Beiersdorf AG

Jens Geissler - IR Stefan Heidenreich - CEO Ulrich Schmidt - CFO

Harold Thompson - Deutsche Bank Hermine de Bentzmann - Raymond James Iain Simpson - Societe Generale Celine Pannuti - JPMorgan Bassel Choughari - Berenberg Javier Escalante - Consumer Edge Research Rosie Edwards - Goldman Sachs Chas Manso - Societe Generale Christian Weiz - Baader Bank Philipp Frey - Warburg Research Guillaume Delmas - Nomura Pinar Ergun - Bank of America Merrill Lynch

Thank you. Good morning everybody.

This is Jens Geissler. Welcome to Beiersdorf’s Conference Call.

Today. We would like to share with you our business results of the past nine months.

I am here with Beiersdorf’s CEO, Stefan Heidenreich and our CFO, Ulrich Schmidt. We will start with a brief presentation, which you can access by using the link we have sent in the invitation.

Of course, we will have a question-and-answer session as always. Please remember that the Q&A session will be limited to two questions per caller.

Okay. Let’s start with the presentation and to hand over now to our CEO, Stefan Heidenreich.

Good morning ladies and gentlemen. Thank you for your interest in Beiersdorf’s performance.

Today we will report on the past nine months and provide an outlook for the full year. Ladies and gentlemen, the global economy has slowed over the past few months.

At the beginning of the year, all signs pointed to further growth. These expectations have not been met as the year has progressed.

Economic and political conditions have worsened significantly in many markets and confidence has fallen. These changes had a direct impact on consumer behavior and spending.

In this difficult market environment Beiersdorf has performed well. In the last nine months, we lifted organic sales by 4.3% and increased our market share in many markets and categories.

In nominal terms profit was up 0.9% on the prior year due to negative exchange rates effects. Sales rose from €4.674 billion to €4.716 billion, posted in the segments consumer and tesa contributed to this increase.

EBIT excluding special factors increased to €671 million, up from €650 million in the previous year. Excluding special sectors, the EBIT margin was again increasing to 14.2% compared with 13.9% in 2013.

In summary the economic slowdown did not catch us unprepared. Beiersdorf is well positioned with its Blue Agenda.

We have made Beiersdorf weatherproof by continuously strengthening our brands, focusing on extending our presence in the emerging markets and above all by investing in innovative products. This is why we are performing really better than many of our competitors.

To tesa, tesa recorded organic sales growth of 4.3% in the first nine months of 2014. In nominal terms sales increased by 2.5% from 791 million to 811 million.

The business segment therefore continued on its growth path. Both the industrial and the consumer business contributed to this positive sales trend.

Again growth was driven by the automotive and electrical industries. EBIT improved from €140 million to €142 million.

The EBIT margin was 17.5%. To the Consumer segment.

In the Consumer Business segment, organic sales rose by 4.2%. In nominal terms sales rose by 0.6% from €3.883 billion to €3.905 billion.

EBIT, excluding special sectors improved from €510 million to €529 million. The EBIT margin rose from 13.1% to 13.5%.

The positive organic top line performance was driven by the emerging market and a well performing Europe where sales increased by 1.8%. In Western Europe sales rose by 1%.

In particular we achieved good sales in Germany and the United Kingdom. In Eastern Europe Beiersdorf lifted its sales significantly by 5.1% mainly driven by a strong performance in Russia.

We recorded sales growth of 3.6% in North America. Sales in LATAM rose by 6.5%.

In particular Brazil achieved again double digit sales growth. However, growth rates in LATAM were negative impacted by macroeconomic developments in Venezuela and Argentina.

We increased sales by 8.5% in Africa, Asia, Australia region. Many countries in this region recorded good or extremely good sales growth, although macroeconomic growth had eased in many markets.

In China as part of the integration of our distribution platform, we have increased the amount of stock supplied to retailers in the first quarter. This along with overall weaker markets had led to a significant decline in sales in the second quarter.

This effect was intensified in the third quarter by a further slowdown in the Chinese economy. In particular the hair care market was impacted with fewer growth since the first half year.

In light of this we have adjusted the book values of our hair care brands accordingly. Ladies and gentlemen, our results for the first nine months show that Beiersdorf performed well despite the economic slowdown.

Our business strategy, the Blue Agenda is working even in a more difficult market environment. This is especially true for our brand strategy and our innovation.

All of our core brands saw sales increases. NIVEA delivered 5.7% growth, Eucerin 6.7% growth and La Prairie 4.0%.

We are pleased to report that we again extended our number one and number two positions by 14 positions in our relevant categories and markets. Growth was primarily driven by our product innovations.

Our ongoing markets support by our major innovations in deo Black & White, body In-Shower and Cellular Anti Age has been very, very successful leading to double-digit growth rates. And partly with these new products we have established sustainable trends and new market segments.

Our recently launched NIVEA Q10 plus have generated strong consumer interest. By using the pearl technology we have been able for the first time to create a highly effective anti-wrinkle serum that combines innovative Q10 plus serum pearls with hydrogen.

This makes pearl technology until now limited to the higher priced premium market segment acceptable for the first time to a wider consumer group, a real trend setting innovation in the important face care business. To the outlook, ladies and gentlemen let me conclude with our outlook for the full year of 2014.

Despite the varying market trends in different regions, we are confirming our previous forecast. We expect group sales to increase by 4% to 6%.

The EBIT margin from operation should be above 13%. In the consumer business segment we are forecasting above market sales growth of 4% to 6%.

The EBIT margin from operations will be around 13%. At tesa we expect sales growth of about 12% with market growth estimated at 2% to 3%.

The EBIT margins from operations is expected to be about 16%. Ladies and gentlemen thank you for your attention.

This concludes the presentation. We will now start the Q&A session.

Please remember two questions per caller only.

I've just got two questions. The first one is, if I look at your growth rate in your emerging markets, it looks like Eastern Europe and Latin America are doing very well.

Therefore it's really Asia where the low growth seems to come from, and I think, Stefan, you flagged clearly China. Does that mean, is it just China which is the challenge there, and I guess it therefore must be seeing negative growth rate both Q2 and Q3, or is it a lot more broad-based than that?

In other words, once you've dealt with the China issues, should that region rebound back or is it just more broad-based? The second question is on innovations.

You put a slide up where innovations, which were launched a while ago like Black & White and In-Shower are still growing very, very strongly. How well distributed are all those new innovations already, and how many more countries do you expect them to be rolled out and therefore for them to be driving significant growth in the future?

Good questions. Let me start with the innovations.

When it comes to deo Black & White, I think we’re in most of the countries nowadays and we will also have a lot of followers nowadays. But that’s a good news.

We are still commanding a market leading share there. But it has set a trend and I think that’s very important why I also showed these innovations.

Black & White today is not just a single flavor or a single fragrance. Black & White today is a new segment in the deodorant market and that has been created absolutely by Beiersdorf.

When it comes to In-Shower, good question Harold. Yes we’re not sure with In-Shower when it comes to country launches and region launches.

The good news is that I'm happy to share it. In-Shower is not only a developed market trend, we have evidence from the first emerging market that the trend is the same and equally successful.

So we’re very bullish there and you see it from the growth rate. So we think there's still a lot to be gained there.

And Cellular is the newest baby. Here we are not sure.

We’ve just started it. We’re very happy in Europe.

We are fired in Europe in that segment. We also beating the big French competitor and we’re very happy with the development and obviously we will bring more news under the Cellular range.

We’re extremely excited by the Pearl technology. That is not easy and that has been years and years of development to make that development also affordable for the masses and capsulating the ingredients in that Pearl technology and that I want to underlines a couple of times, but this is a trend and that trend has been set again by Beiersdorf and we expect that this Pearl technology will have a lot of followers.

As we’ve said clearly, a new sector in this trend, and you will also see we will also come with data and studies in the near future which shows how effective Pearl technology is when it comes to face care. To your first question, yes there is no doubt we have issues in China.

I think it’s not a surprise. Everybody has issues.

We are the smallest one. So it hit us also.

But in general I think in Asia it is overall tough. It has become very tough.

With the exception of Japan where we’re doing extremely well, Southeast Asia has come down, even Indonesia, Philippine has gone down. So it’s a tough environment.

And as you know it is by far as our weakest region if you exclude Japan. When you on the other hand see what we’ve done in Russia -- and we had tough years in Russia.

We have this standing or stellar performance in Russia where we’re very happy, which is going extremely well. And in Brazil I think I can confirm we’re still in the high 20s, growing month after month.

So the team is doing very well we don’t see any slow down there [indiscernible].

High 20s?

Yes, 20…

In Brazil?

Yes, and we’re doing extremely well and you see that also in the market share. So we’re very happy there.

So Russia and Brazil is very good. And also in India on a very small base we’re making good progress.

So we have a lot of good messages also. But really Far East where we are traditionally weak, it’s still a battlefield for us to get better.

If I can do a miniscule follow-up; your full-year guidance, you've kept it unchanged. Clearly you've done, is it 4.2% organic growth in the first nine months?

Does that therefore imply that you're going to scrape in there with an okay Q4 or a Q4 a bit better than that?

Well I can’t tell you exactly how Q4 it’s going to lend. Now if you see my face and you haven’t seen September - October obviously and October just came in, you see a smile on my face, not more not less.

Obviously November - December still has to come. But we are keeping our guidance four to six.

At the moment if you want to have an even more specific answer then, I don’t see us in the six but I also don’t see us in the four. So you make up what we said.

So in the middle.

I have two questions please. The first one on Western Europe.

That slowed in Q3. Can you may be precise in which category you have seen this slowdown and if you've seen an improvement of the Western Europe market recently?

And second question on your guidance. The 13% margin you expect in the consumer division imply a significant increase in Q4.

I was wondering what are the drivers behind that? Thank you.

So I'll do the first question. As you are seeing from the competitors, we think that Europe has done extremely well in Q3, considering that we had a really-really bad summer.

So we can only underline what we saw from our French colleagues. The summer has been very bad.

And obviously a big part in July-August as always is our sun business and that has been affected like everybody. We’re good in market share but the sun business has been horrible this year and considering all that together, I think we had a very-very good quarter with Europe.

Regarding the guidance of profit for the full year, this implies a strong fourth quarter as we just also alluded to. And if you look at the structure and we have in the presentation on Page 6, the development of how typically the EBIT numbers are going, we are ahead of last year and we intend to keep that gap so to say, which will we think safely bring us into the guidance range or guidance number also on profit.

Couple of questions from me, if I may gentlemen. Russia is clearly going very well for you, despite the fact that we've had some of your competitors standing less comfortable with it.

So is there anything you'd point to there as a sort of driver of your relative out-performance? And then just on Latin America, you said that Brazil was in the high-20s.

I think Brazil is just under half your Latin America business. So if Latin America is doing plus 6.5%, presumably everything in Latin America that's not Brazil is struggling if I've understood you correctly, if you could just give some color on that?

Thanks.

Ian let me answer first question and then the second question. But both questions basically show something which basically portray very well in these two questions, how we do our business?

Russia was a very, very tough market for us and we said it in every call last year that we have issues. And the issues came from high stocks which we had to clean up quarter-after-quarter and that business didn’t set still with the guidance that looked [ph], we cleaned the base and so on.

We also put a new team in, with a great guy. And that new team really goes into the details now and goes further than we ever were.

That concludes marketing, that concludes sales as well as the finance and supply chain and they’re doing a very, very good performance at the moment. By the way in nearly all the categories.

We've just had a review with them. So that’s a little bit of how we work.

If we have an issue, it will take time and I'm not going to rush into fixing things for the next two years. We’re fixing things hopefully for the next five to 10 years or even after that.

And I think we have now a very good base in Russia and I'm confident from what I have seen also in the last review that they will continue on that path.

Regarding Latin America, there are two factors. First of all let me comment on Brazil for second success of Brazil in the last year in extreme positively received internally.

On one hand we are growing market shares in the existing channel and on the other hand we’re also broadening our distribution in traditional trades and traditional channels, so that leading for extreme growth. And on top we are also entering in those categories where we have been extremely weak like soap business.

It’s a huge market in Brazil. So it does mean that we are winning market share everywhere every channel, every category.

But that’s an exception. You’re right in assuming there need to be negative numbers coming from first of all Venezuela.

You might be aware that it is nearly impossible to get foreign exchange for imports and that’s not only hitting us, it’s hitting all western companies. So the business would come to very low level.

And that of course has a very negative effect as traditionally we’re very strong in Venezuela. Secondly we have firm Argentina, as we have a very conservative approach like always.

We were publishing last quarter that we implied actual rates for translating Argentina pesos sales to Europe, like we had done in the year before already. So instead of having high nominal growth of clearly double-digits, it's now negative number.

Still we are gaining nice market share in Argentina. That’s only through translation effect.

Let me just give one more sentence on Venezuela because I want to also flak and point a picture. Of course doing business in Venezuela at the moment is not very funny, because you’re not making money but that is very important, that’s a Beiersdorf history which we had again and again and that explains why we have shares like 50% in Myanmar on smaller markets because we stay in.

I have a full-fledged team in Venezuela. The market we believe will turn one day and when it turns we have great share.

And that’s why we stay in and accept that is as great. And on top of that I mean Ulrich said that the last time, we’re taking very prudent measures.

Prudent measures means that we take the exchange with FDR [ph], which hit us tremendously also this year but we’re through with it. We now have a clear picture and we can look much better into the future.

And just to follow up if I may. Clearly you’re having issues in China, I recall a year or two ago you said that your hair care business there had a year or two to prove itself and if wasn’t working you’d sort of review it.

I guess from the write-down, hair care in China isn’t working terribly well. So have you given any thought to what might happen next?

Well first of all, not everything can work. That’s how it is.

But if you know me, will I give up? Forget it.

We stay in hair care and we will continue in hair care, and we will have another attempt to crack it. What is interesting is and it probably gets some flavor, we have not seen any deterioration in the last months on market shares, whether it's NIVEA men which is a key franchise for us or its NIVEA deo where we’re actually even growing.

Also in hair care we are stable and we’re even growing on hairstyling which is a very small market and still remain the market leader in that study. But what we have seen is a tremendous turn down of the market and there we have to see how we live through that and adjust the model towards a better future.

But not everything can work. And if you ask me if I'm happy with China?

No, I'm not happy. But we have to work on it, and like Russia get it fixed.

I wanted to come back to the commentary you made. You said that you're basically hinting to the middle of the range on your 4% to 6% for the year in consumer, which would imply an acceleration in the fourth quarter.

Could you tell us what elements, if you could quantify were kind of a one-off nature? So I'm thinking, okay, maybe the summer may not hit you as much in the fourth quarter, though you have a tough comp in Western Europe.

So if you could comment on that and whether you expect Western Europe to do better in the fourth quarter? And as well in China, do you think we are going to be through this destocking in the fourth quarter; that could explain why we should see an acceleration?

Or is there any other thing that I am not thinking of? And then my second question, could you give us an idea of the growth by brands for the main brands in consumer and what has been the performance of the Pearl brand as you call them?

Thank you.

Well to the last question, I said in my speech the performance of the brand but I'm happy to repeat this. I said we’re growing NIVEA 5.7%, Eucerin 6.7% and La Prairie 4%.

When it comes to the fourth quarter, yes the summer is over however. How the summer starts in Brazil, which is also an important month now.

I hope the weather stays stable. That’s one effect.

But I think the main effect are the innovations. I am very confident that the innovations will drive further volume.

And I'm also -- you point to the right saying. I think our de-stocking, which we by the way also took very early on.

We started with the destocking already in March and April and I think we are mainly through with the destocking. Are we through with finding the right way in China?

No. But the destocking effect is definitely over.

I was asking on the Pearl brands. You call them like that I presume, the smaller brands that you have.

Can you share their performance in the quarter?

Well it just started and I was always asked by you; Stefan, show us technology, show us innovation. Now I guess those who look into the markets will see quite share rises in states in Germany and France where we launched it.

And that’s why I was happy to basically give this at the moment. But it’s early times.

We have to see how that goes further. But so far we are very-very happy with the start.

And we have of course at the other end as well the other programs I think which I am probably referring to we are looking at in order to improve also the smaller brands actually needs [indiscernible]…

She doesn’t mean my Pearl technology she said ask about my Pearl technology

I think she like us anyway. Regarding the Pearl brands

That was good.

Yes, I mean currently we see a lot of potential. Currently there is drag but I mean we expect that to improve.

This is why we are devoting time and resources to it but because we see there a very good opportunity.

You’re fine Celine?

Looking forward to try this Pearl technology…

Sorry I didn’t hear it, can you again Celine?

No, I'm looking forward to try the Pearl technology.

Yes, you should. It’s a good price.

And you know for all you it's Christmas period. For less than €15 you get the perfect present for your partners.

Bassel Choughari from Berenberg, two questions please. The first one, I would like to come back on the tail brand if possible, and I was wondering if you've taken a view now on having each brand growing by more innovation in the existing categories, or you're more considering a global expansion of these brands or some of them as kind of regional?

The second one is on innovation. Could you please give us an update on where you are in terms of innovation in the sun category?

I know it takes a bit more time for -- because you need some approvals in some countries. But when do you plan to launch something in that category?

Thank you.

Yes, let me answer the second question. First as always we’re not talking much about but what we’re coming and that will stay the same.

But I think the good news is now if you look at our six categories; you look at body, we were the ones who came with In-Shower; you look at deodorant, we were the ones who came with Black & White; you look at face now, we were the ones who came with Cellular and Pearl technology. And I think I would also put men to it because whole Sensitive launch this year also has proven very well.

So you’re right time, sun and shower is standing out and wait and see. The Pearl brand stuff is a very interesting stuff.

And where that's going to lead to, we still have to see. But at the moment of focus is in Germany clearly.

We have four brands there. We have number one, the Labello brand, the lip brand which has done the last month phenomenal by reactivating it.

So that gives us hope. And it’s a very important period because lip, and I admit a little bit that we probably neglected it in the last years.

Lip is still the clear number one worldwide and we are going back to it a little bit more. Labello was a good testing case because as you know probably in the world we have Labello and NIVEA.

It's shared on market by market base. The second thing we activated was 8x4 and that was very interesting because 8x4 is a long legendary brand from Germany and I think we found a very, very good positioning which you can see in the market, which hits at the moment the trend.

We see this trend also on our major brand NIVEA coming. This is aluminum-free trend [ph] which is coming.

And in some major chains we have already 40% of the sales in this sector. So we hit here rightly.

As you see those on 8x4, it climbed nicely behind it. On Hidrofugal and also on Florena, which we’re working but we’re hopeful to also come with new sales.

It’s a little bit like, it’s something you start, it’s a little bit like when you see our French competition and I give some credit there. The whole Afcat [ph] range is going extremely well in France and that’s something we try to copy now in Germany and if it is successful we might roll it out also in other markets.

But I mean it will be more step by step approach. I do not expect at that time that we will have global launches, but we’re very proud to develop these markets further.

Sorry, maybe a word on the Hansaplast?

Yes Hansaplast is also an item in the same direction. It has been neglected over years and very much to my detriment and I can tell you we will come back very strong next year.

The organization is set in place, people are coming in, innovations are coming. So we want to protect our 31 number one market positions in the world, 31 number one market position on Hansaplast in the world.

So that makes it interesting enough from a number one position, one of the strongest brands we have. So we will go back on that one we’ll activate it, not only in Europe also on a worldwide basis.

I would like to shift toward the profit side. If you can tell us kind of like year-to-date what has been the currency impact on your EBITDA margins and growth?

And my model shows that some of this impact is going to go away starting in the fourth quarter. So if you can tell us how -- if you can help us dimension what happened in the first nine months and how you see the fourth quarter and then looking into fiscal 2015, calendar 2015, if for sure currency rates remain as they are?

And also my second question has to do with Mexico. My understanding is that the plant should be by now up and running.

Does it have any impact in terms of profitability in the Latin American region and how you approach the U.S. business?

Let me start with the issue of foreign exchange and profitability. In the first nine months we had overall strong euro compared to last year.

Now over the last months it has been weakening. The currency effect at the moment is flat these months.

Therefore you see the gap between normal and like for like is becoming smaller. When you have look to the profitability level of different region, you will know and see that Europe is very profitable.

That comes in Europe whereas the moment where the euro is weakening against rest of the world, it has an acceleration of the other businesses in Europe and that statistical effect will weaken our profitability in percentage. So we have to balance it and that’s the plan for rest of the year and definitely also for 2015.

Now the issue of the plant of Mexico, we’re having a scale up like trend, and the mid of next year we should have managed this one. This brand will supply as U.S.

exclusively and Central America. So in the moment still the profitability effect is not given for this year because we still have the old plant in Mexico.

And next year then we will have breakeven effect because of some remaining also depreciation and from 2016 onwards see a positive EBIT effect.

If I can come back to the ForEx, I guess I'd like to know whether the impact on profitability was proportionate to the impact on the top line.

Yes, at the end we have slight success regarding export from Europe because there are big plants in Europe and they are also supplying rest of the world and special products. Basically we have plants in all the regions but that’s true for special products.

And the moment where Europe is weakening, I mean it has an effect on our results and our import prices, the rest of world which is positive.

Thank you very much.

A couple of questions from me. And the C-BONS impairment, does that have any implications for your ambitions to reach breakeven in China by 2015 or how should we read that in terms of your kind of profitability trajectory in that market?

And then secondly, the tesa EBIT looked very, very strong in Q3. I think margins were over 20%.

Is there anything we should know about what's going on with that business? What’s driven that year-on-year increase in margin?

Regarding the China business, the impairment has been done in a very prudent way like we always do, but it didn’t change our guidance regarding the profitability. We’ve been commenting last time already that most probably this year we will not reach breakeven but we're going for that target for next year operationally and that means from that then on we should have a profitable business, and it was also part of the impairment calculation.

The EBIT of tesa and in fact what we have seen is the European business coming in strong this quarter whereas we were very less positive regarding the project business in Asia where we were profiting the last two years and we were also commenting on that that this will not go on in the full year-on-year. So we were coming back and have increased the profitability of Europe which is very healthy and sustainable.

We would think that the profit level that we see in the month for tesa is good enough for us. We are also expanding our investment into infrastructure and distribution and R&D and manage this business in a very sustainable long term way.

And if possible I do have one follow-up. Just looking now on the P&L in terms of kind of year-on-year movement in your margin expansion that you achieved at the Group level, it seems like the main driver of that is a reduction in the marketing and selling expenses as a percentage of sales I mean.

Can you just give us an idea of what's going on there? Is that savings or perhaps a switch between your kind of A&P?

That’s due to the fact that the consumer business is just being done in Germany some countries around and that’s not a very dynamic market. So you see an industry business which is core tesa is growing nicely, whereas you have growth in consumer business and marketing budget is allocated for consumer business.

And regarding the Group number, we have a clear effect also coming from shift of marketing towards digital and television as opposed to print and outdoor, which means -- and more efficient approach which also has a positive effect on the standing level.

My two questions, the first one is a follow-up on Rosie's really on the marketing spend. You mentioned a shift to lower-cost digital.

Does that mean that your corridor, your 28% to 30% of sales marketing spend corridor is now, you can shift it downwards? I think it was 25% in the isolated third quarter, the spend.

So it’s not normal. And the second question would be, could you give us a bit more color on your performance in Western Europe in the isolated third quarter.

I think it was minus 0.4% organic sales growth. We know that the Western European market is weak but if you sort of come in line with your big French competitor and Beiersdorf is -- you’re saying that you’re gaining market share.

So perhaps you could give us a bit more color on where you’re gaining market share and how meaningful those market share gains are in Western Europe?

First to start with the marketing budget A&P. What you see is that we have strong extension of emerging market business and there we have under proportional skincare, higher share of deodorant and personal care which is not A&P intensive like skincare is.

So that’s also statistical effect that we see. In the guidance we were assuming slightly lower growth of emerging market and higher growth for Europe.

So that the reality is like we see today. We don’t think that weakness.

It’s in accordance to the market dynamics. Secondly we’re more efficient in marketing budget because we have concentrated on efficient media.

We have reduced BTL and POS and trade spend, which is also single strong brand and also from today on I would also think we don’t need to have that high level of spending that we had in the guidance up to now.

I just said from my side when you look at -- the key figure for me is the share of voice to share of market. And when we look at share of voice to share of market in most of the European markets, we actually have increased.

We haven’t gone down. And that shows you how that can work.

It shows you that you, A, we have shifted as Ian said towards more efficient media channels. But also the media pictures and it’s same a little bit like with the trade.

We always have been the guys where you can get the money and at the moment and basically on the pictures we’re getting a lot of efficiency and mileage out of that. And that’s what we’re doing.

And on a 600 million base overall on the Company that’s quite a lot of mileage which you can get out. On top of that I mean every single corner, when it comes to POS, when it comes to displays, when it comes to this and this, we’re getting overall more and more efficient on that one and that’s what you see in the number, but the good news is relatively towards the consumer, we’re not spending less.

Right. But as a percentage of sales, that corridor, the old 28% to 30% can now be pushed down?

Well I would be very careful with any corridor, because that makes the work too easy. We have countries where we just started it and we’re well above the corridor.

Why? Because we still have to pave our way into the market.

And we have other countries we are still below the corridor. So it's something also has to do with the market condition.

Again my currency, which I look most is share of voice to share of market, are we there in line, and depending on what we want to achieve in the market or by category we adjust this leverage vis-à-vis our competitors.

And on Europe?

Regarding the development in Europe, you have seen also negative development in the South European market, especially through Italy, for Southern part of Europe. Also recently UK market coming down and the counties, we're very happy to have gained market share.

So still UK, Germany and a number of countries. So overall we are satisfied with the situation, and we clearly see that overall you have negative development of markets, whereas in sell out we have not only gained market share but also kept the level of sales.

Actually most of my questions have been answered, but one question regarding tesa if I may. You told us that Europe was pretty strong and it was less the effect of project business in Asia.

So could you elaborate a little bit on what this was? Was this mainly automotive industry I would assume?

So the biggest industry in Europe are car industry and electronic industry and you’ll be aware that German car industry is still going and doing well, and they have been not too much effective for overall prices and we’re high on supply of German car industry. So we’re profiting from that.

Also electronic industry is perhaps not as dynamic but it is stable in a stable situation. And might well be that it’s due to the fact that our customer base is more northern part of Europe.

And what electronic industries, is it where demand is coming from?

Electronic industry here -- it’s not only Germany current industry but also have some -- it’s coming in from French customer. So it's very broad and that's not as dominant, big customer like we used to have in the car industry.

First of all, could you still comment a bit on the speed of the rollout of the new Pearl Technology, how many markets will you already be present in the fourth quarter? And also on -- well, you had less number of innovations, but hopefully it will continue to be more relevant.

Do you continue to be that your strategy for 2015 or will the number of innovations increase? And if you could give us an idea quantitatively on the impact of the bad summer on your Q3 OSG, would also be appreciated.

Well, let me on the innovation say it very loud and clear and I’d say it again and again; as long as innovation grow by the magnitude what we show today, they remain in innovation and the type. And you will see another year of deo Black & White support, you will see another year of In-Shower support and you will see another year of Cellular support.

This is inevitable because just like this year number, they generate, we have to win the market and what Harold in the beginning said, there is a lot of room for penetration and still a lot of wide spaces where we have to go. And that’s a proven technology, which we want to roll further out.

And on the other hand, when you look at countries where we've not had innovation, there we’re working very hard to bring innovation and that’s how we came with the Pearl Technology, which we consider extremely important. It also goes by the relatively very important NDA [ph] sector and we are rolling that out.

I mentioned it today, which is normally not my style. Why?

Because the early successes have been extremely well and it’s very clear that we’re rolling out that technology as fast as we can and we’re aware the Pearl Technology is just the start of a lot of other products which come with Pearl technology because the imagination behind the Pearl Technology obviously can be high. So that’s what we are working on and we’re very, very -- how to say -- bullish about that technology.

And we expect competition also to come. It's technology which we have also some experience with on La Prairie, some experience with, but it’s a little bit different how we did it here to make it also grow in the affordability and this year we will roll it out.

Regarding the bad summer…

Yes, the bad summer, of course so much pressure on us. It comes and goes.

And it’s a funny summer in such that the northern part was actually quite good and the southern part was a disaster. As we see then, even in Germany, what’s interesting there half part of Germany was extremely good and the other half part was extremely bad.

Switzerland for example which are lower little bit more was under water. Now in these circumstances you don’t take on as it is.

The important factor there again is you have to look at the market share. They are okay but the market went down as much as 20% in the summer and next year hopefully we have a better summer.

To also add to what we said last time, the effect is not just in one quarter. The effect is coming later on because of the returns and also next spring when you see that certain customers still have stocks.

So you will not see it today in our numbers. You will also see effect in Q4 and you will also see an effect in Q1 and that we would not know until now.

That’s most important summer for sun business and the worst start now, which is Brazil and we are now a clear number two in sun which we’re very proud of and we’re trying to get nearer to the number one in Brazil, which is one of the biggest markets in the world. Thank you.

I think we have two more callers.

A couple of questions from me. First on your gross margin, the nine months, it's down 90 basis points, so around 150 basis points for Q3.

Why do we see such a decline in the third quarter? Is it down to more promotional activities or bit less operational leverage?

And my second question is on the La Prairie brand. And my calculations suggest that you've had negative organic sales growth with La Prairie in Q3.

Why is that?

Okay. Guillaume.

Second question first. The selective business is as everything is also under pressure.

Our big American friends just reported numbers I think two, three days ago. They also put the estimates down.

Selected world [ph] is hit, especially hit in China and Hong Kong and overall the travelers are less on their way than they used to be. Coming to La Prairie, this business is not really made up by quarter-by-quarter because you have quarters where you launch products and then you have a lot of pipe, and you have quarters where you have less and then quarter three is exactly -- we had a quarter with relatively less launches, less type curve but we’re coming now in front of Christmas and already done with October.

So we’re now coming with quite a lot of news and that will be effect at quarter four than we have for quarter three.

Regarding the gross margin, you are right assuming that the level of promotion especially in Europe very high. So we have seen that together with very flat pricing.

That’s part of the market today. Then you have seen that we have developed very positively regarding EBIT and also regarding market share.

Secondly what's very important is kind of mix for regions and products that play a big role here was committing already. That part of emerging market we're growing extremely strong.

They have been influenced on the mix here. At the end of all foreign exchange effect you have seen that we had negative foreign exchange effect and is also having influence on that number.

I think we have a final caller.

Just a quick follow-up on Western Europe. Given the poor summer weather in Western Europe, do you see a risk of large product returns of unsold sun care products in Q4?

And then one on M&A. Previously you've stated that M&A comes at a certain point in time, when the time is ready.

Any updates on your thinking on this?

To the second question, no.

So at the end I think it’s not only our willingness to invest but also on the opportunities. We’re also clearly marked that we’re only interested in strong businesses.

At the moment nothing is on the block on strong businesses. We are in standby.

That’s a diplomatic answer, right.

Yes. Not only diplomatic but I think it’s also reality.

We have not seen something very strong coming on block. Regarding the sun return, like we said we have sun of course -- some more reporting on that.

Overall there was not huge negative market effect because sun was strong in Northern Europe, was weak in Southern Europe and it means also that’s not a clear trend to be seen.

Well thank you for having joined our conference call here today. Beiersdorf’s next investor relations event will be the publication of preliminary sales figures on January 15.

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