Earnings Call: Q4 2016

Feb 15, 2017

Good morning, everyone, and thank you for joining us today for Heineken's 2016 Full Year Results. For information, this conference is being recorded. Please go ahead. Thank you. Good morning, everyone. Thank you for joining us. I'm joined today by Jean Francois Van Boksmir, our CEO and Laurence De Broe, CFO for today's conference call. Following some prepared remarks on the 2016 full year results, we will be happy to take your questions. With that, I'd like to hand over the call to Jean Francois. Good morning. Thank you, Sonia. Good morning, everyone. Sorry to mind being late, but since the introduction text is shorter, I think we can catch up. If you turn to our presentation to Slide 3, let me start by saying that our full year 2016 results were strong, led by the outperformance of our premium brand portfolio and sustained momentum from our innovation agenda. The benefit of our balanced footprint was very clear, enabling us to deliver more than 50 basis points operating margin expansion. This was despite more challenging economic conditions in some developing markets and significant currency pressure. Revenue grew 4.8% organically with positive volume and revenue per hectoliter growth. The Heineken brand volume in the premium segment was up 3.7 percent. This top line growth combined with a continued focus on costs delivered operating profit up 9.9 percent organically with margins increasing 54 basis points. Diluted EPS, Bahia again, was up 2.9%, mainly driven by organic growth and partially offset by currency headwinds. For 2017, excluding major unforeseen macroeconomic and political developments, as well as the impact of the proposed acquisitions in Brazil and in the UK, we expect to deliver margin expansion in line with our prior medium term guidance. I should also mention that you will see on this slide a footnote relating to an accounting adjustment, and this had no impact on operating profits, and Laurence will provide some color on this shortly. Turning to Slide 4, our results clearly demonstrate that Heineken's unique and diversified footprint is delivering strong, balanced growth. Most markets delivered good growth offsetting some of the weakness in Africa and the Middle East and Eastern Europe. Let me start on Africa, Middle East and Eastern Europe, where consolidated beer volume declined by 1.3% organically. Beer volume remained under pressure, impacted by challenging macro dynamics and low oil prices. Positive volume in Nigeria, Ethiopia and export was more than offset by weaker volume in Russia, DRC and Egypt. Revenue per hectoliter was up 5.1% and in Nigeria volume grew mid single digit and was flat in the second half. Life and Goldberg performance was strong benefiting from the continued outperformance the value for money and mainstream segments. Regional operating profit was down 21.2%, negatively impacted by currency volatility, commodity prices and rising cost inflation. The Americas consolidated beer volume was up 3.7% organically, driven by strong growth in Mexico. This more than offset weaker volume in Brazil and in the U. S. Revenue per hectoliter was up 3.3% organically. And in Mexico, high single digit volume growth was driven by the favorable consumer environment, effective marketing programs and sales execution. In Brazil, volume declined mid single digit due to the weak macroeconomic climate and tough trading conditions. Our premiumization focus continued and Heineken volume was up double digit crossing the 2,000,000 hectoliters mark. In the U. S, volume and depletions were slightly negative. Our Mexican brands continued to be the key growth drivers with Tequette and Dozequis outperforming the market. Heineken brand depletions declined marginally. And overall, the Americas delivered strong organic operating profit, Bayer growth, up 23.5%. Asia Pacific continued to show excellent momentum with consolidated beer volume up 17.9% organically. Vietnam, Cambodia and Indonesia all delivered double digit volume growth. Regional revenue per hectoliter was down 3.7 percent, adversely impacted by negative country mix with underlying pricemix flat. In Vietnam, volume grew double digit, driven by strong performance of the Tiger brand. Portfolio strategy, effective marketing and sales execution also contributed. The region delivered strong organic profit 26.5% against, again driven by the strong performance in Vietnam, Cambodia and Indonesia. In Europe, consolidated beer volume was up 0.7%. Growth was driven by our premium portfolio led by the Heineken brand, which was up 4.3%. Revenue per hectoliter was up 1.4% despite deflationary and off trade pricing pressure. In the UK, volume grew low single digit, driven by off trade performance. Our pubs business delivered good results. In France, volume was up mid single digit and in Spain and Poland, volume up low single digit. In the Netherlands, volume was flat given less participation in off premise promotions. Regional operating profit was up 7.1% organically due to disciplined cost management, innovation and successful premiumization. Turning now to Slide 5. In 2016, Heineken premium volume was up 3.7% organically with growth accelerating in the second half to 4.7%. Notably, we saw success across all regions for the full year. There was double digit growth in Brazil, South Africa, Mexico, the UK and Romania. A number of other important markets including France, China, Italy and Spain delivered also good growth. Growth in these markets more than offset weaker volume developments in Russia, the U. S, Thailand and Greece. Handichem brand equity was supported again by the successful campaign around the UEFA Champions League sponsorship. I am also delighted to say that we recently extended our sponsorship until 2021. We also saw continued success with the cities, product stories and music platforms. Our new partnership with Formula 1 provides an opportunity to access new consumers globally and the lowest to launch a very powerful drinking campaign, When you drive, never drink. In 2016, we launched some exciting premium innovations with Heineken, including the white lager beers H41 and H71 launched in a selected number of European markets, not in the UK yet. Heineken Light was launched in Ireland and New Zealand, piloted in Greece and Switzerland and introduced in Australia as Heineken 3. Complementing our truly global flagship Heineken brand, we have an extensive and strong portfolio of international brands. These brands have high potential to travel across geographies. Afliegamps, Sol Premium, Lagunitas, Red Stripe, Tecate and Tiger all grew volume double digit. Also Desperados, Crucovice and Amstel showed good growth. We also remain very excited about Cider, which I will talk a little more about shortly. Turning now to Slide 6, innovation is now firmly embedded in our strategy and how we think at Heineken. In 2016, innovation contributed €2,200,000,000 revenue with an innovation rate at 10.6%. Our innovation focus remains set around key 4 key teams, which I'm sure you are now familiar with: Leading innovation in cider, capturing the low and no alcohol opportunity, satisfying the need for craft and variety beers and innovating around draft systems. We continue to lead in the Cider category, which delivered mid single digit volume growth, reaching a total of 4,800,000 hectoliters in 2016. In the UK, we continue to gain share, thanks to Strongbow Dark Fruit, Strongbow Cloudy Apple and Old Mood. Outside the UK, cider volume was up double digit in Africa, Middle East and Eastern Europe. South Africa and Russia saw positive Cider performance. Mexico was the main contributor to Cider growth in the Americas. Finally, in Asia Pacific, Strongbow, which is now available in 5 markets, showed encouraging early signs. We continue to see great potential in the low and no alcohol category where volume reached 12,300,000 active liters in 2016. These products directly address the theme of moderations and are creating new drinking occasions for our brands. Within craft and variety beers, we continue to leverage the strength of our brand portfolio Heineken H41 and H71, just two examples of innovation in these segments. Mor Zubits from Belgium, Biramorita Reggionale from Italy and JVETs from Poland, variants were also successful. At the same time, Lagunitas is starting its international journey and currently being rolled out in a number of markets, Mexico, France, Netherlands and the UK out of my head. We continue to innovate around Draught. The sub, our at home Draught beer system continues to show positive trends. Also Brewlock, our innovative on premise dispense system is also showing good growth. This is the last year we will be providing an innovation rate. We started sharing this in 2011 to ensure that innovation became more and more a focus at Heineken. Since then, it has become embedded in our strategy and in how we think across all levels of the organization. Although our focus will clearly continue, we will now be updating you in a different way. Going forward, we will provide total consolidated volume for low and no alcohol, as well as for cider. At the same time, we will of course continue to share color on what we are doing in Craft and Variety and Draft Innovations as both are equally important themes. Before handing over to Joao Laurence, I would like to spend some time talking about our recent potential transaction in Brazil and in the UK. Then you move on to Slide 7. Earlier this week, we announced the acquisition of Kirin Operations in Brazil. This transforms our existing business across Brazil, extending our footprint and increasing scale and the platform for further premiumization. Following the transaction, Heideken will become the 2nd largest beer company in the country, consistent with our strategy of being number 1 or number 2 in a market when we operate a full of course a full brand portfolio. This will also position us well in a market which is important for beer and also has a strong future growth potential still. The total consideration to be paid for the transaction is €664,000,000 corresponding to an estimated enterprise value of 1 point €25,000,000,000 The deal will be dilutive to Heineken Margin in 2017 and the transaction is expected close in the first half of this year. Turning to Slide 8, we also announced in December the acquisition of Punch A. Given UK takeover patent rules, I am restricted in how much I can say, but I would like to make a few comments. Following a recommended cash offer from Punch Taverns BLC by Weyen Acquisitions Limited, we announced a back to back deal with Weyen to acquire the pubs in Punch securitization A. This securitization comprises around 1900 pubs. Last Friday, we were pleased that Panj's shareholders voted in favor of the scheme at the court meeting and the special resolution proposed at the general meeting was passed. Turning to Slide 9, that slide provides some further color on the rationale for this transaction. We already have a pub we already, sorry, have a pub estate of 10.49 leased and tenanted pubs through star pubs and bars in the U. K. This generates an attractive return and is strategically important. The home trade in the UK is an important sizable part of the UK beer market and the UK is our largest market in Europe. We believe there is a compelling strategic rationale to enlarge our existing pubs business with this complementary estate. We also believe there is an opportunity to realize increased potential from the Punch A Estate through investment and attracting and retaining the best licensees. Based on the financials, we expect the transactions to be earnings enhancing in its 1st full year. All of this is, of course, subject to customary regulatory approval. With that, I would like to hand over to Laurence, who will make will walk you through the financials. Thank you, Jean Francois, and good morning, everyone. So I'll turn now to Slide 10. So back to 2016, revenue reached €20,800,000,000 the 4.8 percent organic increase is a result of positive volume momentum, 2.8 percent, combined with 2.2% growth revenue per exoliter. And this reflects a very good first half boosted by Easter timing and a strong Vietnamese and Chinese New Year and a solid second half. Operating profit by up 9.9 percent organically, reflecting growth in revenues and also good achievements on cost. I will come back to that one. Operating margin increased by 54 basis points and actually even more if we exclude the impact of the accounting adjustment in the UK in the second half. So a few words on that one. As mentioned earlier by Jean Francois, in the second half of twenty sixteen, we adjusted the way the UK accounts for the cost of products both for resale. More precisely, part of this cost was previously in revenue and raw material, which was not the Corex accounting treatment. The consequence of the de netting is more revenue on one hand and more cost on the other hand, but no impact on operating profit and mechanically, a lower operating margin. So to cut a long story short, excluding these impacts on a like for like basis, the increase in underlying operating margin via would have been even higher at 61 basis points. Moving now to net profit BEIA, it reached EUR 2,100,000,000 up 8.5% organically. So slightly less growth than in the operating profit. The difference being the impact of devaluated currencies on payables, which is accounted for in other net financing expenses. And in 2016, as anticipated, we had no significant benefit the refinancing of older expensive debt, something that had provided us with extra leverage on the bottom line over the past few years. The difference of €558,000,000 between net profit BEIA and reported net profit relates to amortization and acquisition, of course, of intangible assets acquisition related intangible assets, much aligned with 2015 and 2 exceptional items, the most significant being a non tax deductible impairment of 2.80 €286,000,000 on assets in the DRC. Also, as you will remember, in 2015, we had in reported net profit an exceptional gain of €379,000,000 from the sale of EMPACHE, a non core Mexican business. And to finish with the P and L, diluted EPS of €3.68, so 2.9% higher than in 2015. Free operating cash flow was up 4.8% and our net debt to EBITDA ratio ended up at 2.3 times, well in line with our policy to be at 2.5 times or below. Moving to Slide 11 and to the 4.8 percent organic growth in revenue. In 2016, consolidation added €441,000,000 or 2.2 percent to that number, mainly driven in order of size by incremental revenue from South Africa, Malaysia, Slovenia and Jamaica. But what is striking here is the negative impact of currencies reducing revenue by more than €1,000,000,000 or 5.6 percent more precisely, and that was mainly driven by the Mexican Phase 1, the Nigerian naira, and to a lesser extent, by other currencies such as the British pound, the Russian ruble and the Egyptian pound. Turning to Slide 12, operating profit via, so it reached €3,500,000,000 Consolidation changes added €40,000,000 or 1.2 percent to the growth and currency impact was negative, reducing operating profit by €2 €216,000,000 or 6.4 percent, again with the Mexican peso by far the most impactful, followed by the Nigerian naira and the British pound. Excluding consolidation changes and currency, operating profit was up by an impressive 9.9% and this provide a few comments on costs. Looking first at marketing and advertising expenses, the organic increase was broadly in line with the increase in revenue, with a marketing to revenue ratio of 13.6% in 2016 compared to 13.4% in 20 16. This means that our performance was achieved while investing firmly behind our brands, including through our global platforms such as UCL and now Formula 1. Looking at other costs, still on an organic basis, input costs, which is the sum of raw and packaging material costs, were up 10.8%, growing more than revenue. This is a little bit due to mix, but this year predominantly transactional currency pressure in Mexico, Brazil and Nigeria. On the other hand, and still on an organic basis, personal cost and logistic costs increased less than revenue due to tight cost control and repair and maintenance costs as well as energy and water costs even decreased. So overall, the focus on cost is working and helped us to achieve this organic increase of 9.9% in operating profit. And this, in spite of the strong transactional currency headwinds that we have to face in some of our largest emerging markets. As Jean Francois already mentioned, on a regional basis, weaker performance in Africa, Middle East and Eastern Europe was more than compensated by strong results in Asia Pacific, the Americas and Europe. Slide 13 now walks us through the development in diluted EPS over the year. Out of the increase of 2.9% in EPS, $0.31 came from organic growth and $0.22 were taken away by translational currency impact. The impact from consolidation was not material. And finally, there was a small residual benefit of just 0 point 0 $2 from 20 15 share buyback. If we now look at free operating cash flow on Slide 14, all in all, we continue to have very sound cash flow generation with a free operating cash flow for the year just under €1,800,000,000 The increase versus €15,000,000,000 was due to stronger cash flow generation from our operations, partly offset by less benefit from working capital, still positive but less benefit, and by a higher level of CapEx. The main explanation for the lower benefit from changes in working capital was a number of 1 offs in receivables as well as less favorable movement in our payables due to the phasing of CapEx. Underlying working capital still healthy. CapEx amounted to just under €1,800,000,000 so a bit higher than last year and in line with our guidance of being just below €2,000,000,000 This represented 8.5 percent of revenues and including significant investments in Mexico and Brazil, Cambodia, Vietnam and China, but also Ethiopia and Ivory Coast. Our net debt to EBITDA ratio of 2.3x compared to 2.4x at the end of previous year continues to give us margin to maneuver whether organically or through value creating M and A. As a conclusion, and as you've seen in today's press release, we expect economic conditions to remain volatile in 2017. And actually, we have already assumed that headwinds from currency this year would be pretty much comparable to the ones that we had to face in 2016. With this, we do expect further organic revenue and profit growth in 2017. And excluding major macroeconomic and political developments, we also expect continued margin operating margin expansion in line with the medium term guidance of a year on year improvement of around 40 basis points. That does not yet take into account the 2017 impact of our proposed acquisition in the UK and Brazil. This impact will obviously depend on a number of factors, Just quickly touching on some of the more technical elements in the guidance for 2017, we expect an average interest rate broadly in line with 2016 And as I said before, we have now completed most of the refinancing of our old and more expensive debt. So therefore, no more positive leverage to be expected from this. And as for the effective tax rate, it should be broadly in line with 2016. Finally, CapEx should be again slightly below €1,000,000 for the year. With that, I'd like to hand back to the operator and then we will be happy to take your questions. Operator? Thank you. We'll now take our first question from Oliver Nikolay from Morgan Stanley. Please go ahead. Your line is open. Hi, good morning, Jean Francois, Laurence and Sonia. Thanks for taking the question. I've got 3 questions, please. First of all, on Mexico, you had a really strong year in 2016. How should we think about 2017 in terms of volumes and price mix considering that inflation is picking up and the consumer confidence is coming down? Are you already seeing a slowdown actually year to date? Second question is for Laurence. Could you perhaps comment on the FX hedges that you have in place in Mexico for the Mexican peso? And are you covered for 20 17? And should we expect any negative transactional effects to happen in 2017? Or is it going to be more 2018 story? And lastly, you mentioned that your net debt to EBITDA is 2.3x in 2016. What would it be both the acquisition in Brazil and the UK, please? Thank you. On Mexico demand, And it's we don't do forecast. As you know, I'm not going to start today. But what you have been observing in the last year is that obviously with a lower peso, the older remittances from Mexicans to Mexico in dollars translated in a higher peso amount and that certainly to a certain extent has boosted consumer demand in Mexico. Now on the one hand, this is a positive factor for demand in Mexico. Whether that will be continued is something which is you can't totally predict that, but that is one element to look at it. Then the other element of our business is, of course, the export capacity from Mexico to the U. S, which is also in a question mark. And again, there is a lot of speculation and not legislation. So it's very difficult to predict. But we have to look at the fundamentals of our business in Mexico and look at the fact that we have put substantial efforts in developing the franchise of the Tecate brand also beyond its stronghold of Northern Mexico and that we do that with success. That the Heineken brand is developing well in Mexico, that the Dozequis brand franchise is developing well in Mexico, and that we see potential for craft beer, albeit at a smaller level in Mexico and that we are seeing that with Lagunitas exporting to Mexico, trying starting to seed its business over there. It's also related to the fact that we work also in Northern Mexico with Coors Light in the competitive mix and that also does its job to sustain our business in Mexico. That's about the fundamentals, I would say. Now moving to the transactional foreign exchange impact. As you know, we hedge we put hedging on the transactional and only on the transactional impact. In line with our policy, we are at the beginning of the year edged on about 76% of the expected need for non Mexican currency in Mexico. So there is still some part of it that is open, but the majority of it has been hedged already. And then the net debt to EBITDA, it is too early to comment on that after the acquisition. What I can tell you is that we have this policy and this guidance to be or to come back within reasonable time to the 2.5 ratio and that will remain. Thank you very much. We will now take our next question from Fernando Ferreira from Bank of America. Please go ahead. Your line is open. Thank you. Good morning. Thanks for the questions. I have three questions, please. First two ones on Vietnam. First one, is this the year that we should expect volume growth to start normalizing after the very strong 2016? Second question, while you had mentioned that you probably could not participate on the sale process right of Sabeco, but the media continues to report your name as one of the parties looking at the asset. So if you could please clarify if you would be able to beat for the asset or not and also update on what stage the process is there please? And then last question on Brazil. I understand it's very early days, but if you could comment where do you see the bulk of the synergies coming from and how could you turn the profitability of the assets that acquired back into positive territory? Thank you. For the Vietnam prediction of volumes, we don't do that. We never do and give predictions also not on Vietnam. We have seen good growth coming out of Vietnam. It's sustained on our own work with Tiger and LaRue and Heineken as a portfolio and how we do our execution in Vietnam and it has also to do with the strong economy in Vietnam. You're looking for macroeconomic turning points are essentially for Vietnam linked. Its internal market is buoyant. It's very Vietnamese invest a lot in their internal market and it works quite well. It's also an export nation and severe rein in of world trade would have consequences for Vietnam. But again, that is pure speculation and it's macroeconomics. And so far Vietnam is a very strong performing economy and we drive partially and for a big part on that strong economy. For what relates to SABECO, we are not formally deprived from participating to any process when there is one. There is a lot of, again, speculation reports in the press. The only comment we ever made was to say, it might be doubtful that the Vietnamese government allows to for the creation of a player the size of our combined organization. The second comment we have made is Vietnam and in Gazoo VBL is a joint venture between 60% Heineken and 14% Satra. Satra is a state company owned by public authorities. It's a very good partnership. It has been going on for 25 years, very successful, but it brings also its own lots of complications. So I'm not saying we don't, neither say we will. I'm just flagging a number of perhaps caveats to the SABEKO opportunity. But once more, there is a lot reported of it. It will go, but still nothing is going. So it's very much wait and see. And regarding Brazil, it's still early days, but and we do expect synergies on cost and significant synergies on cost, On production and logistics for sure, also on selling and administrative expenses, we will we do expect synergy. But I would say also maybe the main synergy would be on gaining a better presence in the Northeast and being able to pursue our strategy on the Heineken brand and on premium, which has been very successful. We reached 2,000,000 hectoliters this year in Brazil. And definitely, we were weaker in that part of the country where here in Brazil is more present. So we're very much looking forward to the revenue synergies that will come from there as well. Great. Thanks a lot, John, for some of us. Thank you. Our next question comes from Sanjit Ayoola from Credit Suisse. Please go ahead. Your line is open. Hi. Thanks for the question. I appreciate the lack of top line outlook into 2017, but we've seen a bit of a big inflection point on price mix into the second half of the year. Do you think that is at least sustainable into 2017? And then just back on Vietnam, can you just remind us how much of the growth you achieved this year was market share gains versus a broader strong market environment? Thanks. On the price mix, I will not give you any guidance on how the top line revenue and we'll not start today. What I can say is that we have a strategy for building top line. We have several building blocks. And we try to have a better revenue per hectoliter, essentially by overinvesting in the higher end of our portfolio. It takes many phases. It's in the 1st place and it will continue to be the Heineken brand. Mean, I will repeat it, but if it were a business segment, it would be a third of our company. So and it grows at a pace which is slightly higher than the average of the rest of our portfolio. But in addition to the Heineken brand, we continue to invest in premium brands that can travel like Tiger more recently or Sol in its premium version, Amstel, which often we don't talk about, but also making progress, but also more niche brand, craft brands like Lagunitas on one hand or Afliegand and Morcepiv out of Belgium. It's also pushing no and low alcohol varieties, which most of the time doesn't not carry necessarily a premium price, but which the propositions have premium margins. And finally, Cider. And Cider is also for us a way of pushing our top line growth. So, if we articulate all these Heineken plus the other international brands, craft and variety, no and low alcohol and cider, that all together is there to underpin underpin our growth worldwide, also in Vietnam by the way. We don't do all these 5 items at the same speed and pace across our geographies, but we always tap into several of these 5 growth pillars to sustain our top line. And the rest, yes, we depend like everybody else on a lot of macroeconomic circumstances that we cannot foresee and predict. We just have to observe where the waves goes and try to serve as hard on it as possible. That is what I can say. And on your question on Jet Time in 2016, we did continue to increase market share in a market that was growing. And actually, it is a virtual circle, because the part of the market that is growing very healthily and the most is probably these affordable premium segments that we are leading with Tiger. And then people don't buy segment, they buy brands. So we have this wonderful brand, Tiger, which is extremely healthy, strong double digit in the market where you still have expansion to come. I remind you of numbers that we shared with investors back in Vietnam this year, which is we have about 1,000,000 there is about 1,000,000 people in legal age of drinking entering the market every year. I mean, this is a market that still has ways to expand. So, I would say really virtuous circle of our brands, driving the market share and also helping to drive the market. Thanks. Just a quick follow-up on Nigeria. Volumes seem to have been relatively resilient in the context of the devaluation and significant price increases there. Can you just help us rationalize what you're seeing on the ground there? Yes, you may. Yes, yes, no, go ahead. It's no problem. You know the story as well, right? So volume in Nigeria, yes, we're positive. That's very good news because what that means is that when the mix is actually changing, we do have the products that continue to please the consumers and that the consumer can afford. So what you've seen is definitely a switch in the mix with what was before considered mainstream being much more seen as premium and then with the product, very good product that were more value becoming the new mainstream. Again, people don't drink segment, they drink brands. We have those brands. And when you see brands like Life or Goldberg performing very well, going double digit in our portfolio, that is also what is very good for the volume. So that is important because when the Nigerian cost consumer is able to trade up again, then we do have the full range of brands to accompany them in the journey. But today, yes, the volume progress shows that our portfolio of brands is really addressing not only the taste, but the affordability that is needed in Nigeria. That is true. And in complement, I would add that what is difficult in Nigeria is the foreign exchange is not a floating one. So you have to go with official devaluations and the availability of foreign exchange physically to drive your business. And pricing is a derivative of that. If you look at the pricing in dollars or in euro, it has come down quite significantly over the last year. Hence, of course, volume stayed even was in a slight plus, but profitability was in a sharp down. So there is nothing we can do. It still stays by and large positive. But by going too steep in price increase, we might overnight kill demand and enter into a vicious circle of not being able to fix costs to cover our fixed costs. So it's navigation on-site in such a very difficult circumstances. Management there, and we are watching it very closely, is doing its utmost best. And it's a balance between pricing so that you can stay on the long term sustainable with a profit making business. But short term, that in absence of foreign exchange and purchasing power that is very much under pressure that expressed in dollar terms you sell your beer cheaper than you used to do 2 years ago. That is just a fact. And so we are kind of balancing that in order to keep our business afloat, still make money and keep up with our market position in Nigeria. But I don't say that it's going to be anytime or any soon, much more easy tomorrow because a lot structurally depends on foreign exchange supply in the country. And that has to do with the oil price, but also the output of oil. Now it's going slowly in the right direction, but still some way to go. But again, medium term, I remain we remain convinced that Nigeria is a land of more opportunities than problems. But from time in a while like now, we have a setback, which we manage. Many thanks. Our next question comes from Simon Hales from Barclays. Please go ahead. Your line is open. Thank you. Good morning, everybody. A couple of questions, please. Can I just go back to the guidance you gave us for this year and the specific comments around unforeseen macro and political developments and as to what that actually means? I mean, things like trade tariffs that we might see in Mexico doesn't sound like it's particularly unforeseen given the comments we've had over the last 6 months, The slowdown in the macro on the ground that was referenced earlier in Mexico has been well talked about. Are those sort of things factored into your guidance as it stands at 40 bps of margin expansion? Or are some of those factors still to you unforeseen? And then secondly, just going back to Nigeria, you talked about still making money, Jean Francois. Were you still making money in the second half of the year? Were margins still positive from an EBIT standpoint through the second half of last year? And finally, just one quick one on CapEx. Could you just talk a little bit about where the CapEx is going in F 'seventeen and the slight step up we're seeing there? I'll take the first. You take Nigeria and the CapEx, if you agree, Laurent, so you can prepare for that. Unforeseen is unforeseen. And therefore, we put unforeseen. It's we know the environment is volatile and we know that legislation might come up. Now there is a lot of speculation. There is no legislation. We continue to export our Heineken beer from the Netherlands at 0 tariff to United States of America. Every day there is a ship sailing out of Rotterdam. The same goes with NAFTA. It's still in place. The Brexit is for in 2 years. And a lot of uncertainty is around all these things, but the consequences are unknown. The unforeseen has to do with very large moves, which would take a very unreasonable character and which would not only affect our business, but of course, the whole economy altogether. That's why we put that caution of unforeseen. The fact that we live in a volatile world, I think we factored that in ever since 2,008. You all remember the financial crisis that has been I think there is a world before 2,008 and there is a world after 2,008. And I would say that ever after 2,008 business and our business in particular, I can only speak of mine, but we kind of tend to look at reality macroeconomics, factor them in and factor in that they are volatile, devoting some effort to understand where it could go, but at the same time, kind of being more reactive than always planning. So our strategy remains unchanged, but we have to keep a certain degree of discretion to react on things that we cannot totally foresee. That having been said, we reiterate we continued our guidance because we gave the medium term guidance, I think in 2014 and we said, okay, that's up to including 2017. So we will continue to give and to try to go after that guidance. But again, unforeseen is just unforeseen. As for the margin, Nigeria, as you know, we don't comment to that level of granularity. So I'm not going to answer that question. But talking about the CapEx, well, what you see in 2017, like in 20 16, grows predominantly in emerging markets and in revenue enhancing revenue enhancing CapEx capacity. And I would say, you can take Mexico, Vietnam and Ethiopia as some of the main places where it will go. Perfect. Thank you. Our next question comes from Kyle Walton from UBS. Please go ahead. Your line is open. Thanks and good morning everyone. Couple of questions. One on Mexico margins. I know you don't give granular color, but I guess the improved it was a good improvement there despite transaction FX because of focus on costs and focus on mix. Is there any color you can give in terms of the further opportunities on both of those points or anything else going forward, so aside from the transactional FX piece, which you've mentioned, the hedging? And then in the U. S, one on CIDA, Obviously, you saw a kind of slowdown in the wider category, but Heineken is still gaining share. Just any comments on your thoughts of the cider category development going forward in 2017? And also in the past, there had been, I think, a comment on the profitability of cider overall. Is there any color you'd be willing to share around your thoughts of that turning profitable and time line of that kind of thing? Thank you. I'll start with the second question on the cider. Yes, we have been seeing a significant slowdown of the category in the U. S. The explanation I was given is that a lot of these hard lemonades, as they are called, kind of have eaten into the share of cider because it's a little bit overlapping in the sense that both drink categories are rather sweet and often offered with fruit varieties. And that makes that the category was under under pressure as a category. But that does not mean that we do not continue to believe that you can build a side of business in the U. S. Like we have one in the UK, like we are building in South Africa, like you have one in New Zealand, like in Ireland, like we build it in Central Europe, like we do it in Netherlands. It takes time. And so a setback on the year will not change our views that we will continue to invest in developing our Cyto business in the U. S. And what is important for us is to take share, which we do in the U. S. But it remains a very small business. It's a seeding business. So it doesn't move the numbers a lot, but we are in the seeding phase as to one day such a business might become significant and take off. But we are still far away from that business being that significant contributor. It's a seeding business, but in which we believe. And on your question on margin of Mexico, so yes, we don't comment in detail on margin by country. We did say that in the second half, for instance, in Nigeria, it was more impacted by a devaluation, also because this is something that you cannot cover in Nigeria. And then we're partly hedged on transactional impact in Mexico, even though hedging is just pushing back in time, pushing ahead in time the impact of the transactional effect. What I'd like to say on Mexican margin is that we're seeing an incredible work by the teams locally to continue to work on those margins, of course, through revenue management and then through the top line, but also through continuing. And we have told you that we were continuing to add synergies from our operation in Mexico. And that is a real job that they continue to do on a year on year basis. And when you see what they had to compensate this year and how much they've been fighting and the successes they've had, we're very proud of them. Great. Thank you. Our next question comes from Ed Mundy from Jefferies. Please go ahead. Your line is open. Hi. Good morning, everyone. Thanks for taking the question. I've got 3, please. You've very kindly given the guidance of 40 basis points of margin expansion for 2017 pre acquisitions. I was wondering whether you could comment on your outlook for margins beyond that. 2nd of all, you very kindly given some financial guidance for the Punch transaction, but not yet for the Kirin Brazil transaction. Are you able to comment on the broader terms how quickly you could turn that business from a loss to a profit? And then the third question is on low alcohol beer, which you've split up separately. It's roughly about 5% of your volumes. What do you think is the potential size of the price here? Do you think you can get 10% of your group volumes? So, I'll take the question on guidance. Yes, when we gave the guidance in 2014, we gave mid term, so pretty much 3 years guidance. So you could say 'seventeen is the last year into that guidance. So we will update you on the further guidance later in the year and what shape it can take. Rest assured that we remain committed to actually working on our business margin, but also top line and then driving it continue to drive it throughout the world. And then in order to reach And then how quickly we can turn around in Brazil, we will definitely not update today on that. There are still a lot of things that we are working on. We said we would update later on our route to market. So, there are a number of still of moving pieces here and we are working on this. And the low and no alcohol, you're right, 5% today, it's difficult. We're not going to give a precise guidance on it, because it's a thing that you have to build and it's evolving. We feel that there is a demand in the world, which is based on 2 motivations there. There are occasions in which you are looking for having the bite of an alcoholic drink because flavors are specifically better conserved in an alcoholic mix. And so low alcohol drinks are in demand. And we have been working on them for quite a number of years here in Europe with the Rather, less so in the U. K. We tried the Rather, the Foster Rather and it did not really work. But in the rest of Europe, it has been a huge success. We have seen non alcoholic beer, a huge success in Spain. There it's close to 10% of the total beer market, which is quite remarkable. And that has all to do because in that country people love to go to the tapas bar after work, but then they drive home. And in the Tapas bar, you eat and you drink. And then people prefer to have a non alcoholic beer than having a carbonated sweet soft drink with their food. So there are a lot of these occasions. There is a don't drink and drive, and not all people want to drink water. So I think there are a lot of occasions in life as it is evolving where low and no alcohol products might be on the rise. It's very difficult even we cannot predict where it can go. But what we know is that there is a potential there and we take a ticket to be 1st row on the development of these products. It looks like the majority of your lower concierge is based in Europe at the moment and you've got Fintang Max in Indonesia. But how do you think about the prospects for low non alcohol beer in other ADMs, in particular Africa and LatAm? We it takes many different phases, low and no alcohol. And we try a lot of things out and not it is very regionally very dependent of which one of the rhymes will play out in Africa. In the non alcohol, we have a big segment called the malt beverages. And this is even a it's a big competitor to soft drinks because it's much more nutritious. And that's included in that large low and no alcohol business segment of us. And the Moltenas, which are very popular in Nigeria, can also be tried out in other African countries or Latin American countries. So there are a lot of product proposals under the umbrella of low and no alcohol, and we look very much at local idiosyncrasies and potential as how to develop it. This is not a global plan. It's a multi local approach. But with the overarching logic is there are possibilities for us for low and no malt based drinks and to develop a line into that. And most of them bring in accretive margin development for our total business. Thank you. Our next question comes from Trevor Stirling from Bernstein. Please go ahead. Your line is open. Good morning, everybody. Three questions from my side as well. So first to relate to pricing. In Nigeria, I know you've taken price increases that partially offset the devaluation. Are your competitors following you in Nigeria? And in Mexico, you're the price follower. Is your competitor responding to the devaluation of the Mexican peso by taking prices up a little bit in Mexico? On the first, Nigeria, the reply is what we observe is broadly yes. As a market leader, it always go with some delay. We are not always the market leader. And so, I suppose we do the same in markets where we are the follower. But so the reply is yes, with a delay in Nigeria. 1 has to realize it's a matter of survival. You can go rapidly bust with the kind of inflation, monetary inflation or currency inflation that you have in Nigeria if you don't look out with your pricing. That's one. Mexico? Mexico, I would say the answer is in general, yes, as well timing might be different. So there is not necessarily alignment in timing between the competitors on that. Thank you very much. And the third question, final question, there was a little bit of a slowdown in growth in the Americas in the 4th quarter. Was that due to a sort of deterioration in Brazil? Or did the slowdown come somewhere else? Brazil. Brazil. Thank you very much. That's what we observed. Brazil mainstream. Yes, because Not Heineken. Heineken is still flying. Heineken is still flying. It's bizarre, but Heineken in the last quarter was absolutely flying. So it was totally counter cyclical to the mainstream market. Thank you very much indeed Jean Francois and Laurence. Thank you. Thank you. Our next question comes from Tristan van Strain from Deutsche Bank. Please go ahead. Your line is open. Good morning. A couple of questions please. Just in South Africa, you've consolidated that this year and you're carrying a loss on that. At what point should we expect an inflection point of that loss? When do you think you'll get into profitability? And then secondly, you're already in partnership with Molson Coors in Mexico and Canada. Can we expect or are you interested in picking up some of the for that matter? Yes, South Africa, you want to say something? I think you know South Africa better. I haven't been there yet. It's one of the markets I haven't visited. Let's go to Safari. No, no, it's true. It's a business which we try to kind of under one single umbrella and an absolute focus on beer to manage for growth and ultimately profit. I would say the structural problem of South Africa is to fill our production capacity that is installed near Johannesburg in Citibank. So and that we do with the strategy we are most really pursuing, which is an innovation strategy. It's not only based on beer. We also develop cider quite well, and it is all going in the right direction. But we have a sort of a leeway way to go. Now whether that will work in 2017 in order to make really money is debatable. We don't think so. But we are confident that it is going or we are confident that we will get there because it's going in the right direction. Just a follow-up, what's your capacity utilization currently at Citibank? Should we or do we say that? No. I don't feel that I should say it. Let's say, you understand it's not enough. Yes, and then the partnership, the Miller portfolio, yes, you're right. And Molson Coors acquired the Miller brand now rights worldwide because it's reunited. 3rd, we are working on having the Miller brand. Most of the time, it's a form of Miller General and Draft. In our portfolio, not everywhere, but in some geographies, I don't know in which one we have been already out of the market and being public about it. And I'm looking at Bart is nodding none. But we are working on that. And because we have a long standing partnership with Molson Coors, as you know, we worked together in Ireland for a long time where we were doing the Coors brand Coors Light brand for quite a number of years. And as well as we are with our brand portfolio in Canada within a joint venture with the Molson Coors organization. We have the license for Coors Light in Mexico since a number of years. You might expect some more developments to come hand in hand with Molson Coors in a number of key markets. Okay. Thank you. And you can expect they are competing with ABI, of course. I mean, this is logic. Subject. Our next question comes from Richard Whittagen from Kepler Cheuvreux. Please go ahead. Your line is open. Yes. Good morning. Thanks for the question. First of all, in Mexico, we know your commercial strategy in the longer term. But are you making any tactical changes to your commercial strategy in 2017 given the consumer environment is quickly becoming more challenging? And second question I have is on Kirin in Brazil. Are you are there any material tax liabilities that you will also acquire along side of the business or any other material provisions? And then thirdly, can you talk about your plans to launch an alcohol free version of the Heineken brand? And in how many markets do you plan to introduce the beer? So maybe talking about the tax liabilities in Brazil, I would say that tax from Brazil from a litigation and tax point of view is always a very lively market. So it's not necessarily that the amounts are huge, but you have always a number of things. And that's obviously when you inherit the business and then it's a matter of contract, whether you are taking the risk or whether the seller is taking the risk and it's a matter of balancing in the negotiation. But definitely part of the, I would say, the way of doing business and the cost of doing business in Brazil is to be able to handle a number of litigation, whether it's labor litigation, other type of litigation and tax claims. So, I mean, Kirin is a normal business for Brazil. And then we have a very good team there that has been in place for a while and is definitely used to dealing with the specificity of Brazil. So nothing particular that we need to signal on that at this stage. Then for the non alcoholic, Heineken will be launched in the Netherlands, I think, in March. And we will roll out it quite rapidly in the rest of Europe because our infrastructure for producing Heineken is very European. So you might expect us doing that across Europe pretty quickly in the first stage. We will see for the rest of the world later on. We will give it a try in Europe with the Heineken brand. And on Mexico? The first question on Mexico. Can you because we were in an internal debate on mute, whether we had published something about Miller or not. Sorry about that. If you can repeat the question. Yes, yes, yes, sure, sure. No worries. Yes, on Mexico, I mean, I said we know your medium term or long term commercial strategy. But are you making any tactical changes to your commercial strategy in 'seventeen given the more challenging consumer environment? I mean, tactical adjustment, there are always tactical adjustment. There is nothing significant that we have to say and definitely not linked to anything that we would be seeing in the environment. So, we adjust our tactic all the time and strategy remains. And we appoint the best local management to carry out the best local tactics as they've as BMC fit, and I totally trust them. They will do the right thing. All right. Terrific. Thank you. Thank you. Our next question comes from Matthew Webb from Macquarie. Please go ahead. Your line is open. Thanks very much. Just three questions from me, please. The first one, would I be right in assuming that the guidance that you've given on the negative currency impact in 2017, so saying that it will be comparable to 2016, includes both the translation impact and the transaction impact. And if so, it'd be great if you could quantify that. I've seen you've guided to a €70,000,000 hit to operating profit from the translation effect, but it'd be great to have the transaction effect that you expect as well. And then the second question, I was just wondering, this is a long shot, but would you be willing to disclose roughly the currency rates at which you've hedged in Mexico? And therefore, how much protection that's giving you from the recent weakness of the peso and how much of that's delayed into 2018? And then 3rd, I was wondering what you think has been the main driver of the margin expansion in Mexico in 2016? Was it more the positive operational leverage from the volume growth? Or was it more the efficiency savings? Or were both comparably important? So it's extremely politely asked, but it's a lot to ask. On the currency so I'll start with the currency. So no, we don't disclose the hedging. The guidance that we provide is a guidance on margin. So yes, it does take on board what we expect in terms of transactional and translational impact on the margin. Type of impact that we had this year. And of course, we don't give you the transactional impact. We give you the translational impact that you can read later from our tables, which is above €1,000,000,000 on revenue and which is above €100,000,000 in operating profit. What we give a bit later, as you know, is mainly a calculation based on spot rate. So that is not a guidance. That's mainly your calculations that you can actually look in your model whether you feel that works. But really, yes, the guidance on margin takes on board what we expect on currency. And we've taken a number of assumptions on currency. For instance, yes, we have taken the assumption that at some point Nigerian naira is bound to have a new devaluation that we've taken on board. Giving you currency by currency, we're not going to do it neither for our assumptions nor for hedging. We prefer to actually group it in the impact that it would have globally on our business. Right. And then just on that point about the Mexican margin and what's been the biggest driver this year, do you think? The more the operational leverage or the efficiency savings? No, we don't. Okay. So it's all of it. It's mix, pricing, continued efficiencies in but it's everything, but I'm not going to detail that. That's very competitive information. Okay. Fair enough. Thanks very much. Our next question comes from Andrea Pistacchi from Citi. Please go ahead. Your line is open. Yes. Good morning. 3 quite specific questions, please, from me. 1st, on so are you assuming in your margin and FX guidance some further devaluation of the naira? Secondly, on input costs, I think on a per hectoliter basis, they were up 8% in 2016, largely due to FX. Now with the transactional FX pressures continuing into 2017, should we expect similar or more than that on input costs? And then if you could just provide a bit of color, please, on a couple of your medium sized markets in Africa, which have been difficult recently, Egypt, DRC. Is there any improvement there? Thank you. So I'll take the first two questions. So yes, we do expect, I've mentioned, further devaluation of the NERA. Actually, it's not that we expect or don't expect, but when you see the discrepancy between the official rate and with the rate that you hear from the parallel market, usually it ends up at some point in devaluation. So this is why we've that kind of assumption in our internal plans and in our margin guidance. In terms of input cost, part of that transactional effect can be hedged. And then we're not guiding on input cost next year. What I can tell you is that in terms of input cost, our procurement teams are at work to try and mitigate as much as we can from whatever headwind we will have from currencies by better negotiation and by improving the underlying price of our input. And then specifically on your two questions, yes, for sure, DRC and Egypt are 2 difficult markets. Now DRC improved quite a bit in the second half. It was still negative, but it was just to give you an idea, it was 6% in the first half and 3% in the second half. Whether that is significant, I don't know. Management is working hard to try to turn around this company. It's essentially a macroeconomic and political problem, the DRC. It is not a problem which is due to anything that is going the wrong side on our specific how we run the company. It's a terrible country at the moment. It's been a terrible country for a number of years. Now on the other side, we continue for that specific country to look at the potential on the longer side, €60,000,000 inhabitants. You tell yourself one day it might take off. We have been there since 1930 5. So we don't feel quite comfortable to leave a country. We operate a beer portfolio. We also have a Coca Cola franchise. But yes, it's tough. And I don't think 2017 is going to be much better than 2016 was. So we keep it as an option. Egypt is a different story. We were hurt by a very big devaluation, as you know, a one time devaluation of 50% of the currency. It's tough, but okay. The first half had a really a very big downside in volume. We recovered it still negative in the second half, certainly for beer. But bear in mind that we also have a wine business and we also have a non alcoholic business. The non alcoholic business is doing quite well. The beer business and the alcoholic business is doing less and it has a lot to do also with the absence of influx of tourism. The absence of influx of tourism. The liquidity is back. The liquidity of foreign exchange is back in the market. So we unlike Nigeria, where it's very difficult to find the we have to fight to find the foreign exchange to keep our business running. This is not the case in Egypt. 1 has also to realize that in Egypt, we export. So have our own currency resources. We export malt. We have a big malting business. Malte barley is grown in Upper Egypt. It's malted by ourselves in our own plants and exported to other parts of the Middle East and Africa and is generating a part of the dollars we need. So that is for us not a problem. And yes, after the currency devaluation, of course, and there was a VAT increase, you have to adapt. And when you feel that do you have to adapt structurally, your volumes will tank for a while. But we remain on the medium term optimistic. We have a strong business, well managed, good portfolio, a diverse portfolio, alcohol, non alcohol, and we will weather the crisis. Great. Very helpful. Thank you. Our next question comes from Alicia Farri from Liberum. Please go ahead. Your line is open. Thanks. Just three questions, please. The first one, I was hoping to get a little more detail on the U. S. Business performance. So you say that volumes are slightly down there and within that the Heineken portfolio is marginally down. Mexican imports are up sort of mid single digits I guess in aggregate. Given the significant weight of those Mexican imports in your U. S. Volumes, there must be something else there that is really underperforming to take the whole U. S. Business into negative territory. Can you clarify where that is coming from? I know you mentioned weakness in Cider, but I assume that's too small to move the needle. So maybe just some discussion on that U. S. Business. And then secondly, China. I realize it's a very tiny part of your group, but it has been a pretty strong premium market for beer. So I'm surprised that the Heineken volume was down in the second half. Perhaps you can explain what's happening there? And finally, interest rates. Can you tell us what interest rates are looking like as you've been exploring financing for the Brazil and UK deals with interest rates rising? Are you seeing higher rates? Thanks. Higher rates for you. On the U. S, I think you try to reconstruct the best thing is to look at the public available data. The business with the Heineken franchise is going slightly down. It's essentially Heineken Light, which is in decrease. It's very hard to sustain Heineken Light, because it is only 6% of the total franchise. So you're always lagging behind. And we see also that the whole Light segment in the U. S. Is in sharp degree. So that's one explanation. 2nd explanation is Amstel Light, same reasoning, but we don't put a lot of efforts anymore behind that Amstel Light brand franchise, which continues to have sales, but they are decreasing. You pointed yourself out to Ciner's. Newcastle Brown Ale is also underperforming. So that all added to the picture. And on the other hand, you have Dozecho still growing and Teckate, it's growing even stronger. So it's a mixed picture. Overall, we are doing okay ish in the United States. We derive a lot more profitability, partly to do that we are a more efficient organization today and partly also because we benefit from a stronger dollar. So all in all, the U. S. Is performing as a business unit quite well. And then finally in the U. S. And totally unrelated with Heineken USA because there are no managerial links, our joint venture with Lagunitas is doing also strongly. So we remain optimistic and confident in the U. S. Now when you now look into China, I don't think it is going down. It was up 9% in first half, 10% in second half. So it's quite sustained. So I mean, I guess that is what I can see out of the numbers. And what I have to say about China, the picture is a bit blurred because we have a lot of parallel import in China. So a lot of beers that come Heineken beer that we are not the only brand that suffer from that. So it's not fake Heineken beer, it's real Heineken beer that comes mainly through a diverse export organization and European countries because you have a lot of traders who are taking when Heineken is sold in Europe on the promotion some containers are kind of shipped to China. It's very difficult to control because we live in a free trade and China has no import barriers. And so if we would add an estimation of that, the growth rate in China would even be higher. So we're quite satisfied in on how the brand develops in China. Though I have to say, it remains a small business and we remain a very minor player in China. And we are totally super premium with the Heineken brand in China. But it's a promise for the future. So again, you have to see that China is a little bit like Cider in the U. S. It's a seeding business. Okay. And on your question on the rates, I'm not going to comment on financing on any proposed or potential acquisition. I'm just going direct you to the issues of bond that we had in 2016, where you see that we issued €800,000,000 at a 1% rate beginning of the year, early in the year. And later in the year, we issued another €500,000,000 closer to 1.400%, which is still extremely low actually in absolute terms. So definitely rates have been increasing, but we are still in very affordable and cheap quarters. We will take our next question. It comes from Andrew Holland from Societe Generale. Please go ahead. Your line is open. Yes. Hi. We've hardly mentioned Europe on the call so far, so I thought I'd lob one in on that. And I just wondered what you would say is the reason for a reasonably sustained improvement across Europe which has been running now for maybe 3 or 4 years. Is it fair to start talking about structural stability or even improvement in Europe compared to years of structural decline? And if so, what would you put that down to? And then secondly, could you also just give us an idea of what's happened in India, whether you've been affected by demonetization and whether you see any imminent changes in either management or shareholdings in that business? Starting with Europe, you're absolutely right to point out that it's now a number of years where we have been able to grow our business again. The fact that Europe has been declining for so many years had always and I've been always very clear about it, the major factor is demographics. The subsequent generation after the baby boomers were just less numerous between 15% 20%. And even if beer is as popular as it used to be, you just have less beer drinkers because you drink a lot of beer when you're young, I. E. Between your legal drinking age and 35, this is where it peaks. So that structural reason makes for Europe not to have been able to grow since 15, 20 years. So the baby boomers are fading out of the market. And between the X to Y and the Millennials, you see much more stability and even slight increase in many countries. So I think the bulk of the demographic pressure weighing on the total beer market is slowly fading out now. On the other hand, and that's in our own hands, it's we have had a period and certainly in the beginning of the 2000s and you remember that we have been devoting a lot of attention, let's say, between 2,030,010 to restructuring our network in Europe. We have been closing down 46 breweries and multiries across Europe. And if I consider Europe as the European Union, including the UK and including all the Central Eastern European countries of the EU. But we have been optimizing that network and it was painful and it was very costly as you remember. And when you do that, it's very, very difficult quasi impossible that people work and on the heavy restructuring, heavy lifting in restructuring and at the same time trying to build top line. Now we when we were more or less done with our restructuring and bear in mind that our European network has practically no overcapacity. Harbor to Rotterdam, our kind of flexible production point. But all the other of the countries have been pretty optimized. So nobody is kind of displaying overcapacity in Europe. So that provides already in itself for structural better margins, the capacity utilizations that we benefit from. That's one. But then since, let's say, 5 years, we started ago, we started to take the innovation rate as a tool and a measurement to build the top line again. And innovation took many phases. And I alluded to that in previous interventions already, it's about the Heineken brand, other premium brands, it's about craft and variety, no and low alcohol and about cider. But it's about all of these together, a lot of initiatives in all countries in Europe, which have been contributing to put the top line again in the right direction. And you can only build it when you come with products that consumers like and you have to try, some don't work. I said it, Radler Foster didn't work in the UK. So you dump it, but it worked in other countries. You have to try something out and see if it sticks. And when it sticks, you have a new business and you can grow that new business. And that is the whole idea about innovation whilst being disciplined in the fact that it has to be margin accretive because in Europe, our business has had the tendency of being commoditized with the off trade in the mainstream lager segments. And so it's very important for us to get out of it. And so non and low alcohol craft beers and premium beers are of course a kind of a first line of attention for us to rebuild the top line in Europe. That's exactly what we do. And if you sustain that based on a network that is more efficient and has been restructured, then you have a virtuous circle. So it's not a spectacular growth, but it's slow but steady growth. And then finally, and then I close because I want to be complete, consumer confidence in Europe is much better also. We all remember the crisis of 2,008 and that generated a number of years of really depressed consumer spendings, we are in a much better territory overall in Europe. You have seen countries like Ireland, Spain or Portugal, which have been rebounded spectacularly, as well as the UK by the way. Through those years, France and Netherlands have been more resilient in terms of consumer demand. So it's not everywhere in Europe the same thing. Greece is still very, very weak in the union. So there are a number of countries in Central Europe, which are still under pressure. But overall, I would say, our policy and our strategy has paid out and we will continue to walk that path. On India, so in India, they published their results, which is actually the 9 months result a few days ago. And they have commented indeed that in the volume of the last quarter, with the Q3 volume were minus, minus 8, a large part of that decrease was due to demonetization. The impact on the 9 months is minus 2% and which is ahead of the industry. So UBL has definitely outperformed, but demonization has had an impact. Now your question was on change one of the shareholders individually and have consequences of the one of the shareholders individually and have consequences of the Board of Directors of UBL and what is the management of UBL, which is the management of company. And I would say, is going undisrupted, as you can see, for their performance on the market and continuing to serve the best interest of all shareholders of the company. So I would really make a difference between what's happening with what you read in the newspapers, with sevee orders that the company has to and the shareholders have to obey at the level of the Board and the shareholders and what's happening at the level of the management. So no disruption of the management. Yes, I want to be crystal clear that management is appointed by the Board and has the full confidence of the Board to carry its duties forward. That's one. Secondly, Sebi has issued a executive order to dismiss the Chairman of the Board out of his function. It's not the will of the shareholders to do it nor from Board of Directors. It is just a court order that has to be that had to be executed. It's for Doctor. Malia to react on that if he wants to have a stay on that decision. It's entirely in his hands to go with these procedures. So we just have to enact as it is. And as to the shareholder, the rapport between the 2 promoters, as they are called, in the core shareholding, that's Heineken and the group of Doctor. Malia. We still are in a joint venture agreement. And even if the economic stake that we both hold in that venture are an equal that joint venture agreement still holds. And I have to say that over the last years and ever since we embarked on it in 2009, it always has been a properly functioning venture between 2 shareholders. That's what I can factually say about UB. Thank you. All very helpful. We will now take our final question. It comes from Komal Dillon from JPMorgan. Please go ahead. Your line is open. Hi, good morning. Just a few questions back to the Americas, please, and your significant margin improvement and organic EBIT growth there. Just quickly, you talked about positive FX transaction impact in the U. S, which was quite material. Could you maybe give us some more color on what proportion of the profit growth in the region was driven by the U. S? And then also in relation to that Mexico, so you had previously said that you were expecting total synergies of €320,000,000 between 20 10 2016. It looks like obviously you've surpassed that. Could you give us a little bit more color on where you are on that in that context? And then finally, on the interest guidance, you're talking about 3.1%. Does that include Punch on a and on a full year basis, what would the impact of Punch be on your interest line, please? Thank you. So no, the 3.1 percent is too early to include any impact from any acquisition. So that is not included. Coming to your question on Mexico, yes, we have given that number initially. In 2015, we did say that we were still seeing EUR 100,000,000 coming between 2015 and 2016. And then definitely, we've been delivering on that. And I would say, we will deliver even beyond, but on that, we don't give guidance anymore. Yes. We don't publish the numbers by country, but everything which was promised in 2010 for realization of synergies has been realized and even beyond. That's the only thing I can say. So it has been if you were do a post audit of that acquisition, it's a good one. And on the U. S. Transaction impact benefit? The U. S. Transactional cost? Is that your We don't write it down between sources. So definitely a good year for the U. S. It's a good year for the U. S. We hedge the dollars in the transaction always 18 months forward, if I'm not mistaken. And then when but we're not giving the impact of We're not giving the impact that one can realize that in terms of in euros, the U. S, this is the only currency that contributed positively. So that is correct to assume that we have had a positive headwind sorry, positive tailwind from the U. S. Dollar. Though in the hedge mechanism on the transactional volumes we have between the Netherlands and the U. S, all the rest are have been negative between the U. S. And Mexico and the naira, the Egyptian pound have been and the British and the UK pound. They're always weighing in the opposite direction. Okay. That's very helpful. Thank you. That will conclude today's question and answer session. I'll now turn the call back to your host for any additional or closing remarks. Host, thank you, operator, for having handling the call and all those who have been listening to our call. So I'd like to thank you all. And obviously, the team of Investors Relations are at your disposal for any clarifications you will have. So please do contact Sonia Goblian, who will handle your questions if you still have clarifications to ask. But again, thank you very much also in the name of Laurence for your kind attention this morning. Have a good day. Bye bye. Thank you. That will conclude today's call. Thank you for your participation, ladies and gentlemen. You may now disconnect.