Nestle S.A

Good afternoon and good morning to everyone. Welcome to the Nestlé Full Year 2021 Results Webcast. I'm Luca Borlini, Head of Nestlé Investor Relations. Today, I'm joined by our Chief Executive Officer, Marc Schneider, and our Chief Financial Officer, François Roget. Marc will begin with an overview of 2021 and discuss the 2022 guidance as well as the mid-term outlook. Francois will follow with a review of the full year 2021 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.

Luca, thank you and a warm welcome to our conference call participants. As always, we strongly appreciate your interest in our company. I would like to turn straight to the key messages for 2021. And in all modesty, I think it's been an exceptional year with organic sales growth at the highest level in more than a decade. And also, in light of the significant inflationary pressures we've seen, I think a very respectable underlying trading operating profit margin performance. I won't go through all the details on the slide, but to me, the key message of 21 is that in a year, that were still very much marked by significant pandemic-related and supply chain headwinds and issues. We navigated all of that. We delivered very strong financial results. And at the same time, we kept investing for the future, and we did not lose sight of our key strategic priorities that focus around growth and innovation, portfolio development, and also increasingly our ESG commitments and advancing the state of the art on those. So very strong performance. You're seeing underlying EPS growth of 5.8% in constant currency, and all of that also then rewarded with another dividend increase of 5 centimes to 2 Swiss francs and 80 centimes per share. This is our 27th consecutive dividend increase in the 62nd consecutive year of either a stable or rising dividend. So clearly, in a year that was marked by a lot of turbulence, another year of very consistent and dependable performance, which is one of the hallmarks of our company. Moving now for the next two pages to organic sales growth. So while the 7.5% for last year did stand out, I think to me the key message is that we now consistently will deliver mid-single-digit organic sales growth performance. We hinted at you in previous quarterly calls that we have now what it takes from a setup and portfolio point of view to do that. You see it reflected in our guidance for this year, and you also see it reflected in our midterm outlook. So how do we do this? Well, it is essentially the continuation of investments in fast-growing categories and geographies, fast-paced innovation that's at par or even better than some of our smaller and startup competitors, increased digitalization, market share gains as a result of that, and also portfolio rotation. Taking a closer look at the growth drivers for organic sales growth in 2021. Let's focus first on the high growth categories and channels. So to me, Petcare, Coffee, and Nestle Health Science were clearly the star performers in 2021, kicked the lights out when it comes to organic growth. Petcare and Nestle Health Science delivering double-digit organic sales growth, and Coffee just a shade under at 9.7%. Let's take a quick look at all three of them because I think in addition to that stellar performance in 2021, they stand to benefit from some mid- to long-term growth drivers that are going to be very beneficial to us. So pet care, clearly pet adoptions around the world are up in 2020 and 2021 during the pandemic. And that bodes to a permanent step up and grow from a higher base when it comes to pet food and pet care products. Hence, very good prospects here. And as you know, we have invested significantly in meeting the capacity demands of this attractive and growing category. Coffee, to me, is the signature category to benefit from what I call the at-home revolution. And that's the fact that aside from the pandemic and some of the lockdowns, As a part of more flexible work styles and more work being done remotely and from home even after the pandemic, more coffee will be consumed at home, and that plays right into our retail strength. We may lose a cup of coffee out of home, but obviously our market share in home is so much stronger, so we stand to benefit net-net from this development, which I believe is here to stay. And then on Nestle Health Science, clearly demand was up significantly at the time of the pandemic and continues to be very strong as people do have concerns over their health and they also want to boost their immune systems. But we also have increasing evidence that that interest is here to stay. So a strong immune system, the benefits of that, and taking good care of your health in a forward-looking way. I think both of these notions are very much on trend with consumers around the world And Nestle Health Science is ideally suited to benefit from that. Plant-based food, as you know, is something that we account for under our food category. good, strong, double-digit organic sales growth. I think here our foray into specialties has really paid off. So we're not just offering the plain, straightforward products such as burger patties and chicken pieces, but rather we're going to specialties. Just think about, for example, our tuna or shrimp plant-based alternatives. And we're also increasingly pushing into ready-made meals that benefit from high-quality plant-based ingredients. So this is a good way to differentiate. In addition to that, we also have a strategy that rests on two pillars. There's the retail side of the house, and then, of course, there's also the out-of-home presence, which really benefits us. So a very good position here for continued growth. I believe and continue to believe that plant-based food is one of these once-in-a-generation opportunities to revitalize and upgrade our food category, and we're taking advantage of that. E-commerce, some of you may have followed the event we had in November this year. So I think nothing much to add to the ambitious targets from there. You saw that even in a year and at a time when the pandemic is abating, The interest in e-commerce is on the rise, hence our share of sales from that is also increasing. And we're targeting another significant increase towards the year 2025. And Bernard, our chief marketing officer, owed their vote very much into that. So if you haven't seen that presentation, I think it's still available on replay, and I would encourage you to take a look at that. because it details the strategies behind our e-commerce push. Portfolio management, I'll focus on that on the next slide, but suffice it to say for 2021, two major steps. One is pushing deeper into the vitamins, minerals, and supplements opportunity with Nestle Health Science. and building that into a leading global nutrition health platform. And at the same time, also putting the defining steps on the transformation of our global water business, trading out of Saint-François, trading into another one called Essentia. And I think we're seeing on the growth side the first benefits of that transformation. And now, of course, we also have to manage for better profitability. It was not only about portfolio management. As always, fixing underperforming or recovering businesses is also part of a hallmark. I think this is how a business like ours continues to create value by really getting the most out of the business we're in. And two examples, 421, one is the bounce back of the out-of-home channels. Almost 25% growth here, very close back to 2019 levels. This is more than just a bounce back. This is also a lot of reimagining and rethinking of the out-of-home business in order to take advantage of new and different consumer behavior. And then the other one I'd like to point out is the frozen meals in the U.S., close to 10% organic sales growth. And here as well, this is more than just the bounce back and the support from pandemic times. This is also about just revitalizing some of the brand offerings and also improving our recipes and updating those. The next slide focuses on our portfolio, and here you see the summary For the time since 2017, more than 85 transactions, some divesting activities, some acquiring and investing activity, and all in all, a rotation equivalent to about 20% of group sales. It's been giving us a good contribution to organic sales growth. You see that at the bottom right-hand corner of the slide. So around 80 basis points are coming from that portfolio rotation activity. And just in case you're wondering, are we buying growth? No, we're not. So when you look at the margin development from 2016 to now, about a third of that margin improvement is also due to the portfolio rotation activity. So on both fronts, sales and margin, I think a positive contribution from that portfolio trading activity. And so while it's certainly not a panacea, it is an essential part of our value creation strategy. And I think we have the numbers to bear that out. On the next two slides, I'd like to focus on two ESG issues. Here on the first one, I'm talking about the novel program that we have launched at the end of January to address child labor risks in cocoa farming. This program was launched with the support of the government of Cote d'Ivoire. And it builds on our longstanding Nestle COCO plan and also some of the insights we got from extensive pilot programs that we ran on the ground in Cote d'Ivoire in Ghana. And what's new about this is that we're paying direct premiums for practices such as school enrollment of children, sustainable agricultural activities, most often pruning, for example, and also planting shade trees, and also income diversification so that people don't depend on cocoa income alone. The program is designed to really help people achieve a living income level because that also is one of the best drivers to avoid child labor. And it's important that we de-link it from production volume because we also wanted to have a sustainable benefit for smallholder farmers. That program will be complemented by a significant upgrade in our supply chain over the coming years. So over the next five, six, seven years, we attempt to make our supply chain in cocoa fully traceable. And I think that's important to build consumer trust and really give consumers that confidence that this comes from very sustainable and socially just farming practices. And then, hot off the press, I would like to focus on our latest greenhouse gas emissions data. I think this is also timely because there was quite a bit of discussion around this issue last week following an NGO report. And I think it's probably best to let the facts speak for themselves. And to me, the most important statement is that peak carbon is clearly behind us. So we topped out somewhere around 2019 at about 96, 97 million tons. And even though we have kept growing strongly since then, we have been able now for the year 2021 to get down to a level of 94.3 million tons. So this is adjusting, fully reflecting the growth, and it's fully based on true reductions. And these numbers have been reviewed by Ernst & Young, our auditors, and they're also fully aligned with the principles of what we consider to be the gold standard here, and that is the science-based targets initiative. As you know, that initiative has the full backing of the UN Global Compact, And most scientists see them as the most rigorous approach in this field. Obviously, everyone has their own opinions about this, but we believe this is a very solid plan to follow. We'd like to confirm we're fully on track for our targets that we have issued with our time-bound plan. And those targets call for a 20% reduction by 2025. and a 50% reduction by 2030. So I know there's lots of discussions when you think back to COP26 and some of the media coverage about what people intend to do in 2040 and 2050. But the focus to me is about what happens in this decade to really bring down greenhouse gas emissions and put a dent in the curve here and really have that curve point down. And hence, to me, the defining question when it comes to either companies or governments or whoever is, are you already on your way down as we are, or are you still on your way up? And so I think here the facts clearly show we are on the way down. this overcompensates the growth our business has, which we always said it would. And I think the data here is very convincing, and I wanted to share that with you firsthand. For the next two slides, I'd like to focus on the 2022 guidance and also our midterm outlook. So for 2022, we expect organic sales growth of around 5%. and an underlying trading operating profit margin between 17.0 and 17.5%. The underlying earnings per share and constant currency and capital efficiency are expected to increase. Obviously, looking at the attention and some of the questions we got this morning, yes, there is the question, is that expectation around the underlying trading operating profit margin conservative? And my answer to that is, yes, it is. And I think in light of the turbulence and volatility that we see around us, inflation and supply chain issues, it's a good thing to be conservative. And it's fully in line with our meet or exceed approach when it comes to giving guidance. So the same applies to organic sales growth, where, of course, a lot depends on inflation and pricing activity. So we see a very good chance here of being around 5%, but depending on where inflation goes, it also could take us higher. And turning then to the midterm outlook, we're again confirming that sustained mid-single-digit organic sales growth. And then I think it's also important that we point you to expect continued moderate underlying trading operating profit margin improvements. So this is a return to, I think, one of the hallmarks of the Nestle model, where with increasing our growth and operating leverage, we also expect to have some margin benefit. And so that should also give you confidence that whatever margin compression we've been seeing now in 21 and that we might see in 22, that that compression is temporary and over time then will lead to that normal pattern of continued moderate improvements. And, of course, for the long term and midterm, we also continue to practice prudent capital allocation, and we also expect capital efficiency improvements. That concludes my part of the presentation. Let me hand it over to Francois, and then we'll be both back for Q&A. Thank you.

Thank you, Marc. Good morning or good afternoon to you all. I will now go into further details on our financial performance in 2021, starting first with a breakdown of the components of growth. Organic growth was 7.5%. RIG was strong at 5.5% with increased contribution from volume and solid mix. Pricing increased to 2% with an acceleration to 3.1% in the fourth quarter. Acquisitions net of diversified shares reduced sales by 2.9%, largely relating to the Nestle Waters North America, Yinlu and Herta transactions, which more than offset the acquisition of the core brands of the Bountiful Company and Freshly. The negative impact on sales from foreign exchange moderated to 1.3%, turning positive in the second half. Total sales were 87.1 billion Swiss francs, a 3.3% increase versus last year on a reported basis. These slides illustrate the development of our sales by geography and includes both our zones as well as our globally managed businesses. Organic growth was strong in all geographies. Pricing increased particularly in the Americas, and RIG remained strong across all zones. Pricing in AOA also improved to 2.2% in the fourth quarter. Growth was balanced with strong contributions from developed and emerging markets. Organic growth in developed markets reached 7.2%, the highest level in more than a decade, based mostly on RIG. Pricing was positive, led by North America. Growth in emerging markets was 7.8%, with robust rig and positive pricing, based on strong contributions from Brazil, India, Russia and Mexico. Let's now look at the breakdown of sales by channel. Organic growth for retail sales remained strong at 6.4%, with a high base of comparison in 2020. Within retail, e-commerce saw sustained growth of 15.1%, led by the United States, Russia, and the United Kingdom. E-commerce now accounts for 14.3% of total sales. Most categories saw strong momentum in e-commerce, particularly Purina Pet Care, Coffee, and Nestle Health Science. Growth in out-of-home channels reached 24.5%, helped by a low base of comparison due to the pandemic. In 2021, pricing reached 2%, accelerating to 3.1% in the fourth quarter. We have proactively and responsibly addressed inflationary pressures and steadily increased prices over the course of 2021. The strength of our brands, product differentiation and leading market positions enhances our ability to pass through pricing. So far, we have not seen any material evidence of demand elasticity and we are closely monitoring for any signs of change. Volume growth has remained above pre-pandemic levels over the last several quarters. For 2022, we expect to continue to progressively increase pricing in a responsible manner. We continue to offer products across price points and are focused on the development of affordable offerings, particularly those that meet nutritional needs in emerging markets. These efforts help to soften the effects of inflation for those most impacted. We are also using other levers, such as product mix, discipline cost management, and the further rollout of strategic revenue management tools. Let's now look at the results of our five operating segments, beginning with zone AMS, where we saw high single-digit growth with a high base of comparison in 2020. Sales were 33.8 billion Swiss francs. Organic growth was 8.5%, with robust rig of 4.8%. Pricing increased by 3.7%, reaching 5.2% in the fourth quarter. Growth was supported by new product launches, continued strong momentum in e-commerce, and a further recovery in out-of-home channels. The zone also saw continued broad-based market share gains, led by coffee, pet food, and frozen food. North America saw high single-digit growth in the context of significant supply chain constraints. The largest contributors to growth were Purina Petcare and Nestle Professional, which grew at double-digit rates. The beverages category, including Starbucks at-home products, Coffee Mat and Nescafe, saw mid-single-digit growth. Sales in frozen and chilled food grew at a mid-single-digit rate, with strong sales development for staffers, lean cuisine and hot pockets. Water saw mid-single-digit growth, reaching a double-digit rate in the fourth quarter, driven by Essentia and a recovery for international premium brands San Pellegrino and Perrier. Latin America posted double-digit growth with broad-based contributions across geographies led by Mexico, Brazil, and Chile. By product category, the largest contributors to growth were Purina Pet Care and Confectionery. Sales in coffee and Nestlé Professional also grew at a strong double-digit rate. Infant nutrition saw mid-single-digit growth, supported by the expansion of our human milk oligosaccharides products. The zone underlying trading operating profit margin increased by 30 basis points, with a positive margin impact of the divestments of Nestle Water's North America bronze, more than offsetting significant cost inflation. Shifting to zone M&A, sales were 21.1 billion Swiss francs. Organic growth was 7.2%, the highest level in the last decade. RIG was strong. Pricing increased by 1.2% and reached 2.5% in the fourth quarter. Growth was supported by continued evolution of the portfolio towards fast-growing categories and channels, as well as innovation. The zone continued to see broad-based market share gains, particularly for pet food, coffee, as well as ambient and chill culinary. All markets posted positive growth, with strong sales developments led by the United Kingdom, Russia, Italy, and France. By product category, the key growth drivers continued to be Purina Pet Care and coffee, supported by continued innovation across all brands. Nestle Professional reported double-digit growth. Water saw high single-digit growth. Sales in confectionery grew at a mid-single-digit rate, with strong growth for KitKat. Culinary reported low single-digit growth with a high base of comparison for Maggi and strong growth for plant-based food. Garden gourmet sales increased by more than 40%. And infant nutrition posted positive growth with continued market share gains, despite lower birth rates in the context of the pandemic. The zone underlying trading operating profit margin decreased by 10 basis points. Cost inflation, particularly in the second half, as well as increased consumer-facing marketing expenses, more than offset operating leverage on product mix. There is a time delay between cost inflation and pricing actions, particularly in Western Europe where pricing is often fixed for a one-year period. Moving next to zone AOA with sales of 20.7 billion Swiss francs. Organic growth was 4.2%, showing resilience in a difficult economic environment. The zone saw market share gains in culinary, coffee and pet food. Infant nutrition reported market share losses. China posted low single-digit growth. Infant nutrition saw a sales decline impacted by challenging market conditions. Turnaround initiatives continued to progress, including a review of our product portfolio and distribution strategy. Excluding infant nutrition, China reported double-digit growth driven by Nestle Professional, Coffee, Culinary, and Purina Pet Care. Outside of China, the zone reported high single-digit growth. South Asia, Sub-Saharan Africa, Japan and Korea all saw strong sales developments. Southeast Asia saw positive growth despite continued movement restrictions. By product category, the key growth drivers were coffee, culinary and Nestle Professional. Sales in confectionery, ice cream and Purina pet care grew at a high single-digit rate. Infant nutrition saw a sales decline, with growth turning positive outside of China in the second half. The zone's underlying trading operating profit margin decreased by 40 basis points. Cost inflation and product mix more than offset operating leverage. Next is Nespresso, which saw sales of 6.4 billion Swiss francs. Organic growth was 8.8%, based on strong rig of 8.2% and pricing of 0.6%. Growth was fueled by new consumer adoption, particularly for the virtual system, continued momentum in e-commerce, and a recovery in boutiques and out-of-home channels. By geography, the Americas and AOA both grew at a double-digit rate, M&A saw mid-single-digit growth, and overall Nespresso gained market share with contributions from most markets. During the year, Nespresso also continued to progress on its sustainability agenda, achieving carbon neutrality certification in five markets, including its two largest, the United States and France. the underlying trading operating profit margin decreased by 60 basis points. Increased gross investments more than offset operating leverage. Finishing with Nestlé Health Science, which reported sales of 4.8 billion Swiss francs, the business grew at a double-digit rate, building on a strong sales development in 2020 with broad-based market share gains across channels and markets. Growth was supported by e-commerce momentum, new product launches, and geographic expansion. Consumer Care posted double-digit growth, with strong contributions from Vital Proteins, Garden of Life, Persona, and Pure Encapsulations. Healthy-aging products such as Boost, Meritan, and Nutren all grew at a double-digit rate. The newly acquired core brands of the Bountiful company posted high single-digit growth, led by Nature Bounties and Solgar. Non-functional hydration products grew at a strong double-digit rate. And Garden of Life achieved carbon neutrality certification. Medical nutrition saw high single-digit growth with robust demand for pediatric and adult medical care products. The rollout of Palforzia, the peanut allergy treatment, was impacted by the pandemic. In the fourth quarter, the product started to see increased adoption in the United States and was also launched in the United Kingdom and Germany. By geography, the Americas and AOA posted double-digit growth. Sales in Emena grew at a high single-digit rate. The underlying trading operating profit margin decreased by 290 basis points, mainly due to investments in Palforzia, increased consumer-facing marketing expenses, and one-off integration costs related to the acquisition of the core brands of the Bountiful company. Looking now at product categories, we saw strong growth in all segments, with the exception of infant nutrition. Categories with strong market share gains included coffee, pet food, culinary, and Nestlé health science. Within powdered and liquid beverages, coffee saw growth of close to 10%, supported by Nescafe, Nespresso, and Starbucks products. Sales of Starbucks products grew by 17.1% to reach 3.1 billion Swiss francs. This business is now 50% bigger than it was three years ago. We have now captured close to 20% of the Nespresso-compatible capsules market globally. Cocoa and malt beverages grew at a mid-single-digit rate with particular strengths for ready-to-drink formats. Pet care maintained its strong growth momentum. Most segments and geographies grew at a double-digit rate with market share gains. Purina's performance was driven by continued e-commerce growth and increased demand for premium products. Key science-based innovations such as ProPlan LifeClear, the first allergen-reducing cat food, saw almost triple-digit growth. Nutrition and health science grew at 1.4%. Organic growth in infant nutrition was minus 4.6%, reflecting a sales decrease in China and a slowdown in birth rate across geographies. Sales of HMO products continued to see robust growth, reaching 1.2 billion Swiss francs in sales. We have already discussed Nestle Health Science. Prepared dishes and cooking aids saw 6.6% growth, led by ambient culinary and frozen meals. Plant-based food products continued to deliver strong double-digit growth, with sales reaching around 800 million Swiss francs. Milk products and ice cream grew at 5.9%, with a high base of comparison in 2020, particularly for home baking products. The key growth drivers were premium and fortified milks, as well as coffee creamers and ice cream. Growth in confectionery reflected a continued recovery in impulse and gifting products. Within confectionery, KitKat grew at a double-digit rate, and innovation supported growth with new launches such as Incoa, a vegan KitKat, and SharkNuts wafer in China. Water posted 6.8% growth, supported by a steady recovery in out-of-home channels and a low base of comparison. The recently acquired functional water brands Essentia grew at a strong double-digit rate. International premium brands also saw strong growth, particularly in the fourth quarter. Moving now to profit margin by product category. The extent and timing of cost inflation varied significantly by product, with contrasted impact on category margins, particularly in the second half of the year. Powdered and liquid beverages saw a substantial margin increase, reflecting strong sales growth and the benefit of operating leverage. We did not yet see any meaningful effects from green coffee price increases in 2021, but the impact will be material in 2022. Purina Petcare posted a margin decrease as higher commodity and distribution costs more than offset operating leverage and pricing. Nutrition and health science saw a margin decline in both infant nutrition and Nestle health science. We have already discussed Nestle health science. In infant nutrition, the margin decline reflected reduced sales as well as higher commodity and freight costs. Prepared dishes and culinary products saw a margin decline, reflecting higher commodity and distribution costs, as well as investments behind newly acquired D2C businesses and plant-based food. The margin increase in milk products and ice cream was supported by portfolio management, more specifically the divested shares of Yin Lu and U.S. ice creams, as well as operating leverage. Confectionery saw a substantial margin improvement, reflecting the benefit of operating leverage. And water saw a margin decline due to increased freight and commodity costs. Gross margin is a key component of our value creation model, evidenced by our track record of increases in 7 of the last 10 years. 2021 was exceptional, with a gross margin decrease of 130 basis points to 47.8%, reflecting time delays between cost inflation and pricing actions. Inflation was significant and broad-based across raw and packaging materials, as well as freight and energy costs, particularly in the second half. Overall, the impact of cost inflation was slightly above 4% of cost of goods sold, higher than expected, and mainly related to items that could not be hedged or bought forward. The impact of cost inflation is expected to be significantly higher in 2022, particularly in the first half, with the most material increases coming from coffee and metals. We expect to offset increased inflation through mitigating actions, including pricing, operating leverage, and efficiencies. Moving next to underlying trading operating profit margin. Overall, for 2021, our underlying trading operating profit margin decreased by 30 basis points to 17.4%. one-off integration costs related to the acquisition of the core brands of the bountiful company had a negative impact of around 10 basis points. The remaining decrease reflects time delays between cost inflation and pricing actions. As discussed earlier, gross margin decreased by 130 basis points. Distribution cost as a percentage of sales decreased by 20 basis points, mainly as a result of the disposal of the Nestle water brands in North America. Administration and marketing expenses decreased by around 80 basis points as a percentage of sales, based on strong operating leverage and efficiencies. At the same time, we continue to invest for growth, increasing our consumer-facing marketing expenses in constant currency. R&D expenses were flat as a percentage of sales. Investments in AI immune have been financed through efficiencies in R&D. We have made good progress and delivered on most of the internal sustainability targets we set ourselves for 2021. So far, we are on the right trajectory to meet our 2025 ambitions. In 2021, our sustainability investments were around half a billion Swiss francs, a material increase versus 2020. As expected, our sustainability investments were fully self-financed through gross leverage and disciplined control of our structural costs. Looking forward to 2022, we expect our underlying trading operating profit margin to be between 17% and 17.5%. In terms of phasing, given the ongoing impact of inflation, we expect a margin decrease in the first half of 2022 before improving in the second half. Moving on to the P&L items from underlying trading operating profit down to underlying EPS, restructuring expenses on net other trading items increased by 260 basis points, largely reflecting impairments related to the YS business. As a result, the trading operating profit margin was 14%, a decrease of 290 basis points on a reported basis. Higher income from associates and joint venture, reflecting the L'Oréal transaction, as well as lower taxes more than offset lower gains and disposals. As a result, the net profit margin increased by 490 basis points to 19.4%. Moving to underlying EPS, underlying earnings per share increased by 5.8% in constant currency. The main driver of the underlying earnings per share improvement was operating performance, more specifically organic growth. All other items, such as finance cost, underlying tax rate, and share buybacks net of finance cost, also contributed positively. Free cash flow decreased from 10.2 billion Swiss francs to 8.7 billion Swiss francs, reflecting temporarily higher inventory levels and an increase in capital expenditure to meet strong volume demand, particularly for Purina Pet Care and coffee. Moving on to working capital, this chart shows our working capital levels based on a five-quarter rolling average. Working capital was essentially stable in 2021. The group was able to offset a temporary increase in inventory through further improvements in payables. The decision to increase inventory levels should be seen in the context of significant supply chain disruptions. The group's return on invested capital before goodwill and intangibles increased by 60 basis points to 41.7%, reflecting improved operating performance, particularly sales growth. The group's return on invested capital was 14.2% when excluding the wires impairment, with a decrease of 50 basis points mainly reflecting the acquisition of the core brands of the bountiful company. Net debt increased by 1.6 billion Swiss francs to reach 32.9 billion Swiss francs as of December 31, 2021. The dividend payment, share buybacks, and the net cash outflow from M&A more than offset proceeds from the disposal of L'Oréal shares and free cash flow generation. During 2021, we returned 13.9 billion Swiss francs of cash to our shareholders in dividend and share buybacks. We are committed to maintaining our practice of increasing the dividend every year in Swiss francs. At the next Annual General Meeting, the Board of Directors will propose a dividend of 2.80 Swiss francs per share. If approved, this will be the 27th consecutive annual dividend increase. The company has maintained or increased its dividend in Swiss francs over the last 62 years. This concludes my remarks. I now hand over to Luca to open the Q&A session.