Pernod Ricard S A

Alex and Hélène will go through the presentation, which is available on our website, after which we're going to run a short Q&A session. But before we begin, we'd like to showcase a short video highlighting our recent Chivas Regal global campaign.

We're not like those who came before us. The old ways to get to the top. Forget it. We make our own rules. Respect earned, not inherited. Self-made, hustle-loving, fearless. We are the new royalty. Born for a new kind of success. Sharing what we learn and the rewards we earn. I rise, we rise.

Well, good morning to all of you. First of all, I do hope you had a great summer period, sipping the right cocktails based on the right brands. So let's present to you our fiscal year 23 sales and results. Well, first of all, we had a very strong fiscal year 23 performance in an environment which is normalizing. We had a very strong and diversified performance, basically with growth driven across all regions and across all categories. One of our key objectives was to protect our growth margin, and we did. We sustained our growth margin and expanded our operating margin. We kept on investing in our brand's sustainable growth and desirability with record level of investments in ANP, in CAPEX and in strategic inventory to fuel our future growth. We continue to actively manage our portfolio, focusing on priority premium plus brands. Our ongoing transformation continues and accelerates. We are progressing towards our 2030 sustainability and responsibility targets. And we continue to deploy our conviviality platform. Of course, all of this is translating into long-term shareholder value creation. You see our total shareholder return of 18% in fiscal year 23. And today we're announcing our intention to do a share payback this fiscal year, somewhere between half a billion and 800 million euros. Here you have the key highlights. I won't dwell into them. Hélène will present them to you in more detail. As I mentioned, our growth is really broad-based. It's been driven by all regions, with also very strong pricing execution across the globe and resilient volumes. So our 10% global organic net sales growth is composed of 1% resilient volumes, 8% strong pricing execution, and a one percent positive mix you see two percent organic sales growth in america's eight percent across europe and 17 in asia rest of the world and strong pricing basically across the globe Also, and this is core to our strategy, which is to diversify the sources of our growth. You see here six categories have driven approximately 85% of our growth and premiumization also being at the core of our strategy. You see premium plus brands that have driven roughly 80% of the growth. and with the prestige segment growing at plus 15%. So if you look at our Scotch portfolio, it grew organically 17%. You look at our Irish whiskey portfolio, driven, of course, by Jameson, double-digit with 11% growth, same growth rate for Cognac and Brandy's, same growth rate of double-digit at 11% for vodka, 8% growth for gin, and same... as for cognac irish whiskey and vodka for indian whiskeys at double digit 11 growth and you see that contribution is very well balanced perfectly in line with our intent Still obsessed by our consumers, consumer centricity really fueling our innovations, driving consistent brand investments as well across the globe. A strong innovation strategy. I would just like to underline the soon to come launch of Absolute and Ocean Spray, which is our first co-branded RTD range. And you see a few other initiatives. And let's pause here with a small commercial. Okay. This past fiscal year has been our most active year in terms of portfolio management in a decade. We've invested more than 1 billion euros to complement our portfolio in attractive categories in North America. So after north american whiskey and our latest investment there with jefferson's a few years back we've increased exposure to tequila we've penetrated the flavored north american whiskey market and we've increased our exposure to ready to drinks by the way tequila north american whiskey flavored whiskey and rtds are the fastest growing categories in north america so it's This is not just a coincidence. It's perfectly in line with our strategic roadmap. And we also strengthened our partnership with Sovereign Brands, which is the most innovative and creative beverage alcohol company in the U.S. So very active year, as well with the divestment of Klein Campbell here in France, which we announced just ahead of summer. Just a quick focus on our capacity to integrate bolt-on acquisitions. We took that example amongst many, which is Malfi. And you look at our capacity to integrate these acquisitions into our distribution network. to increase of course significantly the volumes. So ever since we acquired Malfi in 2019, our sales volumes were multiplied by three and even more so in value, driving even more margin improvement as well. and increasing the number of markets where the brand is present. So this is the perfect illustration of our bolt-on acquisition strategy with Pernod Ricard's distribution network. Again, very important sustainability and responsibility being at the core of our growth model based on four key pillars. Nurturing terroir, number one, valuing people, number two, circular making, number three, and responsible hosting, number four. Within each of these pillars, we have a number of very clear ambitious targets, some by 2030, others by 2025. It's something that we monitor of course very, very closely. Around nurturing terroir, I think regenerative agriculture is one of the most important topics on which we are working. On valuing people, we are perfectly in line with our ambitions where we want to get to top management balance in terms of gender. We also have gender pay equity. In terms of circular making, and we'll talk about this a bit later in the presentation, of course, we're investing heavily in terms of reducing our carbon footprint, both on Scope 1 and 2, but also with very strong initiatives on Scope 3 through partnerships with our partners, supplier partners, whether it's agricultural or industrial. And finally, responsible hosting, which is very specific to our industry and where we leverage the power of our brands to drive responsible consumption messages around the globe and engage with our consumers. So delivering sustainable and stretched profitable growth, this is what we are here to do. We want to build on the strengths of our growth model, which is a triptych, the most comprehensive portfolio of brands in the industry, the most comprehensive route to market with a presence across all regions. and most importantly, winning culture. And I'd like to take this opportunity as well to thank all of our teams around the world for the very strong results Bernard Ricard delivered. And of course, beyond that triptych, our growth model, which is powered by what we call the conviviality platform and the key digital programs leveraging algorithms or leveraging artificial intelligence to be able to activate a lot more brands. So moving from six to eight brands activated across the globe to 15 to 20 brands, what we like to call precision. at scale, leveraging tech and data. So we already gave you in the recent past, I think it was last February, some clear examples around some of our key digital programs. The first one being Maestria, which is mapping, thanks to Consumer Insight, mapping all the moments of consumption in any given market and addressing all of these with a clear portfolio strategy. Matrix, as well, again, maximizing our marketing investments by touchpoints, leveraging, again, very insightful data and our algorithms. Same thing for promotional efficiency, using our tool and algorithm called Vista RevUp. And finally, around D-Star, which is Salesforce automation, again, leveraging the power of tech and data. And it's all about having the right brand at the right time, at the right place, at the right price, with the right message targeting the consumer. And of course, all this delivering our performance, our roadmap, as we announced it, we're perfectly in line with what we said we would deliver, as you can see, despite the small blip in 2020 with COVID. we came back to exactly our ambition, which is the upper end of the 47% top-line growth with margin expansion of roughly 50 to 60 bps per annum. And this, of course, results in a sustainable long term value creation for all of our stakeholders. You see here the TSR over a one, a three and a five year period. But also when I mean all stakeholders, it's also from an SNR point of view. It's also our colleagues from around the world that deliver these results. We're happy and proud to be part of Forbes 2022 World's Best Employers. We also received in 2023 a gold rating from Ecovadis for our sustainability. And finally, the engagement, the commitment of our teams around the world, despite the challenging environment. So again, thank you to our teams. And of course, adapting our operating model to all of the above, should I say, as we have transformed ourselves over the last few years, as we deploy our digital transformation, which we call the conviviality platform, We've also adapted our operating model and governance with a new EXCOMM executive committee to lead our ambition with, of course, Hélène on finance and IT, but also with somebody representing global brands, Phoebe Guetta. Somebody representing global markets, Gilles Bogart, alongside Anne, who represents North America. Maria Pia, who joined us six months ago, who is driving our operations, SNOP. Cédric, which most of you know on HR. Anne-Marie, our general counsel. And finally, Conor McQuaid takes care of corporate communications, SNR, and public affairs. So this is a resized XCOM. We have also an executive leadership team, which regroups basically headquarter functions around the digital IT, but also 10 management entities. We used to have 22. have ten and six global brand companies. So a resized, reshaped operations for Pernod Ricard to adapt ourselves for future growth, leveraging our conviviality platform. And with a clear medium-term financial framework, which we presented to all of you during Capital Markets Day last year, we aim, of course, the upper end of the four to seven top-line growth. We will continue to focus on revenue growth management, enhanced by our proprietary digital predictive tools, one of them being Vista RepUp, already mentioned. Of course, continuous improvement in operational efficiency, building on our culture of excellence, which is something we're now nurturing every single year. Significant NP investments, I mentioned, it's a record level, maintained at roughly 16% of our net sales. drive very strong consumer driven brand equity brand awareness brand consideration with even higher return on investment leveraging again our conviviality platform keeping discipline on our structure costs investing in priorities while maintaining an agile organization you just just showed it aiming at a rate of cost increase below, of course, the top line and finally delivering, therefore, operating leverage of circa 50 to 60 basis points on average within that framework. So that's what we call driving long-term sustainable value creation. A few words on our sales, starting with the U.S. So for this last fiscal year, stable sales within a normalizing market, as you know, after three years post-COVID, a very strong growth. With underlying spirits, value depletions or net sales growth circa 2% for us, and strong consumer resilience. So we... Underwent good depletions value growth for Jameson, for Kahlua, for Malibu, Red Breast, Jeffersons, Altos, Dalmage. A slight decline for Absolut, but strong resilience of the brand for this last fiscal. A very strong price effect of high single digits. Share gains in the Irish and North American whiskey categories in the single malt category. and share gains for both Malibu and Kahlua. We've continued to deploy our RTD portfolio in the US, enjoying very strong double-digit growth. And as I mentioned, we're looking forward to the launch of Absolute Ocean Spray RTD. The successful, very recent integration of Codigo tequila and screwball peanut butter flavored whiskey, which I recommend for those of you who can have access to it in the U.S. Agility in our inventory management and declining sales expected in our first quarter on a high comp basis, but with a positive outlook for the year. So remember, That last year, we significantly increased our prices October 1st, which obviously led to a retailer sell-in ahead of these price increases. And we also sold into our wholesalers ahead of an OND period, back in a time where supply chain disruption was quite huge, which thankfully continued. is over now so declining sales for q1 but positive outlook for the full year and due to the technicalities i just mentioned moving on to china plus six percent uh frankly a strong performance uh throughout the fiscal year in a contrasted year so if you recall we started the year uh very well with a very strong mid-autumn festival performance in fact it was a record performance And then the environment became more challenging with a soft Chinese New Year season. Remember, there were lockdowns ahead of Christmas, and then the zero COVID strategy was stopped, but created quite some disruption, which led to a very soft Chinese New Year, and followed by a very strong rebound in the fourth quarter, with a resumption of consumer activity amplified by a low basis the year before. We ended the year with a very healthy level of inventories by June end in China. We did increase prices. We had a high single-digit price effect. We increased our prices again during the month of May, as we do every year, in fact. The growth was driven by Martel, but as well by our premium brands portfolio led by Absolute and Jameson. We have maintained our value market share in China and we do expect a soft Q1 in China due to challenging macroeconomic conditions and also a high comp basis which is clearly expected to ease from Q2. Remember we're recycling a record mid-autumn festival in China. India, well, excellent growth with continued premiumization momentum. China up 13%. Growth was led both by price and mix. Our strategic international brands continue to enjoy very strong momentum with strong double-digit growth, notably on our Scotch portfolio, Jameson, Absolute, et cetera, et cetera. Our strategic global brands continue to premiumize, and we have a strong focus on Blender Sprite and Royal Stagg. And we maintained our very strong market leadership position in the segment in which we operate. And we just launched L77, launched in 277 in the very dynamic Indian single malt category. Global travel retail, which is continuing to normalize and will continue to normalize this fiscal year with strong recovery as passenger traffic resumes in Asia. So for this last fiscal year, travel retail grew 40%. Passenger numbers are roughly at 90% of pre-COVID levels globally. We have a double-digit price effect and a very favorable mix as a result of the resumption of travel in Asia, led by China. Strong performance, notably on Scotch, on Martel, as well as on Absolute. We've maintained our value leadership and we expect a solid start of the year, this fiscal year, with continued recovery in Asia. Then on the other regions, so for Europe, up 8%, which is a very strong performance for Europe. Resilient volumes across the region with as well a high single digit price effect. We've had a very strong growth in Spain with a very strong on-trade recovery last summer, remember. driven by our gin portfolio, but also by our scotch and vodka brands. Germany also had a very strong year with 8% growth across basically all channels. The UK grew 2%, but we're gaining share in the UK with very strong share gains in the on-trade. Listen, modest growth of Ricard in France, up 1%, after a year of growth as well, so two years of consecutive growth for Ricard, which is really gaining traction again in France. And finally, dynamic performance in Eastern Europe, notably with double-digit growth in Poland. The Americas up 2%, Canada 3%, which is a good overall sales result, with strong growth on Absolute, Jameson, Glenlivet and our specialty brands, and very strong ready-to-drink performance as a category, but ourselves within that category. Brazil, 1% growth, with a slowdown in H2. This is probably one of the markets where we were very aggressive on price, and it hit a little bit our volumes. Mexico, double digit, 12% growth driven by Absolute and our Scotch brands, in particular Chivas. Asia, rest of the world, excellent growth at 17% with 21% growth in Japan, 19% growth in Korea, double digit growth in Taiwan, very strong growth as well in Turkey, 44% led by Chivas and with share gains across the portfolio. 15% growth in Africa, led by South Africa, Nigeria and Kenya, with our whisky brands and Martel. And again, I won't dwell upon it, I already touched upon that, but growth across all our spirit segments, with double-digit growth for our strategic international brands. A word on Jameson, a double digit, 10%, strong growth across Europe and Asia. Volumes continue to grow in fiscal year 23, building on our last year's 10 million case milestone and therefore a driving us to invest a little bit of money in capacity expansion. We'll talk about it a bit later. Very strong pricing, very strong brand equity. U.S. enjoyed a mid-single-digit value depletion growth with very strong growth for Jameson Orange. Very successful innovation. I think it was rated one of the most successful innovations over the last fiscal year in the industry in the U.S., And the continuation of the globalization of the brand. Outside the U.S., Jameson grew 22%. And to be fair, this growth is driven by all regions. And within all regions, I would say all markets. Our Scotch grew 17%, double-digit pricing building on the strong global demand for Scotch. Chivas, we just broke the 5 million case milestone. Chivas is now up 25% in terms of net sales with a clear premiumization ongoing within the whole range. the 18-year-old performance, the 13-year-old performance, and so on. Valentine's, again, double-digit at 13%, with strong growth as well across Asia, but also in European markets such as Spain, and as well in some of our Latin markets, principally Brazil. Royal Salute, up 32%. I mentioned our prestige range is up 15%. In particular, driven by Royal Salute, up 32%, with a strong recovery in travel retail, but also growing in many other markets. And Glenlivet, up 9%, led as well by premiumization within the range, notably in the US, where we gain share in single malt, but as well in Taiwan, in India, and to be fair, in many other markets. Absolute up 10% and with broad-based growth so coming from all regions and again building on the 12 million case milestone we broke last year with strong pricing on Absolute because of its strong brand equity with a very strong performance across Western Europe The strong international development of the brand, led principally by China and India, but without forgetting Mexico, Australia, etc., and the strong rebound in travel retail. and Martel up 10%, principally led by Asia and global travel retail with a strong price effect in line with our value strategy, which is not new, of course, with favorable mix offsetting a very slight volume decline. As I mentioned, we had a record mid-autumn festival last year, and the year was softer in the US, and very strong development in Africa, Middle East, notably in Nigeria, perfectly in line with our internationalization strategy for Martel. More broadly, on the rest of the portfolio, very dynamic performance. Ricard plus 1% for France is very good. I mentioned 15% for our Prestige portfolio. Beefeater up double a digit, led by a dynamic U.S. performance for Beefeater in the U.S. Havana Club up 6%, Malibu 4%, with a nice rebound in the U.S. in H2. And our champagne portfolio, which grew 1%, with a strong rebound in H2. And on that note, over to you, Hélène.

Thank you very much, Alex. So let's move into the profit section so that we can have a deep dive into the financial translation of this very, very solid performance that Alex just detailed with you. So starting first with the P&L and with the margin evolution. I must say, as I'm sure you remember, sustaining the gross margin was a key ambition for us this year, especially given the unprecedented pressure coming from inflation. And I must say, we are very pleased that collectively we managed to sustain that gross margin. You see the performance here, plus three bips in terms of organic expansion. And this is obviously mainly linked to a very solid price increase across the brand, across the portfolio, across the world. Alex already covered the performance by brand and by market on that front. It's obviously a strong testimony of the strength of our portfolio. And I must say as well, a very solid demonstration of the very strong execution of price that has been done everywhere, which is obviously linked to our capabilities in terms of revenue growth management. We have as well kept very strong A&P, accelerated our investment in key markets like the U.S. with A&P to net sales ratio quite stable at 16% as already announced. When it comes to our teams, obviously investing in our teams, attracting and retaining talent is critical for sustained long-term growth. So we kept investing, but in a disciplined way, in our structure, with a growth which is below top line at plus 8% organically. So this is then getting to the profit from recurring operation performance, growing at plus 11% organically, and as well reported numbers, translating into this operating margin expansion. When it comes to the FX, so FX has been negative, especially in Q4, I must say, and this is linked to the deterioration of currencies, especially in emerging markets that has been a bit stronger than expected in Q4, and this is partly offset by perimeter impact. So moving now to the earning per share growth. So our very strong performance in terms of profit from recurring operation is translating into a strong group share of net profit from recurring operation growing at 10% and further improves to EPS growth of plus 11%. So let's maybe have a quick view on where it's coming from. So starting with the financial expenses, due to the rapid rise of interest rates, our financial expenses are higher than last year, but we managed to maintain an average cost of debt which is well inside the 3% guidance we provided a year ago with an average cost of debt at 2.6%. Tax rate on recurring items is virtually stable at 22.6%, and the earning per share has the accretive benefit of the share-buy-back programme of €750 million that we executed in fiscal year 2023. So bridging now from the group share in profit from recurring operation at plus 10%, we report an increase in group share of net profit at plus 13%. This improvement is due to non-recurring expenses after tax being lower than last year, with non-recurring expenses driven by reorganisation and restructuring costs, partially offset by assets disposal, and positive non-recurring corporate income tax. So let's move now to cash flow and balance sheet. So first, we are consistently generating a strong... which is obviously key to provide us the means, but as well the confidence to strongly invest to prepare our future in a sustainable way. So recurring free cash flow at 1.7 billion euros, which is minus 14% lower than last year, due to primarily the significant increase of our strategic investment to fuel future growth. with well over 1 billion in total invested in Fiscal Year 2023 in CAPEX and strategic inventory. We have as well a modest increase in working capital. So maybe let's come back to the strategic investment. CapEx investment, we are notably directed toward expanding our production capacity in each product. And I will share some examples, very concrete examples, an exciting one I must say with you in a moment. So our CapEx amounted to circa 6% of net sales. We have as well doubled our investment in strategic stocks versus fiscal year 2022, investing circa 500 million euros in fiscal year 2023. And this is absolutely critical to protect our future growth, notably, obviously, with our aged portfolio. So moving now to concrete highlights of our investment program, again dealing with both capacity expansion, but also very importantly investing in sustainable technologies such as mechanical vapor compression in Ireland and Scotland. Needless to say that as well, our new builds in Ireland and in the US will include the top technologies, I must say, to ensure that our production is carbon neutral. So you have here beautiful pictures of our investments to come in Ireland with a new distillery in Middleton. in Scotland with additional investments, in the U.S. with a new distillery in Kentucky, and as well we kept investing, as I mentioned, in strategic inventories. So let me give you a bit more context. on what to expect for fiscal year 24 on that front. So we share with you a guidance for our strategic investments with a range between €800 million and €1 billion for CAPEX for fiscal year 24. And strategic inventory is level to be similar to fiscal year 23. And we anticipate as well that we will have elevated investments for those precise reasons, very strategic reasons, for the next two years. So moving now to the balance sheet. So our net debt increased by 1.6 billion euros and we maintain a strong balance sheet with a net debt to EBITDA ratio of 2.7 while deploying a very dynamic financial policy. So you have the numbers here starting with a very significant M&A activity that Alex went through previously. A few minutes ago, we notably increased our shareholding into sovereign brands and as well acquisition of majority share into Codigo and Screwball. We have as well executed our share buyback program for €750 million in fiscal year 2023. A quite consistent, obviously, financial policy when it comes to dividends for close to 1.1 billion euro and some positive effects impact on debt coming from the US dollar euro evolution. So this has enabled us to accelerate our return to shareholders, given this very consistent performance, strong performance that we have delivered over the years. So we are proposing a dividend of €4.70 per share, subject obviously to the vote at our coming shareholders' meeting, which would be a plus 14% versus fiscal year 2022, We are as well announcing a share buyback program with a range of 500 million to 800 million euros. And let me remind you of financial policy with four priorities in the following order while maintaining investment grade rating. So number one priority, investing in future organic growth, in particular through strategic inventories and CAPEX. Number two, continued active portfolio management, including value creating M&A. And by the way, active portfolio management means acquisition, but as well disposal. And we've been quite active during the summer, as you know. Dividend distribution at circa 50% of net profit from recurring operation, aiming at consistently growing dividends. And finally, share buyback. Back to you, Alex, for the outlook.

Well, thank you very much, Hélène. I think the most important message on this slide and for the outlook is our confidence to deliver our 23 through 25 million term financial framework, aiming, of course, at the upper end of that 4% to 7% upline range and delivering as well 50 to 60 bits of operating margin. For this specific year, in a challenging environment, we anticipate, number one, broad-based and diversified net sales growth for the full year with, as we already mentioned it, a soft start in Q1 amplified by a high comparable basis. We have and we are experiencing easing inflationary pressures, which is good news. We will continue to focus on revenue growth management and operational efficiency. We'll continue, of course, to invest at record levels behind our brands and the brand equity at around 16% of our net sales, which is optimized, leveraging our key digital programs. We'll continue to be even more so disciplined in our investments in structure. and all of this leading to organic operating margin expansion. As Hélène just mentioned it, you should expect significant investments to fuel our future growth in capex between circa 800 million and a billion. and as well behind our strategic inventories to a similar level as this last fiscal year. And again, as Hélène announced it, we will have a share buyback program throughout the fiscal year, expected to be between half a billion and 800 million. And as well, finally, we should expect, at least based on current exchange rates, negative FX impact. I think that's it.

Thank you, Alexandra and Hélène. And we can now turn into the Q&A. So if you don't mind limiting yourself to two questions each, and I guess the operator can open the call with the first question.

Thank you. This is the conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one under touchtone telephone. To remove your sub from the question queue, please press star and two. Please pick up the receiver when asking questions. Anyone who has a question may press star and one at this time. The first question is from Simon Hales with the City. Please go ahead.

Thank you. Morning, Ellen, Florence, and Alex. So obviously two questions for me then, please. Just firstly, I want to start off on the outlook for Q1, just to make sure I understand the drivers of the weakness there. So on the U.S. specifically, can you just confirm that you're not expecting any further destocking in the U.S. in the first quarter, that the weakness really, I think you said, Alex, is primarily just driven by the tough selling comps ahead of the price increase last October? And if that is the case, how do we think about overall depletion expectations for the U.S. for both fall year 2024 and for Q1? And then secondly, also related to that, from a China standpoint, I appreciate, as you said, Alex, you've got a tough mid-autumn festival comparative, but the headline comparative from last year's Q1 of, I think, 9% growth in China doesn't look overly tough. You highlighted the softer macro in your comments. Are you already seeing some changes in consumer behavior there? And how does that make you think about full-year trend growth in China? So that's my overarching question. And then just a quick second one, maybe for Hélène. You talked about weak FX into 2024 being negative. Can you give a bit more guidance on how negative you expect FX to be this year?

I'll start with the US-China one. Listen, we mentioned agility and inventory management. The basis, to be fair, is basically inflated by price increases, which led to a strong sell-in to the retail ahead of October 1st. That was when we increased our prices significantly. quite uh quite significantly should i say number one and number two as well for very strong demand at wholesaler level uh ahead of the ond period again remember last year at that same time we were not just ourselves by the way we were all struggling with supply chain disruptions and the one thing you want to avoid is out of stock situations during the key festive period of ond So this is what we're recycling in the U.S. The underlying dynamics are positive. I mentioned consumer resilience for the U.S. We're not at the four to five percent underlying growth medium term level as we are normalizing. We believe right now the market from a consumer demand standpoint is probably anywhere between one and two. And then the rate at which and the timing to get to the 45%, I would say your guess is as good as mine, but it's not going to happen in years from now. It's a question of six months, 12 months or 18 months max. This is something we'll see. That being said, for the full year, we said we expected a positive full year in the U.S., Just one thing on China, by the way, the famous 9% to which you're referring of last year, Q1, the previous year was up 23%. So just bear this in mind, 23% plus 9% plus now recycling, a record mid-autumn festival. So this is also something to bear in mind. So on FX, Elena.

Yes. So, by the way, Simon, I think it makes it three questions for you. So, how negative? It would be very difficult to quantify that at this time of the year. You have the average rate for our main currency in our deck. We ended the year with the USD dollar at 105, the spot rate. is what it is, more close to 1.10. So that's why we expect negative effects impact. I cannot quantify it more at this time of the year.

Thank you. And just to confirm on the China point, you know, sort of Alex, you mentioned the softer economic backdrop that we're seeing there. I mean, are you seeing a change in consumer behavior on the ground already in recent months?

One of the channels which is probably suffering most related to the economic environment is the untrade. So the untrade I mentioned, nightclubs are clearly suffering big time. The untrade overall is being challenged due to the environment. That being said, we're seeing, I was there a couple of months ago, the strong emergence of live bars, so basically bars where you have live entertainment, music bands, and the strong emergence as well of cocktail, which is spreading. So we are seeing consumer resilience. However, to be fair, there is some softness related to the macroeconomic environment.

Brilliant. Thanks ever so much. I better pass it on.

The next question is from Edward Mundy with Jefferies. Please go ahead.

Morning, Alex, Hélène, Florence. I've got two questions then. So the first is on the recent organisational changes that she announced last night. Alex, when it comes to execution, what are the two or three behaviours that you're looking to achieve and drive following this organisational evolution? And as a second part to that question, Hélène, how should we think about the financial impact of these moves as some of the de-layering takes effect. And then the second question is on margin expansion. I think you laid out some of the key moving parts for fiscal 24, quite a confident tone on driving margins. Could you perhaps elaborate on this and do you think fiscal 24 will be a year where you're able to grow margins 50 to 60 basis points in line with that medium term framework?

Listen, Ed, thanks for your question. I think that these changes this last fiscal year is probably one of the most significant change we've operated during the course of the year. The name of the project, by the way, just to share it with you, it was called Project Tomorrow. And by the end of September, we'll say that tomorrow has now become today and the project is over. We have significantly delayed, by the way, no more regions. The headquarters is directly linked to now the big management entities, the ten management entities on one side and the six brand companies on the other. From a behavioral point of view, maybe I will stress three key words or three key philosophies we based all of these changes on. The first one is simplification. So we simplified some of the layers. We simplified functions, function by function. You know, in today's world, it's very simple to complicate things and it's very complicated to simplify things. But simplicity, simplification is critical. So the only thing that matters to us is is our consumer and our consumer centricity and the relationship between our consumers and our brands so number one uh simplification number two you know we always talk about centralization decentralization To be fair, pragmatism, being decentralized where it matters, being centralized where it also matters. Should IT be centralized? I think the answer is, at least on the hardware piece, of course, infrastructure and so on. I could go on and on, but the key word there is no longer these kind of things. It's empowerment. We now have a framework, by the way, the one we have that we share with you is the global one. But the beauty of that framework is that we can cascade it by brand and management entity with a very strong portfolio strategy in place, leveraging our tech and data. That framework is sufficiently clear and straightforward and in a way simple that we can easily empower people just to get the work done. You know, once we agree on that framework, and we call this freedom within a frame, people are empowered to make the right decisions very swiftly where it matters. And this, I think, is at the core of what we're doing. And we've seen it in the recent past. It is already having an impact. And the third and final philosophy around Project Tomorrow is we call it discipline. Discipline and execution. This year is going to be an execution year. We are delivering market by market, brand by brand, our framework. We really want to focus on that clarity of execution now that we have the framework. So simplification, empowerment, and discipline. all at the service of our consumers that are at the core of our model. That's the behavior I expect from my teams around the world, and that's, to be fair, what they expect as well.

So moving to your following question in terms of financial impact. So as Alec just mentioned, this evolution of the organization is really to deliver stretched profitable growth. So this is not a cost-cutting exercise. This is an evolution to deliver on our strategic journey. Having said that, you just mentioned discipline, Alex. Obviously, discipline as well has been an obsession on many aspects, including in our investment in structure. So we're going to keep having that very strong discipline in terms of investment in structure. And you can expect some synergies because of the simplification, the de-layering of the organization, some simplification and mutualization that will contribute to that journey of discipline investment with structure costs growing below top line. Talking about margin expansion for fiscal year 24, so maybe let me just start by saying thanks to this very solid performance of fiscal year 23, we are starting the year in a very solid position when it comes to the business and when it comes to our margin. So, first, our brands have been very resilient in the context of strong price increase, and we're going to keep that benefit in this fiscal year 24 with some carryover of last year in terms of price increase and some new price increase that are going to still be implemented in the months to come, probably in a more specific way and, to some extent, a bit more moderate in a context where, as we mentioned in Outlook, we believe that we will be... moving to, I would say, some easing in terms of inflationary pressure. So pricing, premiumization will obviously be key for our performance in fiscal year 24. Moving to COGS, so easing inflationary pressure doesn't mean we will turn into... We believe that, especially when it comes to our dry goods, our wet goods, it will be still quite significant in terms of pressure, but not to the same extent as in the fiscal year 2023. And we're going to keep benefit from all the initiatives we put in place in terms of operational efficiencies. And we'll have, finally, good news coming from logistic costs, which already materialise to some extent in H2 of fiscal year 2023. So especially, for instance, in terms of deep sea freight, that will support our margin expansion in fiscal year 24. Moving now to ENP, so quite consistent policy here, aiming at circa 16% of net sales and, as I mentioned, disciplined structure costs. That's why we are confident at this beginning of the year to share with you this ambition to expand our organic margin in fiscal year 24, but we are not guiding on that topic at this time. Again, we are reiterating our confidence into delivering our mid-term framework by fiscal year 25, which is, as you know, both an ambition in terms of top-line growth and organic margin expansion of 50 to 60 bps.

Great, thanks, Hélène. Alex, as a quick follow-up on the three philosophies, how does having much better data and digitalizing the business. How does that help you with those three philosophies?

Let's be very clear. A fact-based, data fact-based decision-making, very swiftly. When you get the information and the data to make your investment decisions in terms of ANP, when you get the data swiftly as well and reliably to make your promotional decisions, What this is going to do, by the way, is your full year strategic planning from an executional point of view, an operational point of view, in terms of what brands to activate in what conditions throughout the year. And at what time? You know, I was mentioning OND is a critical festive time in the U.S., but to be fair, every month is critical on a specific brand or specific set of brands. There's the month of May for tequila. There's summer for a number of our brands. I cannot not mention St. Patrick's Day and so on and so forth. But what this will do is we will be a lot more precise in terms of our strategic planning and execution on the brands we activate everywhere in the world. It's as simple as that. If I simply said, now we need to execute it. It's a new mindset.

Great, thank you.

The next question is from Olivier Nicolai with Goldman Sachs. Please go ahead.

Hi, good morning, Alexandre, Hélène, Florence. I've just got two questions. First of all, on the portfolio management slide that you mentioned earlier, you have acquired multiple brands in the US this year. Could you give us an indication of the organic sales growth boost that you would get? I mean, US, for instance, this year was flat. What would have been the rate if those brands were inorganic? And then secondly, you also mentioned some disposals. I think you sold Cloncombel recently in France. This is obviously a small brand, so not necessarily going to ask you much details about this one specifically, but can you share us some insight to what's the catalyst for this decision? In general, what's the trigger for you to dispose of a brand? And then just a follow-up part of the presentation, you mentioned 2.6% interest coupon for full year 23. Looking at the debt maturity profile and the need to refinance for next year, how should we think about next year in terms of coupon rate? Thank you.

If that's fine with you, Alex, I'm going to cover all those questions. Thank you, Olivier. So, portfolio management. Yes, obviously, Fiscal Year 23 has been very active, especially for North America. This will be still in perimeter impact, mainly in H1 of Fiscal Year 24, starting to contribute to organic growth growth. in H2 of fiscal year 24. By the way, that means that perimeter impact in fiscal year 24 would be quite significant thanks to this active portfolio management. And this will partly offset the negative effects impact I was referring to. So more to come. Our focus right now is obviously to integrate those brands in the U.S. and in Canada soon with Ace Beverage as efficiently and as dynamically as we can. There's a lot to come in terms as well of investment behind those brands. So I must say we are extremely enthusiastic to have those brands joining our already quite comprehensive portfolio. Clown Campbell is exactly what I was referring to when I was talking about disposal. By the way, again, for us, active portfolio management has always been both acquisition and disposal, even if we've been probably even more dynamic in terms of acquisitions recently. But we've been selling brands over the recent past as well. So I mean, the strategy and the way we are looking at our portfolio is, again, to see what other brands that are contributing to the growth, what is the value that we can keep creating behind those brands moving forward. And if we believe that... Some brands are at least a bit less dynamic and not as critical for global portfolio in relative markets. We are looking at an opportunity to sell them. And then when we come to the financial expense projection for Fiscal Year 2024, You're right, cost of debt was 2.6 in fiscal year 23. In the current context of increase of interest rates, we believe that the average cost of debt for fiscal year 24 could be between 3 and 3.5. Thank you very much.

The next question is from Laurence Wyatt with Barclays. Please go ahead.

Morning. Thanks very much for the questions. A couple from me then, please. Firstly, on your travel retail business, I think you had a target to get to the 2019 level of profits this year. I'm assuming you hit that pretty well. I'm just wondering if you think there's further growth to come from the travel retail business as the world continues to return to travel and China is getting on more planes and the like. What are your sort of expectations on travel retail? Do you think that will be growing ahead of the rest of the group? And then secondly, you built your digital capabilities, I think in 2020, and you announced them to us at the Capital Markets Day last year. Of course, those years were pretty impacted by various restrictions and lockdowns and the like. And now we've had a more normal year of operations this year. Has everything performed to your expectations? Have you had any learnings as people are operating slightly differently than they did during the pandemic? What can you take away from that sort of change to more physical meeting? Thank you very much.

Sure. Well, listen, thank you for your questions on GTR. So I mentioned Traveller is at 90% versus 2019. But in terms of profit, we're in fact above. We were aiming at being back to 2019 levels. And at the end of the day, we ended up even above that. So great news, of course, related to the increase in traveler numbers, number one, which we call normalization, but number two, to very strong and good positive pricing, and number three, indeed, due to mix, both in terms of brands, but also as well in terms of regions, with the The Asian region being the last one to rebound. That rebound is expected to continue throughout fiscal year 24. So we do expect a dynamic GTR for this new fiscal year, growing faster than the rest of the world, for sure. Unless there's another pandemic and all these kind of things, let's not... Let's not get there. Digital capabilities, you know, yes, we've been building digital capabilities on one side. And from that point of view, I'm very confident. But even more importantly, we've been gathering the data. Initially, the data was gathered manually, and now we're starting to automate our data gathering processes. The data is becoming more reliable as well. We're starting to use it with a lot more precision, et cetera, et cetera. And on that front, I would say that the data piece is never ending. It's endless because we will keep gathering data year in, year out, which will enrich our models. As you know, we have algorithms for our KDPs, whether it's on the marketing front, whether it's on the promotional front, and they will constantly be enriched by the data. So we have a big change management piece, of course, and now that I talk about execution for this year, a lot of it is going to be around change management to make sure that everybody adopts these tools, which is underway. And, you know, the ultimate vision, which I call the cockpit vision, is to have all these tools not work in silos, but work overall, getting to an excellence in execution from a strategic planning point of view.

That's already clear. Thank you very much.

The next question is from Celine Panuti with JP Morgan. Please go ahead.

Good morning, Alex, Hélène, and Florence. Thank you for taking my questions. My first question will be on the U.S. I saw in my notes last year that your sell-in was 2% ahead of sell-out last year. So it seems that you have a tough comparative for the first half of the year. Plus, you mentioned that the market is growing in the low single-digit range. So I'm just wondering what makes the bridge from starting the year negatively, the TAF comp, if I'm right, in selling and ending the year positively in the U.S. My second question will be on the outlook. You mentioned that you are confident on your mid-term algorithm at 4 to 7, at upper end of 4 to 7%. Do you think that this year, fiscal year 24, will be within the 4 to 7% corridor? And within that, could you as well help us understand how your pricing dynamic versus volume should evolve in 24 versus, I think, 21, where pricing was, volume was 1%. And then maybe just lastly, to make sure I'm right, could you say how big Russia is in terms of sales and EBIT for fiscal year 23? And is that going to be... accounted for in the organic number for 24. Thank you.

Okay, so thanks for those three questions. I'll start with the U.S. So you're right, things have been a bit volatile from one quarter to the other last year in the U.S., by the way, the year before as well, which I will call agility in the inventory management because the situation was very different with the strong COVID recovery, so putting very positive pressure in terms of demand. At the same time, very significant disruptions in terms of supply chain so there were some movements from one quarter to the other that could be very different at wholesalers level and at retailers level and our ambition was obviously to be very agile to monitor our shipments accordingly so things were different from one quarter to the other Taking the example of Q1 versus Q2 last year, as Alex already mentioned, you're right, Q1, we had shipments below depletion. And then in H1, the situation was different because there was in Q1, and I will come back to it briefly, some significant impact coming from a supply chain situation. being much better than the previous semester and as well ahead of price increase in Q2. Things were normalizing versus, I would say, a kind of abnormal Q1 in a context that was So let me just pause a second in terms of the high comp in Q1 that we are now cycling this year. Because we already mentioned there are two main drivers that I will call technical. By the way, this has nothing to do with consumer demand. So there was the price increase. I don't think I need to come back to it. but as well those global supply chain tensions that were created, strong depletion in Q1, so that, again, wholesalers and retailers were confident with the level of finished goods they were getting ahead of very important seasons that are summer and OND. And at our level, which has an impact in terms of shipments, we were as well adjusting the level of wholesalers' inventory at a time where we were exiting a very difficult time during which lead times have doubled. I'm talking about H2 of fiscal year 2022. So our shipments in Q1 were as well in a way boosted by our ability to ship our own finished goods to wholesalers, mainly in July fiscal year 23. So that's what we're going to be recycling this year. Good news is that those supply chain tensions have been resolved. And as well in the current context, especially so with that confidence that this would say normalization of supply chain is giving to the trade and as well the rise of interest rate, we are expecting some tighter management of trade inventory. at trade level. So we're going to keep a very agile way of managing our inventory across the year. As you know, this is our focus. We've been, I would say, quite consistent in doing that over the recent past, despite a very chaotic environment. So we're going to do that again this year. Having said that, please expect that we are not monitoring that on a quarterly basis because that doesn't make sense from a business point of view but our ambition is always to land with a healthy level of inventory and that will be again the ambition in fiscal year 24. When it comes to the top line corridor we are not giving at that time, the corridor that we could deliver in fiscal year 24. We are rate rating, probably with that word, by 25, our ambition, as I mentioned already. This year, we are confident with a broad-based and diversified net sales growth. Again, starting the year with a very solid position. mentioned the combination of price, volume and mix, obviously difficult to know so early in the year, but last year our brands were very resilient and volume were at plus 1%. Again, we are confident in the resilience of our portfolio moving forward. When it comes to pricing, we would expect a pricing which would be probably more close to mid-single digit for our fiscal year 24, especially because of the environment and the easing of the inflationary pressure. and it will be a combination of carryover and new price increase. When it comes to Russia, I think we shared that number already a few times. This is below 3% of our net sales pre-war, and the exit from Russia will be in our organic performance already in fiscal year 23 and in fiscal year 24.

Thank you. Just to make sure I'm clear, so what you were saying about the TAF comp on H1 of fiscal year 23 will be mainly felt in Q1 and not necessarily in Q2?

Yes, I was focusing on Q1. You're right. Thank you.

The next question is the last question from Trevor Sterling with Bernstein. Please go ahead.

Morning, Ellen and Alex. Just one question from my side, and it's coming back to your commentary, Ellen, on input costs for next year. I'm talking about wet goods and dry goods, and it would seem to me that glass bottle supply is one of the stickiest areas of pricing, where even though energy prices are falling, the price of the glass bottles is not yet falling. Would you concur that that's probably one of the more problematic areas of the dry goods supply?

I do concur with the fact that it is not moderating significantly. I would say we are now used to deal with this type of pressure. So that's, I would say, part of our ways of working right now, together with all the efficiency that we want to deliver. So that's our main assumption. That's very fair to say for fiscal year 2024 that... this will not be dramatically moderate when it comes to dry goods.

Thank you, Hélène.

This was the last question. I turn the conference back to the speakers for any closing remarks.

Thank you very much for attending this presentation and for all your questions. We wish you a very good day and we see you for Q&A.