Beiersdorf AG

Jens Geissler – Head, IR and Corporate Treasurer Stefan Heidenreich – CEO Ulrich Schmidt – CFO

Javier Escalante – Consumer Edge Research Guillaume Delmas – Nomura Gael Colcombet – MainFirst Harold Thompson – Deutsche Bank Iain Simpson – Barclays Andreas Riemann – Commerzbank Toby McCullagh – Citi

Good morning and welcome to Beiersdorf’s Nine Months Results Conference Call. This is Jens Geissler.

With me, this morning as always is our CEO Stefan Heidenreich and the CFO of Beiersdorf, Ulrich Schmidt. We will have a brief presentation for you, which you can follow on the internet or using the link in our invitation to this call.

You can also download the file from Beiersdorf’s Investor Relations site. After the presentation you will have the opportunity to ask questions.

The question-and-answer session will be limited to two questions per caller. We will start with our disclaimer regarding forward-looking statements.

And I can now handover to Stefan Heidenreich for the results of the first nine months.

Good morning, ladies and gentlemen, and welcome to Beiersdorf. We would like to present the company’s results for the first nine months of 2013.

We will also provide an outlook on the full-year performance. Our CFO, Ulrich Schmidt and myself will then be happy to take your questions.

Ladies and gentlemen, I would like to start by saying that Beiersdorf continues to make progress. We are on a growth path.

We are pleased to report that this applies to both the consumer business segment and tesa. Growth was above market in both cases, in short, we increased market share in many countries.

This was largely driven by successful product innovations in both sectors. Our new product are being well received by our consumers and also our distribution and industrial partners.

Our clear and disciplined brand strategy, reinforce this appeal. In short our brands are backed.

Our strategy is also manifesting the way for sustained economic growth and further improvements in margins. This is clearly shown by our results for the first nine months.

Let us now turn to the details. Beiersdorf increased group sales, organically by 7.3% in the first nine months, including exchange rate effect, sales growth by 2.4% to €4.674 billion even excluding special factors improve from €575 million in 2012 to €650 million.

The EBIT margin rose to 13.9% compared with 12.6% in 2012, this means 130 basis points. Tesa recorded organic sales growth of 9.3% in the first nine months, representing a convincing continuation of a successful performance in the first half year.

In nominal terms, tesa increased by 5.5% from €750 million to €791 million. EBIT rose from €99 million in 2012 to €140 million.

The EBIT margin reached 17.7% compared with 13.2% in 2012. In the consumer business segment, sales rose organically by 6.9%.

Nominal sales increased by 1.7% from €3.816 billion to €3.883 billion. EBIT excluding special factors rose by 7% from €476 million to €510 million.

The EBIT margin rose to 13.1% compared with 12.5% in 2012. NIVEA, Eucerin and La Prairie all played a part in this positive business development in the first nine months.

In Western Europe, sales throughout 2011 versus 2012 sent to an accelerating strong third quarter. We achieved especially strong sales growth in the U.K.

and importantly in our home market of Germany. Sales in Eastern Europe were down 0.8% year-on-year, Beiersdorf recorded modest growth in Poland.

In Russia, we did not match 2012 sales levels due to the overall market downturn. Important, we increased our market shares in both markets.

Beiersdorf sales rose by 5.2% in North America after declining by 0.3% for the same period in 2012. We achieved clear sales growth in the emerging markets of Latin America with sales growth of 15.5%, we saw especially strong growth in Brazil.

We also recorded double-digit growth rate in Africa, Asia, Australia region, sales rose by 18.9% in these markets. We saw encouraging growth in China, both in NIVEA brand and the local brand SLEK turned in a positive performance following the respective re-launches.

Ladies and gentlemen, as you can see Beiersdorf is continuing to make good progress. The positive development is the result of the clear focus on the key Blue Agenda Sectors.

Number one, strengthening our brands, number two, increasing our innovation power, number three, extending our presence in the emerging markets, number four, winning in our home turf in Europe and number five, and most important, dedicated and passionate employees who turn our corporate goals into economic success. Ladies and gentlemen, let me now conclude with our outlook for the full year 2013.

Beiersdorf is lifting its forecast for full year 2013 as a result of the strong performance in the past months. The company is now aiming for group sales growth of 6% to 7%, the consolidated EBITDA margin from operations is now expected to be around 13% compared with the previous estimate of around 12%.

In the consumer business segment, Beiersdorf is now predicting sales growth of 6% to 7% for 2013 with market growth estimated at 3% to 4%. This healthy sales growth would be further supported by targeted investments and innovation in the emerging markets.

The EBIT margin from operations is expected to exceed 12%. The 2013 sales growth for the tesa business is being raised to 6% to 7%, the EBIT margin from operation is expected to be approximately 16%.

Ladies and gentlemen, thank you for your attention. My colleague, Ulrich Schmidt and myself would now be happy to take your questions.

This concludes the presentation. We are now ready to take your questions.

Please remember, two questions per caller only.

Good morning, everyone.

Good morning.

Congratulations for the great results. A quick question, just trying to understand, I know that you don’t manage the business on a quarterly basis.

But I tried to back into Europe any growth sales by region on a quarterly basis. And I noticed if you can comment on the strength in China.

I know that you mentioned that both NIVEA and SLEK are doing well. Could you tell us how well is it ahead of the 18% to 19% that you are boasting?

And secondly in Latin America, I noticed that a few, that it’s a very strong growth. But the acceleration in the third quarter, so to what extent this is related to shipments versus retail, take away if there is something in the market that particularly Brazil in terms of consumer takeaway or is it just the timing of shipments?

And essentially the market continued robust? Thank you very much.

Well, I think the first question regarding China, as you know, we’re not commenting on specific countries nor do we comment by the quarter. But what is official, I’m happy to report to you the market shares in China, especially of men have bounced back significantly by three or four market share points.

And we’re now closer than ever to our main competitor.

Yeah. Regarding Latin America, what we see is very similar off-takes and sell-out in the market.

And also our strong gain in market share is ongoing. We have one foreign exchange effect.

First you will know that we have devaluations in Brazil, Argentina. Part of the devaluation in that part of the world is due to the dollar.

We have a special effect in Venezuela, where we have adjusted the calculation of the like-for-like sales growth in Venezuela. Instead of using prior year foreign exchange rates, we implied the extra foreign exchange rate to eliminate the booming effect of inflation.

So, that is showing high differences in nominal to organic. Organic we are having similar space like first half year.

If I can get a little bit more color on the China piece. I know that you mentioned that the growth is driven by NIVEA Men.

On a SLEK, how you feel that market share is, what does the data show in terms of market share gains? And have you seen any reactions from either, Procter & Gamble and Unilever which are the leaders in hair-care?

Thank you.

Good. So Men is, very epitome.

Men we also see strong sales in the hair-care business. As you know in hair-care if you compare us to the big guys, we are very, very small.

So if we grow 10% it’s a huge difference for us. It also makes a smaller difference.

But we are very happy in the growth rate on hair-care that I can share with you even exceeding the Men business.

Okay. Thank you very much.

Thank you.

Good morning, gentlemen.

Hi.

Hi.

Good morning. I got a couple of questions for me.

First, on tesa, another very strong quarter. Now, if I look at your revised guidance, even taking the upper end of the guidance, it effectively implies flat organic sales growth and EBIT margin of around 10% so down 200 basis points in Q4.

So, why is that? You guys being cautious or whether on sales shift from Q4 to Q3, which explains why Q2 was so strong.

And then my second question is on North America for the consumer division. We’re seeing some nice acceleration in Q3, with organic sales growth again in excess of 7%.

Could you shed more light on that and whether this is sustainable or not? Thank you.

Yeah, regarding tesa, in fact we used to be a course company. And that’s also true for tesa.

Last quarter I was already mentioning that we have a number of project that came into reality. I mean that we got specifications in Retronic.

And in car industry and that means that we have stock building. That’s difficult to be forecasted.

But we have positive overall in tesa.

Concerning North America, I remain with my statements. I think we’re making on our way, good progress at the moment.

Is it where we wanted to be? No, it’s still single digits.

So, I hope for more to come with few launches and innovation which we hit the markets in the first quarter next year. Yet we will always be probably next to China, our most difficult market just like the shear competitive environment.

Thank you.

Good morning gentlemen. Congratulations on the strong quarter.

My first question on the guidance you gave us 6% to 7% from both consumer and tesa. I was just wondering why are you actually giving a range knowing that we are almost out of the year, is in the back right now.

And maybe could you share with us what you see in October that might have just to keep a range of guidance. And secondly, regarding innovation, so we’ve seen year-to-date some strong products in body and face care as well as the other ones.

I was wondering if you said when you joined, Stefan that you thought 2014 pipeline was stronger than 2013. Would you keep up with that statement?

Thank you.

Well, regarding guidance I think that’s what we’ve seen in the last years as well. We are approaching the end of the year providing a range because we still don’t know exactly what the fourth quarter will bring.

And we’re having a good run. So we could make some statements but I mean, as you know, we always try to be on the course’s side.

So we think a range is the adequate positioning right now in all of the businesses that we show on the guidance.

Concerning innovations, on my tough KPIs how I see innovations I think, one can say in the six categories we compete. And three of them, we brought really breakthrough innovations which not only show in numbers and shares but more importantly we really created here and there really new categories which is nice.

Concerning ‘14, ‘15, I think our catching this forward so it’s more a question of what comes first, second and third. So, I’ll not worry on the contrary, I’m pretty upbeat of what we have in the pipeline, we’re having more electuary probably at the moment.

Really good sight if we look at the first go and the second and the third quarter. So, we’re discussing that at the moment but you can be sure we’re having a lot of things in the pipe at the moment.

Thank you very much.

Yes, good morning gentlemen. Two questions.

The first one is, if I look at your growth, it’s good clearly in developed markets but it’s extremely strong developing markets. And we know that there is some quite notable margin differences that not only of gross margins but also the operating margin.

So, how are you managing to deliver such strong overall margin progression of the consumer business even if lot of the growth is coming from areas which are just have structurally lower margins at this point in time. So, how is that filtering through?

The second question is on tesa, I think you’ve been very clear, Q2 was exceptionally strong, Q3 again but we shouldn’t extrapolate that. Nevertheless the margin will have gone from about 13 last year to about 16 this year.

Should we therefore assume a significant reversal of that for next year or are we just getting to levels where it’s looking about right and this is where it may stick around? Thank you.

Okay. On the develop or emerging question, Harold I think as we hoped and indicated the last time the focus when I started 18 to 24 months ago was clearly on the emerging markets to get that going.

And I think from the results in growth, most of the emerging markets are clearly in the mid double digits at the moment. And also North America tuning in there I think on a small base but nicely.

I think the biggest difference what we see – what started in quarter two in Germany and some of it got infected to the rest of Europe and you could also see it in the latest share data which came out last week. We’re having a tremendous run in Europe at the moment, which sell out data about 10%.

So, I think this is very nice. Europe as you know drives in more margin because we’re coming there from higher levels.

And so, net-net, despite a lot of investments we’re taking to bring our innovations home. We see margin improvements and as I always indicated growth first, margin second.

I think that proves that our strategy should continue on the innovation, we’re continuing to drive them – that’s the right strategy. And I feel also when I look in the total environment around me, I think – we at the moment are getting a couple of things right.

Yes, perhaps adding to that to you’re right saying yes, that’s a shift towards emerging markets on the same time we’re getting strongly not only sales but market share and probably with income together with the market share. Keep in mind that in Latin, at the moment, we are already on the level of Europe with the market share.

And that means that we can also deliver proper profitability. In tesa, what we have done over the last year, we have done ongoing restructuring on low margin business.

Last time I was citing closedown of label business in Switzerland and closedown of low margin assortment factor in Singapore. So it means that our base is becoming stronger.

And part of the industry business is coming stronger together with innovation. So, we think that’s a sustainable development.

Excellent. Thank you very much.

Thanks.

Thank you very much. Good morning gentlemen, and congratulations.

Just a few questions from me if I may, firstly, looking at tesa, if you say that it’s related to stock build issues. Should we expect to see any subsequent de-stocking of that or is it more just as you’ve gained new customers you had pipeline fill in and that one time wind?

And then just on Europe, you talked about the sort of sell-out data being very strong. I think you talked about it being above 10%.

Should we conclude from that the difference between that and the sell-in data it looks that you’re showing in the third quarter that there has been an element of de-stocking in the trade in the third quarter. And therefore perhaps we should expect strong fourth quarter as well as we see those stock build level sort of come through.

Thank you very much.

So, let’s start out on tesa. It’s mainly building up-stocks in specific project in electronic industry and car industry.

It means, if you gained a specification then it’s first delivering for the industry to have these products on stock. It doesn’t mean that later on you de-stock but it means that depending on the lifespan of projects it’s additional business for one year to three years depending.

In the electronic it’s rather one year in car industry if you have gained specification it’s rather four or five years.

Yeah. I think on Europe, again I’m just citing what the data says.

I think nobody has a double-digit performance I mean, even low singles are the closest our competitors come to. So, we’re getting things right and goes without saying, we always sell-out foreign traded.

And do I expect to go to quarter four? Yes, as we indicated it should be a good quarter four.

That’s very clear on those questions. Thank you very much.

Sure.

Yes, good morning. Two questions from my side as well; the first one on tesa.

Again, in the quarterly report, actually you mentioned special effects as regards to EBIT in Q3. Can you shed more light on these effects in Q3?

And with regards to consumer the EBIT margin increase was roughly 90 basis points, and my question would be whether this is a realistic run rate for the coming quarters with regards to EBIT margin enhancement or would you say that marketing needs to go up in the coming quarters to maintain the strong sales growth? That’s it from my side.

Yes, so, with tesa is different to comment details because also different to know the projects coming this next quarter. Last year we have had as I said the closedown of the plant in Singapore that had extraordinary costs of devaluation of asset.

Same was happening in Switzerland with Bandfix label business. So we had last year artificial low profitability.

But maybe a follow-up on this one, then you are basically saying that this year was only so high because of the project business, no other one-offs in Q3 basically?

Yes, part of that business will also in future stay project business. You will know that we have acceleration especially of handy business and that of electronic business for consumer.

And that’s difficult to be forecasted how strong innovation of electronic industry are. And as a supplier we also depend on that and also on the production cycles they are having.

So, we would keep on commenting this as project business. It’s not a stable business like we used to have in old times where you have had assortment that we’re running for 10 years or 20.

It’s more short-term cycles. And we’re in that that’s very promising.

But you don’t have the stable demand.

Okay.

Yes, on margin, is always the evergreen question. And I’m not changing my strategy.

I think the key reason why we’re successful is that we have a crystal clear focus on the Blue Agenda points which I mentioned. And on the margin as ever, NIVEA has a lot of potential still to gain.

We are here completely over 9 on the board and with the teams. And we will further go for the potential as this industry tends to be a good margin industry, margin will come and this is exactly what you see in the first nine months not only in tesa but also very satisfying in consumer business and that’s where we go.

But we always put growth before margin.

Just to add on this, on the quarterly structure there is an interesting slide in the presentation deck. If you look at page number 6, you can see we did this and put this stuff for a purpose that the quarterly profitability came down in 2012.

And we would expect something similar also for this year. This is why the current level is certainly not sustainable just to keep that in mind.

Okay.

Did that answer your question, Mr. Riemann.

Yes, thank you.

Hi there. Two quickies if I may, first on tesa.

Your wins there sound pretty company specific. But could you comment on the adhesives market trends, I guess you commented on the consumer business market trends before that has been pretty consistent through the year.

Perhaps you could comment on the adhesives market? And then back into consumer, on your innovations, of the breakthrough innovations that you’ve talked about, the three breakthroughs, how widely have these been rolled out now in terms of geographic reach?

And perhaps not quite related to that, but – I’m trying to squeeze in a third. In terms of a sun season, we’ve obviously had a pretty good sun season in Europe this year.

What impact – what order of magnitude of impact would a good versus a bad sun season have on your consumer business? Thanks.

Yes, starting with the adhesives market. It’s depending on development of the main industrial sectors.

80% of our tesa business is industry business, 20% is consumer business. Within the industry business, we have a dominant share in car, electronic and paper business.

So, it’s the over development of those industries within the continents. I have seen that we are doing fine in U.S.

there we’re especially doing fine with the car industry that’s coming back. We have gained our share there, applying increasingly European production technologies also in the U.S.

And that brought us some specifications. You can also see that European industry is coming back and have ended downward trend.

We see that in many industries. Electronic industry is depending on innovation like I was saying and paper industry is flat in the development.

So, that’s more or less the dynamics of the adhesive business.

On innovations, let me give you Toby just two or three definitions that’s probably helping the most. First of all, innovations as we consider them, is innovations is really hit to the heart of the consumer and I’m not talking about line tension or the freight.

It’s something which really changes consumer behavior. This I think in three out of the six we got very nice this year.

Second in innovation is an invasion as long as it drops. What I mean was that, it’s we’re running into the fourth year, for example on black and white we order it.

And we are still seeing tremendous growth and success and share basis. So, that means to your third question, how far are we in the rollout, it just started.

So and most of the innovation we launched this year, we have now covered pretty much Europe but the rollout into the emerging markets is just taking place. So I think this is some good potential for next year from the innovations media which we have seen in Europe.

That’s fabulous. That’s really clear.

Thanks a lot.

I like it, its five minutes plus 30 minutes. We thought we are getting really focused all together, because I told Jens get ready in 30 minutes and he said to me no, you have to be nice and courteous.

So I said, I will do this but wonderful that went in 30 minutes.

Okay. So, we come to the final statement.

Thank you for your questions, for having joined our conference call. Beiersdorf’s next investor relations event will be the publication of our preliminary sales figures on the 16 January 2014.

There will be no conference call on that day. Thank you for your interest in Beiersdorf and good bye.