Beiersdorf AG

Jens Geissler - Head of Investor Relations, Corporate Treasurer Stefan Heidenreich - Chief Executive Officer Jesper Andersen - Chief Financial Officer

Alain Oberhuber - MainFirst Bank AG Schweiz Richard Taylor - Morgan Stanley Jonathan Feeney - Consumer Edge Research, LLC Celine Pannuti - JP Morgan Chase & Co. Guillaume Delmas - Bank of America Merrill Lynch Jörg Philipp Frey - M.M.Warburg & CO.

Marion Boucheron - Raymond James & Associates, Inc. Karel Zoete - Kepler Cheuvreux Rosie Edwards - Berenberg Bank Charlie Mills - Credit Suisse Fulvio Cazzol - Goldman Sachs Alexander Smith - Barclays Toby McCullagh - Macquarie Group Charles Manso de Zuniga - Société Générale Pinar Ergun - UBS Investment Bank

Good morning, everyone. Welcome to Beiersdorf's Half Year Conference Call.

I am Jens Geissler, and here with me in our Hamburg offices is Beiersdorf's CEO, Stefan Heidenreich; and our CFO, Jesper Andersen. As usual, we will first present our numbers and the business review, and afterwards, we'll have the Q&A for analysts.

Please remember the Q&A session will be limited to two questions per quarter. [Operator Instructions] And with that, I will now hand over to Stefan Heidenreich.

Good morning, ladies and gentlemen. Jesper Andersen and I would like to welcome you to Beiersdorf.

Thank you for your interest in our company. We will now report on Beiersdorf's performance in the first half of 2017.

We will also provide a forecast for the second half of the year. In the first six months of 2017, Beiersdorf underlined its strong market position.

Once again, we have achieved significant growth. This applies to both business segments: Consumer and tesa.

We have outperformed the market and increased our sales, with a particular boost in sales in the second quarter. Earnings have also increased to an all-time high.

We confirm our guidance for 2017. These positive results in the first six months were not a given.

The consumer goods industry continued to face difficult market conditions. On top of that, Beiersdorf had to deal with an attack in the company's IT in June.

Despite all this, we have overcome these challenges and continued on our growth path. Our employees and our external support dealt with the effects of the attack very quickly.

The incident only led to a shift of sales from the second to the third quarter. Our team has done a tremendous job, and I would like to take this opportunity to thank all of those involved for their great efforts.

Let us now turn to our results in detail. Beiersdorf generated organic sales growth of 3.3% in the first six months of the year.

If we adjust for the sales that were shifted into the third quarter in response to the IT attack, this sales growth would be 4.4%, and that's even more significant above market. In nominal terms, sales reached €3.513 billion, which was 4.6% above the prior year figure of €3.358 billion.

EBIT, excluding special factors, increased by 9.3%, from €513 million to €561 million. The EBIT margin improved from 15.3% in the prior year first time to 16%.

This marks a new record high. tesa, tesa achieved strong organic growth of 8.5% in the first six months of 2017.

If adjusted for the shift in sales in response to the IT attack, sales growth would be 9.4% at €610 million. Nominal sales were up 9% on the prior year figure of €560 million.

EBIT in the tesa business segment was €110 million compared with last year's €89 million. The EBIT margin was 18.1% compared with the prior year figure of 16%.

To the Consumer segment, we recorded organic sales growth of 2.3% in the Consumer Business Segment in the first six months. Without the shift in sales from the second into the third quarter, we would have achieved sales growth above market of 3.4% at €2.903 billion.

Nominal sales were up 3.8% on the prior year figure of €2.798 billion. All core brands contributed to our sales.

NIVEA increased sales by 2.2%, Eucerin by 1.3% and Hansaplast by 2.2%. La Prairie continued its strong performance with an increase of 10.2%.

EBIT excluding special factors increased by 6.3% from €424 million to €451 million. The EBIT margin improved from 15.1% in the prior year to 15.5%.

The regional sales performance was mixed. Here, it is important, like with the core brands a minute ago, that the numbers do not record the shift of sales to the third quarter due to the IT attack.

Europe achieved organic sales growth of 1.1%. Sales in Western Europe at the end of the first six months were up 0.6% on the prior year.

We achieved considerable growth again in Eastern Europe. Organic sales in the Americas increased slightly by 0.8%.

Sales in North America were 1.1% lower than the prior-year level, but sales in Latin America climbed by 2.1%. In the Africa/Asia/Australia region, we achieved a 5.3% increase in organic sales.

Ladies and gentlemen, let me sum up. Beiersdorf continued a sustainable upward trend during the first six months of the year.

Negative effects from the wider environment have had no impact on our performance. We expect further strong growth over the next six months.

Our confidence in this is based on the following strengths: first, our successful brands; second, our innovation capacity; third, a stronger market presence in emerging markets; fourth, an even greater efficiency; fifth, the accelerated digitalization of our business; and sixth, and especially the high-quality and motivation of our employees, which was demonstrated once again in the last few weeks. Coming to the first point on brands, for the current financial year, we aim to make our core brands Eucerin, Hansaplast and La Prairie as successful as NIVEA and we are delivering.

La Prairie achieved a double-digit growth rate in the first six months of 2017. Our strong product innovation including the White Caviar Pearl Infusion serum generated significant momentum.

The Skin Caviar Collection was a - has already been tremendously successful for many years, continued further double-digit growth rate. A new store concept has given our La Prairie business an additional boost.

It was showcased for the first time in Paris, the Galeries Lafayette, and attracted a great deal of attention and importantly had a significant business uplift. In addition, the strong performance in e-commerce contributed to La Prairie's success.

The second point, innovations. At the top of the list of Beiersdorf's successful innovations in the first six months is the new generation of NIVEA SUN with clothing protection.

The market launch was very successful, and this product innovation has the potential to be a further - a future growth driver in our relevant markets. It also strengthened our leading global position in the area of sun protection.

NIVEA SUN with clothing protection has so far been only launched in Europe and the Middle East. Third point, to the emerging markets, one of our key success factors is the targeted expansion of Beiersdorf's local footprint.

For instance, during the first six months of 2017, we expanded our presence in Lagos, Nigeria. Nigeria is one of the largest economies in Africa with significant growth potential.

Here, we are investing in a new production site to manufacture specific local products. Next point, efficiency.

Thanks, and Jesper will dig deeper into that point later on. Thanks to strong cost discipline and to the streamlining of cost structures, we have significantly increased Beiersdorf's efficiency in the first six months of 2017.

One key subject was the further reduction of working capital and we delivered. For the first time now, we have achieved a single-digit-figure.

To the digitalization, the acceleration of digitalization of our business is also becoming more important for Beiersdorf. We are currently focusing on three main areas: digital marketing, e-commerce and improving digital skills within our company.

Our new forward-looking NIVEA app focuses on benefits for the consumer. This progressive web app is platform-independent and can be used by our customers from any browsers on all tablets and smartphones.

It offers a number of user-friendly functions in addition to the traditional functions. To people, Beiersdorf invest in its employees and its future.

This principle is guiding the construction of our new corporate headquarter in Hamburg Eimsbüttel. With an investment volume of about €230 million, the project was given the green light a few weeks ago.

A new office building with 3,000 workstations as well as a research center will be built on an area of 100,000 square meters. When the construction is complete, operational units that are now far away from each other will be working together all under one roof.

With this building project, we are preparing ourselves for further growth. At the same time, we are enhancing our attractiveness as an employee by creating a state-of-the-art urban working environment.

To the guidance, ladies and gentlemen, I would like to conclude with our guidance for the full year 2017. The economic and political uncertainty around us is likely to continue during the second half year of - second half year.

We do not expect any decisive growth stimuli from the wider economy, even though we're looking ahead to the future with cautious optimism. This confidence is based on our own abilities.

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 operation is expected to slightly exceed the prior year figure.

At tesa, we anticipate sales growth of 4% to 5%. The EBIT margin from operation is expected to remain at the prior year level.

Based on the forecast for the two business segments, we expect group sales to grow by 3% to 4%, and we expect a slight increase over the prior year in the consolidated EBIT margins from operations. Ladies and gentlemen, thank you for your attention.

I now will hand over to Jesper.

Thank you, Stefan. Good morning, ladies and gentlemen.

It is my pleasure to share with you some more details on our financial results for the first half 2017. As mentioned by Stefan Heidenreich, we achieved strong net sales growth in the first half of 2017, with organic growth of 3.3% at group level despite an estimated 110 basis points negative effect from the IT attack in the last couple of days of the quarter.

For the business segments, the respective net sales growth excluding the estimated effect of the IT attack would have been 3.4% for Consumer and 9.4% for tesa. As already mentioned, the estimated group impact of around €35 million sales will be a shift between the second and the third quarter.

The good news is that through a disciplined and fast recovery, we've already seen part of this shift materialize in a strong July, which for the Consumer segment on a year-to-date basis confirms our guidance of 3% to 4% net sales growth. Now let me give you a little more detail on the composition of our P&L.

First, we are pleased with the 50 basis points improvement in our gross profit. Ongoing procurement and supply chain initiatives, combined with efficiency improvements in our manufacturing environment, has enabled significant cost savings.

Focused marketing spending, while we've been able to continue optimizing the effectiveness of our A&P spending and mix, reflecting the overall market trend while keeping our competitive investment levels. Given our innovation and investment phasing, we expect a slightly elevated spending level in the second half of the year.

Full year, as a percent to sales will be lower than 2016. General admin expenses, we've had an increased investment of 50 basis points compared to prior year.

We've been investing in structures to enable the growth potential of the business segments beyond the NIVEA categories, Eucerin, Hansaplast and La Prairie, as Stefan Heidenreich already mentioned, together with expanding our global footprint and infrastructure in future growth countries. The total EBIT has improved by 70 basis points for the group, with a 40 basis points improvement for Consumer and 210 basis points for tesa.

In particular, on tesa, we've had an excellent performance for the first half, with continued strong growth in the automotive industry and recovery in the electronic business in Asia. However, the story of tesa is a tale of two halves, where we in the first half of 2017 have been benefiting from an easier comparison to a soft first half 2016 including the recovery in the electronic business segment.

For the full year, we confirm the tesa guidance. We will be running into incrementally more difficult comps in the second half, and we expect a more competitive market situation as well.

In order to continue to fuel the growth of tesa, we will be looking into further investments. Last but not least, working capital.

We are well on track. Our working capital initiative, we continue to see the benefit from the program we started more than a year ago with the 230 basis points reduction and a 9.8% consumer working capital percent to sales compared with the same period last year, this being measured on a 12-month rolling basis, therefore having already delivered on our promise to achieve single-digit working capital by year-end.

In summary, we have again seen a strong performance in a challenging environment. And we are pleased with the progress we have made in managing both top and bottom line.

This is a continuation of our strategy to generate funds to fuel growth. The IT crisis have been handled with minor impact to top and bottom line, and the working capital program is on track, already delivering single digits.

Thank you.

Okay, thank you. We will now start the Q&A session.

And, of course, we are happy to take your questions. Please remember, maximum two for each participant, please.

Good morning, gentlemen. Alain Oberhuber, MainFirst.

I have two questions. The first is regarding the guidance.

Of the good H1 result we've seen, could you give us a little bit more visibility why you are so conservative for the group, and in particular, for the Consumer segment for the full year? And the second question I have is regarding your free cash flow.

When we look into the free cash flow again, it was a good improvement of €40 million. And could we expect a similar improvement in the second half?

Well, I'll do the first question and Jesper has the second one. On the first one, Oberhuber, it's always like that.

We keep our cards close to the end of quarter three and then we have a better view. I think it is also prudent with all the market condition as I said, which is going around at the moment to stay calm and see the developments.

You also saw the cyber coming for us, which we managed in a very good way. But it's very volatile out there.

That's why we keep and we expect a very, very strong quarter three due to the shifts. And we are also pretty upbeat about our innovation pipeline for the second half year.

So let's see how that develops now into quarter three, and then we will in November, be back with definitely a clearer point of where the year will end. But at this moment, we stay with the guidance.

And regarding the free cash flow, yes, we are happy with the results that we saw in the first half. And with the continued focus that we have, both on obviously the EBIT generation but equally so on the continued progress on working capital, yeah, we absolutely expect a continuation of the improvement in the free cash flow.

Thank you very much.

Thank you.

Thank you.

Good morning, everyone. Thank you for the question.

Just a couple from me, you've been very clear sharing the impact from the cyber-attack on like-for-like. But can you also give us an idea of what the impact was on margins?

And then secondly, what was the impact from a very strong summer season on like-for-like in the second quarter? And what is your level of confidence for recovering those lost sales in Q3 from the cyber-attack, please?

Thank you.

Maybe let me start with the margin, Stefan. So, yes, we have had a good margin development in the first half, 40 basis points on the Consumer.

And, of course, the missed sales in the second quarter and the first half would have had a positive impact on the EBIT. Of course, it would.

However, I think it's very important also to stress that there is a cost and there will be a cost associated with the cyber-attack. We are still evaluating that, working our way through it.

Our number one focus has been about the recovery and getting all operations back to speed. So we are still evaluating that, but there will be a cost associated with it.

However, we are confident that this cost will not have a material impact on our EBIT for the full year and we are confirming our guidance on EBIT for the full year.

Yeah, I think the third question you raised is an interesting one. I mean, you saw that we said €30 million plus €5 million, €30 million for Consumer, €5 million for tesa.

We know that pretty well because after these - the IT attack was very short before the half-year closing. So we had a pretty good estimate.

We know what it is. And so that number, we feel very confident.

As Jesper indicated already, we've seen the July coming in, and we're very pleased with it. So a big part of that we've seen.

And that makes us very confident that the majority of this really is a shift from the Q2 going to the Q3. This was only possible, I underline that and I'm extremely, extremely proud of our people.

We have worked here day and night, I mean, over weekends, 24/7 across the globe. And within 5 to 10 days, we were up and running again, at least with the major operations.

And the focus was clearly, clearly no losses of sales to our consumers first of all. And that goal, which was my number one goal we achieved.

And I'm very pleased, and that could only have been done with the morale and the passion of our Beiersdorf employees for their company, who have done a million - in situations like that it is just a pleasure to be the CEO of such a company. I'm very happy that the way it reacted.

We do every year Teamvoice. This is like an engagement level from [Galup] [ph], and I already made this speech this year, we don't need engagement scores.

We've seen it already, so very happy with that. On the summer season, yes, it is very clear; the summer season was good in Europe or is good in Europe.

Our sun clothes protection has been phenomenal, really phenomenal. And so that innovation gave us a double up, right?

Now, the summer is not over. Most countries are now starting their vacations, so we're still very hopeful that there even might come a second wave.

So far, it looks very good. Well, unfortunately not so much in the North at this stage when I look out, but I hear the South and everything.

Temperature is extremely high. Okay.

Could we have the next question please?

Good morning. Thank you very much.

My first question is, could you comment about your development of your sales in North America, particularly by channel? It seems like you had an outsized amount of success in the unmeasured channels that are not measured by traditional IRI and Nielsen data.

Has that continued in the first half? And then my second question is on the cyber-attack, the IT attack.

Were any of your competitors so impacted from what you could see and your - talk to us a little bit of you how measure - ultimately, if you could give us any more information about how much profit, ultimately, that will cost this year in the context of your existing guidance. Thank you very much.

Well, on the cyber and other companies, we are not commenting, obviously. Everything was published, so I'll refer to that.

And profit-wise, Jesper said everything. There is definitely an impact from the sales in the half year.

But on vice versa, what Jesper also said very clearly, there's also cost impact which we are evaluating. And we will be soon be back with a clearer picture on that one.

The whole thing, we'll anyhow take everything together, with promotion shifts and so on and so on. This is a July, August, September effort until you're fully over the hood.

But so far, I'm very pleased with it. On North America, you're right.

There are a lot of standards not measured by Nielsen or IRI at this moment. That's known.

That's a phenomenon. Anyhow, we will have in many, many markets; also in Europe, by the way, and also in the Far East.

And it is interesting to see that we are doing particularly well there in these channels, particularly in North America. But that also has to do that in North America.

We have a very big derma business with Eucerin and Aquaphor, which is particularly tied to other channels, just in the normal ones which are covered by Nielsen and IRI [ph]. Thank you.

Thank you.

Yes, good morning. My first question, sorry, but following on with the cyber-attack, is it possible to have a view of what you're growth was ex-cyber in the key regions of Western Europe, Eastern Europe, and I don't know if Americas was as well impacted by cyber?

I mean, I appreciate that you gave it for the total. But I would presume you may have an idea as well, given how you do on the sellout, so if you could share that and comment on this?

What you said also on the impact on the cost for the cyber-attack, will that be included in the base? Or will it be taken as an exceptional in the second half?

Then my second question is on the A&P spending. So did I understand well that there would be maybe less benefit from lower A&P in the second half, there would be an acceleration of spending in Consumer?

And should we believe that higher G&A should continue in the second half? In which case, could you comment on what could drive further margin expansion on the gross margin line, please?

Thank you.

Okay. Let me just quickly repeat on the cyber topic.

Yes, we provided a number on - a specific million number per segment. But we are not breaking this down into the regions, because it doesn't make a lot of sense, so no comment on this from our side.

Secondly, the extra cost, which we are looking at, we said it's not material. So there will certainly not be an extraordinary position or something.

We're looking into this. It's not material, so that's the message.

And on the question on the A&P spend. So, yes, as I said in my opening remarks, that our innovation pipeline for the second half and the phasing of the investment that we've put behind the innovation means that we will have a slight elevation of the spend levels in the second half.

So, yes, that will be different than the traction that we've seen in the first half.

And could you comment on whether there would be further savings that will help gross margin progressing in H2?

Yes, of course. So our efficiency program continues.

This is, as we have said for a while, this is a long-term program that we set in motion. It has multiple components around the procurement initiative, logistic initiative.

And I think what we've seen in the, probably, the last six months, very good progress on the supply chain processes and efficiencies there. So this is an ongoing program.

And we will continue to generate efficiencies in the margin line that will support our bottom line growth and provide us the fuel to continue to grow the top line. That is the strategy that we set out.

Thank you. Just a clarification, when you said slight elevation of the spend in H2, do you mean A&P as a percentage is increasing?

Or is it less negative like what we've seen in H1?

So it is increasing. But as I also said, on the full year, we do expect A&P percentage to sales to be lower than last year, so in comparison to the first half.

That's why they're lower.

Super. Thank you so much.

Thank you.

Thank you.

Good morning. A couple of questions from me.

The first one, if we could go back to your performance in Q2, excluding the cyber-attack. I mean, I see the wording in your press release where you talk about a major boost in sales brought by Q2, innovation-driven.

Should we extrapolate from that that basically, your organic sales growth will slow down in the second half compared to Q2, and that Q2 was exceptionally strong? Or is it just me being guilty of over-interpreting once again?

And my second question is on category growth. I mean, your largest competitor last week talked about skin care accelerating in the first part of the year.

Are you also seeing this, and would that make you more confident about the second half?

Yes, very good question. I mean, first of all, I think when you see where we're coming from, we started with 4%.

We're now at 4.4% for the group. Excluding the attack, you see the 3.7% on Consumer for the quarter and the 5.3% for tesa, so all in all, a very strong half year.

And indeed, I repeat, particularly in Consumer, we have seen a major acceleration of the business, number one. Number two is, I think it will go on.

I'm very confident on that one. Why because some of the innovations have already hit the market with very good success.

I mentioned in particular the SUN products. But there's more to come in the second half year.

So I'm quite upbeat about the innovation pipeline, and that should also bring nice growth through it, particularly organic growth. And the second point, yes, we also see that.

I think overall, we see the markets in many - I wouldn't say going better, but they're stabilizing. So we saw a more negative trend in the Q1, no more stabilizing trend in the Q2.

And yes, also indeed, but what I also mentioned is that skin care is seeing to get some slight backwind now again. And as we also said in some of the quarters, I think, last year, once the makeup leads to more issues with the skin, the skin care naturally comes back.

Thank you very much.

Thank you. Next question, please.

Hello, gentlemen. Two questions, actually.

Can you elaborate a bit more on regional performance, particularly - well, how sustainably should we consider the pickup you've seen in Asia and - but also the weakness, we saw now continuing in the second quarter in North America? And then is there any special cost effect in tesa that we should take into account in the second half or is it, just as you said, comparison basis, et cetera?

Just some clarification on that one.

Yes. I think the first question, as Jens Geissler already said, we are not giving more color other than the regional numbers, which you have at this stage.

They are all, I repeat, as I said in my speech, they are not x cyber. They're including the cyber, and we are not intend to give more cloud, because it doesn't bring anything.

We can give you a top line number, but then breaking it further down is difficult. As we mentioned, I think, overall, the direction is pretty much what you also see or hear.

Europe is overall getting a slight backwind. The North America is definitely more tough than it used to be.

Brazil is more tough than it used to be. On the other hand, Argentina and Mexico are very strong for us; Eastern Europe, mixed; Russia, a little bit more with pressure; Poland and the others and Eastern Europe, very strong; Asia, India, very good; Japan, extremely strong.

And what pleases me very much is that China, for, I think, months if not years, for the first time was positive again.

And do you see any reason why it shouldn't be the start of a trend right now?

Well, I'm extremely careful at the moment, to be honest. I mean, there are so many things going on at the moment.

If you only look at the currency development in the last four to six weeks, what we are seeing, the political instability and a lot of things, so I mean, it's very, very prudent at the moment to be cautious. But it's a cautious optimism, you can signal that.

But how are the rates, how do these things further develop, and I think we've shown that we're very eager to certain situations that we intend globally to further go on.

On the tesa question, no, there is no special cost in the first half. It is very much, as I said, a tale of two halves.

A fantastic start to the year, but also easier comps, and then an expectation of difficult comps in the back half, but also continued increased competitive intensity.

Okay. Thank you very much.

Thank you.

Hi, good morning. I just have one question.

On the skin care segment, so you were mentioning also an improvement. But could you elaborate a bit more on which category within skin care you see coming back or picking up at least?

Within the skin care category? Do I - I mean...

Yes.

Yes, I think that we definitely have seen SUN doing extremely well. All the others, I mean, deo, shower, men, continue to be strong.

Body is hard to tell, because the winter season is just about to start. Yes, and face, a lot of the innovation on face will come in the second half year.

From a segment point of view, like you've seen also with many of the competitors, selective industries seems to be doing extremely well. La Prairie is no exception, also double-digits.

So we're very happy with that. I mean, overall, I think when - this question is better answered for the full year once we see better.

But you see the shares, I think the shares, particularly in Europe, were extremely strong in the last period and also in other parts of the global world here.

Okay.

Thank you. Can we get the next question, please?

Yes, good morning. Thanks for taking my question.

I have two questions, one on working capital and inventories. Those were up year-over-year in H1.

Is this partly explained as well by the cyber-attack? And the second question is on the Russian market, which appears to be slowing down for you, but also for other players in the second quarter of the year.

Yes, can you provide some more color on that, what you're seeing in that market? Thank you.

So maybe let me start with working capital. So as I mentioned, we are extremely pleased with the progress we're making on working capital.

And what we've done and I've always said is that my true measure of progress is on the 12-month rolling basis, it is not on a due date at the end of the quarter. And this is what you see in the numbers is the due date difference between one period and the other.

So on a rolling basis, we're down 230 basis points. Was there an impact on cyber?

Yes, there was a little bit of an impact because we were holding inventories that would normally have been shipped, on the other hand, we weren't producing. So it's a little bit hard to say.

But again, as we measure success on 12-months rolling, I am confident on the trend and the progress that we are making.

Yes. On Russia, I mean, it's a general trend, too early to tell, because Q1 was still quite good.

Q2 looked a little weaker for us now in Russia to be seen. I'm visiting Russia in the next weeks, and then I can tell you more.

Okay. Thank you.

Thank you.

Yes, good morning. Just to clarify.

I thought in the prepared comments with regard to tesa that you did refer to sort of further investment in the second half. Is that just in relation to the - you're talking about the competitiveness of the market, or is there anything else you're particularly investing behind?

No, it is the competitiveness of the market. It's continuing to invest in our products and invest in our execution in the marketplace.

Okay. I was going to say - so I mean, I think sort of the message I'm getting here is that clearly, both tesa and Consumer growth continues to be very good relative to peers in the market.

You expect that to continue. But perhaps, the sort of cost of growth in both divisions is increasing in order to achieve the same level of growth, and that's sort of reflected in your guidance for the second half.

Cost of growth, I think what we are doing consciously is we are making investments to continue to support our growth. And again, coming back to the strategy that we set out on the efficiency initiative was to generate those funds that could make us - make those right investments being either in non-NIVEA categories, as Stefan Heidenreich explained, or continue to build on our competitiveness in the tesa industry.

So yes, it is about investments, but those investments being generated through our efficiency program.

Okay. And then, sorry, finally, just on - going back to the cyber.

No, no, not from an [indiscernible] just getting an idea of exactly where your business saw the impact, i.e., did you see - was it predominantly to sort of shipping and invoicing, which I'm assuming it was given, obviously, you're saying that most of the sales are going to be sort of in Q3, and therefore, was there no impact to any of your sort of production facilities, which could have a more sustained impact?

Well, there's only one measure, which is in the end, the key measure which we were focusing day and night is, do we keep our on-stock availability with our customers? And then literally, they were not having any problems, that there are no product available for our consumers.

This was the number one. And of course, everything you said, we had production days down, we had this, we had that.

But the most important is that also is reflected in the sales number and our comment that we said, it is shifting from Q2 to Q3. Consumer, nothing was affected, and that's the most important for our business and our brands.

Thank you. Can we get the next question, please?

Yes, good morning. I had a couple of questions.

Point one was, could you tell us what the M&A impact is on sales for each of the two divisions? Second question and perhaps more just interestingly, I'm intrigued by the movement in the margin by region.

European margin down 90 basis points, but the A/A/A margin up over 300 basis points. What particularly is going on there?

Is that in the Consumer Business that these big changes are happening or is it a function of what's going on in tesa? Perhaps you could just shed a bit of light onto that.

Thanks.

So maybe let me start with the M&A. So the only thing that's reflected is the acquisition of nie wieder bohren, which is a small company in the tesa - for tesa, and it is minor.

We're talking about less than €3 million, so it is not significant. But it's a good add-on technology for tesa, so that we are excited about.

From a regional point of view, in the benefits or the improvements we have seen in the A/A/A is the positive impact from the electronic recovery in Asia for tesa. This is a big driver.

But also, La Prairie, I think Stefan has talked about the great progress we've made in La Prairie. Also there, we grow very healthy, and a lot of the acceleration is happening in Asia.

And improvements in the Consumer segment as well in many of our both African and Asian markets. So it's a mixed base, but obviously, tesa and La Prairie are big drivers of this.

And the European decline, why is Europe down 90 basis points?

That's a combination of investments both with the Consumer and with tesa as well, where we have seen the impact from increased investments and competitiveness.

The most meaningful EBIT number always remains to be the full year numbers. So that's I think when we should comment the most.

Thank you very much. Can we get the next question, please?

Yes, good morning, gentlemen. I've got a couple of questions.

The first one, on tesa, just on your comments on the more intense competition that you expect in the second half. Can you provide a bit more color on what drives you to expect this and in which segments in particular?

And then my second question is on the Consumer Business. Can you comment a bit more on the NIVEA SUN clothing protection rollout, please?

I know, you're quite pleased with the performance so far, but can you maybe share a bit of - a bit more performance data, other ways you should look at sellout, market share data in Europe and what you're seeing there, please? Thank you.

Well, let's go for the second first. I mean, as you also see in the Nielsen share reports, our SUN market share is significantly up.

And we are today only in Europe and Middle East. That has to do obviously with the summer season and winter seasons in certain geographic regions in the world.

So you can expect a further rollout, clearly. And on top of that, which is also interesting that the full range of SUN, they more or less be at 40%, 50% of our products with clothing protection formulas.

Next year, we will be at 100%. So that would also next year give us another boost.

And as I always said, I think that SUN clothing protection is a superb innovation, which is a market standard. And in the future, I can't see why any SUN products in the future will not have clothing protection.

What we are seeing on tesa or what we are expecting is, in particular, in the electronic business that there is an increased competitiveness, as you've seen the recovery in this segment. And we see the intensity increasing both from other large players, but also the local players in the region, and that is what we are anticipating and preparing for.

Great. Thank you very much.

Hi, good morning. Can I just follow-up on your comments you've given so far on just sort of market growth and your market share momentum in Consumer?

It sounds like in Q2, the rate of market growth was a little bit better. I'm just wondering if you can actually quantify that.

I think you've spoken of market growth being sort of around 1% in the past. Where are we now sort of Q2 versus Q1?

And then it also sounds like your market share momentum picked up a little bit in Q2 versus Q1. I think you've talked about SUN in Europe, in particular.

But perhaps, you can elaborate a little bit more, if that's the case, where so in terms of geographies and categories? And then just to come back to the data around skin care improving.

I know, you talked about the sort of significant use of makeup eventually beginning to abate, and that should sort of playback into the skin care recovery. Are you actually seeing a slowdown in makeup category growth from where you're sitting?

I mean, it sounds like you haven't seen a pickup yet in face. So I'm just wondering around your thoughts on that.

Thanks.

Well, I think the first question was around market growth. I think, we said throughout the last year that we had a growth of about 1%.

I would estimate it more to be 2% at that stage. So that's the first answer.

On makeup, I think what we can see from makeup, as you know, we're not makeup experts. It is not as buoyant anymore as it used to be, still very positive, there's no doubt about it.

And I remain with that the more makeup is - which is being used, the more this will lead to skin care issues, particularly if you use makeup in certain - as it is used in certain regions, one layer after the other, then there is an issue. So I think that there will be - over and over, people will take more care again for the face in general, and we will benefit from that.

So that thing is happening already, and it will probably get even stronger over time, whether that is already in the next six months or the year, but I predict that, and that's why I also concur what our big competitors [asked us] [ph] last year that skin care is already a little bit back but will be even back stronger over the months and years to come.

Okay, thanks.

Good. Thank you.

Not much left, but I guess, you made a comment about China in the Consumer Business finally having sort of come to positive again. I wonder if you could distinguish between the growth rate between the hair and skin businesses within that market.

And I suppose also, does China continue to break even? Thanks

Yes, Toby. I mean, China overall is getting better for us.

I think we are taking a very bold approach a couple of years back where we said in that situation we are after cutting the losses, we have to put in a big way the e-commerce business into the focus. So we had anyhow no other choice, so we did this.

We are now majorly partnering with Alibaba in many fields, but also Jingdong and [in N&N] [ph]. What's going on?

I think the e-commerce business is still doing phenomenally well. It is also more profitable than the mass business.

And we are seeing more and more that mix effect coming through, which will eventually be a very nice business for us. The more e-commerce and the less traditional sales we're going to have.

In terms of composition, it was interesting to see that men is still doing extremely well. We also have some success, more success in face, particularly face cleansing.

And also, the hair side has done okay, particularly the styling part has done very good. And so I'm - as I said, for the future, if the e-commerce mix, if that whole mix coming more and more through and we're doing there our job, and 11/11 is coming to this year, I'm pretty hopeful for China in the midterm.

Okay. Thanks.

Thank you. Can we get the next question, please?

Yes, good morning. My two questions.

First one would be, you've talked about a nice acceleration in top line momentum in this quarter, in Q2. And I guess what we're trying to get to is how much of that is really down to a great SUN season, i.e., would there have been an acceleration excluding SUN in Q2?

And really, trying to get some color behind that, I think you've mentioned deo, shower and men's. If you could call out some of the kind of the highlights of performance in those other categories, that will be the first question.

And the second question would be your sort of enlarged agenda, the beyond Blue agenda. Could you sort of talk about the activities you're doing to make that to step up in performance in the non-NIVEA brands?

And should we expect the non-NIVEA brands to kind of accelerate beyond the growth of NIVEA?

Yes, I think the first one, once more, even if I'm very, very excited about SUN. SUN, as you know, is the smallest of the six categories we have in NIVEA.

And yes, in the season of this year, it weighs higher. But to say that SUN was the prime factor just for the acceleration in Q2 would be wrong.

It is a factor. But the others, like I said, deo, shower, men also contributed nicely to it.

And I said body is no point. And face, all the initiatives or many initiatives are coming now in the second half year, so that lets us all look quite optimistic.

On beyond Blue, you know Vincent Warnery has started as a new board member. You can't attribute La Prairie to Vincent's success yet.

It is too early, and the general market is very favorable on luxury as we've seen also with our competitors, but rather it's good to see. I mean, we will have - we saw that already last year on plaster business.

And also this year, a very, very strong growth, and a growth which we haven't seen for years, so that's a good sign. And also, on the derma, which is a little bit behind the plaster business, also accelerated growth.

And from what we are seeing and discussing in 2018, 2019, 2020 and going on, we do expect beyond Blue brands to do a lot better than the NIVEA brand, yes.

Thank you. And I think a last caller here.

Thanks very much. A quick question, actually.

Your cash generation is improving very impressively. I was wondering whether you have any updates to your thinking on how you might like to use that cash, be it M&A, CapEx or dividends?

Thank you.

Pinar, the answer is probably always the same. There's no news.

I think we did - the big news is that we are investing into a new headquarter, which was due anyhow because you have been in Hamburg here. We're sitting in several buildings.

And I'm very pleased that this new building is coming alive. And since I visited Facebook, I visited Google and so on, this will be a new market environment, which I consider extremely important for getting talents, top talents also acquainted with the group in the future.

There will be some CapEx also coming in the years because our network, we have some ideas. Jesper alluded already a little bit onto it.

We do see still some network optimization over the time, plants and et cetera, et cetera. That will also cost something.

But I mean, the cash generation is still massive and will continue to be massive. So yes, the issue is not going to - this benefit is not going to go way, no.

Okay.

Yes, thank you. Well, thank you for having joined our conference call today.

Beiersdorf's next Investor Relations event will be the conference call for our nine months results on the October 26. We appreciate your interest in Beiersdorf.

Thank you, and goodbye for today.