Nestle S.A

Good afternoon and good morning to everyone. A warm welcome to the Nestlé full-year 2022 results webcast and thanks for joining. I'm Luca Borlini, head of Nestlé Investor Relations. Today I'm joined by our CEO Marc Schneider and our CFO François Roget. Marc will begin with an overview of 2022 and discuss the 2023 guidance. François will follow with a review of the full-year 2022 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 interest in our company. Thanks for joining us. It's good to update you today on where we are. As you can imagine, a lot has happened in this turbulent and demanding year. And all the more, I'm pleased to say that Nestle has been able to prove its resilience and dependability at this very demanding time. Let's move to some of our key messages here. And the slides I'll walk through are similar to the ones from the press conference this morning, where we've seen insights from this morning. We're also trying to offer some value added and some reaction on our part in order to advance the debate. So, clearly, from our perspective, when it comes to the financial performance, we consider it very resilient in a volatile and turbulent time. Organic sales growth of 8.3 percent was smack in the middle of our guided range of 8 to 8.5 percent. And it was also noteworthy and positive that the real internal growth, so the sum of volume and mix, came up ever so slightly positive for the full year. The mix, which, of course, is a very important indicator for us since it measures the rate of progress and innovation outweighing the negative coming from volume development. I know that there's a lot of concern among you about the volume and rig development, specifically in the fourth quarter, and I hope that when Francois and me will be able to address some of that, we are obviously a lot less spooked about this than you are because I think there's perfectly explainable reasons that are not solely related to pricing that were leading to this development. Underlying trading operating profit margin, it decreased as we guided you to expect all throughout the year due to significant inflation. But I think we were able to limit the decrease to a better extent than anticipated, 17.1 percent, certainly above what outside estimates were. And I think what you're seeing is significant focus on cost efficiencies, growth leverage, to offset some of the effect of cost inflation. So very pleased with that result. Tremendous effort from the team. And again, pointing out the resilience of our financials at a very demanding time. Underlying earnings per share growth, 9.4%. So very close to the top end of that 6% to 10% constant currency underlying share growth rate that we led you to expect as part of our Barcelona Investor Day And as you saw from our guys, this is also what we're confirming as a range again for this year. So here again on the underlying earnings per share growth rate, also very consistent dependable performance. We did not give up when it comes to building for the long term in this year. So clearly when it comes to CapEx in particular, but also innovation, sustainability, lots of good forward looking spend that of course will deliver its benefits in future years. And then also continued progress when it comes to portfolio rotation, where we are now at about 22% of our portfolio compared to the 2017 baseline. You will see later that we made good progress on the good for you, good for the planet agenda. And here is another item where, of course, at a time of inflation and affordability concerns, it would have been easy to cut corners. We chose not to do that because these are important strategic initiatives that over time the company will get measured on by consumers and the public at large and also you as investors. And hence, disciplined, continued progress in that arena is important to us. And then, regarding the dividend, I think we're sharing some of the benefits of our value creation here with a dividend increase of 15 centimes to 2 Swiss francs and 95 centimes. So all throughout, I think, very consistent performance at a time that was marked by so much turbulence and volatility. I also would like to thank Team Nestle for a tremendous job delivering this. Tremendous focus inside the company on operational discipline, making things happen as agreed, and really keeping their eyes on the ball. And over and above that, I think whatever capacity is available towards the strategic development of the company, we're devoting it to them because we know that we're not just managing for today. We're also managing for tomorrow and for positioning the company well for the future. With this, I'd like to move on to the 2022 achievements in particular. And clearly, pet care does stand out as the one category that delivered over and above, no question about it. To me, nonetheless, the second item, coffee, is one that's worthy to point out. 8.1% is a very resilient number in a year that saw growth. on the one hand, spiking coffee prices, and on the other hand, also a normalization in this post-COVID world for so many markets around the world, where clearly the in-home consumption did, first of all, lap very strong quarters from the year 21, and also the in-home consumption gave way to at least some partial out-of-home consumption, whereas, you know, our market shares are less. So in light of all of that, 8.1 percent, very strong performance, And in particular, I continue to be very pleased with how the Starbucks Global Coffee Alliance is shaping up and continues to develop. We've been developing 1.5 billion of incremental sales in this line of business since 2018. Emerging markets are clearly a base of stability. We're seeing, in addition to the pricing-led growth, also very good development in those markets. So I think our strong presence in emerging markets is clearly paying off at this time. And then out-of-home channels showing a tremendous rebound. We're now above 2019 levels. Having said that, the rebound was a lot stronger in the first nine months. And then we see some degree of normalization setting in in the fourth quarter, which is simply a function of how the fourth quarter of 21 shaped up. And then also, we're seeing the negative impact in the fourth quarter out-of-home growth rate coming from China, where, of course, the country was going through some clearly advanced COVID-related reductions, and as a result of that, out-of-home consumption was quite muted. We did make good progress. Moving on to the next section regarding underperforming businesses, China infiltration, a lot of progress done, cleaning up the distribution system, simplifying it, SKU rationalization, a much clearer price point positioning of our various brands and offerings, and again, the results following on the heels of that. So that was very reassuring at a time when the birth rate in the Chinese market is still quite low. And then one thing that I'll talk about later some more and that we discussed already in Barcelona and as part of our Q3 investor call, the streamlining of the SKU portfolio That one was originally born as a consequence of some of the supply chain limitations we've seen. I think it has now grown into a full blown strategic initiative that really gives us lots of bottom line benefits, but also expected top line benefits down the road. More on that later. On portfolio management, two items worthy to point out. One is that new focus of Nestlé Health Science on consumer care and medical nutrition. with consumer care breaking down into active nutrition and vitamins, minerals, and supplements. As you know, we did not achieve our objectives with the immune acquisition, and we're looking into alternatives for that. I think that new strategic positioning builds on what Nestle Health Science is best at, and then there's lots of scaling-up opportunity in those three bases going forward, and we'll focus on that. So, again, we regret that we did not meet our objectives here, but I also believe we found a good way out when it comes to future strategic positioning and ensuring the continued success story of Nestlé Health Science. In food and on Freshly, similar situation, as you know, bad business, while it's clearly flu in the early days of COVID, that's so direct to consumer focus was too narrow. The products, however, were in pretty strong demand. And so combining with the firm Cattle Cuisine and now creating a fresh food business-to-business platform, in my opinion, is very much aligned with the needs of the times. So this would serve as food service operators that don't want to prepare fresh food on site, be it as a result of labor shortages or cost pressures. And we believe that this is a niche that's very much in demand and that we can successfully exploit with this company going forward. So quite bullish on that. And I think what you're seeing here is two examples of us addressing situations that were not performing well early, but then also finding the proper strategic resolution going forward that ensures continued success for the company. I'll now focus on two of our strategic plans, good for you, good for the planet. And let me start with good for you and the nutrition side of things. As you know, this builds on literally 25 years of success with our nutrition, health, and wellness strategy. And in that quarter of a century, I think we've done already a lot of progress regarding the reduction of sodium, sugar, and saturated fats. It's clear that while the work goes on, there are limits. So enjoyment-related categories will not be turned into health-related categories. But nonetheless, across the full spectrum, a lot has been accomplished, and our research and development stays very much focused on that. Because there are limits to how much sodium, sugar, and saturated fats eventually can come out, I think we also have to broaden our approach. And one is around transparency, transparency when it comes to labeling, but also when it comes to the entire portfolio. And this is where we made some significant announcements from our end last fall. The first one is on global transparency. So we will rate coming out with a report in the next few weeks, our entire global portfolio, according to the health star rating, which is the same one that's been used by the access to nutrition index. And to our knowledge among the major global food companies, we're the first ones to do this on the global scale to give you a good sense of where the entire portfolio stands. And then for 14 major markets around the world, we will use the prevalent national rating system to also provide a rating of those national portfolios. So that's, in our opinion, key progress on the transparency front. As you know, we complemented that with a step up in our responsible marketing initiatives and enlarged the age bracket of our marketing children policy and go now starting from July from zero to 16. We will not stop there. I think we have exciting new initiatives underway for this year. Again, regarding targeting, we would like to work and publish with you a target number for the healthier parts of the product portfolio, so the ones that are rated three and a half under the health style rating system or above, and give you an expected sales figure for several years down the road for that bucket. And then the other thing we're working on, since we do believe in the future promise and potential of plant-based food, to give you a sense of where we can take that business, plant-based food and beverage, over time. So both of these are projects that are in the works and that are forthcoming later this year. We will also clearly continue to work on other transparency commitments and responsible marketing commitments, so this work will not let up. And all of that comes on top of ongoing work that we do, as you know, when it comes to affordable nutrition, especially in emerging markets, and also our highly successful drive on micronutrient fortifications. So lots of work going on in this area. It is the core of what we're selling. Nutrition is, at the end of the day, tasty and balanced diets are the core of what we're selling. And so upgrading our ambition levels here over time, I think, is important. Next, under the Good for the Planet header, obviously lots of eco-initiatives, lots of initiatives underway that are designed to improve our sustainability footprint. But greenhouse gas emissions is clearly one that is at the center of our activities. And here also, I think, after a very successful 2022, we have progress to report. I told you last year that peak carbon was behind us already. We crossed that sometime 2019, 2020. But now we're also below the 2018 starting levels. So when you think about our... net zero roadmap, the one that went from 2018 and then extends to 2050, where we intend to be net zero, we're now below the baseline emission levels there from 2018, and to our knowledge, one of the very few companies that has reached that milestone. We're also on track for the 20 percent carbon emission reduction by 2025 versus that 2018 level, and we expect to make significant progress this year and the next two following years. As you can imagine, in some of these initiatives, especially when it comes to planting trees, for example, in your agricultural supply chain, some of them have lead times because any carbon reduction related to that does not get counted for the first two years and only then slightly ramps up. So that's why we knew the whole progress was going to be somewhat back and loaded, but against that backdrop, I think, where we are already, we have good reasons to be happy and we feel good about the 2025 target at this moment in time. Moving on to some key focus areas for 2023. Let me start at the center of the slide with the operational side. One thing I said at the press conference this morning, in turbulent moments like these, good operations and good operational management eats strategy for breakfast. And so clearly, Protecting volume growth is something that's very important to us. And I think our tasty project that we described to you and that we're expanding now is geared towards helping that over time. We will continue to focus on driving cost efficiencies, which are very important to us. And of course, we're also after taking it somewhat easier on marketing investments in 2022, we'll ramp up that again in 2023. Francois will explain later to you that, of course, the marketing spend also needs to be seen in conjunction with the trade spend. And so the picture may not be as bleak as you think. But nonetheless, we believe that in 2023, there is room for further marketing investments. And as a private goods company, these are very important to us. On the strategic front, we will accelerate portfolio optimization. That is an area that's important to us. And in a sense, we will have a complete scalable set of efforts from SKU optimization to the entire portfolio. I'll explain that on one of the following slides. And then continued focus on fast, relevant, impactful innovation is going to be important to try to mix. And then we will continue to lead on our climate sustainability and nutrition agendas. Financially speaking, restoring the gross margin is key. Clearly, after this tremendous surge in inflation, and also renewed focus, stronger focus on cash flow generation. We've made some deliberate choices to run up inventory levels to ensure at all times that our supply chain holds up. But I think now with some of the COVID fears and supply chain constraints around the world easing, now is the time to also walk that down again, reduce the net working capital, and focus on cash flow generation. That brings me to the portfolio optimization slide, and this is one I'd like to spend a minute on because from what used to be a very tactical operational tools to react to supply chain shortages, this has now morphed into a major strategic and company-wide initiative that, in my opinion, has significant promise. So originally, when you had shortages, clearly it was a choice of focusing on the articles that were most in demand with our consumers and the retail partners. And this led us then to what we call cutting the tail in order to push the head. But once we started doing that, we saw that there was tremendous promise in it, and we scaled it up and accelerated it quite a bit. And clearly we noticed that we hadn't done that sort of exercise for a long period of time and the overall SKU portfolio had proliferated, and there was tremendous promise when it comes to cost efficiencies near term and even increasing the organic growth longer term by focusing on the items that are most in demand. So this is what I described this morning at the press conference as a win-win-win situation where clearly consumers are going for the most popular articles, retailers like high-rotation items, and for us having a more limited SKU lineup, also means less complexity, more operational efficiency, and then, of course, an even better on-shelf availability for the items that are in demand. So this was the starting point. And then from there, we took it somewhat broader and bolder and even now we start to look at entire brands and segments and geographies as itemized here. And in cases where we cannot sell a business, we're not afraid of walking away from it as long as we do it right A good example here is the frozen food Canada business that you see at the bottom left-hand corner. That was an announcement from a few weeks ago. This is a book of business of about 150 million Swiss francs. It's a business that was not really sellable and not really a winning proposition because we don't have our own local manufacturing in Canada. These products were made in the U.S. and then imported, and clearly by the time you're talking transportation and you're talking currency, It was hard to turn this one into a winner, but we believe that walking away from it and winding it down over a period of two years while being a drag on rig and organic crow for the short term clearly will have significant benefits for the business going forward, and that is essentially what we're interested in. And while this example may stand out size-wise, you will see lots of smaller ones where I believe making the tough choice short term even though it does impact RIG and it does impact OG for the moment, clearly will have benefits then down the line because you will free up capacities, you will free up supply chain, you will free up resources to focus on the proven winners and to make the most of those. That was one of the key factors, one of three, behind some of the stronger than expected volume reduction in Q4 because we were scaling this thing up as fast as possible. The frozen food Canada announcement is not among them. This was a 23 announcement, and as I said, we'll be winding this down in 23 and 24. But on a smaller, more regional scale, we've done lots of decisions already here. in the fall of 22 now that we're impacting the rig and the OG for the fourth quarter, but again, with a good business logic and expected benefits down the line. And then, of course, we're reallocating those resources towards high growth, high margin, high rotation products, and that is what everyone wants. With this, I'd like to turn to the 2023 guidance. And I would like to confirm that we expect organic sales growth range between 6% and 8%. So this will continue to be pricing-led. We're not in a position, and I think this is in line with prior practice, to give a breakdown here between the pricing part and the rig part. I'm asking for your understanding on that. But it will be pricing-led. and nonetheless we're also seeing good development, especially towards the end of the year, and we're working hard when it comes to stabilizing RIG. The underlying trading operating profit margin is expected to be between 17% and 17.5%, so this is very much in line with the kind of path that we have laid out for you as part of our Barcelona Investor Conference, and we expect to make meaningful progress towards that 2025 goal. And that then also translates into a bracket for the underlying earnings per share growth in constant currency between 6% and 10%, so similar to the bracket that you have seen for this year. This concludes my part of the presentation. With that, I would like to hand it to Francois, and then later on we'll be happy to answer your questions.

Thank you, Marc, and good morning to all. Let me start with some of the key highlights for 2022. In a year shaped by volatile macroeconomic and geopolitical events, we delivered record financial results. As you can see from the chart, our reported sales growth was strong at 8.4%, adding 7.3 billion Swiss francs of sales. In Swiss francs, our underlying trading operating profit increased by 6.5% or 1 billion. Underlying earnings per share growth was robust, increasing by 9.4% in constant currency to 4.84 Swiss francs. We increased our returns to shareholders to 18.2 billion Swiss francs, the highest ever level on an annual basis. Organic growth was 8.3%, pricing increased to 8.2%, reflecting significant cost inflation. RIG was positive at 0.1%, following a high base of comparison in 2021 supply constraints and portfolio optimization actions. Net acquisitions increased sales by 1.1%, largely related to the acquisition of the core brands of the Bountiful Company as well as Orgain. Foreign exchange decreased sales by 0.9%, turning negative in the second half. Total reported sales reached 94.4 billion Swiss francs, an 8.4% increase versus last year. Turning to the distribution of growth between developed and emerging markets, organic growth in developed markets was 7.1% based on increased pricing. Rig was negative following a high base of comparison in 2021. Growth in emerging markets increased to 10% with strong pricing and positive rig. Growth was driven by Latin America, Africa, and South Asia with continued momentum for affordable offerings. This chart shows the evolution of our growth factors over the last five years. Overall, the group's rig in 2022 was positive at 0.1%. In the context of significant volatility, we felt there was merit in breaking out rig into its two components, namely mix and volume. To enhance the quality of this analysis, we excluded water on health science, which results in a slightly negative rig for 2022 of minus 0.1% on this chart. As you can see, mix has historically been a key driver of organic growth, supported by premiumization and innovation. Mix remained resilient in 2022 at 1.6%, indicating that we have seen only limited downtrading by consumers to date. In 2022, pricing became the largest contributor to growth. Looking at volume, we saw an exceptional step-up in 2021, with growth almost three times higher than historical levels in the context of elevated pandemic-related demand. This exceptionally high base of comparison and supply constraints negatively impacted our 2022 volume growth. Overall, the average volume growth for the last two years at 1% was only slightly lower than pre-pandemic levels, reflecting limited pricing elasticity to date. The recent volume evolution is more reflective of overall market conditions. Indeed, we continue to see more than half of business sales gaining or holding market share, in spite of some supply constraints and deliberate decisions to optimize our SKU portfolio. When looking more specifically at our billionaire brands, which account for more than 70% of our sales and saw organic growth of 10%, we are gaining our holding share in close to 60% of business sales. Looking at Q4 rig more specifically, beyond the high base of comparison at 4% in the fourth quarter of 2021 and supply constraints, Q4 was also impacted by three additional transitory factors, which had a negative impact of ONRIG of around 160 basis points. The two largest factors were the normalization of out-of-home growth and the acceleration of SKU and portfolio optimization actions. The normalization of out-of-home growth reflects the unwinding of pandemic-related volatility. Growth decelerated from 18.3% at the nine months to 6.1% in the fourth quarter, toward a level more in line with what we saw pre-pandemic. Second, we accelerated our SKU and portfolio optimization program, which is part of Project Testy and has delivered almost 1 billion Swiss francs of savings in 2022. The portfolio optimization component of this program has delivered strongly to debt and giving us the confidence to broaden its scope beyond SKUs to include brands, segments, and geographies. In Q4 2022, the acceleration of this program led to a more negative impact on RIG than previously communicated. Going forward, we confirm that the rig impact is expected to be negative for H1 2023 and turn 20 basis points positive for the full year as we start to reap the benefit of growing the head. The expansion of the program will support growth on margin in 2024. The recently announced discontinuation of our frozen food business in Canada, with annual sales of around 150 million francs, is a good example of the new broader scope of our portfolio optimization program. Third, water saw a rigged decrease in the fourth quarter as a result of temporary capacity constraints. This capacity reduction follows our recent decision to upgrade our Perrier production facility. the decision will impact our water rig for a few more months. Overall, while we are actively working to protect rig in 2023, we expect rig to be negative for the first half, as the three factors mentioned here will continue to impact our business. Let's now shift focus to the results of our seven operating segments, beginning with Zone North America, where we saw 10.3% organic growth driven by pricing of 11.6%. RIG was resilient at minus 1.3% in the context of a high base of comparison in 2021, supply constraints and pricing. In the fourth quarter, RIG was minus 4.9%, largely impacted by portfolio optimization actions, a moderation of growth in out-of-home channels, and temporary capacity constraints for Perrier. The zone saw broad-based growth contributions across strategic brands and categories, driven by pricing, strong operational execution, and continued momentum in e-commerce. The zone also saw market share gains, led by pet food, portioned coffee, and baby food. By product category, sales in Purina Pet Care, Nestlé Professional, and Starbucks out-of-home products grew at a strong double-digit rate. Infant formula recorded double-digit growth, reflecting supply constraints in the market. As a reminder, we sold the Gerber Good Start brand in the fourth quarter to focus on our core baby food business, which includes purees, snacks, and cereals. Premium Water posted mid-single-digit growth, with a sales decrease in the fourth quarter, mainly due to temporary capacity constraints. The zone's underlying trading operating profit margin increased by 70 basis points, with a notable improvement in the second half of the year. Pricing, gross leverage and portfolio management more than offset significant cost inflation. Next is Zone Europe. Organic growth was 7.2% driven by pricing. RIG was positive at 0.9% despite a high base of comparison in 2021 and supply constraints. In a challenging and disrupted environment, Zone Europe demonstrated resilience, particularly in Ukraine, where Nestlé announced a 40 million Swiss franc investment for a new production facility. The Zone also continued to see market share gains in confectionery, pet food and infant nutrition. By product category, the key growth drivers were Purina Petcare and Nestlé Professional, Within pet care, Lily's Kitchen and Tales.com both grew by more than 20%. Sales in water saw double-digit growth, with a sales decrease in the fourth quarter, mainly due to temporary capacity constraints for Perrier. Coffee posted mid-single-digit growth, led by Nescafe Soluble Coffee, and continued strong sales development for Starbucks by Nespresso. Infant nutrition reported double-digit growth with strong momentum for premium infant formulas, including human milk oligosaccharide products. Garden gourmet plant-based products continued to see double-digit growth fueled by new product launches. The zone's underlying trading operating profit margin decreased by 190 basis points, as significant cost inflation and the impact of war-related supply constraints was not fully offset by pricing, gross leverage, and cost efficiencies. Moving to zone AOA, the zone reported high single-digit organic growth with contributions from most geographies and categories. Growth was driven by pricing, a continued recovery of out-of-home channels and innovations, The zone saw market share gains in coffee, culinary, and infant nutrition. By geography, all regions posted positive growth, with particular strengths in South Asia, Middle East and Africa, as well as Oceania. By product category, culinary was the largest growth contributor, led by Maggie. Sales in Nestlé Professional grew at a double-digit rate across geographies and categories, driven by increased distribution. Coffee, cocoa and malt beverages, as well as Purina Pet Care, all posted high single-digit growth supported by new product launches. Growth in infant nutrition reached a high single-digit rate with broad-based contributions from most geographies. Ambient dairy saw a slight sales decrease, largely driven by portfolio optimization. The zone underlying trading operating profit margin decreased by 110 basis points, significant cost inflation, more than offset pricing, gross leverage, and disciplined cost control. Next is zone Latin America, which reported sustained double-digit organic growth led by pricing of 11.6%. RIG was resilient at 1.5%, building on a high base of comparison in 2021. The zone's growth was broad-based and supported by strong operational execution and continued momentum of out-of-home channels. The zone saw market share gains in infant nutrition, pet food and culinary. By geography, Brazil reported strong double-digit growth. Sales in Mexico, Chile, Colombia and the Plata region continued to grow at a double-digit rate. By product category, confectionery was the largest growth contributor, based on strong demand for KitKat and key local brands. Purina Petcare, Coffee, and Nestle Professional all reported strong double-digit growth. Dairy posted high single-digit growth, led by fortified milks and home baking products. The zone's underlying trading operating profit margin decreased by 70 basis points as cost inflation and one of items in the second half outweighed pricing, gross leverage and disciplined cost control. Turning to Zone Greater China, we are pleased to see significant progress on the turnaround of our business in China following the new organizational structure and leadership. Organic growth was 3.5%, with pricing of 2.5%. RIG was 1%, impacted by COVID-19-related movement restrictions. Growth was supported by strong operational execution in a challenging environment, robust demand in e-commerce channels, and continued innovation. By-product category, infant nutrition saw high single-digit growth, with improved market share trends for NAN and ILUMA. Coffee posted high single-digit growth, led by Nescafe soluble and ready-to-drink coffee, as well as Starbucks products. In confectionery, Tsufuchi reported high single-digit growth, helped by innovation, including the successful launch of savory snacks. Sales in Purina Pet Care grew at a double-digit rate, with strong growth in specialty channels and e-commerce. Following movement restrictions, Nestlé professionals saw a mid-single-digit sales decrease, with market share gains supported by new customer enrollments and product launches. The zone's underlying trading operating profit margin increased by 260 basis points. Favorable mix and disciplined cost control more than offset relatively low cost inflation. Next is Nestlé Health Science. The business posted mid-single-digit growth over a high base with two consecutive years of strong double-digit growth during the pandemic. Our three-year rig average was 8.9%. Innovation, geographic expansion, and market share gains supported growth. Consumer care reported positive growth. Active nutrition saw double-digit growth led by healthy aging products as well as a continued expansion of vital protein and organe. Growth was held by increased distribution, new product launches and geographic expansion. Vitamins, minerals and supplements saw a sales decrease impacted by a high base of comparison, particularly for immunity-related products during the pandemic. Medical nutrition reported double-digit growth, with strong sales development for pediatric and allergy products. Acute medical care products also posted strong growth, based on new product launches. By geography, sales in North America grew at a low single-digit rate. Europe reported positive growth, while other regions combined posted high single-digit growth. The underlying trading operating profit margin of Nestlé Health Science was unchanged versus the prior year, as cost synergies from newly acquired businesses, pricing, and growth leverage were offset by cost inflation and growth investments. Finally, Nespresso, which reported mid-single-digit organic growth driven by pricing, RIG was minus 1.7%, following exceptional growth of 8.2% in 2021 during the pandemic. Comparable organic sales for Nespresso are around 20% higher than they were three years ago, and the three-year average rig was 4%. Growth was led by broad-based momentum for the virtual system. Growth was also supported by a strong recovery of out-of-home channels with continued expansion for the memento system and improved sales development for the office segment. By geography, North America posted double-digit growth with continued market share gains. Europe reported a sales decrease with growth turning positive in the fourth quarter. Other regions combined reported high single-digit growth. The underlying trading operating profit margin of Nespresso decreased by 150 basis points, impacted by cost inflation and investments in the rollout of the virtual system, which were not fully compensated by pricing. Let's now look at product categories. Organic growth was broad-based, supported by pricing across all categories. The contrasted category dynamics in 2022 largely reflect the residual effect of COVID as consumer demand somewhat normalized by channel. Categories with greater at-home consumption, such as dairy and culinary, saw negative rig over a high base of comparison. By contrast, categories and businesses with greater exposure to out-of-home channels, on-the-go consumption and impulse buying, such as confectionery, saw a continued strong recovery. Within powdered and liquid beverages, coffee saw high single-digit growth, building on a high base of comparison in 2021. Growth was broad-based across brands, segments and geographies, and led by a strong recovery for out-of-home channels, which grew at a strong double-digit rate. Sales of Starbucks and Nescafe ready-to-drink products grew at a double-digit rate. Overall, Sales of Starbucks products grew by 12.9% to reach 3.6 billion CHF, generating an additional 1.5 billion CHF of incremental sales since 2018. Cocoa and malt beverages reported high single-digit growth, driven by strong demand for Milo and Nesquik ready-to-drink formats. Petcare posted its third consecutive year of double-digit growth despite supply constraints with mid-single-digit rig. Science-based, premium, and veterinary products saw strong sales developments. Growth was also supported by pricing, continued e-commerce momentum, and innovation. Nutrition and health science posted 7.4% growth. Infant nutrition reported 10.1% organic growth, with a strong recovery and market share gains across most geographies, particularly China. Infant formula growth was supported by continued robust demand for human milk oligosaccharide products, which grew at a double-digit rate, with sales reaching 1.3 billion Swiss francs in the fourth year of marketing. We have already discussed Nestlé Health Science. Prepared dishes and cooking aids saw 3.1% growth, driven by strong sales development for ambient culinary, particularly Maggi in zone AOA. Sales in vegetarian plant-based food grew at a mid-single-digit rate. Garden gourmet in Europe continued to see double-digit growth, while sales for sweet earth in North America were impacted by SKU optimization. Growth in frozen food was slightly positive over a high base. Milk products and ice cream recorded 5.4% growth. The key contributors to growth were coffee creamers, affordable fortified milks, and home baking products. Growth in confectionery reached 9.4%, reflecting strong demand for KitKat, seasonal products, and key local brands. In 2022, KitKat posted double-digit growth with over 5 billion bars sold in 87 countries. Sales in water grew by 11% despite temporary capacity constraints. Moving now to profit margin by product category, most categories saw a margin decline as pricing, gross leverage and efficiencies did not fully offset input cost inflation. There are a number of exceptions, though. In infant nutrition, pricing, gross leverage, and favorable product mix drove a 160 basis points margin increase. Confectionery also saw a margin improvement as pricing and gross leverage more than offset cost inflation. It is worth calling out that pet care also saw a significant margin improvement in the second half. Water also saw its margin temporarily affected by capacity constraints in the fourth quarter and inflationary pressure, particularly linked to energy. Next is underlying trading operating profit, which increased by 6.5% or 1 billion Swiss francs. As a percentage of sales, it decreased by 30 basis points to 17.1%. In 2022, gross profit increased by 2.5% to 42.7 billion Swiss francs. Our gross profit margin decreased by 260 basis points to 45.2% as significant input cost inflation more than offset pricing, efficiencies and gross leverage. In the second half, we saw a further gross margin decrease as inflation was materially higher than we anticipated in the summer primarily due to energy as well as labor costs. For the first half of 2023, we expect our gross profit margin to decrease versus the corresponding period in 2022. Going forward, restoring our gross margin remains the top priority. Distribution costs as a percentage of sales decreased by 20 basis points, mainly as a result of the disposal of the Nestle Waters brands in North America. Marketing, administration, and R&D expenses as a percentage of sales decreased by 210 basis points, supported by sales growth leverage and disciplined cost control. Consumer-facing marketing spend decreased temporarily, following a lower level of marketing activities in the context of supply constraints. Marketing spend increased in the second half of the year. Going forward, we expect to increase our level of marketing investments both in absolute amount and as a percentage of sales. Bear in mind that we should not only look at marketing but also at trade spend. We always look at marketing and trade spend jointly because we arbitrate very often between these two lines of the P&L. In 2022, our total marketing and trade investment increased in Swiss francs versus the prior year. Overall, sustainability investments, mainly recorded in cost of goods sold, were around 700 million Swiss francs. Moving on to P&L items from underlying trading operating profit down to net profit, restructuring expenses on net other trading items decreased by 30 basis points, slightly below the prior year across most items. As a result, The trading operating profit margin was unchanged versus the prior year on a reported basis at 14%. Taxes as a percentage of sales increased by 30 basis points on a reported basis. The underlying tax rate was relatively stable at 20.9%. Lower income from associates and joint ventures largely reflects the disposal of some L'Oréal shares in 2021. Moving to underlying earnings per share, which increased by 9.4% in constant currency and by 8.4% on a reported basis to 4.80 Swiss francs. The largest contributor to the improvement was our strong organic growth. Nestle's share buyback program also contributed 1.8% net of finance costs. The line others, mainly related to income from joint ventures and associates, contributed 2.2% to growth, driven by increased contributions from L'Oréal and Froneri. The negative impact of foreign exchange reflects the currency depreciation of the euro-denominated L'Oréal income. Our cash generated from operations before changes in working capital remains solid and dependable at around 20% over the last six years. Free cash flow decreased from 8.7 billion Swiss francs to 6.6 billion Swiss francs, reflecting our decision to temporarily increase inventory level in the context of supply constraints, the energy crisis in Europe, as well as elevated capital expenditure. As working capital and capex normalize, we should see an increase in free cash flow trending back towards 12% of sales by 2025, in line with our mid-term financial targets. The group returns on invested capital before goodwill and intangibles decreased to 39.4%, reflecting a temporary increase in inventories and a higher level of capex. The group's return on invested capital after goodwill and intangibles was 12.2%, unchanged versus the prior year. Without the impact of impairments, return on invested capital increased by 10 basis points to 14.3% in 2022. The group's ROIC has been relatively stable over the last three years at between 14 and 15%. This is a level two times higher than our WACC, and comes even as we made significant acquisitions. Net debt increased by 15.3 billion Swiss francs to reach 48.2 billion Swiss francs as at 31 December 2022. The increase largely reflected the dividend payment of 7.6 billion Swiss francs and share buybacks of 10.5 billion Swiss francs. Our free cash flow in 2022 was exceptionally low due to our decision to temporarily increase inventories in the context of supply constraints and the energy crisis in Europe. This impact will reverse in 2023 and 2024 with a significant cash flow benefit. During 2022, we return a record 18.2 billion Swiss francs of cash to our shareholders in dividends 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 2.95 Swiss francs per share. If approved, this will be the 28th consecutive annual dividend increase. The company has maintained or increased its dividend in Swiss francs over the last 63 years. Net debt to EBITDA ratio at 2.45 times need to be seen in the context of a temporary increase in inventories. This concludes my remarks. I now hand over to Luca to open the Q&A session.