Good day, and welcome to the Denon First Half Year Results 2018 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Nadia Benzalin Nicola, please. Head of Investor Relations. Please go ahead.
Thank you, operator. Good morning. Nadia Venezuela, Nicolas speaking. Thanks for joining us. We know it's a busy day for you, so we appreciate your attendance to this call exceptionally brought forward, hosting the conference today, Chief Financial Officer, Cecile Cabanis.
This will go through the presentation that can be found on our website and will leave enough time for your questions in a second step. As usual, before we start, I draw your attention to the disclaimer on Page 2 related to forward looking statements and financial indicators. And with that, let me hand it over to Cecile.
Thank you, Najia. Good morning, everyone, and thank you for joining us today. I know it's been a busy week and it will be a busy day for you. So I will directly jump to slide 4 and start by highlighting that we delivered in 1 another semester of very strong recurring EPS growth, 13.4% at constant exchange rate, and excluding the accrued transaction impact, and overall, a strong set of results coupling 4% net sales growth, 51 basis points recurring, organic margin improvement, and over billion of free cash flow. These strong numbers achieved despite expected and unexpected headwinds in some market this semester reflect the underlying strength of our business and our continued financial discipline and focus as you know since 2014 to strengthen our sir.
And I will start with page 5. I am pleased to report progress in WhiteWave Performance 1 year after the completion of the acquisition and especially that we are actually delivering strong sales growth above 5% in the key categories of plant based in Norham and Europe and coffee creamer, altogether representing about a 75 percent of the former WhiteWave business. This contributed to the positive inflection point this quarter in the U. S. Now our largest market, And this great momentum confirms the strong rationale for WhiteWave Acquisition and strengthen our confidence in the value creation potential from this move.
It shows that WhiteWave is a high quality business, accretive to our models, with brands that are strongly complementary to our own. It has fitted well with Denham's operation in North America and more generally. The business is being successfully integrating the synergy capture continues to be fully on track and the innovation momentum in Strong Again and the business has started to benefit also an accelerated distribution expansion, both in the U. S. And in Europe.
So our strategic choice is now paying off. Another important part of the agenda on page 6, and another very important development of the semester is a major step up of our organization in terms of delivering innovation with an accelerated ability to deliver more better and faster innovation in line with the new paradigm on of the ongoing food revolution. On slide 6, you see some of the best performing innovations that we put in the market over the last 12 months across our businesses and geographies. If I, name a few in, essential and dairy plant base you have on the top left Activia Delis, the most successful innovation in the yogurt shelf in the U. S.
Specialized Nutrition in the middle, top part abtamilplatinum representing now more than 20% of our ELN China direct business. And in the middle of those 2, in Waters, a new ready to drink tea line in China, showing the in building an innovation platform outside my zone in that country. Continuing to move on the highlights, on page 7, you have the growth of the Q2 by reporting entity. And when we look at the underlying performance of each reporting entity, Q2 was a solid quarter with a lot of progress especially in rebalancing the growth profile within our portfolio and broadening the sources of growth. Because if you look at it and excluding Morocco, all 4 reporting entities are delivering growth in the 2nd quarter, and the company volume growth was positive as well.
While a specialized nutrition continued to grow at double digit rates, but sequentially, decelerating Waters pursued its mid single digit broad based growth performance. And we have both EDP that made a meaningful contribution to growth with EDP Norham returning to like for like growth despite the ongoing impact from the Fresh Food business and EDP International underlying performance confirming its stabilization if we exclude Morocco. Page 8 on the efficiency side, the protein efficiency program that we started to implement last year is now underway and fully on track The first savings are in line with our plan. So about 1,000,000 of gross savings year to date, And we are continuing to be disciplined to allocate resources in the areas of the business that will generate sustainable value over the long now. If we look, at the savings, they are delivered from all key areas of our indirect expense structure.
In logistics, we've been launching new tenders and reorganizing routes to market in professional services we are deploying global policies for travels and events, and we have created a central control tower for consulting services. Sales and marketing, we are spending, our money in a smarter way, generating efficiencies in non work and P like content production, market research and asset storage. So overall, we have been very encouraged by the start from this semester, and we are targeting 1,000,000 gross savings for the full year, fully on track to deliver the 1,000,000,000 savings by 2020. Moving to Page 9, we've said before and regularly that volatility is increasingly an everyday part of operating and international business. It is something that will continue to navigate.
And in the first half of our performance, we have some impact from a number of macro headwinds. First, from left to right on this chart, a strong increase in crude oil creating a 20% rise in PT cost, in a 20% increase of UF credit cost, and we had the opportunity to commend that already in Q1. And lastly, Transportation strikes, both in Brazil and in France that have, impact it, top line and bottom line. All of these had an adverse impact on our gross and margin in H1, but we are continuing to improve our to address them through accelerated efficiencies, discipline in resource allocation. Turning to next slide, tomorrow, where, as you know, our brand, Francois Danone, has started be called out on social media 3 months ago by a boycott.
This is an unforeseen event that sits outside the increasingly normal volatility I have just described. The impact on our local business has been significant so far with Q2 sales having decreased by 40 percent and recurring operating income down EUR 25,000,000. While the situation is ongoing and even so it too soon to make any definitive prediction. It is clear that this unprecedented events We'll continue to weigh on our performance for the second half. P and L is including a noncash nonrecurring operating charge of 661,000,000, resulting mainly from a goodwill impairment of Saint Carl Danone.
Following our CEO personal visit tomorrow, go to understand the reasons for this boycott directly on the ground. We are studying how to make the relevant changes to our fresh pastaized milk model in response to consumer environment where purchasing power is under pressure, and we are fully ready to offer greater transparency and engaging a consumer dialogue, which we hope will be an important first step to restore the situation. On page 11, to end up on the highlight and before going into the detail of the numbers, You have here the sequence of VPN since 2014. H1 2018 was another semester of progress. And delivery with a very strong recurring EPS growth, 12.8% at constant exchange rate.
And looking at the sequence since 2015, this has been a consistent delivery semester after semester in line with our commitment. So let me move now to the more detail in terms of numbers. I will start page 14 with the usual sales bridge and the sales bridge for Q2 2018. If you look 4,000,000,000 in the second quarter 2018, impacting especially by strong headwind from currency impact. You see the red box -7.6 percent in the middle of the bridge.
If we go through the bridge from left to right, we have a marginal positive impact of 1.3 cents from the contributions to net sales of WhiteWave for the 1st 10 days of April 2017 until the acquisition closed. We have a negative impact of 1.4% from other changes in scope of consolidation. It's most appealing to the disposal of Sunny Field in August last year. As in Q1, we have a very strong negative currency impact, 7.6%, reflecting primarily the acquisition versus Q2 last year of the euro against the U. S.
Dollar, the Argentinian peso and the Russian ruble. And finally, you can see a consecutive quarter where like for like growth is above 3%, still driven by value. And, if we exclude the impact of the Moroccan boycott, like for like growth would have been 4.3% with positive volumes, confirming the improved volume dynamics that we already registered in Q1. The value part, 3.8% is driven by product and country mix for all but twothree in line with our continued efforts to enhance our offering in each category and a 4 but 1 third by price, reflecting some target price increase, primarily in LatAm. Let me now go through each entity to look at Q2 growth, growth levels and dynamics.
I will start with a specialized nutrition on Page 16. Specialized Nutrition posted another excellent semester of highly profitable growth with a Q2 growth at 10.6% in line with expectation, driven by a very strong performance in both Early Life Nutrition And Medical Nutrition. Starting with medical nutrition, medical nutrition grew mid to high single digit rate, confirming the strength of its broad and balanced platform of growth. All regions and all product categories contributing to this performance. The performance was supported by our robust growth platforms in Europe and in the rest of the world.
And notably in China, supported by a fast growing aging population, and benefiting also from some phasing effects. Early Life Nutrition posted a double digit growth in Q2. China remained the main growth in Lyle going at around 30% with balanced contribution from both volume and value. China's performance was supported by a still very dynamic market, driven by growing up the milk segment. Our performance in China was also supported by solid execution behind our strategic priorities.
We continue to successfully expand in intrapremium and invest in our direct sale distribution model, leading as a result to a continuous growth of direct sales with further market share gain in all direct channels. The performance in a Parmay was also strong notably India and Africa. In domestic Europe, the sales slightly decreased ahead of the innovation option. Latin America generated double digit sales growth with both Argentina and Brazil positive in sales and volume. And in North America, Happy family continued to expand growing high single digits.
H1 margin for specialized nutrition was outstanding 25.5 percent, up 121 basis points on a like for like basis, driven by very favorable product and country mix from China, moderated by an unfavorable base of comparison, given if you remember, the 2017 one off, that we had related to the insurance repayment for the fire in the COIC factory in the Netherlands. For the full year, we continue to expect a specialized nutrition to grow at mid to high single digit, with as already shared and H1 stronger than H2 given expected demand slowdown in light of lower number of the in 2017 in China for ELN and very high basis of comparison, especially given the restocking last year of the indirect channel in Q3 Moving to EDP Norham, page 18. In Q2, EDP Norham registered the 4th consecutive quarter of growth improvements moving back to positive, nearly 3% growth we exclude the Fresh Food business, which remains a strong headwind, pricemix effect was still negative in Q2, reflecting still the pricing pressure on premium dairy and some negative mix effect within Vega where the ready to drink and bars are growing faster Pounder. If we go through each segment, 1st year growth, slightly positive growth for denim in Q2, including positive volume, in a low single digit negative category that continues to be penalized by the decline of the Quick segment, Q2 growth was driven by innovation and distribution, but also velocity gain in Valorai segment that include Probiotics, I showed you earlier this Activia daily innovation, which is very successful.
In the key segment, where there is a nice growth, including dynamoals who, register nice velocity with successful animation around incredible We also accelerated plan based euro, which now represent a sizable growing portion of yogurt to flying. Via innovation and distribution expansion as part of the revenue synergy plan. Moving to the plant based segment, the plant based segment grew at high single digit rates, both in volume and sales, reported by a fast growing category, including double digit demand for net based products and a good performance of valorized almond based innovations in large size, premium bottle offerings and novelties. The new Silk Communication campaign launched last quarter also enables to drive velocity and Vega delivered and was a strong quarter of growth. Coffee creamer delivered a strong growth in Q2, the category continues to be very healthy in term of growth rates.
Better for your products and ready to drink coffee on the international Old Delight And Stock Brand continued to perform very well. Premium Dairy registered another quarter of line, mid single digit negative. Organic milk supply continues to outstrip demand, driving lower price on the shelf, as we already observed in the previous quarter. Horizon was, however, able to slightly outperform the category including a high value milk extension. The base of comparison also start to be more favorable, even if the category is expecting to remain complicated for the remaining part of the year.
Freshput performance, continued to weigh in the global performance with sales declining at double digit rates impacted by the discontinuation of a fruit business as part of our turn on plan. The like for like margin of EDP Norham was down 43 basis points in H1, mainly due to the transportation cost inflation. We are reducing the number of spots according to the synergy plan as well as working on long term contracts. That was also a negative mix that I just mentioned, mainly driven by premium dairy performance. Those two headwinds absorb the synergies that we delivered, which in H1, if we go quickly through the synergy, we're mostly procurement and SG And A.
On the synergy plan, we are fully on track to deliver, for the year. And, I think, most importantly, in term of dynamic, given the good Q2 performance and the inflection point in term positive growth, we are very confident that H2 will confirm this inflection of this inflection in term of growth. And will enable to rebalance the overall profile of growth for the company. EDP International Page 20. As I said, excluding Morocco Q2 performance confirms the stabilization of the reporting and with the 2nd consecutive quarters with slightly positive growth.
All regions contributing to the improvement. Morocco, as you know, is representing around 6% of EDP International and sales were down 40% in Q2. If we move through the different regions, so in Europe, sales were slightly negative still in Q2. Iran in line with Q1, the trends by countries were still varied. From one side, UK and Nordics grew solidly both in plant based and in dairy through both global and local brands, showing the potential of the combination of the 2 categories, Eastern Europe registered positive growth as well, driven by Activia Innovation.
On the other side, France and Spain remain team, even if we are seeing improvement and progress, Activia and Danone pursued the sequential stabilization and local brands like LeatherVache and LATAM3 keep growing strongly. Moving to Alpro, Alpro showed another core with growth around 10%, driven by, an improved product portfolio and also, revenue synergies both in France and Spain where Alpro became the number 2 in plant based alternative to yogurt only a few weeks after the launch. Moving to CIS, sales registered another quarter of strong growth with mix continuing to improve consistently with our valorization strategy. Varsha is another example of the high balance between local global brand, Activia Danone, and local brand, Fraschino and Denisimo. And both segments are contributing to this strong growth.
Latin America registered strong growth in Mexico and Argentina in our but was once again penalized by Brazil. We are making good progress on the turnaround plan, both in reframing our product for you and our route to market. Unfortunately, we were negatively impacted by the truckers price. So overall performance in Q2 was double digit negative, in line with what we observed in Q1. DP International was up 26 basis points in H1 as a result of an acceleration in efficiency and portfolio valorization.
Allowing the entity to more than absorb the heat of Morocco. Excluding Morocco, the improvement would have been points. The 2nd part of the year will continue to see EDP, improving and confirming its return to profitable growth excluding Morocco. Last density, Waters Page 22, Q2 represented another strong quarter for Waters 4.8% like for like growth in line with the expectation and again characterized by a broad base of growth, both in terms of regions and category. If we go through the regions in Europe, the sales growth was solid in line with Q1.
The benefit from the acceleration of Balloy's innovation introduction and good weather were, however, partly offset by the French railway Sky Canadian for which the majority of the volumes are shipped by trend. Asia delivered high single digit growth led by Indonesia and Turkey, but in China, Mizone Performance was solid with stable market share in the launch that I mentioned earlier on, ready to drink tea line, whose results, as I said, are promising. So overall, all countries in Asia are contributing to growth now. Latin America was a bit soft in Q2, penalized in particular by Mexico where weather was a headwind. Argentina is growing in value, but increasing in volume, especially on premium Aquadry.
The margin level of water was severely impacted by PT price that keeps increasing even more than, previous expectation. We had also some impact from the Hal West hike in France that forced us to find alternative logistics solution. This generated some sale losses as well as some unexpected transportation first for a total of around EUR 10,000,000. This will also have probably an impact on the summer season due to some out of stock as a consequence. We consider the solid H1 performance to be confirmed in the second part of the year, in line with the outlook given for Waters at the beginning of the year.
Moving to the rest of the P and L, starting with the margin bridge on page 24, So if we go through the margin bridge, we have an improvement in recurring operating margin of 20 basis points on a reported basis, closing the semester at 14.27%. This performance is a combination of a negative 49 basis point impact on the last quarter of consolidation of WhiteWave in our base. Q1 being historically a low quarter for WhiteWave. A slight positive effects from scope at a plus eight basis points as a result of the deconsolidation of to any field, a slight positive impact from currency as a result of our country mix, 9 basis points. If we turn to the underlying drivers of our like for like margin improvement, which was strong 51 basis points of margin expansion, We have 24 basis points negative evolution of our margin from operation in light of the considerable inflationary environment that we did for roughly 330 basis points in our cost of goods sold.
In particular due to PT, transportation costs in the U. S. And headwinds in currency. Almost entirely offset by our profitable growth model based on an improvement of our portfolio mix for our valorized innovation, which I counted for 160 basis points as well as accelerated delivery inefficient fee we created an extra 150 basis points in the margin of operation versus last year. Protain unlocked also sustainable savings in selling and over as expense and together with the synergy from WhiteWave integration and our continuous discipline in resource allocation contributing also for 75 basis points of margin expansion, which is the total of the 2 last green box that you have on the bridge.
So overall, our strategy of improved portfolio mix combined with accelerated deficiencies out of which protein and synergy accounted for roughly 100 basis points this semester enabled us to increase strongly our like for like margin in a context that was, including a lot of headwinds. Moving to the EPS on Page 26, recurring EPS closed at EUR 1.76 increasing by 13.4% at constant exchange rate and excluding the actual transaction impact. If we go through the bridge from the left to the right, the main elements are, the impact of the last quarter of the consolidation of WhiteWave representing 3.5%, positive. The combination of our like for like sales growth and recurring margin improvement contributing 7.9%. The financial costs are decreasing slightly creating a positive impact, thanks to the early repayment of an expensive, bonds from WhiteWave in November 2017.
The tax had another slight positive impact, notably from the U. S. Tax reform. And we have slight negative impact from scope that is linked to the deconsolidation of a Spanish field. Finally, on currencies, strong negative impact, 8.2%, mostly due to the devaluation of the British pound, Russian ruble and Indonesian root beer, leading to the overall recurring EPS growth, at 4.6%.
Page 27, a few comments on nonrecurring items in the P and L, because we had 2 major impact that, around compensate themselves. First one is positive impact of SEK 700,000,000 resulting from the capital gain of the sale of sorry of our participation or part of participation in Yakult. You can see it in the line net income from associates. And, on the other side, a negative million EURO charge in other income expenses that is related, as I mentioned earlier, to the impairment of Central brand in Morocco and as part of our goodwill linked to, Saint Halbanon. The net of the 2 together with some of the items are bringing our reported EPS to up around 20% versus H1 2017.
Page 29, free cash flow. H1, 2018 is another semester showing demand strong cash conversion and delivery model with a free cash flow at over 1,000,000,000, increasing 20% versus last year. The main driver of the performance is the increase in NOPAC, investments are in line with last year at 3% of net sales. The slight deterioration that you see around working capital, which overall remains well negative is a pure mechanical impact driven from consolidation of WhiteWave on a full year basis, while H1 2017 only showed 1 quarter of net sales. This led me to the bridge of net debt on page 30.
At the end of 2017, the net debt stood at 1,000,000,000 and the cash flow generation as well as the Yaku consideration brought it to 13,700,000,000, well on track with our deleveraging commitment. And if you, even look at it, we've been able to deleverage the balance sheet by 1,000,000,000 over 12 months, which is a very nice pace for deleveraging the balance sheet. Moving on Page 31, and maybe to, a bit, summarize H1 and give you some outlook. It is clear that we had to face strong external headwinds in H1. And that we will continue it will continue to weigh on our performance in the second half.
H2 will be a double continue to be impacted by the boycott in Morocco, in EDP International, and we know that there will be a slowdown in the overall growth of specialized nutrition. Having said that, the strong numbers we delivered in H1, despite the volatile backdrop, we are entering H2 with an increased confidence in the underlying strength of our operating model for a few reasons. First, there is greater agility within our organization, delivering more effective deployment of innovation. 2nd, our enhanced focus on efficiency and discipline is driving improved margin and agility better tackle the volatility backdrop. 3rd, we have a stronger balance sheet from our continued discipline in capital allocation.
And last and probably, very importantly, we are doing great progress with WhiteWave integration. We have more growth engines in our portfolio with particularly easy pinoram and going to the inflection point of positive growth and with Waters growing steadily in all regions. As a consequence, even though H2 growth will be lower than H1, we continue to expect accelerated sales growth on a full year basis as 2017. We will ensure that we continue to accelerate our efficiency to enable like for like recurring margin expansion for the full year. Having all this in mind, I confirm our full year guidance double digit EPS at constant exchange rate and without, the impact of the Yakult transaction.
Starting in 2015, I told you that volatility would only increase and that we needed to strengthen our growth model in this reality and make it more resilient in order to make sure that we would absorb the balance and we would have a safe journey towards our agenda of sustainable value creation. With a stronger portfolio after WhiteWave acquisition, with our ability to step up in innovation and execution and accelerate efficiency. I have every confidence that we are making the right steps to increase the fundamental strength of our operating model to deliver sustainable value. And that would be my concluding remark. And with that, I leave the floor to questions.
Thank
And for me, Angela, Nadia speaking and for the discussion part, please be so kind as to limit your question to 2 and raise them all at the time to allow as many as possible people to participate. Thank you. Thank
We'll take our first question from Eileen Khoo from Morgan Stanley. Please go ahead. Your line is now open.
Good morning, Cecilia. Good morning, Nadia. Two questions from me. The first one is just on Morocco. If you could give us an update where your local sales are currently trending now in terms of the actual decline and where your prices are now relative to competitors there?
And, what steps you think you can mitigate, you could take to mitigate the risk of this kind of social media boycott happening in your other businesses? That's the first one. And then the second one is just on EDP Norram. It's great to see that business accelerating in momentum. On the business that's still a drag, get fresh food, can you just update us on your thinking there?
Thanks very much.
Thank you, Eileen. So overall, the trending in term of, of sales in Morocco continue to the same as the one that we've seen in Q2, in term, especially fresh pasta rice milk. In term of mitigation plan, there are a few, we are contemplating to have some innovation that will be more affordable also because we will do them in different packaging, and that will help in term of, going, towards more affordable products. The other thing is that, we are studying a plan in order to also adapt our cost base, work with the farmers in order to, overall mitigate the all impact of the boycott locally, in our Morocco equation. In terms of your question, regarding regarding the how we can avoid, to have this situation, I think you need to look at Morocco as a very specific situation, where the boycott was really about, about people going after the fact that their purchase power and inabilities are increasing.
Santraal Danone is a very symbolic brand and was caught into that boycott, but it's much broader than a boycott against the Central brand. So we continue to work on that. You know, that our you went went there. We are opening a consultation to rebuild a dialogue and trust with the people that will start very soon. And with that, we believe that we can find a way with the people on the ground to adapt our business model, especially from fresh, personalized milk, We continue to do many initiative and innovation on the Fresh Dairy Product part, and we hope that we can mitigate effect.
On EDP Norham, your question was around the fresh foods business. So Fresh Food business, we continue to be very focused on the turnaround. We have now a management that is coming, that is a very, expert and specialized in this type of business coming from Dol before we didn't have a special management. And we are working very hard on continuing to make the turnaround. We have, as I said, discontinued, a line of business, and we continue to work on that.
I have nothing else to say. That's what I said in the first quarter. So no news to share, on that front.
Our next question comes from John Cox from Kepler Cheuvreux. Please go ahead. Your line is now open.
Yes, good morning, John Cox, Kepler Cheuvreux. Thanks for taking my questions. Just to come back to Morocco, obviously that is a pretty serious issue and the impact is having on the group overall. You talked about an operating loss of 1,000,000 in Q2. I'm just wondering, do you sort of envisage that sort of loss going on through the rest of the year?
And is that included in overall guidance. And as an add on, on Morocco, you've written down, it looks like three quarters of the goodwill. Is that your sort of long term projections about that market. Just a little bit more detail on Morocco. I think it is a very important issue.
And just one point of clarity, did you say that nutrition would slow down to mid high single digit in H2? Or are you saying that for the full year, it will be mid to high single digit?
Thank you, John, for your question. So to answer your question and the impact of Morocco, We have overall taken a very prudent outlook for the remaining part of the year. Acknowledging that, we don't have yet, all the answer, even if we are building a mitigation plan to the overall impact. So, when I confirm the guidance, this is of course, acknowledging that Morocco could continue to weigh on the performance for the H2. Then On your question on Specialized Nutrition, there is nothing new there, what we've said already in Q1 is that, for the full year, Specialized Nutrition would grow mid to high single digit for the full year, again.
And this was going to be driven by a very strong H1 with continued, very strong dynamic demand in China. And then on H2, which will bear the impact of very high base of comparison because you remember that last year in Q3, we had more than 70 of course in China, including restocking from the indirect part of the trend. So, the sales as a comparison and in percentage, of those will slow down. We continue to, very well expand in Altra premium, our innovation of Atamil. We continue to very successfully gain market share in the day high part of channel.
And we've just introduced new innovation in term of, an organic offering. So we are fully confident of China, both potential and the strength of our business, going forward. But we have, this next quarter that will slow down versus the beginning of the year.
Thank you. Now we'll take our next question from Mitch Colas from Goldman Sachs. Please go ahead. Your line is now open. Hello.
Can I ask about the impact of the rail strike on the waters business? Can you quantify the impact of that in Q2 and perhaps give us some color on the impact that you said you would expect spilling over into Q3? And then Secondly, on margin expansion, most of your margin expansion in 2017 and the first half of this year, came from specialized nutrition. Given the growth trajectory, you've guided to for the second half, Is it right to expect margin expansion to come more from the other divisions than from specialized nutrition?
Thank you, Mitch. Sorry, I wasn't your second question. So on the railway impact, overall, We had, in Q2, some impact in the top line, but also led to what I say around having a solid Europe, but not strong despite some good weather and good innovations. And, net net in term of EBIT, if we take both this impact on top line, but also on the fact that we had to find alternative in term of transportation costs, can factor in around a bit more than EUR 10,000,000 as a net, EBIT impact, from that. Because we are having a very hot season now, we think there might be some spillover effects in the H2, given the situation where, in some cases, we were not able to fully deliver and we've been having out of stock, which in a very hot season, is, could have some, some spillover impact of our H2, but that doesn't absolutely put in question the overall outlook for the water category growth for the remaining part of the year.
And I fully confirm, what we said earlier in terms of, of the Waters growth for the year. Then your question on margin coming, especially from specialized nutrition, in term of, enhancement of margin, that's correct. We've been in a specialized nutrition from a very strong rhythm of growth, including a positive mix in both product and geographies. But if you look at it, I think it's very important to notice and that's why I made the comment, several times on that call. Is that we are starting to rebalance our gross model.
And for that, we will rebalance in H2, our profitable growth model So yes, in H2, you can probably factor in that there will be more profitable growth and giants. And, the contribution will be a bit rebalanced between the entity. And that's ultimately what we what is continuing to build the strength and the resilience of the model going forward. So it's an important step. Next question.
Thank you. Our next person from the Q Over Huber from MainFirst. Please go ahead. Your line is now open.
Good morning, Cecile. I will open MainFirst. Would you give us a little bit more insight regarding the development of these major brands, Octavia? And Octi Mail and where we stand? And secondly, maybe you could also give us some outlook for France and Spain, when do you expect that these two markets could find some bottom and start to grow again?
Yes, sure. Thank you, Alan, for your question. In Activia, we are registering great progress. First, it's important to, to say that we have different situation, Akcea is a worldwide brand. It's growing very nicely in the U.
S. As I said, given especially the new innovation on the daily probiotic shot. I suppose your question was more around Europe. So in Europe, we continue to make a lot of progress in terms of improving. There have been innovation, including innovation into the new pairing with some new ingredients, some new pack that are being very well received.
So overall, we're making good progress. And, we expect that we will continue and we expect that we can reach stabilization soon. If we look at the situation in France and Spain, we are really accelerating our transformation in constant Spain. And it's important to note that the introduction of Alpro, the inspiration of the momentum of Alpro, will, we believe, accelerate the overall turnaround for these, for these 2 countries. There has been also some very specific innovation.
In France, we've launched a world range, that we call the yellow dune, the world you got with specialties of, of your growth from all over the world. And it's starting quite well. We've also have, a drinkable that we call UC, Loebio, which is working well. The, as I said, Activia Superfoot and the infusions with new ingredients are working well. Well.
We just introduced Flat N3, which is starting also well. So in France, we are quite see then that the trend will improve and that we can, hear as well, reach stabilization in a foreseeable future. Spain, we have also good introduction from, some moose drinkable denim or a customer addition. I think it's really, coming. It's taking a bit of time, but it's coming.
It's improving and we can be, confident that even if the market remains competitive in both Samsung Spain, we can really see that we will, as I said, reach better, better trend in the foreseeable future. We are seeing already, in July, quite good improvement in those please.
I think we don't have any other questions. Good. So I propose we stop the call here as it is a very busy day for everyone. Maybe I'll let Cecile makes some closing remarks.
Yes. Just one really, because I think it's, it's really important. And now as we are quote in the short term result, maybe, but I would really like to insist on that. I think that As we said now, for several years, volatility, is a norm and we'll be there. And we will have some some headwinds and volatility, in our quarter.
So what we really need to focus on is continue to strengthen our growth model. To navigate this reality. And as I said, we have a stronger portfolio after WhiteWave acquisition with very strong and dynamic categories that also inspire the rest of the portfolio. We've been really stepping up in terms of innovation and agility see in getting the innovation to market faster in the new paradigm of the food revolution. And we've been accelerating efficiencies, and the mindset of efficiencies quite significantly.
And as a result, when you look at the gross model, I think fundamentally, we are really improving the strength of the model. It's our focus every day and this gives us a lot of confidence that we are on the right track of our agenda. I wish you a great day, a busy day, I know. And a great summer, if I don't talk to some of you Thank
you very much. This is end of this call.
Thank you. That concludes today's first half day results 2018 conference call. Ladies and gentlemen, thank you for your participation. You may now disconnect.