Nestle S.A

Good afternoon and good morning to everyone. Welcome to the Nestle full year 2020 results webcast. I am Luca Borlini, head of Nestle's investor relation. Today, I'm joined by our chief executive officer, Mark Schneider, and chief financial officer, Francois Roger. Mark will begin with an overview of 2020 and discuss the 2021 guidance as well as the midterm outlook. Francois will follow with a review of the full year 2020 sales and profit figures. We will then open up the lines for your questions. Before we begin, please take note of our disclaimer. And now I hand over to Mark.

Thank you, Luca, and a warm welcome to our conference call participants today. As always, we appreciate your strong interest in our company. And I think we have very reassuring results to share with you for the year 2020 and also a very encouraging outlook for the year 21 and beyond. This conference call may feel the same to you. Behind the scenes, it's a little different. We have taken every possible precaution here from a COVID perspective. So perfectly in line with Swiss regulations, Francois and Luca and I, I'm handling this call from these three separate rooms because we wanted to talk to you without masks on to make it better understandable. So we will have to improvise here and there, and I hope you bear with us. If you don't feel a difference at all, all the better. It means we're on top of the technology here. That takes me right to the key messages for the year 2020. And while we don't want to have this call dominated by COVID only, of course, I mean, COVID has been the defining element of the year 2020. It's been a year like no other. I'm proud to say that Nestlé has been rising fully to the challenge by this global pandemic. We were from the beginning staying focused on three priorities, employee safety, business continuity, and community support. I think we stayed true to these three priorities all throughout the year. In all modesty, as I look back over the year, as a team, we tackled that challenge really well. We were one of the first companies to issue a global travel restriction at a time when some other peer companies still thought that maybe this may be a little over the top. We were one of the first companies to roll out and make widely available masks as a form of protection. at a time when even some of the national health agencies were still actively advising against that. Of course, that has reversed during the year. And we're one of the first companies to roll out widespread regular testing. And to this day, whether it's Francois or me or anyone working in our facilities, people who come into our facilities at this time undergo frequent testing. Personally, I do it once or twice every week. And that certainly gives us continuity. It gives us assurance that we keep a safe workplace. And I think it's part of our commitment to our colleagues. And in terms of community support, I think we were supporting the communities where we operate. We're supporting the public where we can, not just by fulfilling our essential function of providing food and beverage, but also providing in very good ways throughout medical help, donating products, and increasingly now also providing support when it comes to vaccinations. I'm also proud to say that with all the challenges posed by this pandemic, we did not get distracted from our major underlying initiatives and strategic directions that we had shared with you in previous years. I think that also bore out in the financial results. Organic sales growth of 3.6% is slightly ahead of the year before, and we were able to increase our underlying trading operating profit margin by another 10 basis points to 17.7%. Portfolio transformation is also fully on track, and I think that's also a very reassuring sign. The latest transaction you've just seen yesterday announced, and that's the divestiture of our North American waters business. And in line with that very reassuring performance, our board has agreed to raise the dividend by 5 centimes per share. This is what we're going to be suggesting to the annual general meeting in April to an amount of 2 Swiss francs and 75 centimes for the year 2020. One other achievement that I'll go into later in this presentation is our detailed roadmap to achieve net zero greenhouse gas emissions by 2050. We were one of the first companies in our space to issue that in December. We were keeping the timeline that we had set out to be one of the earliest ones out there with a detailed plan. And in addition to keeping the timeline, I'm proud to say that this plan now which is a very detailed document. It has become sort of an industry benchmark, and we're quite proud of that. Now, moving on to the financials, Francois, of course, will give you a much more detailed update, but I would like to point your attention that we're seeing now the third consecutive year of improved growth and margins. When you think back to our investor event in September 2017 in London, that balanced pursuit of better organic sales growth and better underlying trading operating profit, that was the key element of that plan. And that was also something that was kind of doubt at the time, like can you do the two at the same time? And I think here we go, third year in a row. And when you look at our guidance for this year and also the midterm guidance, then you see that that balanced success story is expected to continue. Underlying trading operating profit margin, wanted to address that, and I think Francois will also get into that a little later. We had guided you towards a modest increase, which we have delivered. It is a guidance that we typically give in actual currency, not in constant currency. And so I think what we delivered here, the 10 basis points, is in line with the guided increase. I think there were some questions around the half-year point when the underlying trading operating profit was ahead of plan. We had told you that in the spring of 2020, some of our marketing spend had been reduced simply due to COVID. But then during the fall, we accelerated that. I think we are investing in spring loading here for growth in 21, which is a good thing. And then also any potential currency impact. on underlying trading operating profit margin was much stronger in the second half of this year than the first half. So I want you to keep that in mind. But even though we have been sort of coming back from some of the levels from half-year point, we were completely in line with what we told you because I think we cautioned, even in the summer, that we would actually get back to a more moderated underlying trading operating margin improvement level for the full year. Next, I would like to talk about the continued efforts here to get towards mid-single-digit organic sales growth. You see essentially the same three buckets that we covered with you in the previous years, focused on high growth categories and channels, portfolio management, and fixing underperforming businesses. You see specific examples from each of these buckets that apply to the year 2020. The one area I would like to point your attention to is plant-based food, where we've seen strong double-digit organic sales growth. As you recall from previous sessions, this is not only about the one product that seems to be getting all the attention, and that is plant-based hamburger patties. It is about a wider opportunity to reimagine, reinvent, and reinvigorate what is a 12 billion Swiss franc category for us, and that is food. Those opportunities to reinvigorate the food category are few and far between. It's a once-in-a-generation opportunity, and I think we're making good progress with that. So we told you that when it comes to the inner core of plant-based meat analogs, we're talking still about a sales level in the vicinity of about 200 million Swiss francs, growing at strong double-digit rates. But when you look at the wider opportunity, when you look at where we use these ingredients to then make more attractive downstream offerings, like frozen pizza with plant-based toppings or frozen meals or other prepared dishes, then it's a much bigger opportunity. Then we're talking almost 700 million Swiss francs. And here again, growing at double-digit organic sales global rates. So it shows you that. The entry point, of course, is a product like the hamburger patty, where I think we have a very competitive offering. But then it branches out into a much, much wider opportunity and downstream then reinvigorates our food area. Same applies to plant-based dairy alternatives. Here we have a business slightly ahead of 100 million Swiss francs, again, crawling double-digit markets. But here again, it's an entry point to other areas that you can invigorate. Think about ice cream. Think about confectionery. Some of you may have seen earlier this week our announcement on a vegan KitKat product. And so these ingredients are necessary starting points so that further downstream we can see continued success in new products. I'd like to move on to the next slide and the development of our portfolio. Clearly a lot of activity. Sort of looking back to the year 2017, more than 75 transactions by now, and the equivalent of about 18% of group sales. This is including the latest Waters transaction. And on balance, a very successful endeavor, and I think a good contributor to our continued organic sales growth improvements. The contribution in 2020 was around 60 basis points. Next, I'd like to cover briefly the net zero roadmap. I won't get into all the detail anymore. I'd refer you to our website where the full document is available. And mind you, this is not just some sort of high-level summary and ambitions. This is 20 pages of fairly detailed material by areas of operation on how we intend to get there. To me, there is a few key messages here. First of all, when you compare our 2050 commitment to other players, it's always important to keep in mind that this is a full scope category three commitment. So this includes all of our agricultural supplies. That's different from what some other players are using, which is category scope two. So that would be basically the company's operations and distribution logistics and also inbound logistics, but not some of the commodities. And hence, especially in the agricultural space, we believe that we're not solving the problem if we're not moving up the supply chain and helping our suppliers to get to a net zero environment. So hence, this is what it takes. This is also where the vast majority of our greenhouse gas emission takes place. Actually, just solving the part inside our own four walls and in transportation logistics would be a relatively easy endeavor compared to the full scope three. And hence, this is something you just need to appreciate across the categories and the vast scale the company has. We believe it's a solid plan. We're very committed to it, and it's something that also has the full support of our management team, the board, and the employee base. In fact, I've rarely seen anything as motivating as this commitment when it comes to our colleagues around the world. that are part of the Nestle family. I would like on the next slide to put this into the wider context of our ESG commitments and some of the costs that we're facing when it comes to fulfilling our plans. And I know this question had come up a few times over the winter now, especially after we issued the net zero roadmap. It's important for me that people do not see it only as a short-term impact on our P&L or a burden, but rather we see it very much as an opportunity, an opportunity to, first of all, do a great service to society and Earth around us, but then also a great business opportunity in a world where priorities around sustainability are changing very fast. especially now with the United States rejoining the Paris Agreement. I think there's a good expectation here that for the very first time between the major North American economies, European economies, and Asian economies, there's going to be a regulatory convergence towards much, much higher standards when it comes to carbon neutrality and other sustainability matters. And so when you look at doing business in this environment, when you look at the heightened consumer awareness environment, it's very clear that lagging behind will come at a significant cost. You're losing out with consumers. You're losing out with regulators. You're facing in some areas taxes for those people that lag behind. You're facing also, given the higher expectations from our investors, potentially higher cost of capital down the road. And certainly when it comes to the war for talent and the employee base, you know, if you want to capture talent, the dedication, imagination of the best possible people on the planet, I think it's good to be one of the leaders in this space. So we see it as a source of competitive advantage. We do not see it as corporate philanthropy or giveaway. And we're looking at these projects very much from an investment point of view. And just like with research and development that tries to make the best products available to our consumers, we see it as forward-looking spending to be sure that our sustainability profile gets improved and and spending on which we expect payback and a decent return. So this is something I want to assure you about, that we look at it from a very commercial point of view. We see the opportunity. We see the benefits of being a leader in this space as opposed to a laggard in this space. And then short term, when it comes to some of these expenditures, I do think, and we have given you every insurance, that we have enough gas in the tank, when it comes to efficiency improvements, structural cost reductions, and also growth leverage to make these sustainability investments earnings neutral. In fact, when you look at our guidance for this year, when you look at our midterm outlook that we've shared, you see very clearly that we continue to follow the traditional investment model of growth. moderately improving underlying trading operating profit margins. So no deviation from that plan. And yet at the same time, we're firmly on our way to being a leader in that space. That also brings me then to our 2021 guidance. And on the next page, our midterm outlook. And on the guidance and our modesty, let me point out that I hope you appreciate that we're giving guidance at all in this circumstance because that's not a done deal for everyone. Some people have still stayed away from that. So we believe that while, of course, there is some residual uncertainty related to COVID, we have sufficient clarity and visibility to commit to what we're giving you here. And as you know, even at the depth of the crisis last year, each and every quarter we were staying very clear True to what we were telling you, we were trying to be as precise as possible and give you as much dependability as we could. So with this, the most important thing, of course, is around operating organic sales growth. And this is where we expect a continued increase in our organic sales growth rate towards mid-single-digit. This means better than the 3.6% that we accomplished in 2020, and there is a very good opportunity to actually get across the 4% barrier, which is then the entry point to the mid-single-digit range. Again, I hope you understand with some of the residual uncertainties around COVID that we're not in a firm position to guide towards that, but nonetheless, I think that you should appreciate the underlying optimism that That is part of this guidance here, where we're saying definitely better than 2020, and then there is an opportunity to actually cross over into the mid-single-digit range. On underlying trading operating profit margin, as explained earlier, we continue to see and expect moderate improvement. And then the other metrics around earnings per share and constant currency and capital efficiency, we also expect to improve. The same applies to the midterm outlook, and very much steady as she goes when you look at the business model here. But to me, the key word is in the first bullet point, the emphasis on sustained mid-single-digit organic sales growth. This is what we're aspiring to. No one is served if we hit mid-single-digit organic sales growth once and then slide back. What we have done now with our innovation work is, our portfolio adjustments, and our focus on underperforming units, I think positions us really well to reap the benefits here over the midterm. And especially in a low interest or zero interest rate world, I think the single biggest value driver that we can give to you as our shareholders is strong organic sales growth. And I think this is what we're positioned for. So on this outlook, let me hand it over to Francois, who will give you a more detailed financial update, and then we'll be back to answer your questions. Thank you. Thank you, Mark.

Good morning or good afternoon to you all. Mark has shared the financial headline with you already, so I will provide you with some of the details behind those numbers. Our organic growth increased to 3.6%. The most significant contributor to growth was RIG, which accelerated to 3.2%, the highest level in the last nine years. Our strong rig is largely made of positive product mix, which is a good illustration of our capacity to innovate and premiumize our offering. Pricing was 0.4% and improved during the year, particularly in emerging markets. Foreign exchange reduced sales by 7.9%, reflecting the continued appreciation of the Swiss francs versus most other currencies. divestiture had a negative impact of 4.6%, largely related to the divestment of Nestle Skin Health, the U.S. ice cream business, and Erta. As a result, reported sales decreased by 8.9% to 84.3 billion Swiss francs. The effects of COVID-19 on organic growth varied materially by sales channel. Organic growth for retail sales doubled to 7%, reflecting sustained strong demand for at-home consumption. Within retail, e-commerce saw exceptional growth of 48.4% and now accounts for 12.8% of total sales. Sales in e-commerce exceeded 10 billion Swiss francs, with further market share gains online. Out-of-home sales declined sharply as a consequence of movement restrictions and the closure of many offices, restaurants and hotels, to name just a few. Before COVID-19, the out-of-home channel accounted for around 10% of group sales. If we include on-the-go and impulse products, then our total exposure to this channel is closer to 15% of sales. Sales in retail remain strong throughout the year. In out-of-home, sales declined moderately in the second half of the year, stabilizing at around minus 26%. We remain cautious and expect continued headwinds for the out-of-home channels in the first half of 2020. Improvement in the out-of-home channel is expected to be gradual. We serve recovery back to pre-COVID levels at the earliest in 2022. These slides illustrate the development of ourselves by geography. It includes both our zone as well as our globally managed businesses. Our organic growth was positive in all geographies, led by sustained momentum in the Americas and robust sales development in MENA. Pricing was positive in the Americas and AOA. Europe saw slightly negative pricing. Now turning to growth dynamics between developed and emerging markets. In 2020, developed markets accounted for the majority of our sales, with organic growth accelerating to 3.8%. Emerging markets represented 41% of sales. Organic growth improved during this year to reach 3.4%, supported by both rig and pricing in the second half. We are positive on emerging markets as a key growth platform for the years to come. Let's now look at the results of our four operating segments, starting with zone AMS, where we saw a significant increase in organic growth to 4.8%. Sales were 34 billion Swiss francs. North America grew at a mid-single-digit pace, led by the United States. The largest contributor to organic growth was Purina Petcare, supported by strong sales development in e-commerce and science-based premium brands. Beverages, including Starbucks at Home products, Coffee Met and Nescafe, posted double-digit growth with market share gains. Frozen food reported high single-digit growth, led by staffers, Digiorno, and Hot Pockets. During the year, we created a new range of modern health offerings, including Lean Cuisine and the newly launched Life Cuisine, which saw encouraging results. Latin America posted high single-digit growth, with positive contributions across geographies and most product categories. To meet strong demand, the zone invested behind key growth categories such as pet care, coffee, and food. For pet care, we announced several investments amounting to $1.5 billion in new production capacity, including two new plants in Ohio and North Carolina. For coffee, we are also adding a production facility in Mexico in 2021. The zone's underlying trading operating profit margin increased by 40 basis points. Operating leverage, portfolio management and the positive impact of direct store delivery transformation more than offset commodity inflation and COVID-19 related costs. Next is Zone M&A with sales of 20.2 billion Swiss francs. Organic growth at 2.9% is the highest level achieved by the zone over the last five years. RIG at 3.3% was supported by favorable mix. Each region saw broad-based positive growth, with most geographies and categories seeing market share gains, led by pet food, portioned and soluble coffee, as well as vegetarian and plant-based food products. By category, the largest contributors to growth were Purina Pet Care, coffee, and culinary. Sales in Garden Gourmet grew by close to 60%, supported by new product launches and continued distribution expansion across its 20 markets. The Zones continued to evolve its portfolio towards attractive high-growth categories, with acquisitions such as Lily's Kitchen in premium pet food and Mindful Chef in direct-to-consumer meal delivery. Both businesses grew at a strong double-digit rate. In June, the group closed the sale of a 60% stake in its Erta charcuterie business The zone's underlying trading operating profit margin increased by 50 basis points. Lower consumer-facing marketing expenses, structural cost reductions, and portfolio management outweighed COVID-19-related costs. Moving now to Zone AOA, with sales of 20.7 billion Swiss francs. Zone AOA posted 0.5% organic growth for the year. Excluding China, growth was mid-single digits. China posted negative growth due to the timing of Chinese New Year, declines in out-of-home channels, and limited consumer stockpiling during lockdowns. Coffee, culinary, ice cream, and ambient dairy all delivered positive growth, supported by e-commerce and innovation. Sales in infant formula declined, with improvement in the second half. Infant cereals on Purina Pet Care saw double-digit growth. Nestle Professional reported a sales decrease, with growth improving to almost flat in the fourth quarter. Southeast Asia posted low single-digit growth. Sales in the Philippines grew at a high single-digit rate, led by increased consumer demand for Bear Brown, Milo, and Maggi. Indonesia also delivered strong growth, supported by Bear Brown, Milo, and Danca. Southeast Asia continued to perform well. with high single-digit growth in India and a return to positive growth in Pakistan. Sales in sub-Saharan Africa grew at a double-digit rate, reflecting strong sales development across most countries and categories. Oceania posted robust broad-based growth, led by Purina Petcare, Coffee and Confectionery. Japan saw a sales decline, with improvement in the second half supported by Coffee. KitKat sales were negatively impacted by a reduction of inbound tourists. By product category, the largest contributions to the zone's growth came from dairy, culinary, and coffee. In coffee, there was continued strong demand for Starbucks products. Outside of China, infant nutrition grew at a mid-single-digit rate, led by South Asia, Sub-Saharan Africa, and Indonesia. The zone's underlying trading operating profit margin decreased by 30 basis points as a result of commodity inflation and COVID-19 related costs. Finally, we review our other businesses, which mainly includes Nespresso and Nestlé Health Science. Total sales were 9.4 billion Swiss francs. Strong organic growth of 7.9% largely came from RIG at 7.3%. Nespresso sales reached almost 6 billion Swiss francs, with growth accelerating to 7%. Strong double-digit growth in e-commerce and the virtual system more than offset sales declines in out-of-home channels. By geography, the Americas and AOA grew at a double-digit rate, with continued market share gains in North America. The United States became Nespresso's largest market. In Europe, the at-home business grew at a mid-single-digit rate with strong sales development in the United Kingdom. Nestlé Health Science grew at just over 12% and reached sales of 3.3 billion Swiss francs. Growth was driven by strong demand for products that support health and immunity. In consumer care, Garden of Life and Pure Encapsulations were the largest contributors to growth with continued strong momentum in e-commerce. The recently acquired Vital Proteins, America's leading collagen brand, saw strong growth. Persona, the subscription-based personalized vitamin business, more than tripled its sales. Medical Nutrition posted high single-digit growth, led by pediatric food allergy and adult medical care products. The underlying trading operating profit margin of other businesses increased by 90 basis points based on operating leverage and structural cost reductions. Nespresso and Nestlé Health Science will be reported as standalone operating segments in Nestlé published accounts from 2021 onwards. This change reflects the increased financial contribution of both businesses and provides greater transparency on their performance. Overall, 2020 demonstrates the resilience of our business. Our diversified portfolio is well geared for fast-changing trading conditions. As you can see, there is a clear contrast between category growth, partly reflecting their level of exposure to out-of-home channels and on-the-go products. Powdered and liquid beverages reported growth of 3.2%. Coffee posted around 5% growth. Sales declines in the out-of-home channel were more than offset by strong development in at-home consumption, which grew at a double-digit rate. Starbucks products, Nespresso and Nescafe, continued to gain market share. Sales of Starbucks products reached 2.7 billion Swiss francs, generating incremental sales of over 400 million in 2020. The sales of the total Nespresso system increased including Starbucks by Nespresso, grew at a double-digit rate. Powdered formats in cocoa and malt beverages, including Milo and Nesquik, grew at a high single-digit rate, offset by a sales decline in ready-to-drink formats. Pet care saw outstanding growth globally, supported by e-commerce, premiumization, and science-based offerings. Most segments grew at a double-digit rate, with market share gains. We continued to bring innovations to the market, including Purina ProPrime LifeClear and Purina Prime Bones. Nutrition and health science grew at 1.7%. Infant nutrition saw slightly negative growth, reflecting the impact of a sales contraction in YS China infant formula. Outside of China, growth was in low single digits, with market share gains led by NAN and Cerelac. HMO infant formula is now on sales in 64 markets and delivered more than 100 million Swiss francs in incremental sales in 2020. Infant cereals posted strong growth, boosted by increased demand in China, Brazil, and South Asia. We have already commented on Nestlé Health Science. In prepared dishes and cooking aids, Growth was broad-based by region and product segment. We are building a portfolio of strong plant-based brands, such as Garden Gourmet and Sweet Earth. We are also launching products across our portfolio using more climate-friendly ingredients, such as meatless lasagna and plant-based pizzas. Altogether, sales of plant-based food products are close to 700 million Swiss francs, with strong growths. The newly acquired direct-to-consumer meal delivery businesses, Freshly and Mindful Chef, also saw strong growth since their consolidation during the fourth quarter. Milk products and ice cream grew at 7.9%. Within the category, dairy performed strongly with elevated demand for home baking and fortified products such as Nino and Bear Brand. Coffee met also saw strong growth in retail. After a difficult start to the year, ice cream showed sequential improvement with growth reaching a double-digit rate in the second half. Growth in confectionery was slightly negative with reduced demand for impulse, seasonal and gifting products partially offset by strong momentum in baking products and tablets. Water saw negative growth given its high exposure to the out-of-home channels. Sales decline moderated in the second half. Moving to profit evolution by product categories, as we saw with growth, the contrast in margin evolution strongly reflects the level of exposure of each category to the out-of-home channel. Powdered and liquid beverages saw a slight increase in margin, supported by significant contributions from our coffee businesses. Pet care, prepared dishes, as well as milk products and ice cream, saw material improvements, reflecting strong organic sales growth and the benefit of operating leverage. Margin in nutrition and health science reduced, mainly reflecting sales decline in YS infant formula. Water on confectionery saw a margin decrease, mainly as a result of lower sales in out-of-home channels. Looking at our gross margin, we finished the year at 49.1%. Excluding Nestle Skinheads, our gross margin improved by 10 basis points. Gross margin has improved in seven of the last nine years. This illustrates the quality of our portfolio. The improvement also reflects our capacity to efficiently manage our product mix and industrial operation, as well as to neutralize commodity and packaging inflation. This slide shows the progress of our underlying trading operating profit margin, which increased by 20 basis points in constant currency and by 10 basis points on a reported basis. The disposal of Nestle Skin Hells, which had a very different P&L structure, makes the reading of the different components of our own margin improvement difficult. It is therefore more relevant to look at margin expansion on a like-for-like basis, excluding Nestle Skin Hells, which is shown on the next slide. Excluding Nestlé skinheads, our underlying trading operating profit margin increased by 30 basis points in constant currency. Our gross margin continued to improve as our portfolio evolved towards more value-added products. Margin expansion was supported by structural cost reduction, portfolio management, and slightly lower consumer-facing marketing expenses, which more than offset commodity inflation and COVID-19-related costs. During the second half of the year, marketing expenses returned to a more normalized level and even increased versus the same period of 2019. We are increasing our media investments, particularly in digital channels, which now accounts for 47% of total media spend. Moving on to the P&L items, from underlying trading operating profit down to underlying EPS. Restructuring expenses and net other trading items decreased by 200 basis points, reflecting a significant reduction of asset impairments and COVID-19-related delays to restructuring programs. The trading operating profit margin reached 16.9%, an increase of 210 basis points on a reported basis. Gains and disposals decreased as a result of the large gain on the disposal of Nestle Skin Health in 2019. Income from associates and joint venture increased by 120 basis points, mainly due to the revaluation of our original equity investments in AI MUNE and Freshly. the underlying tax rate decreased by 50 basis points to 21.1%, mainly due to the evolution of the geographic and business mix. As a result, the net profit margin increased by 90 basis points to 14.5%. Underlying earnings per share increased by 3.5% in constant currency. Moving on to working capital, This chart shows our working capital levels based on a five-quarter rolling average, working capital decreased by 60 basis points to 0% of sales, marking nine consecutive years of improvement. This reduction came even as the company increased inventory levels materially to meet COVID-19-related demand. Payables was the main factor driving this improvement. The group's return on invested capital increased to 14.7% as a result of improved operating performance and disciplined capital allocation. This is the sixth consecutive year of improvement. We are pulling all levers to improve ROIC, including sales growth, margin improvement, working capital reduction, as well as disciplined capex and portfolio management. Free cash flow was 10.2 billion Swiss francs, or 12.1% of sales. The slight reduction as a percentage of sales was mainly due to one-off items in 2020. We expect our free cash flow margin to remain around 12% as we work on all drivers of cash generation, such as sales growth, margin improvement, and working capital reductions. Net debt increased by 4.2 billion Swiss francs, closing at 31.3 billion Swiss francs on December 31, 2020. The increase largely reflects share buybacks of 6.8 billion Swiss francs completed during 2020 and is in line with our intention to avoid deleveraging our balance sheet. Our net debt to EBITDA ratio now stands at 1.7 times versus 1.4 times in 2019. During 2020, we return 14.5 billion Swiss francs of cash to our shareholders in dividends and share buybacks. We are committed to maintaining our practice to increase the dividend every year in Swiss francs. At the next Annual General Meeting, the Board of Directors will propose a dividend of 2.75 Swiss francs per share, an increase of 5 centimes. If approved, This will be the company's 26th consecutive annual dividend increase. The company has maintained or increased its dividend in Swiss francs over the last 61 years. This concludes my remarks. I now hand over to Luca to open the Q&A session.