Earnings Call: Q3 2015

Oct 28, 2015

Slides

Good day, ladies and gentlemen, and welcome to the Trading Update Third Quarter Results 2015 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Heineken Investor Relations and Management. Please go ahead. Good morning, everyone, and thank you for joining us today for our Q3 2015 results conference call. I'm joined this morning by Laurence Dubrow, CFO and Member of the Executive Board. Today's call follows the usual format. So after some brief prepared remarks, we'll open the call for your questions. With that, I'd like to hand the call over to Doron. Thank you, Sonia, and good morning, everyone. So before taking your question, let me take you through some brief slides highlighting the key developments in the quarter. Strong performance in the Q3, which was in line with our expectation and consistent with earlier guidance, and I'm sure we'll come back to that. That came on easier comparables, but also quite a good summer weather in a number of countries, mostly in Europe. Within this context, the consolidated revenue was up 7.5% organically with revenue per hectoliter up 1.8 percent. And actually, if you exclude negative country mix, revenue per hectoliter would have been up 2.2%. Looking at beer volume, it was up 5.4% organically with positive growth momentum in Europe, Asia Pacific and Americas. And in the region Africa, Middle East and Eastern Europe, volumes were flat for the quarter. As for the Heineken brand volume in premium segment, it was up 3.9% driven by strong performance in Americas and in Europe. We have revised our full year guidance for foreign currency translational impact as well as tax and interest rate, all other 2015 outlook items remain unchanged, including our full year operating margin guidance. Moving now to Slide 4, I'd like to provide a little more detail on the region for Q3. So in the quarter, volume was flat in the region Africa, Middle East and Eastern Europe. Excluding Russia, world volume would have increased mid single digits. I would, however, mention specifically on Russia that premiumization continues to drive strong revenue growth and this also benefits the region's revenue per exoliter, which was up strongly at 7.2%. In terms of key markets, Nigerian volume was up mid single digit in the quarter, so an improvement in trend compared to H1, but still with negative mix as value keeps outperforming mainstream and premium. And Ethiopia continues to be a strong performer with volume up double digit. Moving now to the Americas. Volume continued with the same momentum as in the first half. We saw strong growth with beer volumes up 6.7% organically. And this, coupled with 4.2% growth in revenue per hectoliter, drove double digit organic revenue growth. Mexico continued to deliver both favorable volume and price trends. In Brazil, the premium portfolio kept its impressive growth profile with volume up double digit. And in the U. S, sales to retailers were ahead of the overall market, thanks to the success of the portfolio strategy and the continuation of Heineken Brands turnover trends turnaround trends. Beer volume in Asia Pacific now, it was up 6%, still driven by a strong momentum in Vietnam and Cambodia. Volume in Indonesia continues to be strongly impacted by the implementation of the regulation banning the sale of alcohol in minimart and as a consequence still down double digit. Also the decline was less pronounced here than in the previous quarter. For the region, revenue per hectoliter was down 3.2%, and excluding adverse country mix, it would have been flat. Finally, in Europe, beer volume growth was 6.8%, driven by good performance across almost all markets. This was partly due driven by softer comparables from last year and also some favorable weather in most, but not all, countries. Weather particularly helped volumes in Italy and France as well as in Poland, which also kept benefiting from the relisting at an important modern trade customer. UK volumes improved on the prior quarter due to good growth in the off trade and they were up mid single digits. And as for revenue per hectoliter for the region, it was flat, largely as a result of the general deflationary environment and more specifically of off freight pricing pressures, which we did highlight to you in previous quarters. So this definitely continues to impact markets like the U. K. And France. Moving now to the Heineken brand. Heineken brand grew 3.9% in the quarter, taking year to date growth to 4.4%. So this reflects a strong quarterly growth in markets, including Brazil, the CCU markets, the UK, Italy and Spain. But in Africa, Middle East and Eastern Europe region, volume was lower, given in particular lower volume in Nigeria. And in Asia Pacific, volume was also lower, largely due to weaker volume in China, Taiwan and Korea. Heineken volume growth was positive in the U. S. We see continued signs of the brand's turnaround. And obviously, overall volume growth in the quarter was supported by the successful Cities campaign as well as the Rugby World Cup sponsorship. We are also very excited about the James Bond sponsorship, which is now stepping up in the current quarter. Slide 6 now takes you through a breakdown of consolidated revenue growth, driven mainly by organic growth of 7.5 percent with consolidated volume of 5.7 percent and consolidated revenue per hectoliter growth of 1.8%. And as you can see in the graph, the impact of consolidation and currency were more limited. With that, I would like to hand back to the operator to open the line for your questions. Thank you. And we will take an opening question from Trevor Stirling of Bernstein. Please go ahead. Your line is open. Mr. Sterling, please go ahead. Your line is open. Mr. Sterling appears to have withdrawn their question. Our next question will come from Olivier Nicolai of Morgan Stanley. Please go ahead. Your line is open. Good morning, Leon and Sonia. Just two questions, please. In Africa, Middle East, could you just give us a bit more details on the working capital growth? You obviously have a very strong growth, but when I did some calculation, I cannot find out that Russia is growing in terms of price mix at plus 30%. Could you just give us a bit of clarity there if it's really the case? And also in Poland, could you just quantify the relisting impact that you had at Jatkari? And is it now in the base? Or is it going to continue for Q4? Thank you. The line was not excellent on your first question, but I think I still got it. It was on the impact revenue per hectoliter in Russia, impact on Africa, Middle East, wasn't it? Yes, absolutely, yes. Because Russia, I guess, is what if they were small, like going to be probably less than 20% of total. Actually, a very impressive impact on revenue per hectoliter coming from the premiumization and also some pricing mix in Russia. So this is really major in the quarter indeed. And on your question on Poland, we don't quantify it. It's still quite important this quarter. Bear in mind that this is not impacting 4th quarters. So this is one of the things that you will not see as a favorable impact in Q4. And underlying trend in Poland also a bit better with the favorable weather impact in Q3 are still pretty challenging. Thank you. Our next question comes from Sandeep Ayoola of Credit Suisse. Please go ahead. Your line is open. Hi. Just a quick question on the margin guidance, please. Given the operating leverage that you've on 5% volumes, I just want to understand a bit better as to why the margin guidance is unchanged for the full year? Thanks. Okay. So this is a bit of the trick of communicating on a quarterly basis. And I'm going to give you a number of elements here and doing something that is quite unnatural and trying to play down beautiful expectations. But I think it's very important to get it right. This is a strong quarter. When we look at the full year, it is in line with our expectations. There is timing in promotion. This has impacted the number of markets. It comes a bit earlier, a bit later. You see that on the volume, we shouldn't get like overexcited about it. What you are seeing is at the end of Q3 and in Q4, you do have some negative transactional impact from currencies in a few countries, countries like Mexico or Nigeria. That's fully integrated in the way we look at our guidance, but that's still coming. As I said, you have a bit of flattering of the volume by promotional timing, and that's for instance in Mexico or in Nigeria. In Poland, I would just mention as an answer to the previous question, the relisting, which also plays favorably. Nigeria, let's talk again about Nigeria. We do say very clearly that, yes, volumes are better and this is don't get me wrong, this is really good news. But the mix is still very much weighted towards value at the detriment of the mainstream and premium. And that does play on the margin. So when we give you the guidance, we do integrate all of that. And that's still something that will play in Q4. So this is the reason why we didn't upgrade the guidance. Thanks. And just a follow-up on that. Is it safe to say we should have you've gone through some of the moving parts in the other regions, but if we just focus on Europe more specifically, are you comfortable that we can get full year margin expansion within the European region? We don't as you know, we don't give guidance for a region on the margin. Okay. And just a final one on the underlying trends in Mexico and Nigeria. I know you alluded a little bit there to some timing of commercial activity. But are you seeing genuine sequential improvement in underlying demand in those markets? Are there market share issues there that may be distorting those numbers a little bit as well? If I start with Nigeria, in Nigeria, the comps are getting a bit easier, that we said in the first half. So that helps. So it's always a good news when people go out and have a beer. What we see is that the underlying macroeconomic issues are still not resolved and that doesn't help with the portfolio, that doesn't help with the premium. So that's what I would say about Nigeria. Regarding Mexico, besides the impact of promotions on the volume and timing of promotions on the volume, there was good weather. And then the I would say the environment on pricing is slightly better than the one we described in first half. Great. Thank you. Our next question comes from Tristan Van Strain of Deutsche Bank. Please go ahead. Your line is open. Hi. Good morning, Sonia. Good morning, Laurence. Just to follow-up, just two questions. The first one, just to follow-up on Sanjeet's points. It looks like in the Americas, Brazil and Mexico is driven a lot of it by strong share gains besides the promotional side of things. Do you think these share gains are sustainable at a similar pace? Or how should we think about it going forward? And the same in Brazil, how sustainable the share gains in the premium segment considering the weak economy there? And maybe just a second question. On your Cote D'ivoire deal with you've decided to partner up with CFAO rather than going on your own in the market. Just why you've decided to do that? And should we think about the relationship beyond Ivory Coast into other Francophone African markets as well? Okay. So we do not update on market share on a quarterly basis. But what I can tell you for sure is that in Brazil, premium is still strong and that we do see we do see a case for increasing market share of premium. And because we're playing very well in that segment, that definitely helps us. On Cote D'ivoire, yes, we've chosen to partner with the CFO. It's actually a good combination where everyone invests, so it's good partnership. And then we're contributing our brand and our growing expertise, and they have an in-depth knowledge of distribution in the local market and particularly in Cote D'ivoire. So not excluding anything, but really it made plenty of sense in Cote D'ivoire particularly to go with them. And currently do you have any other partnerships with them in Africa? Just Brazil. I don't think Brasovil, but other than that, no. Okay. All right. Thank you very much, guys. Our next question comes from Carl Walton of UBS. Please go ahead. Your line is open. Yeah. Hi, guys. Just wanted to ask a little clarity around the improved guidance on tax, whether that's definitely sustainable going forward, the key drivers of that and just how to think about that line going forward, please? Thank you. Okay. Improved guidance of tax, you have a few small one off elements. You also have the fact that the number of countries actually in contacts is becoming a little lower. The countries are doing what they can to actually incentivize businesses a bit better. As you know, we also have things playing in the other direction. So I wouldn't guide down on tax on the midterm. So because I think there are a lot of things coming our way, but this is still a positive sign that you have countries reacting and then trying to help the businesses. And even in Europe, which I and that's playing for this year. Okay. So this is more just for this year, but yes, not really changing your The number of the positive are going on, but I would expect that there were always some negative cooking in taxes. The UK, for instance, has lower income tax for businesses and that's going on and that's going to be helping us in coming years as well. But it's as you know, it's a complex question and it's made of many countries. Okay. Thank you. And then second question, just on Heineken Brands improvement in the U. S, kind of early days, but any particular trends you speak to or seeing change in or key things driving that or key activations that may have driven that? Clearly, the James Bond it's good to see that last quarter that's on positive. Very good, I would say, very successful marketing strategy in the U. S, turned around the image of the brand, Heineken like, still good, the TV, Neil Patrick Harris TV ad is working. And then also, I mean, Americans are becoming more excited about soccer. So that's a good thing for us. All in all, I mean, a number of elements. And again, still early days and then we're not talking about massive growth, but it's a very good achievement for us because Heineken brand is an important brand for us in the U. S. Also for our image and that's the name on the door and we are the Heineken company in the U. S. Perfect. Thank you very much. Our next question comes from Robert Voss of ABN AMRO. Please go ahead. Your line is open. Yes, hi. Good morning. I have a few questions. At half year results, you said to expect beer volume growth to be skewed to the second half. But you also said to expect total beer volume growth in 2015 to be lower than what was reported in 2014. I did not see a renewed comment on this statement, so this implies that it is maintained. If so, it also implies flat to slightly lower volumes in the 4th quarter. That seems rather conservative. Can you comment on that? That's my first question. 2nd, yes, you mentioned the general slowdown in the economy as the reason for the volume decline in China. As far as I know, you are only present in the premium segment over there. Can you explain why in China there apparently is a much stronger relation between economic growth and growth in premium than, for example, in Brazil? And related to that, do you see any negative impact at all on your operations in Brazil from the more difficult economic conditions over there? And then finally, difficult to answer, I know, but if you were to strip out the favorable conditions of the weather in Europe and other nonrecurring items, what would roughly have been the underlying volume growth rate in Europe in the quarter? Thank you. Okay. So starting with the question on our guidance on volume growth. No, we're not changing that guidance now. Again, timing of promotion between 1 for a quarter and another plays a role. Still the number of moving parts, a number of uncertainties. So we're keeping it as is now. It's not significantly enough changed that we would want to update it. Even though I agree with you, this looks quite favorable, I think from here, but not significant enough that we change it. Really, timing between quarters plays really a role here. Then your question about China, yes, indeed. Indeed, some weaknesses in China. Fortunately, that's not material for the group. And I would know I would see a different trend in Brazil, again, because the penetration of premium is going very fast and because of the building of this segment that we're doing in Brazil. Market underlying is quite different as well. But yes, in China, that's for the Q1, we did see what we've heard a lot of our competitors, friends and other fast moving consumer goods people companies say that the trend is really a bit more difficult. Finally, on the weather, so we are not breaking that down into different elements. Even without the weather impact, growth is pretty healthy, and that's really on the back of easier comps and also on the premiumization of our portfolio. Our next question comes A couple of questions, if I can. Can I just come back to Mexico, Laurence, just to completely understand what drove the acceleration in volume growth there? From what you said earlier, was it really the timing of promotional activity coupled with the favorable weather? There hasn't been any early moves in terms of underlying pricing that we should be aware of in terms of shipments versus depletions, how that will play out Q3 versus Q4? And then secondly, I wonder if you could talk a little bit about just the Indonesian regulatory backdrop. There's been chatter that we could see some rollback of the ban on sales in minimart. Where are we with that? Is there any sign of any developments politically on the ground in that regard? And then thirdly, I wonder if you could just talk about the performance of ACE Routes in Nigeria in the quarter. Mexico. So volumes on Mexico were up high single in the high single digit in Q3. So they really they benefited from strong growth from Tecate and Dos Equis. And also, I'd say, favorable weather and some timing on promotion. And really well executed promotional campaign in the market, but also see signs of a more favorable environment in Q3. That's what I can tell you about Mexico. On Indonesia, it is we are less negative than we were. There was a change in Minister. I would say we're back at the dialogue and we are talking and we're around the table. It's very early, so still very cautious, but at least we're around the table. We can express the fact that we do support fighting against underage drinking, binge drinking, and that we don't think this is the right way to do it. So I'm a little we're a little more optimistic. But in fact, I mean, the regulation hasn't changed. So it's still in place. And your last question was about ACE Route in Nigeria. So ACE Route is okay. What we do see at the RTDs level is that the growth is slowing. So we don't expect RTDs to take massive shares in the future. It's going to remain a pretty limited phenomenon. Brilliant. Thank you. Our next question comes from Karl Zoete of Rabobank. A couple of questions. First one with regard to cider that seems to improve during the Q3. Is this weather related or do you see a broader based improvement there? The second question is with regard to the impact of the acquisition you did with the Achal of their assets in Jamaica and in Malaysia. What will be the impact on a top line level in the Q4 of that, more or less, and the profit impact, say, for 2016? Thank you. Okay. So yes, Cider had a very positive performance. And so with volume up double digit, and you see that strong book performance was very impressive in Europe and in the Americas. Cider in the UK was definitely more positive than in previous quarters. And you do know that cider is a category that we're building in a lot of countries, but where it's already big is in the UK. So the behavior in the UK definitely does have an importance. On your question on the JV impact, we will update you later on that one. So we've just closed and this is not going to be very significant in Q4, but we will I mean, you will see that in 2016, but definitely not giving detailed number at this stage. Thank you. Our next question comes from Anthony Boakalo of HSBC. Please go ahead. Your line is open. Good morning, everyone. Good morning. Just two quick questions on the U. S. The first is the Heineken brand after many years of decline seems to have stabilized and is returning to health. Can you speak to why that's happening now? What you're seeing in the market that's getting Green Bottle Heineken back into growth? And the second question is on the Lagunitas, I guess, the JV with Lagunitas. Can you sort of explain the strategic rationale behind that? It's not necessarily clear to me what you may be trying to get out of that? And also the you're sort of now in Goose Island's backyard with this arrangement. Can you just sort of speak to it? Okay. So on the Heineken run, I tried to answer it earlier, but I'm obviously not a convincing market here. So I'm going to try it again and probably do a poor job again. So marketing definitely marketing policy and reviving the interest for the brand, advertising campaign, very witty and successful advertising campaign seems to be bearing fruit as we so as we speak. And the fact that we have Heineken Light back on TV also works for us. So positive trends and very encouraging trends, again, early days, but encouraging trends on both Heineken and Heineken Light. On Lagunitas, craft beer in the U. S. Is a very, very interesting space. Basically, what's growing in the U. S. In beer now is Mexican beer and craft beer. And when you see that it's 11% of the market in the U. S. And it's forecast by most analysts to be 20% of the market in a few years. That's definitely somewhere where we want to play. There is a trend towards craft beer in other countries, but the U. S. Is very specific also because of its distribution system. Now when you look at the craft beer universe, there are not that many actors that have some critical size and not that many actors that are actual brand builders over a long period. And that's really what we related to when we looked at Lagunitas. These people have been around for more than 20 years, building patiently their brand. And today, they have really a category defining brand in IPA. And within craft beer, IPA is by far the segment which is growing the fastest. So that's where we came from, coming from being in a very interesting space, a growing space with people, partnering with people that we also have a common language with, not only the language about the product and the passion for the product and the quality and the taste, but also about the building of the brand. And actually, if you look at a lot of craft beer, Lagunitas attracts more consumers' loyalty than many of them. So there is really this brand building element. We see a case for bringing Lagunitas internationally, not as a massive brand, of course, that's not what it is, but as a markets are demanding to have right now. And that's a very interesting development both for us and for the Lagunitas founders. So I don't think we are in anyone's backyard. I hope we are in our own backyard when we go with Lagunitas. And when I really look at the forecast of growth, which we feel are strongly documented and which we really believe in. I'm very positive about this acquisition, both what we're going to be able to this partnership to learn, what we're going to be able to bring to them in terms of international expansion and how it will develop on the U. S. Market. Do you does Slegon just have national or near national distribution right now? Or are you going to sort of help in there in building a bigger footprint, both domestically specifically? Domestically, they're doing quite well. And we are going to keep the distribution networks totally separate. I mean, this is really we're going to run it separately. Internationally, what they do now is very tiny. They're present very symbolically on 2 or 3 markets. So that's where we're really going to be able to put it on the back of our distribution network. Thank you very much. Our next question comes from Javier Gonzalez Lastra of Berenberg. Please go ahead. Your line is open. Yes. Good morning, Laurence. Just a few questions on Nigeria. Just wanted to understand on ACE routes, if you could give us some indication how big that business is now within your Nigerian operation? And whether ACE Routes is accretive or dilutive to price mix and margins in Nigeria? And when you mentioned that RTDs are slowing in Nigeria, do you mean RTDs generally or is your business, Ace Routes already slowed from the growth in the initial months of the launch? And lastly, on the merger of the entities in Nigeria, is there any synergies or cost benefits that we should expect maybe in H2 or fiscal 'fifteen overall? Okay. So your question RTD, yes, my comment related really to the RTD category as a whole, which is slowing, not us. Ace root is small to our business and will remain small to our business. And the price at standard beer does not dilute mix, definitely not. Now coming to your question on synergies, we're still on the synergies that we communicated upon, which is upon, which is N5 1,000,000,000 this year and an additional N1.5 billion to come into a total of N6.5 billion materializing from 2016. And that's what we communicated, that's what they communicated upon at the time of the merger and getting confirmed and on track to deliver that. So just to clarify, so in fiscal 'fifteen, we shouldn't expect any benefits from that? Yes. The N5 billion synergy is already materializing in fiscal 15. That's in the results of this year. It's an additional NAR1.5 billion that you will see next year. And just coming back to ACE routes, you say that the pricemix is not it's not diluted to the pricemix, but is it to margins is not dilutive either? You know what, it's pretty small to us, really. I'm going to Nigeria for the first time next week. I promise you, I will be a specialist of ACE Route when I come back. Okay. But right now, I will stop my comments here. Okay. Thank you. Our next question comes from Richard Whithagen of Kepler Cheuvreux. Please go ahead. Your line is open. Yeah, I have two questions. First of all, can you talk a bit about the Heineken brand performance in Mexico and in Vietnam specifically? And the second question is on the buyback. Should I read it that the buyback is postponed or canceled altogether? And related to that, what net debt to EBITDA level do you expect to exit the year? Okay. So about the buyback, we have decided to well, discontinue means that we stop it. We stop this program. We should be around maybe slightly above the 5 at the end of the year. We've announced quite a list of acquisition partnership ventures, Greenfield in this quarter. And then it's always the same objective to come back pretty quickly to the 2.5 or below. Your first question was on the performance of Heineken brand in Mexico and in Vietnam. Mexico on track, but you know that the Heineken brand is quite small in Mexico. And Vietnam Q3 was a bit more difficult, but year to date is okay. All right. Thank you. Our next question comes from Kamal Dhillon of JPMorgan. Please go ahead. Your line is open. Hi, good morning. Just a quick question on the UK, please. So substantial change in the country in terms of your underlying your trends. So quarter up mid single digit down in H1. I know H1 was impacted by World Cup comps and higher competition. But could you give some color on what exactly is going on in the market? Any tangible shift in underlying trends? Thank you. So as you were saying, H1 comps were impacted by a number of favorable elements last year. Q3 comps were impacted by a particularly bad weather last year in the UK. So not to say that we had a great weather this year, but the difference is already visible. So that really plays a role. So no change in terms of competition or underlying? Off trade developed. The trend is difficult in the overall market and it's still not an easy market and with the trend on pricing is pretty difficult. We are very pretty happy about the performance, even if you strip out the impact of the weather and also of the comps. Pretty happy about the performance in off trade. Okay. Thank you. Our next question comes from Andrew Holland of Societe Generale. Please go ahead. Your line is open. Yeah. Hi. Just a question. If I've done the math right, then the head office eliminations line in the 9 months is minus 488, in the Q3 it was minus 182. If the Q4 was the same number approximately as it was in Q3, then the full year number would be about 670. Euros Is that the sort of number that we should be expecting because that's somewhat higher or a bigger negative than currently in consensus? It's really a mix of a lot of this. And we don't split that number. We can definitely take also offline the detail of head office technically, but I wouldn't forecast the 4 quarter on that basis. When you say you wouldn't forecast it on that basis, and in other words, you wouldn't forecast it on the basis that it might be similar to Q3? No, not necessarily similar to Q3. You don't have enough info because we don't give the breakdown of these things. Right. Okay. Okay. Thank you. Our next question comes from Andrew Stott of Bank America Merrill Lynch. Please go ahead. Your line is open. Yes. Good morning, Laurence. Good morning, Sonia. I had a couple of questions. First of all, on a reminder of the brand. So the volume growth double digit in Desperados sold premium in African. Can you just remind me of the key territories for each of those? I'm just trying to contrast that with Heineken obviously. The second question is related to transaction. You obviously cited that as one of the reasons for not raising the margin guidance. I'm just going back to your Q2 comments and a very specific hedge rate of a 95% coverage on your transaction in U. S. Dollars. So basically, 503 plus 527. So what am I missing? Is this just a different transaction issue not related to the U. S. Dollar? Absolutely. You get the point. We give you a detailed impact on U. S. Dollar. We're talking about basically emerging countries currency and more particularly, so countries where you have to actually say in what we're giving you is our exports from Heineken, Netherlands to the U. S. And that's what we're giving you. And then here we're talking about us from Europe. Here we're really talking about Mexico and Nigeria specifically, which is not included. Okay. And can you put a number on that effect? No, I won't, but you there are currently you can't agent Iran, for instance. And you do have to buy even though we are pushing local procurement and local supply, you do have to buy a number of things in U. S. Dollars when you're in Nigeria. Okay. And then your other question was on the main markets for our other global brands. Well, Aflhygm, which is a brand I knew very well before I came to Heineken even because it's big in France. That's one of our biggest markets for Hafleyheim. Desperado originated in France as well. So it's also big in France, but it's big in Spain, Netherlands, and it's pretty successful in Brazil as well. And then when we talk about the sole premium market, we talk I would say really by far the biggest market for sole premium now are Brazil and the CCU market outside Mexico. Perfect. Thank you very much. Thank you. Our next question comes from Gerard Wick of S&S Securities. Please go ahead. Your line is open. Yes. Good morning. Can you hear me? Good morning. Yes, good morning. Yes, two questions. First on the U. K. You indicated the mid single digit increase. You also mentioned the weather comps. Well, in my view, the weather comps were not so favorable for the UK. But concerning the mid single digit increase, is that including the Strongbow improvement? Or is the mid single digit only for the beer business? And to be more specific, Strongbow has improved, but what has really changed in your execution in the UK off trade business versus what we have seen before? That is my first question. 2nd question, you mentioned about upcoming transactional ForEx effects in specifically Mexico and Nigeria. And you are, I think, referring to the Q4. Is that impact also moving on towards 2016? On the ForEx, yes, the impact will be moving on 2016. We I mean, we've hedged what we could, but in the number of currency, you can't hedge much. And then definitely, you will see some of that in 20 16 as well, absolutely. Regarding the UK, well, I'll let you I mean, estimate I understand your opinion about the weather, but that does play a role. What we are seeing in the UK is that, yes, if you take cider as well, we're in the same ballpark of growth figures. UK, there is like a strong portfolio management and innovation is key in the UK. You do see the traditional brands suffering, so you do need to innovate and fuel that market with innovation. And actually, one of the way we do that is through our pub estate. And we've been very successfully doing that through our pub state, which is now very profitable. And then I would say impressive for me, who joined the company recently. And this is a way where we can actually test and bring to the market innovation. So I would say this is paying off in off trade. And if you look at the innovation rates in the UK, it's definitely far ahead of the group typically, yes? Okay. So the improvements in the club and space? But you also mentioned the World Cup in Q3, yes? This is something not to forget. Yes. Concerning the UK mid single digit increase, is that mid single digit increase that you mentioned, is that in beer or is that in beer plus cider? It's a mid single digit increase in beer and in cider as well. Okay. So that's the group of beverages. And then concerning the Mexico and Nigeria transactional effect, you mentioned that as an impact on the margin for the rest of the year. Can you elaborate on that? Absolutely, because it's a margin on our costs, because those people had to buy some of their raw material. And again, it's a long term and it's really our goal to get to dominant raw material supply from local sources, but they still have to buy a significant amount from abroad. So that's really that weighs on the cost. That's why you're taking margin. Yes, that will happen in many other emerging markets. Are you already starting to increase your price in these specifically affected emerging markets? Well, the capacity to take price in Nigeria significantly is I mean, you have to relate that to the comments which we make about the macroeconomics and the fact that today's mainstream is really what the value is really what's winning against mainstream and premium. So again, in emerging markets, we've been present for a long time. We've been present since 20s in Africa. We know there are bumpy times. I mean, issues with the currency will happen and they've happened in the past. Long term, that's where the engine of the world consumption growth is. And there is no way around that. I don't want to make the marketing of some of our competitors, but the reason why people look at Africa now and we've been doing that for a long time is because that's where you see the trends in terms of demographics, urbanization. So yes, that will weigh on costs. That does weigh on margin. But long term fundamentals are intact, and we're still very positive about Africa. And when will the price increases the compensationary price increases be weighted? Is that in the first half twenty sixteen or the second half twenty sixteen? I wouldn't talk about compensatory price increase. Will talk about long term trend of growth in those countries and portfolio management. Again, in Nigeria, you need to see the macroeconomics become a bit more positive because we can actually before we can actually place the portfolio. We did raise price on part of the portfolio. So that's not price raising price to compensate from for the NERA, but that's just our policy and our portfolio policy. In the first half, we did. But pricing remains difficult in Nigeria. Okay. Thank you very much. Difficult in Nigeria. Okay. Thank you very much. You're welcome. Our next question comes from Eamonn Ferry of Exane. Please go ahead. Your line is open. Hello. Hello. Hi, Laurence. Hi, Sonia. Just a question on the share buyback. I'm just struggling to find the rationale for canceling that for what would appear to be a relatively small sum, I. E. Incremental amount on top of what you've already done. Just keen to get your views on that and maybe to push you again, what do you envisage your leverage of Heineken being once the recent acquisitions have gone through? Thanks. Okay. So actually, when we announced the share buyback, we announced it as strictly related to the Empate transaction. And we did say that we were going to initiate that share buyback, but that if I mean, we were possibly we would interrupt it at any moment, because really the 2.5 goal is the most important and it will all depend on what the pipeline of acquisition partnerships and Greenfield would be during the year. It has been a very, very active pipeline. So nothing major individually, but when you add up all of this, we've actually been working on the footprint, adding this and that, doing what I would call string of pearls, which is working well for us right now. So which is why we think it's consistent with the way we approach the share buyback and not as a massive element, but that's something that we felt we could do and that we felt we could also stop in light of the acquisition. So I get your question, I get your point, but that's definitely the angle that we took. Sure. And the pipeline today, I guess, post the announced acquisitions, I guess, it's still looking fairly healthy, is it? We're not commenting on M and A, but the team of M and A people is never idle here. I guess not. Thank you very much. Our next question comes from Wim Host of KBC Securities. Wim Host of KBC Securities. I have a question on promotional activities. It was mentioned, I think, specifically with regards to Mexico. But I just wanted to get your thoughts around, yes, how much was on the group level, the promotional activity, the marketing spend ratio? It was up already a bit in H1. Was it skewed for H2 towards the Q3 and we will see less promotional activity in Q4, for example? I would appreciate your thoughts around that. Thanks. So we're keeping what we told you about the marketing and selling expenses as a percentage of revenue for the year, so slightly higher than year. Nothing that would derail us from that, and we will definitely update you with the full year figures. Okay. But how should we look at Q4? Was there a skew within H2 to Q3? Or will it be fairly evenly spread between Q3 and Q4? You should look at Q4 like I'm not upgrading my margin guidance and then our margin guidance and we're like pretty comfortable about it and maintaining it as it is. Okay, understood. Thank you. Thank you. I think if we could take one more question, please. We will take our next question from Chisholm Ufoni of Chapel Hill Denham. Please go ahead. Your line is open. The question appears to have been removed. I would now like to turn the call back to the speakers for any additional or closing remarks. Thank you. So no further questions. I'd like to leave the call there. So as I mentioned, believe this is a strong quarter. This is a very good quarter. It is in line with our expectations. And for us, it's really consistent with our 2015 full year guidance. Again, I'd like to thank you for joining us today. And obviously, our Investor Relations team is available for any further questions. Have a good day. Bye bye. Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.