Beiersdorf AG

Stefan Heidenreich - CEO Jesper Andersen - CFO

Christian Weiz - Baader Bank Philipp Frey - Warburg Research Marion Boucheron - Raymond James Toby McCullagh - Macquarie Richard Taylor - Morgan Stanley

Good morning, ladies and gentlemen. A warm welcome to Beirsdorf’s full-year financial analyst meeting.

We appreciate your interest in the development of our Company. Jesper Andersen and I will report this afternoon on the Company’s performance in 2016 and we will also provide you with an outlook for financial year 2017.

Ladies and gentlemen, growth expectations for the consumer goods industries were restrained at the beginning of 2016. It was assumed that a range of negative factors would weigh on the world economy, including the threat of terrorism and a possible Brexit.

Today, we know that these negative predictions were not only accurate, they were even exceeded by reality. So, it is even more satisfying to report that for Beiersdorf 2016 was once again a successful year for both business segment, consumer and tesa.

After a satisfactory first nine months of the year, we further picked up the pace with a strong sales increase in the fourth quarter. At the end of the financial year, our EBIT and EBIT margin hit their highest level in Beiersdorf’s history.

This reflects the success of our business model and business strategy, as well as our remarkable strength in implementing them. The successes of our Company are also the result of the hard work of the people at Beiersdorf.

Our employees performed outstandingly well last year, and I want to thank them very much for that. The individual successes added up to a stronger, more robust Beiersdorf at the end of 2016.

As a result, we can look ahead to 2017 with cautious optimism. Let us now turn to our results in detail.

During the past financial year, we increased Group sales organically by 3.2%. In nominal terms, sales rose by 1% from €6.686 billion to €6.752 billion.

EBIT, excluding special factors, improved by 5.5% from €962 million to a record €1.015 billion, so for the first time over €1 billion. This is the best result in the long history of our Company.

Excluding special factors, the EBIT margin was 15%, also for the first time, 15% compared with 14.4% in the previous year. Profit after tax rose by 8.4% from €671 million to €727 million.

Consumer segment; in 2016 the consumer business segment achieved organic sales growth of 3.3% with a particularly strong growth momentum in the fourth quarter. We would even have achieved much higher growth rate, if we could have avoided negative exchange rates effect in Argentina growth in the consumer business would be then at 4.1%.

I would like to point out once more here, like the last year, that Beiersdorf was one of the very few companies to calculate organic growth for Argentina, based on the current exchange rate rather than the prior year's average rate. So, 4.1%, if you compare it with our competitors.

In nominal terms sales increased by 1.1% from €5.546 billion to €5.606 billion. All our core brands contributed to the sales.

NIVEA boosted sales by 3.8%; Eucerin by 1.5%; Hansaplast by 3.4% and La Prairie by 5.5%. EBIT rose by 7.6% from €771 million in the previous year to €829 million.

The EBIT margin improved again, rising from 13.9% to 14.8%. This meant that our EBIT margin increased for the fifth year in a row, climbing from 11.4% to 14.8% in these five years.

These good results were the product of sales growth in all regions where we do business. In Europe, we generated sales growth of 2.0%.

Sales in Western Europe rose by 1% against prior-year levels. There was good growth, especially in Germany, Spain and the United Kingdom.

However, sales in Switzerland and France did not repeat last year's performance. In Eastern Europe, we boosted sales by 6.6%.

Growth was mainly driven by the healthy -- further healthy trend in Russia and Poland. In the Americas, we lifted sales by 2.9%.

Sales rose by 1.6% in North America and by 3.7% in Latin America. Our businesses in Brazil and Mexico were the main growth drivers in the region.

Considering Brazil's major economic difficulties, our growth in this country can be seen as proof of Beiersdorf's strong capability and market impact. As I'd -- or as already mentioned before, the growth rate was negatively impacted by the developments in Argentina.

If the prior year's exchange rate had been used, this would have led to a growth rate of 9.3% for the Latin America region.In the Africa/Asia/Australia region, we increased sales by 5.7%. This was especially due to our continued very strong performance in Japan and India.

In China, sales were slightly below prior-year level. To tesa.

Tesa grew organic sales by 2.6% in 2016. In nominal terms, sales rose by 0.6% from €1.140 billion to €1.146 billion.

Sales growth was generated in both the industrial and consumer business. In the industrial business, tesa was especially successful in Eastern Europe and the Americas.

In Asia, sales were below the prior year's level, mainly as a result of the continued weakness of the electronic industry here. At €186 million, EBIT was down 2.8% on the previous-year's figure of €191 million.

This corresponds still to an EBIT margin of 16.2% compared with 16.8% in the previous year. Ladies and gentlemen, let me sum up.

Beiersdorf remains on a sustainable growth path. Each day, we are strongly committed to our blue agenda, which means to making our strong brands even stronger; to winning consumers with new innovative products; to systematically expanding our position in the emerging markets; to further increasing our efficiency; and last but not least important, to engaging our employees to further driving the Company’s success.

Let me give you to each of these points some insights. On brands, at the heart of our Company’s success are our international respected outstanding brands.

One of the most important products is to continuously strengthen our brand profiles and make them even more profitable. In 2016, we were very successful in meeting this challenge.

By further boosting the profile and competitiveness of our brands, with an equivalent increase in the marketing budget, we have succeeded in squaring the circle. The secret to the success is focusing on optimizing the marketing mix.

We responded to fast-moving changes in consumers’ media use by consistently setting new priorities for marketing spending. This includes significantly intensifying digital marketing and increasing investments in digital media.

Two innovations. Ladies and gentlemen, Beiersdorf’s innovation engine is finely tuned and is running on full speed.

We have enticed consumers with new product that they want to buy and that are designed to meet their wishes. NIVEA Deo Protect & Care, for example, has been rolled out in more than 100 countries around the globe.

It has proved a major success. Within just a short time, this product innovation has developed into a key growth driver in the deodorant category.

At the same time, we have substantially expanded our market opportunity to extend it, importantly, around innovations cycles for our major innovations with strategic and focused marketing approaches. We’re willing to surprise and delight consumers with pioneering innovations in 2017 and 2018.

Our pipeline is full of outstanding new products for 2017 and 2018. To markets.

Ladies and gentlemen, our Company has continued to grow in Europe over the last year. Our performance in the emerging markets, however, has been even more impressive.

We have achieved high growth rates in the countries by expanding our presence. We have not only established new protection sites in recent years, but also moved parts of our research and development closer to our consumers.

This closeness enables us to identify consumers’ wishes in a specific region at an early stage, and respond quickly and decisively by bringing products to market that meet them. Beiersdorf, therefore, made further targeted investment in local development and production capacities in the reported year.

This has helped us to increase the emerging market share and total sales to more than 50% in the recent years. On efficiency, as I said at the beginning, the profitability of our Company reached a new record level last year.

Increased efficiency in all areas of the Company made a significant contribution to this. We have shown strong cost discipline and considerably improved our cost structures, also thanks to Jesper and Harald Emberger.

We also significantly reduced our working capital in the consumer segment from 13.6% to 11%. Jesper will provide more information on financials and efficiency on this later.

Employees, ladies and gentlemen, at Beiersdorf we achieved significant progress in the further development of our Company in close cooperation and team work. Our achievement brings us even more strongly together and inspire our team spirit.

Ladies and gentlemen, over the last five years, Beiersdorf has been part of an impressive success story. The numbers speak for themselves.

Between 2011 and 2016, Beiersdorf consumer business segment grew by an average of 4.7% per year. In the same period, we have increased our EBIT in the consumer business from 11.4% to 14.8%.

The share price has risen by 94% in a period, in which the DAX as a whole rose by 66%. The value of our Company has almost doubled; and, our cash has grown from €2.2 billion to €3.7 billion.

What's on the agenda for 2017? Just one word: growth.

Or in a different form, we are determined to grow our consumer business by 5% year on year in the medium term. How do we intend to achieve this?

With breakthrough product innovations, with a continued focus on the world of men and their skincare wishes; by expanding our presence in the emerging market; by accelerating the digitalization; and, by lifting the great potential of Eucerin, Hansaplast and La Prairie. Let me give you some further details on these points.

To product innovations. We started 2017 just right now with a new product sensation.

A few days ago, we launched a new generation of Nivea Sun on the market. We are, by the way, the number one company, in Nivea, in sun products in the world.

With this product range, Beiersdorf not only guarantees trusted Nivea skin protection and excellent skin tolerance, but also offers the first-time clothing protection. This makes Nivea Sun the world's first.

UV filters in sun protection products frequently cause unavoidable yellow stains on clothing. This often results in lasting damage to textiles.

The new generation of Nivea Sun and its clothing protection complex is different. Yellow stains can be washed out for the first time and the innovative clothing protection complex makes persistent stains a thing of the past.

We expect, very importantly, this generation of sun protection products to establish itself in just a short time and fundamentally change the market for sun products in a whole way. Let us take a look at some of our commercials.

[Audio/Visual Presentation] Yes, we are very happy. We waited for that innovation a long time.

It has been close to eight years of R&D work and research. And we rate that as very, very important.

We know that over 40% of consumers are really annoyed about stains. And those who have the experience, there's also quite a value element in the new sun protection range.

Coming to the second point of men. Products for men will be at the heart of all global business activities in 2017.

In recent years, men all around the globe have taken a growing interest in skincare and a well-groomed appearance. Beiersdorf was earlier to tap into this trend and turned it into a success.

Also, here, like sun, we are the number one in the world. A significant share of our NIVEA sales now comes from our products for men.

Our NIVEA Men product range is in the league of its own in every region of the world and is growing rapidly. Real Madrid, Paris St.

Germain, AC Milan, Liverpool FC and, of course, Joachim Loew in Germany symbolize our claim for the leading position in men's products. Third point, the emerging markets: we will continue to further grow our position in emerging markets.

In 2017, we will considerably expand our production lines in Itatiba, Brazil, one of the most important growth markets for buyers. The investment volume here amounts to approximately €80 million.

This will be Beiersdorf's first production site for aerosols outside Europe. To digitalization.

Digitalization is another crucial topic of the future for our company. At Beiersdorf, we also believe that this technology of the future will create good opportunities and provide many possibilities for our company.

But it is, and I say this with all the respect for the importance of this issue, not an end in itself. In applying it, we must always focus on the specific added value it will have for our consumers.

We are focusing on three key fields regarding digitalization: digital marketing; ecommerce; and the expansion of digital capabilities in the company. We made great progress in each of the areas.

First, we are primarily using digital marketing as an excellent way to intensify our dialog with the consumers. We are successfully sharpening the profile of our brands around the world, through the use of systematic online marketing measures and with excellent digital campaign and content that already have won numbers of awards.

The share of ecommerce in total sales has increased significantly, as a result of our systematic expansion of digital business activities and our close partnership with online marketplaces. This is especially the case with our business in China, where ecommerce already accounts now in total for more than 20% of our total sales.

In men, it's even above 30%. Our luxury brand, La Prairie, has experienced a similar increase.

It now generates more than 20% of its sales in the United States through the online channel. It's important, because the United States are the biggest market for La Prairie in the world.

At the same time, we have broadly expanded our NIVEA and Eucerin website. Both now combine individual assistant with product recommendations and online shopping.

In addition, we are continuing to enhance our digital capabilities. To prepare them for the future, we've set up the Digital Factory.

This acts like a think tank that creates a digital future of Beiersdorf outside the confines of established forms of work and points the way to its realization. It has been established here in Hamburg in a different location.

We are introducing our company's employees to the digital changes that lie ahead in the workplace by providing them with systematic advanced training at our digital campuses. At the same time, we're building up our digital capabilities.

We recently added two very experienced, still young, digital experts from competition to the management level to drive digitalization for NIVEA and Beyond. Coming to Blue and Beyond, ladies and gentlemen, we have great expectations for our updated business strategy, Blue and Beyond, after adding a new polish to our NIVEA brand over the last five years and achieving exceptional success.

We will devote ourselves with the same strength and focus to Eucerin, Hansaplast and La Prairie. We believe that these brands still have significant untapped potential that we intend to lift.

For this reason, at the beginning of February, Beiersdorf appointed a new Executive Board Member to manage these three business segments. Vincent Warnery brings a wealth of international experience and expertise to his new position at Beiersdorf.

After completing his university degree in Paris, Vincent went to work for Procter & Gamble. This was followed by more than 15 years in management positions at L'Oreal, also in the active cosmetic side.

Since 2011, he has served as Senior Vice President and Head of Global Consumer Health Business at Sanofi. He’s just perfectly placed to intensify the business growth of the three business sectors and drive product innovation.

To the outlook, ladies and gentlemen, allow me to conclude with the guidance for financial year 2017. As I said – no you do first, sorry.

It's first Jesper with the financial part. Then, I come with the outlook.

I was too quick.

You were a bit quick there.

Yes, I wanted to finish. Good.

There’s no rush. Good afternoon, ladies and gentlemen, it's also a warm welcome from me to our annual Beiersdorf analysts’ meeting.

I’m pleased to share with you some highlights on our financial performance for the full-year 2016 and, in particular, how we’ve continued to make excellent progress on our efficiency and working capital initiatives. As you might remember, this is a Company-wide program that we started in the beginning of 2016 and it has been landed throughout the Beiersdorf organization, and the results are already visible in the very first year.

As you've heard from Stefan, growth has been and will continue to be our priority. And we did achieve a solid net sales development in 2016, growing 3.2% versus prior year.

However, in addition to growth, we've been able to improve the second pillar of our successful business model, profitability and delivering a good balance between growth and profitability in the year 2016. This balance is represented by our flywheel, where efficiency provides the fuel for growth and enables a profitable and sustainable growth going forward.

We’ve also expressed our financial strategy in a very simple framework, outlining the key financial indicators that we focus on, the role that they play in how we steer our business and the levers that we use to drive a positive impact from sales growth and the quality of sales; price competitiveness; promotional effectiveness; through margin drivers; and, a competitive and efficient media spending. Our efficiency program has been focused on six core areas, which represents different areas of our business.

In the cost of goods sold area, we’ve been focused on procurement and logistics; generating savings through network and load optimization; global and regional spend consolidation; and competitive buying. This has been the main contributor of generating gross savings of around €100 million and a positive contributor to our margin gains of 60 basis points.

Assortment optimization where we initiated a long-term assortment and complexity reduction program, focused on improving the productivity of our portfolio by streamlining and harmonizing within the product ranges. Our objective is not about reducing our product offerings, but making it more productive as we measure it in the average increase of sales per SKU.

We are pleased to have achieved a more than 10% improvement already in the first year. Continued effort in cost discipline, containment in the area of general expenses, are also important drivers of Beiersdorf's efficiency program.

However, margin and working capital have been our primary focus in 2016, and I would like to share with you a few more details on that in the next charts. If we focus on the real gross margin impact first, then we have generated a positive benefit of 90 basis points from our efficiency program, together with some positive benefit from commodities.

This has allowed us to more than offset the substantial negative FX headwinds that we have experienced in 2016. Together with the margin impact from our positive pricing, we've, overall, been able to improve our gross margins by 60 basis points.

Working capital. We have made strong progress on our working capital in the consumer working -- in the consumer -- as a percentage of sales in the consumer segment with an improvement of 260 basis points versus prior year.

Our working capital drive focuses on all aspects, from streamlining and standardizing our payables and receivable processes, to optimizing our inventories. However, I'm particularly pleased with the progress that we made on inventories.

Through better demand and supply synchronization, shorter production cycles have resulted in a more-efficient operations and being able to respond faster and more agile to the changes in the marketplace. Our target remains to be single digits within the next 12 months.

Our strong business growth, together with our efficiency efforts in 2016, have given us the foundation for another year of strong and healthy EBIT improvement of 90 basis points in the consumer segment, reaching 14.8% return on sales. This progress is very much in line with our long-term ambition to grow the consumer EBIT margin by about 50 basis points each year.

From a Group point of view, we have, in addition to improving our Group EBIT margin by 60 basis points, and, as Stefan mentioned, getting to the 50% to sales. And, for the first time ever, reaching an important milestone of 1 billion EBIT, our profit after tax also improved nicely by 8.4%, reaching 10.8% to sales for the Group, an improvement of 80 basis points compared to the same period last year.

The after-tax result is driven by the positive result from our operating businesses, improvement in our tax rate and realized gains from our financial investments. The net result of our positive business development and our efficiency focus has yielded substantial liquidity improvement, almost 700 million incremental for the year 2016.

In summary, we are pleased with our financial results for the year 2016 and the progress that we've made in our efficiency initiatives, being able to deliver a positive contribution to EBIT margin and liquidity already in 2016. Now, let's turn to the guidance for 2017.

The outlook. Ladies and gentlemen, allow me to conclude with the guidance for financial year 2017.

As I earlier said, we are looking ahead of the 2000 financial year with cautious optimism. However, we, by no means, underestimate the macroeconomic and political risk.

These were a constant feature of 2016 and are unlikely to be any less intense this year. In fact, we expect them to increase further, meaning that there will be only a little tailwind from the wider economy.

For Beiersdorf, our guidance is as follows: in financial year 2017, we expect sales growth in the consumer business segment to outperform the market at 3% to 4%, the EBIT margin from operations should slightly exceed the prior year level. At tesa we anticipate sales growth of 3% to 4%.

The EBIT margin from operation expected to slightly down on the prior-year figure. Based on the forecast for both business segments, we expect group sales growth by 3% to 4%.

A slight year-on-year increase in the consolidated EBIT margin from operation is expected. Thank you.

So, these were the strategy update and the review of our full year figures, 2016. I can see the microphones are ready, so we can take your questions, please.

Eva?

Thank you. Can you maybe talk a little bit about the underlying market, what you expect to see in your key regions in 2017 and how that compares with 2016?

And especially, you obviously now have a big innovation in sun care, do you see any change in the fate of skincare, or is that still quite a subdued market? And secondly, can you maybe talk a little bit about Eucerin?

It's obviously been a fairly slow year; I think Q4 in particular was quite difficult. What's the reason for that and how do you think that will be addressed now that you have new management in place?

To the market, I think we, in our assumption, take the market, more or less, pretty much the same as 2016. That's the assumption we have in our planning.

Unfortunately, we're also not seeing any improvement at this stage. The volatility and uncertainty in the markets remain high.

There are many questions this year where we don't know where it turns. You see the news every day yourself; hard to predict what happens in the U.S.; hard to predict what's happening in India.

I can cite 10/20 examples from France to UK. Many things are happening.

I think the company who wins will be that company, which shows the strongest agility and speed to the changing environment. I'm particularly pleased in that, Eva, that the fourth quarter was very good.

It showed that we got the message. We are acting very agile.

So, I'm going with, as I said, some optimism into the year 2017, but as I said, there will be no tailwind. When it comes to sun clothes protection, it is by far the smallest category in our field.

Yes, we are number one and I was waiting for that innovation for a long time. So, that should do something.

Will it really impact the overall? We have to see.

It's brand new. I think maybe just two words on it, because I'm obviously very excited about it.

And I predict that in two or three years there will be no sun products any more without clothes protection. Why should there be?

And we had a superb success; we were making over €300 on deodorant Black & White. And I guess when, in ‘11 or ‘12, the first time we talked about that, people also said well, what has that to do with deodorants in the first place, and the success of the whole line speaks for itself.

Here in sun, it is even more important, because when clothes get stained, they are ruined at this stage. So, it’s also a great value proposition.

We sought a lot of increasing prices, because you could justify that, because it’s just much better value. If you think if your bikini or any white clothes get stained.

But we decided not to, so that should also give, against private label, some ammunition and we’re going full blast on that innovation to make the most out of it before others jump to the wagon. The Eucerin bit is indeed the one we were not happy last year.

That had predominantly to do that the U.S. was relatively weak on Eucerin, other than on Aquaphor; Aquaphor was double-digit, but Eucerin was weak.

We relaunched the brand by the end of the year, November/December, so we had a significant slowdown prior to the relaunch. We are now fully in the launch phase, so I expect that to improve over the year.

Christian Weiz, Baader Bank. Maybe also on La Prairie in the U.S.

It seems also to have been pretty slow in the US together with Eucerin, so maybe you can elaborate on that. Then Argentina had a negative impact on growth.

Maybe can you elaborate with regards to the margins, what margin impact you saw there? And then if you could give us, maybe some housekeeping aspects for Jesper, tax guidance for 2017, maybe even 2018.

And also, something housekeeping, can you elaborate about this tax effect we had in the financial line -- in the financial result this €7 million I believe tax thing you had reversed in 2016?

Do you want to start or should I go?

You start with La Prairie.

Okay. In La Prairie.

La Prairie, by all means, had, since I'm here, the strongest year ever; 5.5% in the industry of selective is by far best in class, because you have to see that we are not in the makeup. If you just look at skincare, you even can look at Lauder La Mer and so on, we definitely outperformed the market by far.

The growth rate has been, over the last six months and still in the Jan and Feb period, double digit – high double digit. So, we're getting it right and that gives me also a lot of confidence for all the things on Hansaplast Eucerin.

What we learned there is that we are a fantastic company when it comes to NIVEA. The people are trained in NIVEA; we're very good in NIVEA.

But we don't have a lot of skills when it comes to Eucerin, Hansaplast and La Prairie. Two years ago, we started to put quite a lot of selective experts in it, because it's a very different business that pays out now, and it’s running like storm at the moment.

So, we're very, very happy with the pace of La Prairie also.

The question on Argentina and margin, so we don't guide specifically or don't give a lot of detail specifically on the country margin. We have -- what I can say in generally is what the FX volatility that we are faced with in Argentina.

Of course, we try to play all the different levers within the business from a pricing to an efficiency point of view, to try and outweigh the negative impact that we have seen in the country. Overall, it's not a significant impact on the Company margin.

On the tax guidance, we have, in the year 2016, been able to move and improve on our tax rates, which is the reason why we are down to 30.1% from the 30.7% tax rate that we had. Our guidance going forward is, we will be, for 2017 and beyond, is around 31%.

We obviously experience volatility one year versus the other, but overall, our guidance is 31% going forward. Specifically, on the improvement in 2016, they have come from many different areas of -- or non-deductible expenses in many of our countries, so that's how we've been maneuvering the -- and improving step by step in 2016.

And regards the provisions that you've been -- if I understand right in your Company report, you write about provisions that you had to do in 2015 --

2015, yes okay.

And then resolve them in 2016, and that had a significant positive impact on the financial line, if you could elaborate on that.

So what we had is we had a provision created in 2015 on the tax assessment, and that's what we have reflected in 2015, and not in 2016 and beyond.

So the financial line to 2016 will be a pretty good run rate for 2017?

Yes, knowing that tax rates always have some volatility. But yes, the overall long-term guidance is the 31%, that's what we have.

Yes and if I may just continue, can you also give us an idea, some flesh on the bone, with regards to the CapEx, also with regards to your expansion in Brazil with the new plant you're plan in Brazil for 2017 and 2018?

Yes, so what we have seen, so, in 2016, you have seen that we are a little bit lower than what we've been in the last couple of years as we finished some of our investment projects in both Mexico and India, and the new tesa headquarter. For '17 and beyond, our guidance is between 200 and 250, reflecting the continued focus on building supply in the developing markets, including the investment in Brazil.

It was actually unchanged. That has been the guidance for some time, but we did have a dip in 2016, because, actually, it was mostly maintenance and other things.

Now, we have new investments, like we had in the years before.

Philipp Frey, Warburg. Can you elaborate a bit on your pricing, which you had in 2016?

You mentioned this 40 basis points increase in pricing; can you say a bit how much of this was driven by higher prices of innovations? How much was any general price increase?

And what you foresee going forward, given your strong innovation pipeline, wouldn't it be reasonable to expect a continuous positive pricing? And then your outlook on advertising and promotions, first of all, can you update us on what percentage we had as spending in 2016, and how you want to evolve going forward?

You mentioned digital marketing, what will this generally mean for your business, in terms of A&P rates, just some more color on that?

So maybe let me start with the pricing element. So, you know we don't break out volume and price in our sales.

But we thought from a margin and showing the real benefit of what we tried to do on the efficiency was important today to share a little more meat on the bone on our margin achievement. Obviously, there you see the 40 basis points on pricing.

So yes, it tells you that we have had a healthy mix between volume and price in the year 2016. Our expectation, going forward, is that we will continue to have a healthy mix on volume and price, but also that we see a continuation on the competitiveness, in particular in the European environment that could have some implication in the mix between volume and price.

But, overall, we will continue also for 2017 to have a healthy mix between the two.

Second question is, obviously, one of the most important questions we are at the moment battling and working on, is, and I wouldn't call it A&P, I would call it in a much bigger scheme is optimizing the mix. So, literally, as of your margin one, how do you spend your money?

And there is one tendency whether we like it or not is that the media, the actual classical media spending is significantly reduced. We have seen in many markets tendencies, which are not good, that we have not decreased much A&P, but competition has even more.

That means our share of voice, one of the most important factors has increased to very high rates. Basically, you could also say it, in other words, there is more money and investment going into price and promo, especially in the emerging markets.

So, how do you leverage it comes also to the pricing question, and how do you deal with that? And that is a big question of how much do you invest into the price?

How much do you invest into the promo? How much you do in classical marketing?

Then comes the question of the digital marketing? And then comes even your POS, and any other promotional activities you have.

That mix is the question. How that further goes on, can't tell you.

Can't tell you, we'll be experimenting with that. What we've seen, what I can clearly say to you is that classical media will further significantly reduce over time, but it will definitely be used in other forms.

We, at the moment, expect stable levels of A&P, but in a totally different mix combination. When you look in A&P line, I guess, everybody will report somehow a marketing mix line, but the composition of that is already, in 2016, completely different, and will further accelerate in 2017, especially in Europe.

Hi. Good afternoon, Marion from Raymond James.

I have two questions. So you're obviously stepping up the focus on the Eucerin, La Prairie, and Hansaplast, so could you talk more about the strategy, maybe the one you expect these brands to accelerate?

And what would be the targeted growth once some changes have been made? Also, on NIVEA, what will be the area of focus besides, and in the coming years you haven't talked much face care.

Are there any new categories you could focus on to drive growth? I think you've had some launches in haircare, which was quite put aside in the previous years.

Thanks.

Yes, lets start with the new [indiscernible] Beyond, what we call it, Blue and Beyond. First of all, we're very happy that we've got Vincent Warnery.

I think he is a real asset, or proves hopefully to be a real asset for our Company. He has great experience.

He was one of the fathers of La Roche-Posay. He also was five/six years with Sanofi in a big position, so he brings the pharmacy experience.

That's exactly what we needed. As I explained already with La Prairie, with the entrance of the selective [profiles], the business turned dramatically.

What NIVEA is good at is we're good at brands; we're very good in innovations. But then the commercialization of the business and all of these new businesses are very different.

We got a question this morning, do the businesses have anything together? I don't think so, other than one boss.

So basically, we see separate business units. Eucerin will be the dermatological flagship under the plaster business, where we're number two in the world.

La Prairie is the selective flagship. Here, also, M&A cooperation partnerships are foreseeable.

Vincent just started. I think in six months/12 months from now, you will see that going.

Already this year, that number we gave this morning, we can give that, we believe that sector alone, which accounts for EUR1 billion accounting for more than 5% of growth that sector and very profitable, because, as all of you know, some of the profitability will be used to invest behind it, like the wheel. But we are very bullish on that for the future, and there's a lot of potential to lift.

On NIVEA, as you asked, we are focusing further on the six categories. As always, we are showing the innovation which is, at the moment, going into the market, so we showed sun, there's a lot of things coming in face this year.

We have been not good in face last year. Our French competitor was a lot better than we are, so we have to catch up there.

We're doing very good in body. That's also something to expect.

Sun, I talked. Men had a fantastic year last year and I expect, with all our soccer clubs and so on, to further go on.

Real Madrid and also Paris St Germaine are still, if Paris St Germaine wins today against Barcelona, still in the finals -- hopefully going to the finals of the Champions' League. Our deo business is in very good shape, had nearly a double digit last year again.

Our shower is improving year on year, with also quite some innovations to come. As I said in my statement before, the pipeline -- and that also took time, because when I took you over the pipeline, it was okay, so we used what we had.

But now after five years, also with May Shana’s since three years, our new R&D chief, more and more is coming through the reins. And I’m looking more and more really for breakthrough innovations.

I'm not looking for these little attention, I'm really looking for breakthrough innovations which change the market. Sun is exactly that.

That will change the market once and for all, we hope, and that's what we're looking for. So, we're very pleased with what we're seeing in 2017/2018 to come, etc.

We're also experimenting in new fields; some of them you heard. We experimented very successfully in new fields or old fields, but it wasn't in the six.

We are experimenting very nice in the cream field, especially with NIVEA Men cream. We also do a lot in lip this year.

There's a lot of innovation in lip; some you even have in the bag. And then other fields, which we are testing in certain markets to see whether they have a global appeal.

So, there's a lot happening at the moment. There's quite a lot of things to cover for the guys here.

Hi, it's Toby McCullagh from Macquarie. Just picking up perhaps on that last point.

You've talked about new growth engines, talking about La Prairie and Eucerin, in NIVEA talked about sun in particular, but also the other core categories and just alluded to the category adjacency. I guess specifically you've been talking about blades and razors, the markets, particularly in Austria and Germany, now for about two years.

I think I'm right in saying that you have a dedicated R&D team embedded in your blade supplier and you've been testing various formats. What is your ambition for this business?

And when do you think that could feasibly have a material impact on sales? Second question is just on consumer margins.

You once had a medium-term margin target of 16%. You're at or very close to being at 15% now.

You've talked about margin expansion run rate of about 50 basis points or so. Is this more than just a medium-term aspiration?

Is it a margin target that you should be exceeding? And is there something that we can think about longer term?

And then just finally on net liquidity, you're at 3.7 billion now. The sales growth guidance is there.

You're talking about margin expansion and further improvements in net working capital. That suggests that the net liquidity number is going to get bigger.

Perhaps you might give us an update on what to do with it?

Well, I think -- let me start and then, obviously, I'll give -- we'll combine the answer. Let me start with the 16% that I like, because when I came, the first thing Jens came and said, we have that 16% margin.

And I said rubbish, I stick with it, because we didn't know better. But you were the one holding it up.

I always said, listen that is not my number one priority. My number one priority is getting the getting the brand right.

We have seen also last year, which we measure every year, we measure so brand health tracking is for us so important. I can tell you, just the latest result of Readers' Digest came out with this, we have once again improved the NIVEA brand profile significantly.

What is very good to see is that the brand profile, very important for us, we skewed a lot more to younger consumers than we used to. So, the brand profile, perfect.

The second point, Toby, was getting the innovation machine going, and with some considerable success. Now, the pipeline also with May and the R&D [team] is also expanding.

But these two were never my big headaches. They were just had to be fixed.

The other third point was the presence in the emerging markets, which we increased over 50% and there's still a lot of wide-space areas for us. One example, for example, also to put some color on it, is we were nothing in India.

We have now in India last year, first time €100 million and we're profitable. We have a plan and that business growing over 20% every year.

So, we're, and we are now even going towards 300,000 distribution products, 300,000. These three, I'd say, the theme to your question is and there's a little bit, and this is what we learned over the last five years, is we have now a very good understanding of where we're good at in Beiersdorf; or, let's say, with NIVEA.

We are good brand guys; we're good innovation guys; and we're very good at commercialization in our business. Efficiency was not the strong part.

I admit the [indiscernible], I said I'm not an efficiency guy. But the last 12 months, since we have Mr.

Jesper and Mr. Harald Emberger, we're running more KPIs and dashboards than what we have than ever before.

The improvement you have seen, and then Jesper will put some color on it, is that's the easy bit. That's a question of discipline and expertise.

I can tell you, Jesper, with his great experience from Colgate, and Harald, who was the number two in supply chain at Unilever, they bring in a completely different measure. This is just the toe of the iceberg which you see, which we talk.

Obviously, we know the teams are with them. There's a lot of efficiency in it.

Overall, and that's probably the most important, we are much more balanced team now. So, we're managing the growth part, I think better, and we're also becoming increasingly better on efficiency.

When you just look, and I'm more the commercial marketing guy, is 90 basis points in two years; over nearly 300 basis points in working capital. If you would have asked me would we ever do that last year?

I would have said probably not. The good news is, it continues.

It's not a one flash. Month by month, by month, also in January, we're seeing major improvement, where which gives us fuel to grow.

So, the 16% from torque, yes that will come inevitably, but probably more. Now, it's your turn.

What more can I add. I think the only thing that's…

The dashboard.

I can share some KPIs and dashboards with you. No, I think what is important is that what we have initiated this year is not a one-year fix of any kind.

This is really a long-term program. That has, as Stefan mentioned, landed extremely well in the organization, through the entire organization.

The program is set up for multiple years as we keep addressing multiple areas of efficiency from cost of goods sold, working capital, fixed costs and so on, as we will go down that path. So, I think long story short, the objective of ours is to generate the fuels for the growth, and continue to deliver for our long-term objective of 50 basis points EBIT margin improvement; some years a little bit more, some years a little bit less.

That's the area. Liquidity?

And blades.

And blades.

You want to do liquidity?

Liquidity is a positive problem to have. That's how we see it.

And the initiative that we were driving and, again, working capital, for me, was never really about the €1 more. It was about the efficiency and the effectiveness of how we run our operations.

That was the number one objective. The cash and the liquidity fallout is only an added benefit for us.

Of course, it raises questions, what are we going to do with this? And Of course, we are actively looking at ways to invest and enhance our business with that liquidity.

And when something relevant at the right price point, strategically important for us, comes up, we have a very solid cash pile to help us move into that area. I think that’s the best way we look at it.

Is the problem, at the moment, the availability of assets or the price?

Well, I think, Toby, it’s relatively clear. It's a little bit like real estate, right; at the moment, everything is very expensive.

And I can tell you any asset, which went last year on the market and got eventually sold, we looked at it, but most of them we found were expensive. You see, I don’t know how to phrase it in a different way.

At a certain point, you have [auditors]. At a certain point, you have to meet the maker, and then you have to justify the price.

Businesses, which go for 7/8 times might have its merits, but I also have to justify that. At the moment, it's a little bit like real estate.

You shouldn't buy when prices are too high, and they are very high at the moment. If you ask me for Eucerin, maybe even for La Prairie, maybe even for Hansaplast, it looks a lot better.

But for NIVEA anything major at a crazy price. This is not in line with our shareholders and this is also not what we're going to do.

Since we still have so much organic to grow, we're staying on that. That doesn't mean we don't have our eyes and ears open.

We're very actively on it, but I'm not going to go into race, just because there's a liquidity. Also, let me tell, I think, we, as a management and we as -- also with our major shareholders, this, for us, is not a [sleepless].

We have set cash by, the cash by [we find] and one day we're going to use it. But it's not going to force us to do any stupid things.

Go on then; humor me on blades and razors.

Yes, I know you wanted that. Yes, I think the time has come now, but this is what we learned and that's what I always said.

If we enter into a new field, we got to get the basics right. For some, two years, it might not seem a long time.

If you think that we want to keep the blades for longer, and longer, and longer, the next 100 years, then the preparation time of two test market is vivid. You have to get the product quality right.

You have to get your learnings with the consumers. You have to get your supply chain right.

You have to set up your ID, because, even if you have the first good product, that doesn't mean the pipeline goes up. We were looking for a long, long time how do we really start the consumer to transfer and accelerate in that business, because just writing NIVEA on it is not enough.

I think we have found that; we're stepping up the gas this year in the market. Within the next six to eight weeks, you will see a lot and let's see whether that works.

The test results are awesome. So we’re seeing what happens, but it’s just a couple of weeks that's why we’re a little bit more bullish.

It's coming now. Let's see what happens.

Can I just have a follow up question, please, on the tesa margin? We've seen that decline two years in a row now and you're guiding to another slightly below prior year for 2017.

Can you may be talk a little bit about the reasons behind that caution?

Yes, it is about caution. As we've seen, and maybe just, I think, maybe re-emphasize how well tesa has performed in 2016, coming from a very tough beginning, where we saw some significant declines in the electronic markets in Asia, and a strong recovery in the second, third and fourth quarter, behind great growth in both the industrial segment, the consumer segment, Europe, North America on a real growth pattern in tesa.

What we saw last year, and we will see a little bit in 2017 is the rebalancing between the different segments. The fact that there is some uncertainty on the electronic business still, going into 2017, that has a small impact on our margin going forward.

That's what it is. The underlying profitability of tesa is not changed.

The great growth story that we have seen in the last three quarters has not changed.

tesa, I think, is also interesting, Eva, in it such that that's how I foresee also Eucerin and Hansaplast and La Prairie. 2001/2002 when we separated, the business was already broke.

So, we gave it a totally different business. The management found its way in B2B.

Nobody told them to be B2B. It's now one of the most-high tech businesses; has absolutely zero to do with NIVEA and the rest.

We are very pleased how the business has developed over the years. So, this is another indicator that if you separate the business from Blue, and there's nothing wrong with Blue, but you have to acknowledge Blue has its own going on.

Then, other business can be very successful, but you have to give it a different structure; and, you have to give it different management.

Yes Richard.

Richard Taylor, Morgan Stanley. Can I just ask a question about China, please?

I think going back to some of your old targets, obviously 2014 was break-even. If you could give us an update on that business and your ambition for it, please?

In the BRIC arena, I'm extremely happy with what we have seen in Brazil last year, despite very difficult market. Fantastic growth in Russia, double digit again; and, in India, just blowing it out.

China is more slightly down. We've not lost money any more.

So, we're not losing money. But what we are struggling with in China, and I think like everybody else does, is a dramatic change of the composition of the sales mix.

When you look at one of the pictures in the digital acceleration, in the core skincare arena, more than 30% of our business we generate through ecommerce. We're extremely pleased -- you also saw that one thing there on [little dog] we just were awarded, which is a big award there by [Jingdong], the second after Alibaba, as the number one supplier in our field last year.

It's a big award. It shows you that it's not just a hanky-panky prize.

It's growth rates; it's quality; et cetera, et cetera. So, we're very happy with that part of the business.

The good news is also quite profitable. The bad news is that all the brick and mortar stores are, at the same time, slowing down.

Not only the hypers, you also see that in the provinces with the smaller markets, and many changes happening. The problem is that most of the cost delay in the other areas.

How do you, it's a question of balance. Unfortunately, it doesn't stop.

There's no extra growth, which is a problem. The growth has now slowed down to single digits in China.

I don't think we also don't forecast that change. But, it's basically, it's balancing these very distinct businesses.

By the way, when I go to China, the week after I'm in China again, it feels like we're operating on two companies: the ecommerce company, very health, very profitable, very much going forward; and then you have the other ones, who just sticking on the cost. When you see how much movement we had on the cost, very dramatic, and it's still not enough.

When this balances out, then I'm very happy that we're hanging in. I'm very happy that our shares in the NIVEA categories are moving in the right direction.

We're still struggling in haircare. I'll be very honest there, still not having found it, not in styling.

But, in styling, actually, we're doing quite good, but in haircare, because it's a fierce battle there with everyone. That's what it is.

We have to outgrow the negatives when we come to positives and it's a little bit like everywhere. We are not going from the market, so one day I hope I report better numbers.

I think we know what we're doing, but it will take time, but we are not losing money any more.

And then one follow up, just on, I think, historically, people have mentioned that maybe Beiersdorf lacks scale. Obviously, lots of opportunities and white space, but maybe lacks scale in a digital world.

You talk a lot about digital, being small and nimble and agile. Can you just talk about why that's an advantage for Beiersdorf?

It depends very much on the markets. It's a very difficult question.

When you look at Brazil, it's not much ecommerce. It's still very much traditional.

It's really, really driving into every region in Brazil, particularly now, we are into the northeast region, which we didn't tap so far big time. Then you look at India, a lot of people say, we are, by the way, one of the most fastest growing companies in ecommerce in India.

It's coming up, but still small. But still, the majority of the business is in the distribution points.

We are at, as I said, we are moving towards 250 to 400 distribution points. We have become market leader in a couple of sectors, against the mighty Unilever Hindustan there, so we're quite pleased, in the smaller sectors, one has to say.

And then you look at Russia where, totally different, distribution, the distribution point's going away and it's playing more towards hypermarkets and supermarkets, or discount. So, it's composition, very, very different.

Africa, for example, we have a totally different concept. We are not - you probably know that we are very successful in Africa.

We're running a city-by-city model. We don't even care about whether it's Nigeria, Angola and so on.

We run city by city and conquer city by city, better distribution, better market shares come with production local things, et cetera, et cetera. But to your question, it's a very, very diverse question.

Ecommerce in itself, what you're probably after, what I see is -- I see some progress in there, especially with Alibaba. They're having a great concept with the Taobao Villages where they now bring really into the last corners of China through ecommerce products with little shops where people can pick up; a very new concept.

We are in that. But, look, the trade, even in Europe, people always say, in Europe it's so stable.

Look how many channels are coming up in Europe, at the moment. The channel landscape is also evolving dramatically fast.

Example, you take Action from Holland, it's expanding into Belgium, expanding into France. We don't even have to count the more-old elephants of Aldi and Lidl.

There's a dramatic change coming up and how to cope with all that. We have to be there where our consumer is, that's the guiding principle.

Puts a lot of more efforts into the sales capabilities, the channel capabilities, which we also see as an area where we still have a lot to grow and improve. But it is a very complex world as it used to be.

Okay, okay. Any final question, otherwise I think we conclude the Q&A session?

Thank you very much.