Earnings Call: Q2 2015

Aug 3, 2015

Good morning, and welcome to the Heineken 2015 Half Year Results Conference Call. Today's conference is being recorded. There will be an opportunity to ask questions at the end of the conference call. At this time, I would like to turn the conference over to Heineken Management and Investor Relations. Please go ahead. Thank you. Good morning, everyone, and thank you for joining us today for our half year twenty fifteen results conference call. I'm joined by Jean Francois Van Boxmer, CEO and Chairman of Board and Laurence de Broz, CFO and Member of the Executive Board. Following some prepared remarks, we will open the call for your questions. And with that, I'd like to hand the call over to Jean Francois. Thank you, Sonia, and good morning, everyone. Let me start on, I think, slide 3 by saying that the results in the first half of twenty fifteen were in line with our expectations. We started the year at the start of the year, we highlighted that we were facing strong prior year comparatives and challenging conditions in a number of markets, including Nigeria and Indonesia. And despite this, year to date, we have delivered positive top line and profit growth, demonstrating the further progress we have made delivering on our strategy. Group revenue grew 2% with positive organic volume and revenue per hectoliter growth. The Heineken brand volume in the premium segment was up a healthy 4.7% with growth across most of the regions. The brand delivered double digit growth in a number of key markets. And on top of this, our portfolio strategy is working well with a number of our global brands having grown double digit in the first half of the year. Our innovation rate of 8.6 percent generated an impressive €854,000,000 of revenue. We saw market share gains in key markets during the period including Vietnam, the Netherlands, Poland, the U. S. And Brazil. As a result, group operating profit was up 4.7% organically. Diluted EPS was up 19% mainly driven by organic growth. It is important to highlight the half year results were in the context of a continued volatile global backdrop. Turning now to slide 4. Across most of our businesses, Africa starting with Africa. Beer volume in Africa, Middle East grew 2.8% organically. Volume in the second quarter improved primarily due to slightly better volumes in Nigeria. Ethiopia and South Africa contributed positively to volume growth. Revenue per hectoliter declined 1.1%, primarily due to higher volume growth the lower revenue per hectoliter countries. In Nigeria, volume was down in the low single digit for the half year with some slight market share loss. The Value segment continues to outpace the bear market and our volume growth was led mainly by our value brand portfolio, which puts adverse pressure on mix. Fuel scarcity also had an impact on the volumes in the period. Margins in Nigeria were impacted by adverse product mix, the Naira devaluation and increased inflation. The merger of our majority owned subsidiaries, Nigerian breweries and consolidated breweries, which completed at the end of last year continues to progress well. In Ethiopia, volume more than doubled and we are adding additional capacity here. Despite challenges in the current year, we see medium and long term growth fundamentals for the regions remain firmly intact. Now in the Americas, group beer volume was up 3.6% organically with positive growth in Mexico, Brazil and the U. S. Revenue per hectoliter improved by 2.8% with consolidated operating profit growth up a strong 8.6%. In Mexico, volume was up in the low single digit with higher pricing, cost savings and mix all contributing to profit growth. Easter timing and increased competitive price competition led to more subdued volume in the Q2. In the U. S, sales and depletions were both slightly up continuing to outperform the overall U. S. Fare market. Our Mexican brands continue to be the key growth drivers with both Dos Equis and Tecate Light volume up in the mid single digit despite weaker weather in the Q2 in key markets. Encouragingly, trends with the Heineken brand continue to improve. In Brazil, despite the World Cup last year, our performance was strong with double digit growth in Heineken volume and market share gain. Asia Pacific saw good volume growth for the first half and up 6 0.1%. Vietnam was the key driver of this growth and was complemented by strong performance in Cambodia, China, Korea and Taiwan. Revenue per hectoliter was down 1.1%, adjusting from negative or adjusting for negative country mix, this would have been up 3.4%. Vietnam was a star performer with continued double digit volume growth in the 2nd quarter. This followed the strong first quarter boosted by a successful Vietnamese New Year period. China saw volume growth in the mid digits with double digit Heineken growth. Cambodia was strong with volumes up double digit boosted by successful implementation of the portfolio strategy. Indonesia remained weak with similar trends to the Q1, mainly due to the implementation in April of the new alcohol regulation relating to the sale of alcohol in minimarts. Consolidated operating profit by increased a healthy 9.3% organically. In Central and Eastern Europe, despite group beer volumes down 2% for first half of the year, our strategy of focusing on driving value and premiumization delivered results. Revenue per hectoliter improved 2.7% and the region saw double digit profit growth. Despite volume down double digit in Russia, operating performance improved as a result of the premiumization of the portfolio through Heineken, Krusowice and Amstel Premium Pilsner. In Poland, whilst the underlying market remains difficult, volumes were up in the high single digits with some share gain. And surprisingly volumes remained under pressure in Greece and was down mid single digit in the first half of the year. Organically, the region's consolidated operating profit was up an impressive 15%. In Western Europe, the Not an Inch Back strategy continues with cost savings reinvested back into the business to drive growth. This was the region that in the first half faced the toughest comparatives as it was the main beneficiary of the Weather and Football World Cup last year. Volumes in the first half were down 3% with positive growth in Spain, France and the Netherlands more than offset by the high single digit decline in the U. K. The revenue per hectoliter was up 0.5% organically despite deflationary pressure and pricing pressure in the off trade in a number of key markets and most notably in the U. K. And France. In the U. K, market conditions were challenging combined with particularly tough comparatives, which adversely impacted the region's profits. In France, volume grew in the loss income. France volume grew in the low single digits with positive Heineken Desperados and African growth. Spain continues to show signs of an improving economic environment with positive volumes underpinned by growth in the on trade. In the Netherlands, we gained shares with volumes up in the low single digits. Regional operating profit was up 2% with the higher profits in Spain, Portugal and the Netherlands offset by the lower profitability in the U. K. Now turning to slide 5 that shows Heineken's geographical footprint, which we firmly believe provides us with the right balance of stability from more mature developed markets and at the same time higher growth from the more volatile developing markets. In the first half exposure to developing markets was a key driver of growth with organic volume revenue and operating profit by up. This more than offset the decline seen in the developed markets. In the first half of twenty fifteen, 64 percent of volume and group operating profit came from developing markets. Now turning to slide 6. In 2015, the Heineken brand volume in the premium segment was up 4.7%. Importantly, growth was seen across almost all regions and the brand continued its positive long term growth trend. The 20 year compounded average growth rate for Heineken premium volume is around 5%, not only growing ahead of the overall beer market, but also importantly ahead of the premium beer market. Double digit growth in 2015 was seen in China, Brazil, Vietnam, Spain and the CCU markets. Strong growth was also seen in France, South Africa, U. K. And Taiwan. In the U. S, the Heineken brand continues to show encouraging signs and is delivering positive share momentum. All regions with the exception of CEE saw positive Heineken brand growth. In CEE, volume was impacted by continued overall market weakness. Heineken brand equity was supported by a highly successful campaign around the UEFA Champions League, which was activated in 109 markets. With an exciting pipeline for the brand in 2015, including the Rugby World Cup and James Bond, we are confident about the remainder of the year. Of course, although Heineken remains our largest brand, we have a far broader portfolio driving the group results. Our global brands, Apligen, Sol and Desperados all delivered double digit volume growth in the first half of the year. Our regional power brands such as Tiger, Dos Equis and Tecate all continue to deliver strong volume as well. Our mainstream brands remain key in providing scale to grow the premium platform. Cider although slightly down in the first half of the year given weaknesses in the mainstream segment in the U. K. Remains an exciting and high potential category for the business. On slide 7, innovation remains a focus, a significant source of competitive advantage and a sustainable contributor to our profitability. The first half of the year saw further positive momentum here. Our innovation rate increased to 8.6 percent ahead of the 6% long term target. This resulted in an €854,000,000 revenue contribution delivering an impressive 26% CAGR from 2011. Bradel remains one of our innovation stars and it's present in 43 markets across all of our 5 regions. This continues to address the emerging theme of moderation creating new drinking occasion for all our brands. Radler 0.0 is now in 15 markets and we will expand this into further markets through the remainder of the year. The SUP, our at home draft beer system will be rolled out in China this month, our 5th market. This unique product provides access to a wide variety of our brands and provides consumers with a new and exciting route to market via e commerce. We are also continuing to lead innovation in the Cider category with the launch of Strongbow Cloudy Apple in the U. K. And further boomers flavors including Zesty Blood Orange as shown on the slide. Old Mut, our New Zealand cider continues to perform well. We launched cider in 10 new markets in the Central Eastern Europe region during the first half. Additionally, our priority brands are also showing strong growth boosted by rollout into new markets. We also continue to innovate with packaging. Present, I would like to hand over to Laurence Debruv to take you through the 2015 half year financials in more detail. Laurence, the floor is yours. Thank you, Jean Francois, and good morning, everyone. So let's go first to slide 9. And as Jean Francois said earlier in the call, we delivered positive top and bottom line growth in the 1st 6 months of 2015. And this was despite tough comparative given the good weather and the World Cup in the same period last year. Positive volume momentum as well as growth in revenue per hectoliter led to group revenue up 2% organically. Group operating profit was up 4.7% organically, driven by those higher revenues as well as cost efficiencies. Looking now at the consolidated numbers. Consolidated revenue was up 1.9% organically and consolidated operating profit BEA was up 3.4% organically with consolidated operating profit margin flat. The results benefited also from a lower interest cost resulting in net profit of €915,000,000 14% higher on an organic basis. The difference of €229,000,000 between net profit and net profit is essentially due to the exceptional gain from the sale of AMPAK, the Mexican packaging business in the Q1. And finally, diluted EPS of €1.59 was 19% higher than the same period last year. Free operating cash flow remains robust. And at the end of the first half year, our net debt to EBITDA ratio was 2.4 times, so slightly below the level of June 2014. Let's move now to Slide 10. Slide 10 shows the year on year growth in revenue. On an organic basis, group revenue, so including our shares in JVs and associates, was up 2% and reached €10,900,000,000 Consolidated revenue increased by 6.7 percent after a favorable currency impact of €469,000,000 more than more than offset a small negative consolidation impact. Organically, consolidated revenue increased by 1.9% and this is underpinned by 0.8% volume growth and 1.1% revenue per hectoliter growth. Group operating profit, BEIA, on Slide 11, was up 4.7% organically. Consolidated operating profit was up 6.5% after a 5.1% favorable impact of currencies and a 2% unfavorable impact of consolidation, again mainly the sale of Impeque in Mexico. Organically, consolidated operating profit was up 3.4%, driven by higher revenues and cost savings. Let me provide now some further insight into costs across the business. 0.6 percent organically. Input costs declined 0.3% per hectoliter on an organic basis. Marketing and selling Bayer spend increased to 13.9% of revenue from 13.4% last year, and this increase was driven by a deliberate step up in brand investments, primarily in the Americas. On a regional basis, the Americas was the main driver of the organic operating profit there growth with Asia Pacific and Central and Eastern Europe also positively contributing. These three regions together with a stable Western Europe more than offset the weaker performance in Africa and Middle East. Slide 12 now walks us through the development in reported EPS over the half year period. So EPS up 19% with 3 quarters of the increase coming from organic growth. Favorable currency also enhanced EPS by €0.09 and the adverse consolidation impact, as you can see from the chart, was relatively small at EPS level with just a few euro cents related to the divestment of Mpake. If we look at the free operating cash flow on slide 13, It remains solid with €486,000,000 in the period, lower higher lower, sorry, than the €571,000,000 last year. The decrease is partly due to the working capital change during the period and also, but to a lesser extent to higher CapEx. Regarding change in working capital, it is important to say that last year, peak sales in Q2, linked to the World Cup, led to higher receivables, but also disproportionately higher payables, resulting in a lower than normal working capital position. The comparison should correct in the second half of the year. As in H2 of last year, working capital returns to more normalized levels. Consequently, we expect the change in working capital for the full year 2015 to be more in line with 2014. Coming now to CapEx. We continue with our strategy to invest ahead of the curve, focusing on our high growth markets. In the first half, this was reflected in a CapEx to sales ratio of 6.1%, higher than in the same period last year. And we do expect CapEx for the full year to be higher than last year at €1,700,000,000 Consistent with what we have said before, around 75% of the CapEx in H1 is allocated to developing markets. Projects in the first half including extensions in Brazil, China and Cambodia. We opened a new brewery in Myanmar in July. We will open 1 in Shanghai during the second half of the year. And in the coming year, we will be investing in further capacity expansions in Ethiopia and Mexico, for instance. At the same time, we continue to have a sound cash flow generation and a healthy balance sheet. Our net debt to EBITDA ratio decreased from 2.5x at the end of June 2014 to 2.4 times 1 year later. And our long term target for net debt to EBITDA remains a ratio below 2.5 times. Finally, turning to our 2015 outlook. We expect to deliver further organic revenue and profit growth in spite of the continued challenging external environment. We continue to expect positive organic revenue growth with volume growth more moderate than 2014 and weighted towards the second half of the year. We will slightly increase our marketing and selling spend as a percentage of revenue versus 2014, and this reflects continued higher planned commercial investment focused on innovation, premium brand growth and outlet execution. Input costs in 2015 are still expected to be slightly lower, excluding the transactional effect of currency movements. And as you know, we target a year on year improvement in consolidated operating margin of around 40 basis points in the medium term For 2015, and as previously stated, this will be adversely impacted by the sale of Empeque, which we will partially but not fully offset. So this is in line with our previous margin guidance. As for CapEx, our guidance for the full year has been increased to €1,700,000,000 and this is €100,000,000 higher than stated in February due to the impact of currencies. It is also worth confirming at this point that when we issue our Q3 press release on October 28, this will be under the new regional structure and as such with 4 regions instead of 5. And obviously, ahead of this, we will provide you with restated 2014 and first half twenty fifteen results. On this, I hand over to Jean Francois for conclusion. Thank you, Laurence. And in summary, our first half volumes were solid and in line with expectations. Importantly, the results demonstrate ongoing momentum and continued progress against our strategic objectives. Revenue management and further cost savings taken together with the results underpin our confidence in the medium term margin guidance. We remain committed to delivering on our strategic priorities. We continue our focus on innovation, strong execution and to invest in our brands. The organizational changes announced in March have been now completed. This will accelerate delivery on our strategy and will better position us for the future growth. On that note, Laurence and I would be happy to take your questions. And operator, if you could now open the lines for the Q and A. Thank you for having paid so much attention. Thank you. We will now take the first question from Andrea Pistacchi from Citi. Please go ahead. Yes. Good morning. I have two questions, please. The first one, if you could talk about Nigeria in a little more detail. What drove the volume improvement in the quarter? Is this the comp? Or is there something else? And how is ACE Route performing? And also on Nigeria, whether you started to get the benefit of merger synergies in this half year or are they more back end loaded? And then just more broadly on Western Europe, you've normally been quite cautious on the outlook for Western Europe, but you highlighted in your prepared remarks the you're seeing some signs of macro benefits on volumes in Spain. So more broadly, is there any reason to be a bit more optimistic on the outlook for Western Europe in places like Spain, Italy, Ireland where the macro has clearly improved compared to a year or 2 ago? First on Nigeria, I think that we are let me put it that way. The macros we are struggling against in Nigeria, I think, is much lower oil prices, and that puts pressure on the economy. That's the context in which we operate. So it's a much more difficult market than it used to be for macro reasons. That does not take away that we still believe that medium- and long term Nigeria remains a very good proposal for us because it has a sector emerging in non oil, which is strong. It has emerging middle classes, a high urbanization rate. So all these things give us confidence that Nigeria is going to be good for us and for our industry in the years to come. That is the macro context. And as maybe as regards to synergies, we I mean, the companies have announced synergies expected of nir5 1,000,000,000 in 2015, nir6.5 1,000,000 in 2016. This is already coming along, so pretty evenly spread over the years and all dropping to the bottom line. Yes. Can I just on Nigeria, can I could you just comment on Ace Root, which you launched in March, how that's performed in the quarter? It's still relatively new product. We push it to national. And yes, it's doing well, but one has to realize that in that segment, we are clearly a number 2. So because it is an RTD as we call it and it is not let's say our core business. It is a competitive response, but so far so good. We are expanding the distribution of that product. It seems to be an emerging trend. And you never know whether that's going to last or not, but Nigerian Breweries has a good distribution machine. And so we operate that brand with pretty decent margins and above mainstream. So it is a good proposal for us. And so on Western Europe? Yes, Western Europe. On Western Europe, you're right. It's a very scattered picture in effect. I have to say that on Western Europe, most of the countries have been doing well and you see noticeably improvements in Spain. I would say that this year the country which has a little bit more headwinds is the U. K, A difficult retailing environment, but also tough comps on the World Cup perhaps more pronounced than in other countries. I don't know. But you see clearly the U. K. Is the market that struggles the most in our portfolio this year. The Netherlands have been performing well in terms of share, but also overall markets and markets like Spain, Italy is withholding quite well. So yes, you're right to point out that the macroeconomics are a bit better in Europe. But one has to still and I'm always cautious on Europe, because I think that the competition will remain high. There is no inherent growth in Europe because there is no population growth. But we are happy with our premiumization and innovation focus in Europe and our focus on market share and in particular value market share that we are making good progress. And indeed the conditions overall are a bit better. Thank you. Thank you. And the next question is from Tristan van Strien from Deutsche Bank. Please go ahead. Good morning, Jean Francois and Laurence. Just two questions. One on the marketing spend, which increased and you highlighted the Americas. So I just wondered if you could give a bit more color on that, what you're spending in that region? And the second one in Poland, some strong results there. I guess part of that is because you're relisting in If you strip that out, was the market still in growth for you? Or how should we think about Poland beyond the one off this half? Thank you. First the ethylbtl in the Americas, it's essentially a phasing exercise more loaded to the first half than to the second half. And secondly, particularly in the U. S, we continue to have a healthy spending behind the cider category and the launch of Strongbow Cider, which is a deliberate effort of us to do. And then on Poland, Laurence will Yes. On Poland, we actually don't quantify what is linked to ZAPCA. ZAPCA is an important factor. I mean, we are saying very transparently that the underlying market remains difficult, continues to be impacted adversely by negative channel mix, and that's pretty much it. Okay. So just to back on the U. S. Then, the side is back in growth in the U. S. Are you growing strongbo at the moment? We are growing Strongbow, yes, absolutely. Double digits actually, yes. Thank you very much. Thank you. And the next question is from Ian Shekelham from Nomura. Please go ahead. Yeah. Good morning. Two questions. I mean, firstly, how should we think about South Africa after this year once the JV around brand houses collapses? How will you run that business going forward? And the second question was, I see you sold your wholesaling business in Poland. And I just wonder whether that was a precursor to exiting wholesale in other parts of Western Europe. Thank you, Ian. The South Africa, it's collapsing the JV not collapsing our business obviously. It was a natural moment to part ways with Diageo. We do that in a very orderly way, because we have common distribution channels and logistics operators. So it is not you don't have to see it like a brutal divorce. It is going our ways, them concentrating on the spirits portfolio, which they have been developing quite nicely over the past decade. And we have been developing the premium end of the beer market in South Africa, and we feel comfortable to go ahead with that. The cycle in South Africa is longer. Investment mode. We still see Africa in the investment mode. We still see potential for growth in that market in the premium segment. We have been rearranging our joint venture with 2 partners, so with Namibian Breweries, as you have been seeing. So we continue with the partnership, albeit that we are a majority in South Africa and our partner of Namibian Breweries is the majority holder in Namibian, but we continue to work in close collaboration to push not only our Heineken and Amstel brands and Amstel Life, but also the Winthorpe brand, which doing well. So we continue to see in South Africa and in Namibia opportunities to grow in the premium sector of there and we can work on our own legs. And then your 2 second question the wholesaling in Poland. You have to realize that our wholesale operation in Poland is totally geared towards distribution to traditional retail. And that is a segment in distribution, which in itself is in decline, and it is poised that distribution has to consolidate there. So what used to be fairly core 2 decades ago for growing our business in Poland is not anymore. So that is the reason why we have decided to sell our business to people who are more specialized in distribution to traditional retail and bundle that with larger portfolios. That is essentially the deal we did. That does not mean that we're going to divest all our wholesaling operations in Europe. For the reason, for instance, and if I take one comparison, it's France where France Boursin is the leading wholesaling organization, but totally specialized towards distribution to the on trade, which is a very different way of doing wholesaling. So we look at wholesaling on a country by country basis and we look whether it can boost our core business in beer and cider or not. And that drives the decision to keep it or not. So just coming back on South Africa, it sounds like you're ruling out still any move into mainstream beer? I will never Iain, you will understand that comment on competitive statements. We have been always deliberate and we are good at developing the premium end of the market because we have also observed that that has been growing the fastest. And by us, by the way, concentrating on that segment, our competitor has done also. And you see that that segment of more premium priced beers have been growing quite a bit in South Africa. So we are happy with that strategy. Thank you very much. Thank you. And the next question is from Trevor Stirling from Bernstein. Please go ahead. Good morning Jean Francois. Good morning Laurence. To me going back to the marketing and selling and I suppose following up, should we be expecting to see some similar level of increase in the second half? And I think in the call in particular you emphasized outlet execution. I wonder if you could just give us a bit more color about where the increased spend on outlet execution is going to take place and what sort of things are you planning to do? We are we have guided towards slight increase in ATL, VTL as a percentage of revenue for the full year. And this is still what we're seeing happening. So yes, I could confirm that it's going to happen half. As regards outlet execution? Laurence is looking at me. I'm jumping on the track in government sales at Crate and Clear this morning. But that's exactly that. So what we meant to say here, we often talk about our strategy in terms of we are skewed to sell more premium propositions and we are also skewed to being more on innovations. And by that saying, innovation is to go in the trend and offer more choice to the consumer. But at the same time, a part of our increased marketing and sales spends are also dedicated to be more efficient at sales outlet execution. What do we mean? That is a very much local market by market approach, some markets more than others. But think about the market like Nigeria, where we are significantly building up our coverage of retail outlets, A market like Nigeria, and I take that only as an example, is a market that is works a lot with independent distributors historically. So they are acting on our behalf and selling the beer as wholesalers. But at the same time, we are increasing our merchandising push directly to retailing seeing that this market has become much more competitive lately. So we are investing that. And that is what is called outlet execution. It takes various forms and in the in the U. K. And how we work with Tesco, for example. That is what we mean by sales execution. And we remain very committed in being top of the build there, because it works hand in hand, the pull and the push. So the marketing, creating the best innovation, the conversation, that goes hand in hand with the push, which is make sure that you are at outlet level correctly priced, cold beer and not out of stock. That is what we have to concentrate on. Very good. Thank you very much Jean Francois. Thank you Trevor. Thank you. And the next question is from Chris Pitcher from Redburn. Please go ahead. Yeah. Good morning. Thank you very much. Could I get a bit more detail on your Polish business? You talked about high single digit volume growth in the half, whether that was an acceleration in the second quarter driven by the relisting. I know you mentioned that earlier. But specifically on the revenue growth, I mean looking at Zeviate's results today, you've got very negative price mix. Was it just the volume coming back that caused that profitability step up in Poland? And more broadly on Eastern Central and Eastern Europe, you talk about Russia, Poland and Romania all contributing to the strong margin performance. Is it an equal contribution? Or was it mainly the Polish move that drove that? Thanks very much. Thank you, Chris. All of them contributed to the margin, including Russia. It's counterintuitive with volumes going down, but we have been taking price. We have been restructuring and the premium end of our portfolio in Russia has been performing well. So all three together has led to lesser volumes, but better profits. That is 1. Then Poland, yes, the relisting of Zabka has an important contribution to volume. Price mix is perhaps deteriorating by then. But at the same time, if I look, we have been struggling in Poland for quite a number of years now, and it feels like we are in a better shape here. And probably impact is more positive on Q1 than on Q2. Thank you. Just in terms of the negative price mix because with Zivyatch numbers down 3% in revenue terms and limited impact I suppose in that from the wholesale divestment actually no impact from the wholesale divestment. You're looking at down high single, low double digit price mix in Poland. I was just trying to work out whether that was the sort of the rate you should see for the year or whether that was an impact of this relisting coming in? That's what I was trying to get to, sorry. So revenue per hectoliter is down as you were saying and it is definitely going to keep being a challenging market over the year, yes. Okay. Thank you. But the gross margin is actually up. So you have to look at both sides of the equation. Thank you very much. There's lots to work with. Thank you. Thank you. And the next question is from Olivier Nicolai from Morgan Stanley. Please go ahead. Hi, good morning Jean Francois, Laurence and Sonia. Just got two questions please. First in the U. S, you said that your sales to retailers grew 0.2% in H1 and you're obviously gaining share. But could you give us an idea of how your Mexican portfolio is doing against your main competitor? And also regarding the European imports, the Dutch portfolio, is it still in decline in volume terms, although I understand less than the markets? And just a second question, a bit boring for Laurence. Just regarding the slight increase in CapEx, is it linked to a new project? Or is it just to reflect the euro weakness against most currencies? Thank you. Should I take the boring question first? I'm the boring one. So let's go ahead. CapEx, no, the increase in the forecast for the full year is linked really to ForEx. Then in terms of main projects, and you've seen that anyway, the 1.6 or the 1.7 is higher than what we had last year. Last year was 1.5. And actually, the increase is really this was 1.5. And actually, the increase is really the investing ahead of the curve in a number of countries, talking about Ethiopia, talking about expanding in Vietnam, Mexico, Myanmar, Shanghai in the second half. So all these things, that's what comes in and explains the higher CapEx this year than last year. But really the difference between 1,600,000,001,700,000 is about foreign exchange. Thank you. And then for the for our U. S. Business, Heineken brand flattish, slightly up in terms of market share. So that is what so in terms of share, we have continued to slightly, but very little step by little step improving our competitive position, whereas the Mexican portfolio is still growing mid single digits. So it is kind of a contrast, but overall, our business is doing well in the U. S. And we have the Cider, of course, booming, but from a very, very low basis. So it is building for the future, which we are currently doing. There were some floodings in the Q2 in the U. S, which affected a bit the business. But overall, our business is doing well. We are quite happy with the results of the U. S. And we see the Heineken brand slowly turning the corner. But it is, of course, a slow process and you have heard me saying that many, many times. Thank you very much. Thank you. And the next question is from Karl Zwett from Rabobank. Please go ahead. Yes. Good morning all. Thanks for taking the question. Two questions please. First one is on Nigeria. You mentioned adverse mix trends in this market for quite some quarters now. Can you quantify the decline in revenue per hectoliter in local currencies you've seen over the last say 12 to 24 months? No, we're not providing that granularity. Right. And the second question would be on margin expansion in Asia. That was quite good despite of the adverse price mix effect we still see. What has driven this margin expansion? Price mix actually when you look at Asia is really country mix. If you take away the fact that we're growing in lower prices country, then you actually have an underlying effect, which is very positive. So that helps. All right. And then a follow-up question is on the U. S, which is now doing better for some time. But the price gap between your brands and the market has declined. At what point would you feel comfortable to take a bit more price in the U. S? I recall the last one on the Heineken brand on a national level has been quite some time ago. Yes. The U. S. Is an environment very close to what Europe is. It's an environment which is not inflationary on consumer pricing, one has to realize. Now the price gap with mainstream brands has been declining slightly if you consider that over a 10 year period, but not lately, if I'm correctly informed. So one should have said, we're very much in terms of pricing depending on what larger competitors are doing. And often we see the practice of going in with a price increase and then rolling them back anyhow. So that is a little bit and what we mostly do in the U. S, it's of course not taking account of a general price increase. It's very selective. It's state by state, channel by channel. So those are when you act on pricing today, you're not acting on listing prices like we were doing that a few years ago. It's much more granular. That is what revenue management is called for. You do it client by client, SKU by SKU. And so the effect is not always noted as being a large signal. These kind of price increases where you say as the 1st January, our price increased so much and so much of the whole range, they don't work anymore. So they are not practiced anymore in the industry. All right. Thank you. Thank you. And the next question is from Andrew Holland from Societe Generale. Please go ahead. Yes. Hi. A couple if I may. Firstly, just looking at the impact on your revenue and then on your operating profit from disposals. Obviously, Empek is the main one. You've lost €20,000,000 from disposals of revenue €29,000,000 of operating profit from disposals. Can you just explain those two numbers? It looks like slightly strange numbers, so much higher EBIT than revenue? And the second question I have is just related to what you're saying about U. S. STRs for your Dutch portfolio, if your share is flat to up. I'm just looking at the most recent import figures, which showed Dutch imports up 5.6%, so quite a mismatch between imports and well shipments and STRs. Can you explain that difference and how you would explain it to the SEC if they came calling? So I can take the question on Empaque. And actually, the difference comes from the fact that when you sell we sell Empaque, we take out from the consolidated figures the 3rd party revenue. But we are we were a client of Empaque and we still are. So actually, when it comes to taking out the profit, we still have to expense on the bottles that we buy outside and actually we buy them outside now. So which is why you take disproportionately higher amount of operating profit. Laurence was hoping she was clear. I hear the Yes. It's easy to run you through that maybe, I mean, whenever we do that because it is a mechanical impact and that's an easy one once you've seen numbers flow through. Okay. Yes. So that's a promise for a particular course on how it works. Absolutely. I've got a very good one when I arrived because it is counterintuitive in the end. Yes, it is. And then on your question on the U. S, it's a bit of a tricky question, my friend. We run always a difference between shipments and what we call the depletion, and we manage these. And I don't think I would have any problems in explaining the differences, which are highly seasonal or seasonal related. And there is nothing in the pattern, which is it's abnormal. We have been running these differences for years years years. There is nothing which I'm which would make me nervous at all. Okay. Thank you. And just one other one on Poland coming back to that again. Relisting has been very helpful by contrast to your competitor, major competitor there. Are there any delistings that we should know about? Because there seems to be an awful lot of that going on in Poland. Is there anything that is going to affect you adversely that you should be flagging to us perhaps? Nothing that we are aware of. Okay. Thank you. Thank you. And the next question is from Sanjeet Aula from Credit Suisse. Please go ahead. Hi. A couple of questions please. Jean Francois. You talk about a relatively soft pricing environment, but price mix has sequentially improved in Q2. To what extent do you to what would you attribute that to? And how do you think that shapes up in the second half of the year? And also just on the net interest expense, I note that the average interest rate in the first half was 3.2%, but you're still keeping the guidance at around 3.7%. I just wanted to get a sense of why that would be. Thanks. So I understand that quite a few people found us conservative on that one. I'm talking about the one about the financing costs. Yes, 3.2, we have quite a few variable interest rates in there. It might be a bit conservative, but we prefer to keep it that way for now. Got it. And your first question sorry, I'm not sure I understood it well. It was just really on the pricing environment Jean Francois. You talk about a relatively soft pricing environment. However, looking at your Q2 numbers, your revenue per hectoliter was stronger in Q2. I just wanted to get a sense of what you attribute that to and how you think that shapes up in the second half of the year? Well, we had to we took price in Mexico in Q2 and we had also selected price taking in Nigeria on parts of our portfolio. Those are kind of big actions. And for the rest, a lot of our pricing comes in gradually as we tend to launch innovations which are higher revenue per hectoliter and the Heineken brand is performing well, which by definition always has a higher revenue per hectoliter. Now all these factors, they contribute to a better revenue per hectoliter. Sure. Thanks. Thank you. And the next question is from Gerard Reek from S&S Securities. Please go ahead. Yes. Good morning. A few questions, a few follow ups. Concerning the strong Heineken premium brand growth, can you also offer a number for the global brand growth? Because I understand that the others are growing sometimes with double digit numbers and maybe that's a better number than only the Heineken number. That's my first question. Then well, I heard your remark about the interest rates about the difference, but also about the tax rate. Is your tax rate guidance also too conservative because it was down substantially in the first half? Or is that in line statement for the full year? Is that the correct one? And then my third question is on the, well, quite surprising strength in Eastern Europe for several half years for a long time, you have seen declining EBIT numbers year on year. Now it's suddenly up. Concerning, do you see this as a sustainable improvement as really a change in this division? Or is it relatively temporarily also in relation to the fact that your competitor in Poland already also returned again to Sabka listing. Maybe you can elaborate on that. So I'll start with the tax rate. Actually regarding the tax rate, there were a few one offs in the first half. So we are really maintaining the guidance at 29.7%, so comparable to what it was last year, this is the exact guidance. So don't make the first half as being necessarily indicative of what's going to happen for the full year. So second half will be higher year on year tax rate versus second half 'fourteen? If that's the case, yes, that would be. But so we give yearly guidance. And here, I mean, you always have one off 1 year or the previous year, and that plays in the first half. Okay. So the global brand growth rates, we just indicate whether they are doing well or not, single digit or double digit, but we don't give the precise number for competitive reasons. We do it for Heineken because the brand is so big and it represents such a big part of our business that it's as big as the region. So therefore, we give it Heineken. We won't give it for our other international endeavors for competitive reasons. And CE, yes, I hope that we turn the corner. It's structural work we try to do. Of course, you always come back to the Polish affair, and it's true, I can't predict totally what it's going to be. But the groundwork we lay in Central Eastern Europe, it is there also to invest in innovation, there also to be overweight in the premium segment, because there is an appetite for premium beer in the context of a beer market, which in many countries has lower beer prices. So the reason the more that we over index into premium beers. These markets are by definition a bit more volatile than let's say the Western European markets, but in their competitive behavior, they start to be very similar. And we apply kind of the same commercial and marketing policy than everywhere in Europe. And is there something really specific that really changed since the last well, maybe the last 10 years of decline in Central and Eastern Europe? I don't think we have been declining for 10 years, but we started to decline with the financial crisis. So we have had a kind of an upswing from the early '90s. It has been a growing business up into 2,008. And then you have seen that in many countries the per capita consumption started to stagnate. All big international players have been investing in that region. So you have a kind of a very healthy competition between big players there. And when the market stops growing, of course, prices go down that you learned that in all economics faculties, isn't it? And so for them, Central and Eastern Europe was not an exception. It was over skewed towards value proposition and mainstream and very little to premium. And it takes time to build the premium segment. And we have been doing that for quite a number of years. It's perhaps now that we start to see the effect of it playing. Then the second thing is we also have to adapt to a very big shift in terms of trading channels in most of these countries. When we started our business in the mid-90s and I've been working in Poland myself in the mid-90s, the bulk of the market was traditional retail. Today, it is evolving towards any other European market with a large part of the volume driven towards organized retail. And of course, that calls for a different approach. And underway, quite some margin has been lost, but that is those are competitive dynamics, which you could have foreseen of course 10 years ago. And those are forces that you can't do a lot, but to adapt to and I think we are doing that. Yes. I ask this question because the Heineken global brand only grew by 0.1% in first half. So I don't see it really in the numbers of the global brands growing strongly. Well, that's correct. But then you have also to take into account that in Central Europe, we have a heavyweight, which is Greece, and that is really falling through the cracks heavily. And it's in that region that it is put. And Greece is a big was a big market for Heineken, but it's suffering a lot. And that in the mix, you don't see it country by country. Some do it better than other. But the skew towards the premium portfolio in most of the countries works well. Okay. Thank you very much. Thank you. Thank you. We will now take the next question from Richard Wittigian from Kepler Cheuvreux. Please go ahead. Yes. Good morning. I have two questions. First of all, on the Africa Middle East region, in the past you've mentioned a couple of reasons why the margin was down like country mix and the growth of your value portfolio. Could you perhaps talk about the continued pressure of these on your margin over the next 2 to 3 years? Do you see that easing off in the medium term? That's the first question. And then second question is on Vietnam. It seems like you're doing very well over there with double digit growth for the Heineken brands and also you're saying Tiger is doing very well. Perhaps you could talk a bit about the consumer environment in Vietnam and also about your market share? Thanks. The Africa, it's I think it's a bit difficult to go into predictions. I think that for the macro reasons that I indicated before that you have that higher growth of urban tissue. You have towns are growing much ahead of the total population. Total population is growing and the urban population is growing ahead. And in many countries, you have these growing middle classes. That is what constitutes the main reason to believe and to invest in the future. In some markets like Nigeria, we come from fairly high price levels. And under competitive pressure and macro pressures, these price levels are just going down and it's for us to adapt to that. But if you take into consideration the size of the market, the size of our scale and market share and the medium to long term perspective, I think the Nigerian business will continue to grow even if you don't have to dream perhaps to return on the short term to margins that we had 2 years ago. That is a little bit how you should think about it. On the other hand, Ethiopia starts at margin levels which are lower because there is no premium market at all at this moment in time. It's a market which is growing at an incredible pace, but with mainstream brands and mainstream brands, which are relatively if you compare it with Nigeria, it's at much lower price points. But again, if you took it mid- to long term, there will also be a the development of a premium segment in a country like Ethiopia. So not all the African countries are at the same stage of development going forward. And even if Africa and the Middle East has been one of our primary growth engines for more than a decade. It's perhaps so that since the second half of last year, it's a little bit lesser than it used to be. That is no reason to think that in the future, it won't contribute to the growth of Heineken even if if on the short term, we might have some hiccups in that growth model. That is for Africa. And your question about Vietnam was a question about share, I believe. Yes, your performance, I mean, you're doing very well. It seems like the Tiger brand, the Heineken brand is doing well. So what's the consumer demand? It's a final statement. We are doing really very well. The Tiger brand is absolutely on fire. I think it has been the right thing to reposition that brand as a mainstream plus brand. It has a lot of growth. The good news is that Heineken is back on growth. Also it had suffered the years before a little bit of overheat. I still stay very concerned to that that it is not overheating. The Heineken brand is already big. We had an exceptional good debt in Vietnam. And the debt season is, of course, the season where you buy premium products, if you will. So that contributed also to the good growth of Heineken. I don't know if we give particularly our market share in Vietnam. And to be frank, I'm just looking at my it's going up, but it's 23%, 4%, 5%. That is volume wise. In terms of value, we are much ahead of it. I would say that in market value, we would be market leaders in market volume. We are a very healthy and growing number 2 in Vietnam. Thank you. Thank you. As there are no further No, I have no closing remarks. Otherwise, I'm saying thank you, operator, for having led us through, and thank you for listening to us. And despite the challenging external environment going forward, we continue to be committed to deliver on the expectations and the outlook that we have posted. If you have any questions, please do contact the Investor Relations team. Thank you very much for your attention today, And I wish you a sunny and bright day for most of you who are in London. Bye bye now and also on behalf of Laurence. Good night. Thank you. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.