Good day, and welcome to the Denone Q3 2018 Sales Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Nadia Ben Salem Nicholas, Please go ahead.
Thank you very much, operator. Good morning, everyone. This is Nadia Bensalem Nicola, Head of Investor Relations team of Tenant. Welcome to Danone's conference call for its third quarter sales, which will be given today by CFO, Cecile Cabanese. Before we go through 2 related to financial indicators, definition and forward looking statements.
For the Q And A, in order to allow as many as possible people to participate. Please be so kind as to limit your number of questions and weigh them all at the time. And with that, I hand it over to Cecile Cabanis. Thank you, Rafael.
Good morning, everyone. Thank you for joining us today. I will move straight into Slide 3. You've seen that, we have registered a quarter with 1.4% like for like sales growth, which is reflecting notable progress, especially in rebalancing and broadening the growth profile of our business. If I go through the categories, the company delivered another quarter of meaningful acceleration in essential dairy and plant base, both in North America, which registered a 5th consecutive period of growth improvement, but also internationally with a significant step up in its performance.
Waters registered a very good performance, notably in Europe with a high summer season. And finally, as expected, specialized nutrition posted its 1st negative quarter as a result of a contraction in ELN China after 12 months of exceptional performance. Let me go through the details, starting with the bridge on Page 4. Going through the bridge in the third quarter 2018, consolidated sales stood at 1,000,000,000, down 4.4% on a reported basis. This is primarily due to negative impact from currencies, minus 5.3%, reflecting the of the euro against the Argentinian peso, the Turkish lira and the Brazilian real mainly, which all depreciated by 20% or more in the quarter versus expelled by 0.5%.
This is entirely due to the disposal of Sony Field that occurred last year in August. Moving to the like for like growth, 1.4%. The growth continued to be driven by value at 3.3%. With volumes decreasing by 1.9%, which is mainly due to Morocco and the contraction of Early Life attrition sales in China. Value contribution to growth was driven by the continued effort in enhancing milk, in each category with product innovation that are launched at the higher net sales per kilo or liter compared to the existing portfolio, and was compensated partly by negative country mix due to the ELN contraction in China.
The value growth also resulted from targeted price increases in the water business and to a lesser extent in the U. S. EDP, helping to partly offset inflation on PET and U. S. Transportation costs, respectively.
And we had some specific price increase in inflationary markets like Argentina. I will come back to Argentina and they are continuing implication later in the presentation. With the underlying performance of each reporting entity in the third quarters. First, I think it's important to note that if we take the 9 1st months of the year, both Specialized Nutrition and Watchers, which represent 50% of the business are growing more than 5%. And we have had significant progresses in our agenda for the growth on EDP as a whole.
If I start with EDP, which represents around 50% on our sales on the quarter EDP Norham delivered 2.7 percent like for like sales growth, driven by solid volume growth, 3.4% and a minor negative value effect lower than what we had in previous quarter. 2nd, essential and dairy plant based international posted flat sales despite the impact on the full quarter on the ongoing consumer boycott in Morocco that weighted almost 3% points. So this is a really great progress that, that we have registered in EDP International and this positive progress versus last quarter. Mostly came from improvement in both volumes but also coming from the continued Validation strategy of the business. Specialized Nutrition sales decreased by 1.5%, The volume growth turned negative this quarter, 3.9%, while value growth remained positive, but slowdown to 2.4%, reflecting primarily a contraction in Early Life Nutrition China sales that I will comment on later.
Finally, Waters delivered a very strong quarters with like for like sales growth at 6.4%, including a strong rise in value contribution, which is reflecting, what I was mentioning on targeted price increases and also the benefit from successful value added innovations in beginning of the year, especially on Ecuador. So let's move now through each of the category have some deep dive on the performance drivers. I will start on Page 7, with, in Naran, we are, overall, very pleased to report the 5th quarter of acceleration in a row so that today with 2.7% growth and 3.5% growth if we exclude fresh food, EDP NorAM is really representing the new growth engine for the company. If we go through the different segments, yogurt segment delivered solid growth in Q3 and achieved 34% market share in the U. S.
This excellent performance was realized through our leadership positioning, especially in fast growing segments like probiotics, kids, and plant based, but also top velocity in our innovations. And I will comment on your growth on the next slide. Silk and for delicious, posted strong growth in plant based segments, thanks to a buoyant demand on net based product. Innovation in adjustments, such as so delicious smooth and innovations in format around the Silk brand. Are also part of the and we are changing, that to recover the growth on that part.
Growth in coffee creamers was strong in Q3, with ready to drink and better for your creamers as key contributors. We also added a new license with Belize, that will further enlarge our offer in the 20 coffee creamers category. We had some better news in the premium dairy, where Horizon is improving, volumes are turning positive. Sales were reinforced by Gallon format and value added offer, while still being slightly negative versus last year. So given all these progresses, we see EDP in Iran in Q4 around the same performance than Q3 If I move to the next chart, I know that there had been quite a few questions about, especially the attractiveness of the yogurt category in the U.
S. The truth is that, as I mentioned, I think before, the Eagle category is composed of different realities, and that's what you can see on the chart on the left part. You have on one side, the Greek and Regular segments, which are suffering. And on the other side, you have kids, indulgence and new trendy segments, which are increasing in weight and growing strongly. For example, our plant based yogurt is still small in retail, but already represents as a category, more than 10% on the natural channel.
And this is a channel where the Yogurt category is growing globally. We are clearly there in the most dynamic yogurt segments with Activia in probiotics, animals in kids yogurt and silk and soda leashes in plant based yogurt. So this over exposure to the fast growing parts of the category is allowing us to consolidate our leadership in yogurt as a whole and to improve our mix because these segments are better valorized than the rest of the category. Lastly, the potential of the category better on your growth continuously increasing the shelf space dedicated to your cost. If I move to EDP International, So as you've seen, the sales were flat overall and up 2.6% if we include the impact of the Moroccan boycott.
Every region has made progress in Q3. Europe made another significant big steps towards full stabilization, and I will share that in a minute. Russia delivered another quarter of growth superior than 5% in a category led by valorized yogurt. Sales in Latin America were up mid single digit, While Mexico and Argentina keep delivering strong growth, all the improvement versus Q2 came from Brazil. In the country, the sales were still decreasing, but all the action that we've implemented, and I shared with you over the past quarters, both on portfolio and what to market are starting to pay off.
We also re launch silks through our own sales force. In at PAMA, sales declined with Morocco continuing to be severally affected by the boycott of the Central Brand. Sales in Morocco were down approximately 35%, especially in the mill category, while your goals are now improving. Given the strong progresses and the continued headwinds, we expect overall for EDP International, a for that will be roughly in line with Q3. Going on Page 11, where you can see the Europe, progress in Europe.
Sales growth was slightly negative, and the performance has been improving for the last 18 months, execution, local relevancy and disruptive innovation are the main drivers of this continued progress of our stabilization. I said in Q2 that some countries like UK and Nordics were growing solidly. This is still the case. Spain is showing good progress as well. We are putting on the shelf, a slate of innovation such as light and free, some new on the go serial topping by Activia.
Then it has been relaunched as well with new visual identity and results promising. In France, we are rolling out the denim view and Activia Tutsur as well as the demand from the world. And we activated a call for action towards our consumers where all the sales that we achieved in France on September 21st. From all denim products were devoted to regenerative agricultural project to favor biodiversity the result exceeded expectation with more than 5,000,000 collected. If we go on a brand, per spec active, Activia, our biggest brand in Europe is well on track, growing in countries, representing around 40% of itself.
In Italy, for example, sales were up double digit, thanks to a successful activation around probiotics and 0% fat range. Alpro continued to deliver another double digit growth quarter with sales led in part particular by Net Based beverages, plant based alternative to yogurt and ice cream. We continue to expand in France and Spain, and we pursue our top line synergy plan deploying the brand in Poland started in July. Finally, young and local brands continue to be at the core of our strategy with light entry. I mentioned it in Spain and leave the verge at ongoing double digit.
Moving now to Specialized Nutrition on Page 13. I told you at the beginning of this year that the growth rate for specialized nutrition was going to be unbalanced during the year. We expected H2 to be significantly weaker after 12 months of exceptional growth in China. And as a result, Specialized Nutrition posted in Q3, a sales decline at -1.5%. This decline is entirely linked to Early Life Nutrition, while Advanced Medical Nutrition grew solidly this quarter, again, both in pediatric category, which performed well, driven mainly by products for faltering growth in all regions and also in the tube segments where we launch in several countries, a new packaging called Uptree, which offer a better tube feeding usability and safety for patients and is also better for the planet as it's recyclable.
Moving to the performance of Early Life Nutrition. It was negative on the back of a steep drop in sales in China of around 20%. Outside China, early life nutrition registered solid growth in Asia and particular Indonesia, we are gaining market share. In the U. S, we registered double digit growth.
And in Africa, Middle East growth was very strong too. On the other hand, we are Europe affected by social and mainstream media coverage after the formula upgrade in July of Amel in the UK, where the brand lost locally market share. We put in place a communication plan to better convey the product benefits and safety and restore parents' confidence, but it will take time. Beside Cowen Gates, our 2nd brand in the UK was relaunched in Q2 in Q3, sorry, and results are excellent. This allowed us to particularly, to partially compensate optamil market share.
This upcoming innovation has been successfully launched in several other markets, in Europe, so it's really a situation that is locally affecting UK. Let's now go through China on Page 14. And focus on the different drivers of the sharp contraction that we've seen in Q3 with, as I said, sell declining at around -20 percent with negative volume but positive value effects. It's overall stream and factors, that we already mentioned. It's the base of comparison.
It's some changes in market dynamics especially given the lower number of birth in 2017, continued premiumization and continued channel shift. So if I go through each of them, the performance was first due to an unfavorable year on year comparison, if you remember, last year, Q3 sales rose by more than 50%, including, at that time, strongly talking call border player. The second driver around changes in market dynamics is following the slowdown of birth that we had in 2017, where we have a decline in volumes on products stage 1 milk and stage 2 mix. So it's 0 to 6 months 6 to 12 months. Growing up meals remained pretty dynamic, but we expect it to progressively soften in the coming months.
The IMF category is overall still very supported by Valorization trend, annual premium and specialties products, that are increasing their share in the market. And accordingly, our upcoming platinum keeps performing well in our portfolio. On the channel side, Cross border e commerce continued to be, under pressure given the regulatory change, where we've seen some increase in custom control. The rebalance of channels in net new is continuing. To happen and will require us to continue to adjust our model and build on our direct channels which is what we've been doing, and it's now representing 70% of our business.
So looking at that overall, sales will continue to contract over the next quarters after years of exceptional growth. We are confident in our assets and strengths and ability to capture the growth beyond that, and Bridget will have the opportunity to deep dive on Monday on our Investor Day on this topic. For the short term, we expect sales to remain negative in Q4 in China. This will weigh on specialized nutrition global performance. And we expect that specialized nutrition sales should be broadly flat in Q4 and as a result, specialized nutrition should be around mid single digit for the full year.
Moving on Page 15, because we talk a lot about China because it's the biggest market worldwide in terms of category for IMF. But specialized nutrition is more than Early Life Nutrition China, which accounts roughly for 25% of the reporting line. We have the number of exciting growth platforms that you can see on this chart. Year, a range of organic baby food that has already achieved 10% market share in Indonesia, which I mentioned earlier, we relaunched our 3 leading brands, SGM, BBELAC and Nucleon, Ohio, and results have been outstanding in terms of share and brand equity, we have now more than a 40% market share with our 1st brand SGM in that country. Happy family, number one player in organic baby food in the U.
S. Is consolidating its leadership and guiding the growth of organic product into baby space. So overall, there continued to be lots of opportunities for specialized nutrition in these regions. Finally, moving to Waters, Page 17. Water growth in Q3 was strong, 6.4%.
It was driven by both volumes and even more by valorization, combining some price increases to offset PE inflation and positive mix, thanks in particular, to a number of innovation that we've put on shelf at a price 50% higher than the average range. In Europe, we had, particularly strong momentum for the category overall due to temperatures, around 10% higher than some same period of last year. And in addition to that, we put on the market some new acquired rings that were particularly well received by consumer. In North America, Evian keeps growing steep double digit, benefits on both distribution game and a new campaign this summer involved famous U. S.
Influencers. Asia registered strong growth in Q3, despite a weak season in China for Maison, Growth was led by Indonesia where our quest transformed the Asian games, the 2nd most popular sport event in the world after the Olympic game. In Latin America, finally, growth was positive with Mexico growing moderate and Argentina challenge, mainly on acquisitions as consumer look for more affordable drinking options in this moment. Despite the high comparison base for Q4, given Q4 2017, We expect the next quarter to be roughly in line with the growth registered during the 1st 9 months of this year around mid single digit. And to complete on what does important to stop page 18, coming back to a very strong innovation pipeline, especially in Europe acquiring.
You can see here the 3 most successful launches put on the market earlier this year, bad weather delivery, volvic, organic infusion and the lemonade of our local Polish brand, which drove the growth of Aquadex in Europe. And as I was saying, these innovations are sold at a higher net sales per liter versus the basic range bringing value growth to the category. Moving to the overall performance. On Page 19, this is the the mirror of what I described in July, probably where I flagged strong headwinds that impacted our H1 results. These elements will remain in the back half of the year and will impact H2.
On the left, we continue to have a challenging environment, including strong inflation on input costs, increase in transportation costs in the U. S. And particularly on the raw material side on PET and emerging market currencies that are devaluating and that are being very volatile for some of them. 2nd, the boycott of the of Morocco will continue to impact us in the 2nd half And finally, as we were expecting the contraction of Early Life Nutrition, China sales versus a high base of comparison. If I move, page 20 before going back on, the overall guidance, I wanted to give you an update on the way we were going to manage Argentina.
As you know, consensus has been recently reached that all necessary conditions are in place to now consider the country as an impaired inflationary, as defined by the IFRS rules. So that one will obviously apply IF IS 29 to the country from July 2018 with the effect from January 1st. And since Argentina is now considered as impaired inflationary, to have a better readability of the performance, we will exclude Argentina entirely from our like for like definition starting January 1st next year. However, as you know, as well, Our like for like current definition exclude the effects from change in applicable accounting principle, So for this year, it will have no impact on the like for like sales growth and margin evolution. For reference, however, you should note that Arjun in our represented around 3% of denim net sales in the first half contributed to the total company like for like sales growth around 10 basis points in Q3 and 30 basis points year to date.
In Q4, the contribution will increase because the high season in Argentina. Finally, on this topic, I want to make clear that the full year guidance that we communicated at the beginning of the year was set obviously without considering the application of hyperinflation accounting to Argentina and therefore exclude any impact from IAS 29 on recurring EPS. Given the current volatility in the country, it is very difficult to predict the impact for the future. But in any case, this represents an accounting effect and it doesn't change the value, from them to leave our model. So maybe to wrap up on, the overall performance and why we are confident that we are making the right steps toward our superior profitable growth model is that if you look at Q3, we have been doing great progresses in many underlying parts of our model.
And notably around rebalancing our growth profile with meaningful acceleration in essential dairy and plant based. As well as strong delivery in Waters. And I think this is a great achievement. And at the same time, we've been facing an exacerbation of the headwinds, as I just said. But given the full focus that we've been putting on both driving value to boost and to ensure another semester of sustained like for like margin improvement as we did in the first half of the year.
And therefore, our EPS guidance for the year remains unchanged. Thanks a lot for your time, and I'm now open for your
you. We'll now take our first question from John Cox from Kepler Cheuvreux. Please go ahead, sir. Your line is open.
Yes, good morning. Thanks for taking the question. John Cox, Kepler Cheuvreux here. Just a question, excuse me, on the, the Chinese nutrition, no surprises. Just at the end of the year, I understand the regulations will change at the end of the year regarding indirect after being postponed for 12 months.
And as a result, I expect some destocking in Q3 offsetting the restocking or a year ago, you also seem to be saying now actually the custom controls at the border now is having a negative impact one of you just gives a bit more granularity on what the regulation changes are at the end of the year? Or do you still think there will be changes? And maybe you can give us a bit of insight into start of next year, what do you think will happen in China and nutrition generally? We know that Q4 obviously is going to be again a tough comp and you've given guidance flat development there. Should we start to think about a reacceleration in the second half of the year?
Or are some of those things you're talking about regarding less births, etcetera, etcetera, will that continue to weigh in the 1st part of the year, in nutrition? And then a second question, just a point of clarification, on the whole Argentina issue, what impact does that have on your guidance? You seem to be inferring that actually your guidance on change, excluding that, what's happening to Argentina, what would the impact be there in terms of, your like for like sales growth being better than 2017, which is the guidance we're working on. I think consensus is about 2.9% 2017. You're about 2.5% organically.
Thank you very much.
Okay. Thank you, John. So overall, in term of your first questions regarding Chinese regulation. There is no new news. What we are observing that there is a continued trend of increased custom control and including inspection, quarantine and all hedging certification.
Putting the channel under pressure, but there's no new news. And we've been saying that the channel shift was, starting given the fact that there will be the implementation of the regulation. There has been nothing new. And yes, it's this is after a restocking of Q3 last year. It has implied some destocking in Q3 this year.
So it has affected the performance, obviously, but the situation is still that it should occur earlier next year in term of a change in regulation, and we have no new news on that front. Overall, if we take the China dynamic. There are probably, three things that we know today as, being the underlying trends of the category. The first one is we said, there has been a lower number of birth in 2017, and that was what I was explaining regarding the start of decline, especially on stage 1 and 2 milk, but the continued performance on gum growing up 2nd, there is a channel shift, and this is no news. We continue to rebalance the avenues of growth.
There are also more avenues to be open like Lower Tier Cities that will be avenue of growth for the mid to long term. And finally, there is premiumization. Premiumization is continuing to, to happen, especially with the development of premium and ultra premium. We've been launching Appta Mill Platinum, which has performed well and continued to be a driver for value growth. And given our strength in term of science and innovation, we have a good innovation pipeline.
However, the reason at which we'll be able to launch this will depend on regulation. So overall, we see today an adjustment, a short term adjustment, but that will last several quarters, given the fact that we had exceptional growth started Q3 last year, but still in 1, we recorded a very strong growth. There will be a basis of comps that will lead to an adjustment of growth in the quarter. So growth will not be linear in 2019 nor it was in 2018. But we have, and we are confident that we have the assets and strengths to end the ability to capture the growth beyond that.
And I think I, I will let Bridget on Monday go through in detail through the different drivers and our different assets to capture that, going forward. Then on Argentina, what I said is that on the growth, it had an impact of 10 bps in for the year would be a bit more, and there won't be any impact on the margin anyway. So when we say it will not impact the like for like. This is what you can retain in term of, in term of like for like impact, if it was to, the address.
Thank you. We'll now take our next question from Eileen Coe from Morgan Stanley. Please go ahead. Your line is open.
Thanks very much. Good morning, Cecilia Nadia. Two questions from me, please. The first one is on EDP International. It's nice to see good progress here.
Can you give us more color on Brazil possibly? So how your sales are progressing here? Where are you at portfolio and route to market change? And then secondly, just on China ELN again, sorry, I'm just wondering if you could give some indication on your market share in the various channels and how this has evolved over the year? And also your comments on the indirect channel one of your competitors Aytu has just reported that their momentum is still very strong here.
So I wonder how we should square your comments on this particularly Thanks very much.
Thank you, Eileen, for your hand. So, regarding Brazil, sales were still decreasing, but to a much lesser extent than what's I had to comment in the previous quarters. So we are seeing, an improvement in term of trends We've been, as you know, implementing, action on both the portfolio and, the route to market, especially the cleaning on the pributor space, in terms of what to market. For the products, we've been, launching the Activia pro biotic shot especially, and it's working very well. We have also, relaunched the Silk brand, but through our own Salesforce, which is contributing to the improvement.
And we had some initiative on indulgence. So all this was really to rebalance our portfolio. Create some momentum on the trendy part of the portfolio and plan based probiotics are a good example of that. So that's for Brazil. In terms of your question regarding market share in China and China shift.
I think we cannot probably compare, the different comments as they are because as you know, we started very only for several years now on the indirect part for many good reasons that we had the chance to comment on the origin of milk and the fact that the mom, we are willing to get their products from Europe, and we were leading in Europe, and we are very strong brands. So it skewed the demand towards our brands. So we had a starting point in the indirect channel, which is not the same. As the other competitors. And that's why the dynamic for us and for them is not the same.
However, on our side, we have many opportunities in continuing to adjust and build other channels. And all the questions will be, the reason in the past in doing that. Yes, so that's it for China. Thank you for your question, Eileen. Next.
Thank you. We'll now take our next question from Alan Ober Hooper from MainFirst. Please go ahead. Your line is open.
Thank you very much. Cecile and Nadia, good morning. Alain Oberhu remain first. I have two questions. The first is regarding the mix change.
Could you I know it's a call regarding revenues, but given that we see slower growth now in the specialization part. Could that be a negative mix effect which could help you hurt you more than expected? And the second question is about fresh foods. Could you give us a little bit more insight where we stand regarding the development there and when you expect the turnaround to come through and how much sales you currently have with that category?
Maybe the easiest way to comment on mix would be to go through, each category On Specialized Nutrition, we had positive mix, results from continuous valorization strategy, And this positive mix in terms of segment and products, has been offset by a negative country mix, which is due to the contraction of for Early Life Nutrition in China. In EDP International, we had the part of the value effect that came from Python and within that Argentina, but there is some slight improvement in terms of mix as well, but a good improvement in volume, which is really, an important thing for ADP in National as we are stabilizing Europe as we are improving the overall performance, to make sure it's a driver for our supplier growth later. In independent interim, we had a negative mix, but, as you know, it's mainly linked to the premium, very unbalanced where the good news was that volume were positive, but it continued to have to have a negative mix effect. In water, I commented on the mix is coming from very successful and innovation that are priced at a higher range than, the overall existing range. So overall, there has been, progresses in term of, of mix and specialty mix is driven by premiumization in specialized nutrition and value innovation in the rest of the of the categories.
Regarding fresh food, overall, we continue to be working on the turnaround. There's no, it is improving. It is improving also because of the base of comparison. But it's not yet, solved and coming back to positively participating to the agenda of growth. So we continue to work on that quarter after quarter to make sure that we can stabilize.
Thank you. We'll now take our next question from serene Panugi from JP Morgan. Your line is open. Please go ahead.
Sirin, we can't hear you. I don't know. Maybe you're on mute.
Yes. Good morning. Thank you. Sorry for that. So my first question, I would like to come back on China.
I see from this slide that locally it seems that you have grown. So could you tell us what was the number? And also, do you still expect the market to grow, the IMF market to grow in China, given your comment on premiumization of significant volume, And within that as well, could you tell us what percentage of your business is in direct China, for that division, please? And then my second question is on raw materials
and we cannot hear you very well. So I am not sure that I get the, the, your full question every time because your words are not, coming through very well. So maybe you can try again.
Okay. I'll try again. Otherwise, what let's hear it. Can you tell us what is the local growth in the Chinese IMF market? It seems you have been growing locally.
And also can you tell us which percentage of your sales is gray market or in the luxury, for the IMF division, for the specialized nutrition division?
Okay. So in terms of growth driver, and for the category, we still had a double digit growth category in H1, which was driven by, the growing up milk segment consumption dynamism and the continued premiumization. Now, we are seeing a decline in volume in infant formula and follow on, so IDFFO. Volumes. CRM segment is starting to softening in H2, but still growing.
And we expect overall, the IMF category to slow down, but still growing. So for the full year 2018, overall, we, ago deep that will grow in a mid to high single digit range. Then on your question, around the split in term of direct and indirect sales, we are now 70% direct and 30% indirect.
Can I ask to follow-up on
Next question? Thank you.
Thank you. We'll now take our next question from Marjan Dubu from Jefferies. Your line is open. Please go ahead.
Yes, good morning everybody. Morning, Cecile. It's a brief sort of technical question, but an important one. And it goes to the role of Morocco in mix. Price mix is consistently beating market estimates.
So something is going on there and you've given good account of that, but it just occurs to me, is Morocco positive for me? Because it's a low priced liquid milk market that's obviously declining sharply. So just is there a material influence of Morocco in your positive mix equation?
So Morocco is positive in mix, are you right? Exactly because of what you said and also because, when we look at the overall sequential performance of Morocco, we are seeing better news in yogurt, which are driving also the mix inside the country. So yes, we have a positive impact from our co internal mix.
Is it material, Cecile, with an overall group mix, Morocco?
In overall mix, for the company, It's not it's not the major part, but it's, it's there. But then on mix, Martin, you should go back to when I was commenting each category, and you're right that I should have mentioned Morocco, which I didn't. But otherwise, for the rest, it's basically what I described in the earlier question that was asked on the mix.
That's all very clear. Thanks.
Thank you. We'll now take our next question from James Edward Jones from RBC.
Please go ahead. Hello. 2 quick Two quick questions, please. Mix again, can you just tell us what the split is in the value increase in Q3 between price and mix And secondly, are the UK optimal problems now over? Or is it still an issue?
So your second question, I didn't hear you.
The problems with Amtamil in the UK, and the reformulation. Is that now all sorted out or are you still having problems?
Okay. So maybe I start with the second part. So in Asthmael UK, we've been implementing a new and reinforced communication plan to really make sure that the parents are rebuilding the trust as well as understanding the benefits and the use of the products better. And as I said, in the other country, it was very successful. In UK, it continues to impact the performance, even if, as I mentioned, Cowen Gates, is partially compensating this drop for the early life nutrition performance because The relaunch was successful and it's taking part of the uptime in UK market share.
But yes, it will continue to impact until we are fully recovered with the parents' confidence through our own different actions. And then on your question on Stifel.
Just the value increase in Q3, how does it split?
As you increase is, if we include the impact of price of Argentina. It will be around the alph mix alph Ulf price.
Thank you.
I think we have maybe a last question, operator.
Thank you. We'll now take our last question from Cahill Kenny from Dairy Research. Your line is open. Please go ahead.
Good morning, Cecilia. Good morning, Nadia. One question from my side. Just would be possible to get a little bit more granularity on the current cost circumstance and just interested in some of the headwinds have intensified or not particularly for PET and U. S.
Freight inflation. And also on dairy, you speak to low to mid single digit inflation. Is that closer to low now?
So overall, we are seeing for the full year in term of input costs, mid single digit inflation. PT cost versus H1 would be around the same kind of inflation. So more than 20%, which is what we had already in H1. The mill price inflation will be low single digits. And we also have, some currencies impact on our overall input costs.
Especially if you take, for example, Brexit because we are importing for 2 of our categories, for example, in the UK. So overall, in input cost, we observe the kind of the same situation than H1, overall. And then, what we have in addition, in H2 is the full ALFA effect the impact of the Moroccan boycott. And we had it in H1 only partially because it started on the 27th April. And the deceleration of Early Life Nutrition China as a mix to the company.
As I said, despite that, and I think it should also really be noted as consistent focus on discipline and making sure that we are increasing our efficiencies and our model overall, we will be able to post an improvement in margin as we did in H1.
And U. S. Freight costs, please?
It's around the same as H1. What we have in Q3, which we, didn't have in H1, is that we started to pass some price increase to mitigate the impact. Thank you very much, Katharine. Thank you, everyone. Thank you
for having joined this call. I think this is concluding the call of today. We remain available with the team only long to follow-up. Thanks for your attention. And look forward to meeting most of you.
Next week in London.
Today's call. Thank you for your participation. You may now disconnect.