Earnings Call: Q4 2018

Feb 13, 2019

Good morning, everyone, and thank you for joining us today for Heineken's 2018 Full Year Results. For your information, this conference is being recorded. There will be an opportunity for questions at the end of the conference. At this time, I would like to turn the conference over to Heineken Management and Investor Relations. Thank you. Good morning, everyone, and thank you for joining us today for our 2018 full year results conference call. I am joined by Jean Francois Van Bochsmeer, our CEO and Laurence De Bruc, our CFO for today's call. Following some prepared remarks and the results, we will be happy to take your questions. With that, I would like to hand the call over to Jean Francois. Thank you, Frederico, and good morning, everyone. I immediately start on Slide 2. I hope you have Slide 2 in front of you. In 2018, we delivered another year of superior top line growth with organic net revenue up 6.1% and net revenue per hectoliter growing 2%. Consolidated beer volume grew 4.2% with growth across all regions. Brazil in particular recorded a stellar performance growing double digits following the successful integration of our 2 businesses. The Heineken brand grew 7.7% and that is the best performance in over a decade. Operating profit BEIA grew 6.4% organically and operating profit BEIA margin was 17.2 percent, down 17 basis points mainly due to the first time consolidation of Brazil, higher input costs and adverse currency effects. Diluted EPS was up 7.9%, driven by organic growth, partially offset by adverse currency effects. We will propose to the AGM a dividend of €1.60 per share, an increase of 8.8 percent versus last year, bringing our payout ratio to 37.6 of net profit. Our strategic priorities are growth oriented with an ever increasing emphasis on sustainability, both socially and environmentally. We focus on innovation and operational excellence, so our consumers enjoy our brands and we exceed our customers' expectations. At the same time, we keep seeking productivity improvements, and we are constantly reassessing our spending behavior. And going into 2019, we expect the environment to remain uncertain and volatile. Overall, we anticipate our operating profit BEIA to grow by mid single digit on an organic basis. On Slide 3, you can see an overview of our performance with organic net revenue growth in all regions with a faster rate of this growth in the second half driven by pricemix. Net revenue per hectoliter was up 2% for the full year organically with growth across all regions except Asia Pacific due to country and brand mix. Operating profit by second half of the year due to both higher revenue and overall slower growth of expenses despite continued pressure from higher input and logistic costs. Starting with Africa, Middle East and Eastern Europe. Consolidated beer volume grew 5 percent organically and net revenue per hectoliter was up 5.2%. We saw strong volume growth in South Africa, Russia, Ethiopia, Rwanda and Egypt. This more than offset volume declines in Nigeria, the DRC and Ivory Coast. Regional operating profit by year was up 16.2% organically, mainly driven by South Africa, Ethiopia, Egypt, Russia and the DRC. In the Americas, consolidated beer volume was up 5.4% organically, driven by strong growth in Mexico and Brazil, which more than offset lower volumes in the U. S. And Panama. Revenue per hectoliter was up 3.2% organically with an acceleration in the second half driven by price increases and premiumization. In Mexico, beer volume grew single digits and the Heineken brand continued to deliver strong double digit growth. In Brazil, our premium and mainstream portfolios grew strong double digit, led by the Heineken brand, which grew by more than 1,000,000 hectoliters. During the last quarter, our operations in Brazil were consolidated beer volume grew 8.2% with double digit growth in Vietnam, Cambodia, Myanmar and Korea. In Vietnam, we continue to grow strongly in the main cities and to expand to secondary cities and rural areas led by Tiger and Larue. In Cambodia, beer volume returned to growth in the 4th quarter led by Tiger and Heineken. Regional net revenue buyer per hectoliter declined by 2.5% due to adverse country and brand mix. The region delivered organic operating profit by a growth of 3.4%. In Europe, consolidated beer volume grew by 1.3%. Pricing in the retail market continues to be challenging, but net revenue per hectoliter was still up 1.8% driven by the growth of premium brands and the innovations in low and no alcohol as well as craft. In the U. K, total volume was up low single digit with the Heineken brand growing strongly. Our Pub operation successfully completed the integration of Punch and is delivering strong results in line with expectations. In France, beer volume grew mid single digit led by Heineken, Desperados and Apligen. In Italy, the Heineken brand and Ichnusa are leading in the strong growth of our premium portfolio and overall growth. Spain declined low single digit due to unseasonably cold and rainy weather in the first half and disappointing tourism in key regional markets. The Netherlands was up low single digit driven by the low and no alcohol and craft and variety portfolios. Regional operating profit increased by 4.2% driven by top line performance and disciplined cost management. I'd now turn to Slide 4. The Heineken brand volume was up 7.7 percent organically in 2018, the stronger performance of the brand in more than a decade. The brand grew double digit in Brazil, South Africa, Russia, Mexico, the U. K, Nigeria, Poland and Germany, mainly due to the Heineken original. The ongoing success of Heineken 0, so no alcohol now available 38 markets also contributed to the growth. Turning to Slide 5, I would like to reflect on the other developments which contributed to our strong top line growth. Our portfolio of international brands grew double digit, notably driven by Tiger, Krusovice, Biramoretti and Desperados. Cider volume increased to 5,600,000 hectoliters. In the U. K, volume grew mid single digits and outside the U. K, we have now reached more than 2 1,000,000,000 hectoliters. Moderation trends continue to create new drinking occasions for our low and no alcohol brands. Their volume increased to 13,100,000 hectoliters due to the performance of Radler and Heineken 0.0 and that despite lower malt volumes in Nigeria. Our craft and variety beers grew double digits. African launched a lower alcohol variant driving double digit growth. Lagunitas continued to expand outside the U. S. And is now also brewed in our craft brewery of Wille in the Netherlands. And craft line extensions such as Brandt IPA in the Netherlands or Biramoretti Reggionale in Italy continued to grow strongly. During 2018, we continued to roll out The Blade, a countertoppremium draught beer system targeted to small outlets. And we continue to invest in our e commerce platforms, both B2B and B2C as they gain traction across markets. Turning to Slide 6 and Brewing a Better World. Last year, we surpassed our 2020 commitment for CO2 emissions and this year we reduced them further to 5.5 kilogram of CO2 equivalent per hectoliter produced, a 47% decrease since 2,008. This year, we have also surpassed our 2020 ambition on water efficiency. The average water consumption in our breweries was 3.5 liters of water per liter of beer, a reduction of 30% compared to the same year till 2,008. And is also 3.2 liters of water per liter of beer in water stressed areas. Last February, we announced Drop the Sea, our 2030 ambition for CO2 reduction aiming to cover 70% of all our electric and thermal energy needs in production by renewable energy. In 2018, we launched 13 renewable energy projects, and you will find more details in our annual report that will be available next week. We're also aware of the pressing water issues globally, and here we are finalizing a new 2,030 ambition, which we will announce shortly. Responsible consumption continues to be a high priority and in 2018, 69 markets dedicated at least 10% of the Heineken media spent to responsible drinking campaigns. Finally, as part of our regular review cycle, we have refreshed our Code of Business Conduct and associated policies and rolled them out to all operating companies in 36 languages. And in particular, we renewed our brand promoter policy incorporating the suggestions and advice of NGOs and brand promoters themselves. Moving now to Slide 7, I would like to conclude by highlighting the announcement of the strategic partnership with CRE to join forces in China pending regulatory approval. In the largest beer market in the world, the partnership will bring together the best in class route to market with an unparalleled international brand portfolio led by the Heineken brand, a key milestone for us and a big opportunity for both businesses. For more details on this, please refer to our announcements of August 3 November 5, 2018 where you can read all the details about this deal. And with that, I would like to hand over to Laurence. Thank you, Jean Francois, and good morning, everyone. So let's turn now to Slide 8 and the financial overview. Looking at the net revenue beta of €22,500,000,000 in 2018, Organic growth was indeed 6.1 percent with volume growth across all regions. Revenue per hectolitervea grew 2% with growth in all regions except Asia Pacific due to mix. The underlying pricemix effect was 2.9% with pricing alone contributing 1.6%. Operating profit was up 6.4% organically, and the growth was actually plus 11.1% in the second half. This acceleration came from our top line growth, of course, but also from slower overall growth of expenses despite continued pressure from higher input and logistic costs. Operating profit margin was down 17 basis points, so slightly better than the updated guidance we provided at the end of July, and that includes the negative impact from the first consolidation of our acquisition in Brazil for 22 basis points. Net profit reached €2,400,000,000 up 12.5 percent organically, so growing much more than our operating profit. What you see here is partly the result of a very good performance of our joint venture CCU and UBL and of a lower effective tax rate. But the main driver by far is a decrease in other net finance expenses. Indeed, payables denominated in non local currencies were less 2017, most notably in Nigeria and in the DRC. Just to mention, because you also have the IFRS measures on that page, the EAS in 2018 included an impairment of €183,000,000 essentially in the DRC, while in 2017, they included a profit from sale of our wholesale activity to Sligro in the Netherlands. Diluted EPS via was €4.25 7.9 percent higher than last year. Free operating cash flow grew to €2,200,000,000 a 10.6% increase with higher CapEx being offset by improvements in working capital. And finally, our net debt to EBITDA ratio improved to 2.3x, times, so well within our target of 2.5 times. Moving now to Slide 9 and our net revenue of €22,500,000,000 On top of the 6.1 percent organic growth, consolidation changes added 2.4% or €514,000,000 mainly due to Brazil and to a lesser extent to Punch in the U. K. Currencies had a negative impact, reducing net revenue by 4.7 percent or about €1,000,000,000 This was mainly attributable to the Brazilian reais, the Mexican peso, the Nigerian naira, the Vietnamese dong and the Russian ruble. Now with Slide 10, we want to provide a bit more insight on the development of the operating profit margin during the year. In the first half year, as I'm sure you remember, our operating profit margin was down by 118 basis points. And at the end of July, we told you that we expected a very different picture for the second half. This has indeed materialized, leading to minus 17 basis points for the full year. Starting with the acquisition in Brazil. In the operating profit margin of the first half year, there was a negative impact of 43 basis points coming from the consolidation of this acquisition at the end of May 2017. While the absolute value of this impact is unchanged, but it is now spread over the full year, representing the dilution of 22 basis points only, if I may say. And as you know, we are happy to report that Brazil, while still below average group margin, is growing very fast. Excluding this, the margin is actually up 5 basis points. So let me provide a bit more details here. On the one hand, input cost per hectoliter increased by 3.6% for the full year, largely driven by packaging materials and commodities inflation and including an increased transactional currency impact, for instance, in Nigeria, Mexico and the DRC. Logistic costs also played negatively on the margin with the impact of 1 offs in H1, such as the truck strike in Brazil or the railway strike in France, but more generally, an inflationary trend in a number of countries. On the other hand, we had a significant positive impact in H2 from operating leverage in our fixed expenses, especially in production. And this can be traced back to synergies kicking in, in Brazil, but also to the fast growth in markets such as Brazil again or South Africa. We also had in H2 a more favorable comparison base for the head office as our investments in some systems and commercial platform had already intensified in the second half of 7. Finally, we continue to benefit from the increased productivity of our marketing and sale expenses as well as some operating leverage here as well in 5 growing countries, while fully supporting our strong top line growth. Continuing with Slide 11. Operating profit reached €3,900,000,000 in 2018, an organic increase of 6.4% as strong top line growth, positive operating leverage and efficiencies in our marketing and selling expenses were partially offset by rising input and logistic costs and transactional currency effects. Consolidation changes, mainly Brazil and Punch, added €43,000,000 or 1.2%. Currency impact was negative, reducing operating profit by €176,000,000 or 4.7 percent. The main impacts came from the Mexican peso, the Brazilian reais, the Vietnamese dong and the Nigerian naira. Looking now at diluted EPS via on Slide 12, €4.25 up 7.9 percent or €0.31 with €0.49 driven by organic growth and €0.02 coming from consolidation. This more than offsetting the $0.20 decline from currencies. Let's now go to cash flow on Slide 13. Free operating cash flow reached €2,200,000,000 in 20.18. The increase of €250,000,000 was largely driven by the positive change in working capital and particularly by payables as we continue to bring our payment terms closer to industry standards. Partly offsetting this was an increase in CapEx. In 2018, we invested in additional capacity in markets like Ethiopia and Vietnam, but also Mexico, Brazil, Cambodia, Haiti, South Africa as well as in a greenfield brewery in Mozambique. CapEx investment represented 8.4 percent of net revenue or €1,900,000,000 pretty much in line with our guidance for the year. Let me now wrap up with the full year outlook for 2019. Our strategic priorities are growth oriented. And in 2019, we will again strive for superior top line growth through a combination of volume, price and disproportional growth of our premium portfolio. We expect input and logistic costs per hectoliter to increase by mid single digit this year, and we will continue to mitigate this by driving productivity and efficiencies in our operations as well as our head office, while investing to grow our brands and to accelerate our digital agenda. For 2019, excluding any major unforeseen macroeconomic and political developments, we expect operating profit to grow by mid single digits on an organic basis. Noticeably, our guidance moved to an organic form, reflecting our ambitious growth agenda and taking away the uncertainty from currencies and the timing of consolidation changes. We will continue to provide a translational currency impact update on a quarterly basis as well as, of course, timely announcement on any material scope change. And finally, the technical guidance for 2019. We expect an average interest rate broadly in line with 2018 and an effective tax rate there between 27% 28%. And CapEx in 2019 should again be around €2,000,000,000 With that, I would like to hand back to Federico and then to the operator to open the floor for your questions. Thank you very much, Laurence. Operator, we are ready for your for the questions. Thank And the first question comes from the line of Edward Mundy from Jefferies. Please go ahead. Good morning Jean Francois. Good morning Laurence. Three questions please. The first is on your new guidance of mid single digit organic EBIT. Presumably, this is 4% to 6%. And any color you're able to share on how you see the shape of mid single digits relative to 2018? The second question is, Jean Francois, in your opening comments, you talked about seeking productivity improvements and constantly reassessing spending behavior. Are there any new initiatives you can point to and provide perhaps a bit more color around the commercial spend productivity program and how you balance productivities here versus top line growth measures? And the third question is on the supply constraints and systems migration you pointed to in Brazil in Q4. Are both of these resolved now for 2019? I can easily start with the supply constraints. It's actually logistics constraints in really the peak of the peak of the year, the top month, which is December. And it's kind of a shortage of trucks because the sales were flying so much that there was a shortage of truck in Q4. And this is peak season, so that's, I would say, hopefully, a one off. And in terms of the SAP transition, we actually transitioned our operations into Kirin SAP, which is a larger one. And at the moment of the opening, there were 2 a few days where the delivery was a bit less easy, but that's passed back as well. It's part of the integration process. And then on your question on guidance, I'm afraid I will not be more precise than what we have said, and I could not be more precise. We give guidance on superior top line growth, which means we'd like to be leading in the industry and over the market. That's one of the things, we have shown being able doing that and we want to continue doing that. And we give guidance with confidence that we can grow our operating profit by our mid single digits going forward. And I cannot add anything more than that guidance that we give you today. Now your question about initiatives on productivity and cost, we always have been focused on that. We started initially a long time ago by concentrating our efforts essentially on our supply chain activities within the breweries. We expanded that in the whole supply chain and especially also looking at the whole logistic aspect and to optimize that also. And that is a complex interaction of optimizing existing logistic systems as well as finding out better and more efficient location allocation systems. I remind you, beer is a lot of water and it's very ponderous. And so having your logistics optimize this, as Laurence pointed out to from Brazil and the whole integration case of Brazil and the synergies of Brazil, logistics is a very important part of our efficiency. So these programs of relentless productivity improvement are in place and they are there to mitigate inflation, which from time to time spikes and can be more pronounced in some periods than others. And then your specific question on marketing sales productivity, it is and I'm not going to dwell into the detail of a number, which in percentage might go down, but in absolute goes up. We also there have plans in place to have more out of the back we invest also in advertising above the line, out of our sponsorships and out of our promotions. That is a discipline that we have been gearing up over the years because there also it is not automatic that if you spend more you're going to sell more. And so by and we never guide by the way the spending as a percentage of revenue is never guided for also internally. Every operation, if there is one thing which is rather 0 budget based, it is the marketing and sales spend because year on year people sit down and they reassess how can we better build and make our brands grow. And it's a sum up of all kinds of activities both above the line and below the line that gives a plan and that is designed to grow. As a result, after a year, you can just account for that, yes, we have a better productivity of our marketing spend today than we had a few years ago, and our Thank you. The next question comes from the line of Simon Hales from Citi. Thank you. Good morning, Jean Francois. Good morning, Laurence. Three questions as well, please. Just firstly, in terms of costs, you flagged the higher input costs again that you're facing this year. I wonder if you can provide a little bit more detail as to where they're hitting geographically? Is there any particular phasing of those impacts through the year, I. E, I'm just trying to get a feel for how margins might develop H1 versus H2? Also on the cost side, I don't know if you can just sort of talk a little bit about the lower head office costs that you reported in the second half of twenty eighteen and how we should think about that line developing going forwards? And then from a market standpoint, could you update a little bit more on what you're seeing in Nigeria? And I think particularly more recently, we've just had another excise duty increase go into that market. I'm assuming you haven't priced that through. And finally, Laurence, I don't know if you can comment on working capital outlook for sort of 2019. So talking about the higher input costs, it's definitely an impact that we had in H1 and in H2. If anything, there was a bit of acceleration in H2. If you look where it is focused, it is really widely on packaging costs, And that includes underlying commodities, but that includes as well transactional impact, which we have been suffering in a number of our markets. When we guide into 2019, we do guide for mid single digit increase in our input and logistic costs. So you will see a continuation of that trend. And I would say that as regard commodities, we pretty much know where we're going because we're hedged for a large part of our commodity input. And logistics, we don't see the trend changing. So that's how much color I could give you. Now the lower head office cost, you have 2 phenomenon here. First of all, there were a few one offs. We called them that in H1, so they are not reproduced in H2. But what's more important is that we ramped up our system and platforms, both in commerce and then in finance and supply chain, and we did that already in the second half of twenty seventeen. So when you compare first half twenty eighteen with first half twenty seventeen, you saw the incremental impact. And now I would say this is business as usual. So this is why you do see the phasing of those expenses being different. But that, we had also, I would say, planned for. We called for that in the H1. Working capital. Working capital, so we've moved back we've done, I would say, the main part of the road in terms of moving back our payment terms to industry average. And again, I insist that this is not on the back of smaller suppliers. First of all, there are regulation, and we're very strictly abiding with regulation in a number of countries. And also, this is not where we had to improve. We had to improve our own major contract. We were really not getting the same conditions in terms of payment terms as our competition. And then we move back closer to average. There is still a little bit of a way to go, but I would say the essential part has been done in 2018. Nigeria, let me zoom out. Nigeria is a difficult country for us for a number of years already. And the zoom out is just to point out that it is going on for a number of years. A, an economic downturn, It's going better, but it's certainly not a hooray situation in Nigeria, first thing. That has led consumers to down trade. We have a full portfolio in our Nigerian breweries operations today with high priced brands and low priced brands. And in effect, you have seen over the last 5 years the big shift from what were the mainstream brands to the what were the economy brands and these economy brands have become the new mainstream. And that is that's a major phenomenon and repricing the whole industry down. Now the competitive pressure initiated by SAB and now continued by ABI is not helping at all, of course. But the repositioning of the whole market from what used to be mainstream to the value segment of the market, which is a new mainstream, again, has been pushed through during a period of economic recession. And in so far, our price levels suffered a lot more than our volume levels of that period. Now the second element that you have to think, Nigeria is a stock listed company and you can for yourself make the analysis of all these numbers is that the high devaluation rate of the naira towards the euro has also pushed down expressed in hard currency the sales price. So like for like, the value segment, which is the new mainstream, is lower than it was 5 years ago. So we had a cumulative effect of devaluation and of segment shift in the Nigerian market. If we just then zoom in, in the last quarter, it was better. We had flat sales after a third quarter, which was kind of relatively bad than the one before, which was at minus 6%, the first half year of last year was at minus 6%, if I remember well. So the last quarter was okay. Seeing through our portfolio, the good news is that the Heineken brand is growing double digit, really strong double digit. And so we continue to believe that the Nigerian market is a strong consumer market. The whole portfolio going forward will reposition in another shape. It will never come back as it was 5 years ago, but we never underinvested in our business. We restructured heavily the business for the new realities, and this is a fit business for when Nigeria will return to fair weather. And this is what we invest to. So I do not have a gloomy outlook over Nigeria, but it's still rough weather and working through ahead. So but it's a fantastic option for growth in the future for us and we have also to underline that we are still by far the market leader in Nigeria and we are very intention to maintain that. Perfect. Thank you. The next question comes from the line of Trevor Stirling from Bernstein. Please go ahead. Hi Jean Francois and Laurence. I suppose three questions from my side too. The first one, appreciate you're not going to give any more detail on the number and guidance and I don't expect that at all. But can you just give a little bit more color about where you think the threats and the opportunities are clearly as elections in Nigeria, South Africa, political uncertainty in Mexico? So just a little bit of color around where you think the big uncertainties are would be very helpful. Second question, the Americas margins down 140 bps, more than 140 bps in the year and you've got negative country mix going on there. Is that the scale of the margin pressure, which we think we're expecting in 2019? And then finally, staying in the Americas, the U. S. Has had a very torrid 2018. Are there any signs that you got sighted better towards the end of the year that the pressure is still as intense as it was in 2018? Trevor, I take the first question for me and leave the others to Laurence. You alluded specifically to geopolitical events and they always have influence. I'm customary to say and I really do believe it that our business for 70% is depending on things that we can't totally control. And we have to surf the way the best we can. And elections are always, I would say, important events, whether that's in Brazil or in Mexico and tomorrow in Nigeria or South Africa. But they are equally important even in European countries. It's everywhere important as to the freedom of operation and the level of taxation in which we operate. That is what and then what general policy does to the general economy because beer is a discretionary spendings. In that framework, we have to look for what political events influence directly or indirectly our business. Now I'm not going into forward looking statements and making speculation what we what could happen. We never did that and I do not want to start that. But of course we internally give it a lot of thought and it's something that we are always having on our radar screen. But unfortunately, I will not comment on that. I will just add that for Nigeria because I was offended and I forgot to say it that the excise duty increase that was due to start this year in January has been delayed by the Nigerian government to June 2019. So we had a little bit of relief. So the I will say the shock of an excise duty increase will come a bit later in the year, just as a reminder for you. Then I hand over to Laurence for the rest of the answers. Hi, Trevor. Well, if you look at the margin in the Americas, so you have a mix impact as Brazil is growing very fast and has a lower than average margin. What you have now if you dive a little bit into the countries, you have a strong increase of the profit and of the margin in Brazil, which is not enough to offset the impact of the S. And Panama for this year. So I wouldn't take that as a global trend. This is just how the mix of our countries play this year. Again, very strong growth in Brazil and the margin moving out pretty nicely. In terms of doing better in the U. S. In the future, maybe you can help me with that, Jean Francois. We operate for that and work hard. We are a small no, we are more seriously, we are a small player in the U. S. And there are a number of things going well in the U. S, which do not forget that if I look at the price level that is sustained in the U. S, it's far more better than what you have in Europe on average. But it is true that the market is suffering and you have very little winners and a lot of losers in 2018 as we see. We're a small player and we are also rather at the side of the losers, alas, I have to admit that. We're not satisfied with it. We have to work hard to put ourselves in the camp of the winners obviously. But again, we are a very small player and it's perhaps disproportionately a bit harder for us seeing our size in the U. S, but we have always good plans in the drawer and we hope to do better. That's the only thing I can say without going into the details. You know that Heineken USA and Lagunitas are totally separately managed from each other. So the performance of Heineken USA is certainly due to for an improvement or at least should is tasked for improvement. Let me put it that way without giving any precise guidance. And for Lagunitas, they were also slightly under pressure, but in the segment, which overall was under pressure, they performed quite well. And the good news also about Lagunitas, it's a strong brand and that is gaining traction in the markets where we start to export it noticeably here in Europe, and we even started to produce it locally here in our craft brewery in the south Netherlands. I was calling out Wilhel, nobody knows where the place is, but it's in the southern part of Holland. We have a smaller brewery, which is a craft brewery where Lagunitas now is locally brewed. So we're satisfied with the development of Lagunitas also in the U. S. Our performance of Heineken USA should improve. Thank you very much. The next question comes from the line of Fernando Ferreira from Bank of America Merrill Lynch. Please go ahead. Thank you. Good morning, Jean Francois and Laurence. I have 3 as well. First one on Africa, if you can talk about the drivers behind the strong operating profit improvement in the second despite the challenging conditions in Nigeria, as you mentioned? Second one, if we can go back to Brazil, can you talk about your 2019 expectations there as you expand the Heineken brand capacity? And then a third one, more of a technical question for Laurence. There was a significant increase in the other operating expense line from a €10,000,000 to €95,000,000 in 2018, which was excluded from your EBIT, if you can comment behind the reasons there? Thank you. Whilst Laurence is thinking hard about your technical question, I will try to give you a view on Africa. And I cannot go that much beyond what we say. But the improved performance despite the lesser performance still of Nigeria is due to we operate in more than 20 countries. And there are a number of countries where we have noticeable improvements, and I would only cite the biggest ones of them, which are principally South Africa, Ethiopia, but also Egypt, but also smaller countries like Rwanda and Burundi, who performed quite well. So we have a portfolio of countries. And overall, we had more, I would say, increased performance than declining performance. Even in the DRC, relatively, we did better even if it stays a very, very complicated situation whereby we have taken, as you have seen, a strong impairment and basically putting the value of all our business to basically 0. But at the same time, you have to realize this is in potential a big consumer market. It remains a very complicated situation. But by the impairment, which was a very technical cultivation, obviously, based on volume expectations, which are given in by outside parties. But it creates also an option for the future. And I think that is how you have to look at the DRC even if it is really not brilliant at the moment. But we have a lot of operations, as I said, Ethiopia, DRC, Rwanda, Burundi, Egypt, Algeria, which are just performing well. And those compensate more than for the weakness that we have today in Nigeria and DRC and also in Cote D'ivoire where we are also having a slower operation at the moment. You want me to go on the EIA? So in the other, in the EIA, you have a number of different things, none of them major. I'll give you an example. We had a provision for onerous contract in the U. K. On our apples, which we actually talked about in the first half, and that plays this year negatively. We had also some indemnity that we had to pay as part of the logistic crisis in France because when you don't deliver on time to your retailers, if it's not your fault, you do have to pay penalties. And then we have a few legal and tax provision here on ongoing litigation or discussion with the authorities. It's an amount which is pretty consistent with what we had last year, except that last year, we had a number of positives that came and actually minimized that. So that's that play one way or another depending on the year, which is why we included because it's totally non related to the business. Thank you. Yes, you gave you asked for a specific country guidance. We cannot give that obviously. Otherwise than saying that we stay with the positive outlook on our operation in Brazil. The integration as we said has been played out well. The Heineken brand has traction, but not only the Heineken brand, also our other local premium propositions like Devassa or Eisenbaum, but also Amstel, they all have traction, and they are rather all premium priced. And we continue to see growth in that corner of the market and that is where and whilst we continue to make progress on our integration, you have to realize that as you grow into higher sales with a higher gross margin and filling up your available production capacity, and it's a virtuous circle. That's what you have to think about. And if I may come back to your question on the AME region, I would say it's nice to see at the same time some fast growing countries ramping up, as Jean Francois says, and that would be the example of Ethiopia or South Africa, but also the recovery of countries that were more difficult, Egypt, definitely, Russia as well. So now playing positively on the mix. And so you see these double effects, which is very encouraging also for the teams in the region. We're working hard on that. I still have difficulties to see Russia in Africa in the middle. It's because you're The next question comes from the line of Tristan van Strien from Redburn Partners. Please go ahead. Hi, good morning. Just 3 from me on the on different countries. Just first on Europe, following up on your comment on the pricing environment. Do you see it's getting a bit better? Are you able to offset this cost inflation? Or to protect the gross margin, are you going to be dependent a bit more on the mix as we look at the next year ahead? Then second on Mexico, can you just remind us what share of your volume that goes through OXXO? And if I look back on last year, your growth last year, was that in proportion to your OXXO share or the issue your growth in OXXO was proportional? And then lastly, in South Africa, just 2 parts. 1, just you just what's the role of Soweto Gold, which kind of sits at the bottom end, in your portfolio in that market? And then secondly, on that, do you need to start looking at a second brewery in the market? I take Europe and Soweto. You take Mexico. Okay. So we'll do that. Yes, absolutely. Look, tendentially, Europe, it is the most difficult environment to price. That is a mystery for nobody. It is the continent where the competition is cutthroat between producers as well as between retailers. So we all know that dynamic. You know that dynamic. And that is we are living in a period where we have more inflation than usual. It's a spike of inflation on both in the COGS and the logs as we call it, the logistic cost as well as the cost of goods sold. And it is difficult and it is country by country. And allow me to not dwell on that because those are harsh difficult negotiations, whereby we put inflation in front of our demand for price increases. But those are all also used in Europe to mitigate, and we mitigate both ways, 1 from the cost, which is Europe is a cost improving machine. It's a productivity machine. If you look back 15 years, it's an ever increasing productivity. And on the other hand, we have a policy to indeed improve our margins also with mix. So it's all these three things that play together And we're up so far. We have a big business in Europe. We have some bumps, but it's a pretty stable and progressing business, albeit not at very high growth rates. That's what I can say about Europe without dwelling into details. For what the South Africa concerns, the Soweto Gold is in effect the mainstream proposition, but totally regional. So we do not have obviously a national policy because you would need we where we never make announcements when we did not publish them. So if we need a second brewery, we will build it for sure as we do ever. Should I go to the share of volume of OXXO in Mexico? So share of volume last year is around 25%. And the well, we don't comment on performance by channel, but there is no thing to single out either there. Okay. Very clear. Thank you. The next question comes from the line of Andrea Pistacchi from Deutsche Bank. Please go ahead. Thanks. Good morning. I have a couple of questions on countries in Asia, please, first and then a third one. On Vietnam, I mean, Vietnam has had another strong year. You've been moving into 2nd tier cities with La Rue. Could you just give a bit more color please on Vietnam, whether you are moving more gaining share particularly in the north there? And then if you've seen any change really yet in the competitive environment there with SABECO? Thirdly, on Cambodia, a market where you've been growing strongly, but competition has intensified. You had a weaker Q3, back into growth in Q4, if you could provide a bit of color there. And then Heineken 0.0, which I believe you've just launched in January in the U. S. So what is the ambition for Heineken 0.0 in the U. S? And do you think in the U. S, it could be as significant as over the medium term as it could probably be in Europe? Let me start with Vietnam? Yes. Go ahead. So another very good performance in Vietnam and indeed continuing to deploy the strategy that we have talking to you about talked to you about and then we've initiated a few years ago of continuing the great growth in the big cities and in particularly, Ho Chi Minh City, but also going outside of the big cities. And that worked very well. And as we mentioned already, well, we use La Rue for that, but it's a good surprise that actually Tiger works also very, very well outside of the large city. So this is there is also very good potential for Larue. So our operation are continuing to progress very well, including in terms of share. What I would more highlight about the North is the merger that we announced between our North and our Southern operation. And I remind you, the North was 100% owned, and the South is in partnership with SATRA. And this partnership has been really successful, so we decided to put 2 together and everything in partnership. And we expect that this will give us leverage and also all the power of the large company that we have in the South to serve also our distribution and our marketing in the North. So too early, of course, to call on results, but we really see that as a next step of development in the country. Cambodia back into growth. You know that the competitive reaction was very, I would say, overly promoting, and that actually did not do any good to the market in Q2 and Q3. So there is still potential, and then we are still continuing with our strategy in Cambodia. So still a very good market for us. Yes. I think what you can underline in Cambodia, it is that Cambodia is a free market. You can set capacity as you want as opposed to Vietnam where capacity is regulated by the state. As a result, you have an overcapacity in Cambodia and you have a right capacity in Vietnam. Therefore, Cambodia will, by definition, always be a more volatile market than Vietnam just for you to remind when you are trying because when you have large over capacities and our competitor in Cambodia had that, the temptation is to use that overcapacity at a lower price because it's a marginal kind of benefit. And that's the danger how you go with that. We are not unfamiliar with this kind of situation, but that is just 2 neighboring countries, but having 2 different systems. Then Heineken 0.0 in the U. S, yes, it's a launch. I won't give you an objective. We have I think we have also to give it a try. Somewhere in Europe, it's a very safe bet. And in Europe, we are in all our European companies in a position where we are practically a market leader or if not the number 1, a very strong number 2. So we have a kind of infrastructure in which we place it that is it's secure. In the U. S, it's a bit more delicate because we are a very, very small player in absolute terms. But also we ally with distributors who have a strong belief themselves that there is a need in their local markets and this in priority with those distributors that we work to try it out. And we try it out with a belief that also in America there are moments where you don't want to drink alcohol, you have people who never drink alcohol and you have people who love beer and don't want to have the alcohol inside or want to have a glass of beer and being able to take their automobile back home. So for several reasons or in sports clubs or all these kind of things, lower calories and no alcohol. So we got to give it a try. And so far, it's never done in a serious way in America. But we think there is a demand latent for it. We're going to try it out with open eyes, and we'll see what comes out of it. But again, working with distributors who are like us in for the ride and believing in the opportunity. Thank you. The final question comes from the line of Olivier Nicolai from Morgan Stanley. Please go ahead. Hi, good morning. Jean Francois and Laurence. Three questions on my side. First, looking back at Slide 10, your margin increased by about 5 bps in 2018, excluding Brazil. Now since you're expecting more input cost inflation in 2019 than 2018, will it be fair to assume roughly stable organic margins in 2019? 2nd question is quite short term actually on Vietnam. Vietnam has been very strong. Did Q4 volumes benefited at all from the earlier Tet Festival? And just last one, just a follow-up actually on Mexico from a previous question. OXXO is obviously a big customer for you. The current contract ends I think in 1 year. Do you believe your chain of fixed stores will allow you to maintain share in Mexico if the exclusivity with OXXO was not renewed? Thank you. I will take the first question about you implied asking margin guidance. And I'm saying we stopped. Hear me officially, we stop giving margin guidance. Grab back to the history, we gave margin guidance back with Rene a long time ago to fill the gap with the back then SAB with a mix of businesses we had back then and SAB had back then. I think we have delivered on that program and we have said we stopped this year. We gave still a margin guidance for this year, and we had to correct it half year. We gave a guidance on that and we delivered on that guidance. Full stop. Now we forward, we give a dual guidance. A, our business model continues to focus on growth with a disproportionate attention to the premium end of our portfolio and with an increasing eye on social and environmental responsibility. Please weigh the two words. They are equally important, the environment and the social sustainability of our model, very important. With that, we believe with the attention that we have for cost and also what we say spending behavior, spending behavior we mean 0 bad costs in an organization. We give a guidance that we can improve our operating our overall operating profit beta going forward organically by mid single digit. And sincerely, we have to respect the guidance is public, and we're going to stick to that guidance. And all questions around that guidance are accepted. The ones outside, I will not reply. Excuse me, don't take it personally, but I wanted to make the point very clear. Thanks, Arthur. Thank you very much. And your question on Vietnam? Yes. Your question on Vietnam, no impact on Q4. If anything, it's between January February where sales will be distributed differently. And regarding Mexico, regarding the fact that you chain of 6 stores growing over the years, do you think if the contract was not renewed with OXXO next year, that will those 6 stores will allow you to maintain share? I think I have to make a kind of nuanced answer there that the OXXO store has never been set up to build for a mitigation for the OXXO contract. OXXO and the 6 stores, our own stores, they fulfill a different demand and they are geographically positioned differently. And in a way they are complementary. They work for us. The 6 stores work for us. They would never work for OXXO, if you would. And the other way around, we could not operate in places where you have an OXXO store. It would be ludicrous to have a 6 store. So it's very geographical in it when you go into whatever city in Mexico and you see what is the SIX store and what is the Zoxo store, you immediately see what I'm talking about. So one has to realize that SIX store is not there to mitigate and per se the loss of exclusivity in the stores. For the rest, you cannot take away that if you would go brutally from an exclusive relation to a nonexclusive relationship, we would effectively be a net loser over time. That is for sure at the moment that arrives. That is just a mathematical fact, if you will. For the rest, I will not dwell into how a contract will be and in which condition it will be renewed. You will hear from us when that will be done, obviously. Thank you, Jean Francois Laurin. I will now hand the call back to your host for any concluding remarks. Well then, the host would like to thank the operator for the good services today, and thank you for joining and listening in today. 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