah, it's always a big area of focus for us and the competitive set. And we can see in our consumption numbers, we're pleased with performance in quarter one, you know, double digit growth in food, drug, mass channel, e-commerce continues to perform. And some slight pullback in the club channel that we've already spoken about. But overall, New Year, New You has been positive for the business. And competition environment, look, it's, it's been, it's always, it's a growth category. So there's tons of competition in every one of the markets and challenge we competed. I think last year we were probably more conservative on pricing turning over the course of the year. We felt that given that we have a lot of visibility and away prices, given the integrated nature of our business. So we were probably more cautious on way prices. We knew they would turn. And as a result, we're cautious in promotions. But we did see promotions over the course of the year, not elevate, but continue to maintain. And our job then is to maintain share on that. So that's why we would have invested in price in quarter four. I think undoubtedly, given the unprecedented nature of way prices, which all suppliers, all companies are calling out now, we're going to see a pullback on promotional spend and a real focus on promotional effectiveness in 2025. And that would be the same for us in terms of how we spend our promotional money, but also marketing spend effectiveness. You know, as part of one of the mitigating levers, we will reduce our marketing back to the spend we had in 22, 23. We believe we're comfortable with that after the double-digit spend the last couple of years. We have a lot of learnings. So we'll be more, far more focused on effectiveness of marketing and promo spend as we navigate our way through these unprecedented wait costs.

All right. Thank you. We will now take our next question from the line of Deirdre Mullaney from Deutsche Bank. Please ask your question, Deirdre.

Morning, everyone. Thanks for taking my questions. Just touching on kind of, Hugh, if you could provide a bit more detail on kind of exactly what's going on in the club channel and particularly the competition from, you know, private label. You know, historically, private label hasn't been a huge presence in the category. Has something changed here? Is it that consumers are more price sensitive, showing less brand loyalty? And is this competition that you're seeing specific to Costco and the Kirkland brand, or is there a risk that this becomes more widespread? And then secondly, just on the mitigation strategies that you've referenced for the elevated way costs, just your confidence that these would be sufficient to offset the impact of kind of the continued way price volatility and And I think you referenced three quarters, you'd be able to mitigate three quarters of the $200 million impact. Are you able to kind of break this down in terms of kind of mitigation strategies? Are there some which will be more important than others? So kind of between RGM, marketing spend effectiveness. And then my last question as well, could you just clarify about the timing of the new supply of whey and when that's due to come on? Has this been delayed? And what conviction do you have that this supply will be available by the end of 2025? Thanks.

Well, a lot of questions there, Deirdre. So I hope I've captured them all. Maybe start with the last one first, which is Huay. Look, we have clearly significant expertise across our B2B dairy nutrition business and our B2C consumer business around dairy insights, dairy procurement. This is unprecedented record prices. Neither part of the business would have planned nor forecast for the scale of increase we saw in Q3. In fact, the businesses would have been aligned in terms of seeing potential reduction. So as I said, it's 20% higher than the peak we saw in 2022 and significantly higher than what we planned for. Look, dairy commodities, if you follow, they can be hard to call. We're well used to that in so many of our products. There's lots of different variables, milk supply, inventories. Some suppliers can switch between different high-end ways and the lower end ways for um and then you demand variables such as price and we see you know strong us dollar can impact as well so we're we're well aware of all of these and uh we take all this input um what we do know though is if you look back there hasn't been additional the challenge for us is at the very high end of the market which is way proteinized 90 protein There hasn't been additional significant supply added to the global market since actually we commissioned Midwest cheese in 2021. And that was about a 5% additional supply. And that's primarily driven by COVID. You know, for additional waste supplies, you're primarily going to need cheese plants. And they would have been put on hold through COVID. Then we had an inflationary environment. And now they're all being built. So we're seeing the cheese plants coming on stream. And that's kind of a precursor to Huey. What we do know is there's an additional 5% to 7% of high-end WPI coming on stream in half to 2025. It's just hard to call it by a quarter because you're going to have some commissioning delays, you're just going to have some variables there, but we know it's coming. And we know there's an additional 10% to 13% coming on stream in 2026. We haven't had volume like that come to the market in many, many years. And we also know there's more coming online in 2027, and we've been engaged with waste suppliers over the years on that as well. So we have good visibility of supply coming, where it's just difficult for us is to call exactly when that will arrive. We are seeing new product, we are seeing new supply, which we're testing in our innovation labs and quality labs at the moment, so it is coming. In quarter one, supply was tight, but we can see production and inventory is increasing. Demand continues to be strong across all formats, and that's fundamentally what's driving this as well as demand. But we haven't seen the impact of price increases or raw formulation. So in the round, significant amount of new supply coming. We can see we're already testing new supply. It's coming in half too. We've been conservative in our outlook. Certainly, Q3 was a surprise in terms of way prices we were paying for in quarter two a little bit conservative for quarter three into quarter four but uh we will we will definitely see a turn as we go into 2026. in terms of mitigation of the 200 million very roughly half price about a third marketing and the rest would be sgna efficiencies um so that's that's kind of the the big chunks of mitigation for the 200 million What we have to be careful in all of this is the cycles. What isn't good for our business is the volatility from the highs to lows and trying to navigate that. So what we want to be careful on in terms of price increasing and promotes that we're very aware of consumer spend in the US. We can see that in our own consumption numbers. These are essential products, but we do know that 50% protein will be purchased in food, drug, mass channels, and we see that they'll be lower price points. So that's why you see us launching a lot of lower price point items in terms of affordability for a consumer. But that's a key focus for the business. In terms of club channel, yeah, look, we have seen the entrance of the new private label take share from, we don't get shared data, but what I'd say is we're a nominee channel business. So, you know, we are seeing good growth in food, drug, mass, good growth in e-comm, but the scale of our business and club, that is having an impact. In saying that too, in terms of distribution, the club channel is very different to your normal grocery markets. We'd see pallets of innovation go in on test. They may come back out again. So you will have some movement in distribution gains and losses. So that's just, and it's a key area of focus for us in terms of growth. So look, we will navigate our way through this as we always do. But, yeah, it certainly has had an impact since in half two last year and will have an impact in half one this year. And I think if I got that, I think I captured all of the questions. Hopefully, Deirdre.

Super. Thanks a lot. Thank you. We will now take our next question from the line of Carol Zutta from Kepler Shiver. Please ask your question, Carol.

Yes, good morning all. Thanks for taking the question. I have a question with regards to the longer term margin you see for the GPM business. Typically, we've had cycles and then after 18 months, margins normalize. Is that also what you anticipate this time or are things really different? And the second question is on the international business. You've exited the European business via distributors, went direct to consumer, and now you sell that business or plan to sell it. How do you aim to operate in the European market going forward? Thank you.

Good morning. In terms of your question on Mars, we do look at this year as a transitory year in terms of managing through an unprecedented way, input cost cycle, a huge trip you through there, 200 million of additional costs and 150 that we will mitigate through pricing, marketing, SG&A, et cetera. We're pretty confident that we can do that and still maintain a 13% to 14% margin for the full year. As that supply comes on, we fully expect these record prices, which are 20% higher than the records we saw during COVID, just after COVID, Will come back and that should see us come back to a margin level not too similar to the big teams that will Take you through all of this or capital market say at the end of the year in terms of how we see a corridor that we work through here and Visibly this is more extreme price that you see for a while But the supply coming on stream will certainly balance out that demand supply and we expect that to come back towards the mid team level Okay.

Thank you. I Carl M. I What I'd say about body, so the body and fit business is in the Benelux only, and it's a direct-to-consumer retail business. So it's more limited in terms of geographic. And the reason we're exiting it is it's a smaller, more focused business in that region. And the economics of DTC are challenging and margin dilution. In terms of broader Europe, we're an omni-channel business. So it wasn't that we moved from distributors to a direct-to-consumer business. That's just a small channel business. a channel part of our business we sell in and have a good success in europe in in grocery we still have distributors across those markets as well so we'd be selling to food drug mass distributors specialty channels and online so all of the four channels you would see us competing across our global business we compete in in europe as well and are doing very well and that was part of the reason to exit the business as well And most recently, in the last 12 months, as we have launched into the Benelux with Optimal Nutrition, we've had significant success there, which is another reason we decided that the body and fit retail business was in core to our growth strategy.

All right. So to clarify, you will continue to work then with the distributor model and not necessarily have your own direct... Yeah, distributors, grocers, and online.

Yeah. That's our business.

Thank you. We will now take our next question from the lineup, Alex Sloan from Barclays. Please ask your question, Alex.

Yeah. Hi, all. I've got three questions, please. The first one, obviously, in terms of the 25 EPS guidance, it's a relatively large deviation from what consensus was expecting after several years of meet or beat from Glambia. How confident can we be that you've reset expectations enough for 2025? That's the first one. The second one, I guess, is somewhat related. I mean, the competitive challenges, I think you first started flagging them in the specialty channel in the US, obviously now more apparent in the club channel. I guess, why should we not be concerned or worried that those competitive pressures build in 2025 in online games? and food drug mass. That's the second one. And then the third one, I mean, protein consumption is clearly a mega trend. We're seeing more and more consumers seeking daily protein goals in the US and Europe. I guess you're guiding to GPNX, SlimFast and Body & Fit flat in 25 in that environment. And I appreciate there's obviously input cost dynamics at play. But I guess I'm surprised that you can't grow more with that backdrop. Do you think you've taken the prices too high perhaps, or is it just that the powder format of protein is resonating less with consumers? And if it's the latter, can you leverage the optimum nutrition brand in different formats, you know, perhaps licensing to yoga or another push in ready to drink, which does seem to have very good momentum. Thanks.

Good morning, Alex. I'll take the first question on APS guidance, then pass over to you on the competition on the protein point that you made. We're comfortable with our guide of 124 to 130. We've outlined what we see as the input cost challenges, and we've outlined where we feel we're able to mitigate them. We feel we've been prudent through our assumptions through the rest of the year in terms of where input costs will be. We've already procured through most of Q3, so we've fairly good visibility to that. I think we're also being reasonably prudent on our top line in terms of where we expect that to play out with some of the dynamics. I'm sure Hugh will talk to you as well around We're going to be sensible in our promotional activity with such a high level of cost that's in the system right now as well that helps us make sure we manage our P&L very carefully. I would also say that we're very bullish on our health and nutrition business and our dairy business. Obviously, there's some counter effects not completed. Our dairy business, as we head into the beginning of this year as well, so that obviously will be a benefit and health and nutrition is going to start off very, very well in the first half also. So we put all that together and we feel that it's a reasonable guide that we've given the

Yeah, Alex, maybe I'll start with the second question because I think it leads into the first, sorry, the third question because it leads into the second question on competition. Look, clearly protein is a mega trend and it's a great space for us to be in and compete both as a B2C and a B2B organization. You know, FLAS, I suppose we're very early in the year. We've seen unprecedented weight costs and we have a number of things to do there in terms of marketing spend effectiveness, pricing promo effectiveness and price increase. They'll have to be negotiated and navigated over the next couple of months. If you look at the channel piece, so really early in the year and a lot to do, but we don't see a fundamental change in the demand trend. Powders continues from research to resonate well with consumers. I think what we're just seeing is we're seeing some trading in sizes across gold standard way. And for us, that's around consumer affordability. And I think consumer in the US is definitely a challenge in terms of affordability. It's not that they're, and that's where our powder brands will stand up in terms of cost per serve. So overall, we'd still be positive. It's just, you have, the last thing I'll say is the club. That is, that will impact our share in the club channel in half one. this year. So when you take that, we spoke about it earlier on, we see sequential growth in demand over the next four quarters. In terms of competitive, look, it's always been competitive. I wouldn't want you to think that there's no competition in the online or FDM. There's absolute competition in all of the channels we compete in. I think specialty is different. Specialty is a channel issue. It's not a, our decline in consumption there would be less than the decline of a lot of the competitors we see. So that's just a channel shifting issue for specialty. for the two main specialty retailers that they haven't been able to solve yet. And club is a specific and it's just the scale of our club business. And as we move innovation in and out, we will have some ups and downs in that channel. But overall, it's very competitive and we'll continue to compete in those channels with our great brands.

Thank you. Thank you. The next question comes from the line of Carl Kenny from Davie. Please ask your question.

Good morning, all, and thanks for taking my questions. First question is on inventory. Just interested in a comment on inventory in the channel in North America. Secondly, Mark, you've guided to mid-single-digit to high-single-digit price increases, if I'm correct, for branded in 25. Any assumptions on elasticity around that? And thirdly, is there any... What color are trends between isopure and OAN? Are they moving in sync in light of your comments on pricing? They're my three questions. Thank you.

Well, let me answer the one in terms of pricing to start with here. I would say we're in the market now looking for mid to high single digit price increases. So we've done that internationally as they were doing in North America. Right now, we're assuming elasticity of one call in terms of how that's going to play out. So there's going to be a balance here between pricing and volume more likely as the year progresses. That's our expectation back to the point that you mentioned as well in terms of consumer affordability and focus on value. We're sort of conscious of that and pack sizes are important for us in our portfolio around that as well. I would say we're comfortable in terms of where inventories are right now in the system. You can get some spottiness in the online channel a little bit back and forth as you go through the year. We've seen that. but overall in the channel, we're comfortable where inventories are.

Yeah, Karl, I think what I'd say on ICE, if you're an ON, look, firstly, very happy with their growth last year, double digits. Secondly, happy with all of the brand metrics we see in terms of awareness, net promoter score, and as we look at the purchase from a consideration, so strong there. In terms of demand, continue to see good, robust demand as well. The thing, just to reflect, the isopure is pretty much 100%. In terms of the protein use, whey protein iso, that will be more impact in terms of margin cyclicality, ON a little bit less so. So you will see similar pressures on margin driven by the high input costs. But overall, very happy with the growth performance and brand metrics are strong.

Great. Thank you.

Thank you. We have now reached the end of the question and answer session. Thank you all very much for your questions. I'd now like to turn the conference back to the CEO, Mr. Hugh McGrath, for his closing comments.

I'd just like to thank you all for your time and attention today, and I look forward to engaging with you individually over the next couple of days.