Ladies and gentlemen, thank you for standing by. I'm Stuart, your Chorus Call operator. Welcome, and thank you for joining the Q3 Results 2022 conference call of Beiersdorf AG. Throughout today's recorded presentation, all participants will be in a listen-only mode.
The presentation will be followed by a question-and-answer session. If you'd like to ask a question, you may press star followed by one on your touch-tone telephone. Please press the star key followed by zero for operator assistance. We'd now like to turn the conference over to Jens Geißler, Head of Investor Relations. Please go ahead.
Good morning, everybody. Welcome to Beiersdorf's conference call. Here with me this morning is our CEO, Vincent Warnery, and our CFO, Astrid Hermann. We would like to share with you Beiersdorf's business results of the first 9 months of 2022. We will start with a presentation and a business review. Before we get going, let me make some technical remarks.
Throughout today's presentations, all participants will be in listen-only mode. The presentation will be followed by a question-and-answer session. When you register for Q&A, please remember that there is a limit of two questions per caller. With that, I will now hand over to Vincent.
Thank you, Jens. I'd like also to welcome you to today's conference call, and thank you for taking the time to join us. Over the course of the next few minutes, Astrid and I have the pleasure of taking you through our performance in the first nine months and providing you with an overview of the key developments from the past quarter.
First of all, we are happy to report that we have been able to ensure that the momentum from the first half of the year carried over into the third quarter. We achieved strong organic growth on a broad base in the first nine months of the year, and this despite the ongoing economic and geopolitical challenges that we are all facing.
Looking at our growth results, an impressive third quarter resulted in double-digit growth of +11.1% in the first nine months of the year. Our consumer business continued the strong performance it had delivered in previous quarters, ending the nine months period with robust growth of +11.7%. Tesa gained significant ground in the third quarter and closed out the first nine months with an increase of +8.3%.
Looking at the performance of our brands in the third quarter, we saw very strong organic growth on a broad base. The double-digit increase of 11.8% in the consumer segment was based on contributions from the entire portfolio due to pricing and volume, with all brands delivering positive volume growth.
Nivea's growth was close to double digits, but we'll get into that in greater detail in a couple of seconds. Growth at Derma was again above 20%, thereby confirming the strong performance from the first half of the year. Driven by high demand in the Americas, including our key market, U.S., ongoing success of Thiamidol, and strong white spot penetration, we were able to once again outpace the competition and gain significant market share.
The continued growth of our plaster brands was again driven by last year's relaunch, which helped us to outgrow the market. As we already anticipated in our last call, La Prairie is now back to double-digit growth with an increase of +14% despite lockdowns around Hainan. This clearly demonstrates that our intensified focus on strengthening the online business is having a positive impact.
In addition, Tesa expanded its growth to an extremely impressive 14.3% in the third quarter. The main drivers here were the electronics business as well as a significant recovery in the automotive business. Taken together, all of these results in a remarkable +12.3% growth for the group in Q3, despite increasingly challenging market conditions.
Let us now take a closer look at some of those notable performances in Q3. As I just mentioned, Nivea comes out of the third quarter with sales growth of +9.9%. Worth mentioning in this regard is also the fact that it was the first time that Nivea managed to expand its market share in all regions and in all categories. This wide-ranging expansion is not just limited to market share. Indeed, we are seeing growth throughout the entire portfolio.
The skincare portfolio even managed to outperform the personal care portfolio. The sun season completed with strong growth in the third quarter, and there was positive growth in all skincare subcategories in Q3, thus demonstrating the strength of the Nivea portfolio. The personal care growth was driven by our strategic deodorants category.
We are also pleased to see that our pricing actions have been well received. Due to our successful pricing initiatives in the first half of the year, the growth in Q3 was mainly driven by pricing while volume was still positive. A quick glance at the competition show that we are in line with the market when it comes to pricing, but our volume performance remains better than most of our competitors.
This is a clear indication that we are finding the right balance between pricing and volume growth, and that our brands are highly resilient in terms of price sensitivity. Let us turn now to our performance in China. There we have grown by an outstanding +24% with Nivea in Q3. We are also pressing ahead with our premiumization strategy in China.
That means that we have optimized our portfolio. We are concentrating resources on driving premium development and high-margin products. Additionally, we have a clear focus on e-commerce activities. We are relying on online first product launches. Our online share of business increased significantly from 46% in 2019 to around 60% expected for the full year 2022. At the same time, we are upgrading our lower price categories.
Our focus is on premiumization drivers in our current categories, men, face cleansing, and body, and especially in the strong growing online business. Since the start of our valorization process in 2020, we have increased the average selling price in our online business by more than 32% for our portfolio. On top of that, our successful Luminous 630 launch via cross-border e-commerce has been delivering some impressive results.
The market share of Nivea face care increased significantly in 2022. Luminous 630 is currently ranked number two in cross-border e-commerce anti-spots with a market share of 4.3%. Just a quick reminder here, this is all coming only from cross-border e-commerce business. The formal approval to sell in domestic China, which we are working on, will be a huge milestone.
This brings us to our selective cosmetic business, La Prairie in China. Following a difficult second quarter that was marked by ongoing lockdowns, we saw a strong recovery in China in the third quarter with a growth of +41%. With a goal of achieving a greater degree of the diversification and to be able to react to short-term disruptions going forward, we decided to further expand our distribution.
On top of a strong brick-and-mortar business, an impressive growth in the travel retail business over the course of the past year, we also strengthened our online business in the third quarter. We took the lessons learned from our successful online launch on Tmall and applied them to the latest launch of La Prairie on JD.com. Initial results have been extremely promising and have exceeded our expectations.
These results are including 140,000 unique visitors in the first four weeks since launching, strong conversion rates, and what is even more important, we are reaching a more diverse consumer base. We are reaching more clients from tier-three cities than at our other online platforms. We will work to continue strengthening our presence on JD.com and are confident that it will be a strong partner in addition to our Tmall presence, thus providing us with a much greater degree of flexibility going further forward.
The momentum in our Derma business has continued, and it's still growing at very high rates. Our so-called white spots, either countries, categories, and businesses with high potential, were again, strong growth drivers. All of these investments in developing the white spots are fueled by strong profitability increases in our legacy business.
Long-standing businesses in Europe, Asia, or the U.S. have managed to significantly increase their profitability over the course of the past few years, while still delivering strong top-line growth. The EBIT margin of our legacy business has increased by 380 basis points since 2020. We have been using this profitability increase to help us invest in the following white spots.
In Brazil, we have been working to expand distribution and to maintain a digital focus. We launched Eucerin in Rio and São Paulo four years ago, and from there, we expanded the brand nationally with a strong digital focus. The strategy is clearly paying off. With Eucerin, we have achieved the number one position for the anti-pigment category, and we are now growing three times faster than the market.
In China, we are on track in terms of our expectations and have been recording strong growth thanks to our online-only strategy that started with Tmall. We are also seeing strong sales figures from our Thiamidol products via cross-border e-commerce. After two years, we are now one of the fastest-growing international derma brands in China. In the U.S. sun market this year, we leveraged our existing know-how and added local expertise from the Coppertone R&D team to launch Eucerin Sun, thereby transforming our already very successful body brand into a full dermocosmetic brand.
The first summer season was very successful, and we have already established our position as an important competitor in the U.S. dermocosmetic sun market. In Poland, we took our lessons learned from the most recent successful white spot penetrations and decided to re-enter the Polish market in the third quarter.
This re-entry has been shaped by focused distribution in major cities, medical detailing, and a strong focus on e-commerce. Taking these steps means that we are entering the largest dermocosmetic market in Eastern Europe. I'm very happy with the overall performance of Beiersdorf and our teams around the world in these volatile times. Now I will hand over to Astrid, who will take you through our financials in greater detail.
Thank you, Vincent, and good morning also from my side. It will be my pleasure to guide you through our nine-month 2022 results. Let us start with a view on the group and our sales results per segment. In the first nine months, the consumer business grew by 11.7% like-for-like. On a nominal basis, favorable foreign exchange effects and the additional sales from our most recent acquisition, Chantecaille, led to growth of 18.1%.
Our Tesa business accelerated its top-line growth significantly in the quarter, bringing like-for-like growth of the first three quarters to 8.3%. In nominal terms, the sales growth was 11.8%. All in all, the group grew double digits at 11.1% from January through September and by 60.9% in nominal terms.
The consumer segment shows a very stable performance on a high level throughout the year. After strong growth in the year 2021, we have managed to grow double digits every quarter this year. This is a remarkable performance, especially given the volatility and changing market situations throughout the year. Turning to our performance by brand in the consumer division. The broad-based growth I mentioned is also visible when looking at the nine-month performance of Nivea.
Personal care and skin care are growing at similar rates. In addition, all of our major subcategories are growing year to date. Next to outperforming businesses like Sun, Lip, or Deo, we are very happy with the performance of our focus categories, body and face care, which both show strong growth rates in the first nine months. Our Derma business continues to outperform both in terms of net sales and market share.
Year to date, almost all countries are growing double digits. This is true for our biggest markets like U.S., Germany, and Thailand, but also for smaller markets which are picking up significantly, for example, China or countries in Latin America. Let us now look at the healthcare business, which continuously gained market share in every month of 2022. This is proof of our leading market position. In the first nine months, all our main countries reported positive growth rates, and the development of our businesses in markets like India and Mexico is impressive.
In the luxury segment, La Prairie looks back at a very volatile performance in the course of this year. This was primarily caused by external disruptions like the lockdowns in China. As we mentioned earlier, we just extended our Chinese online business and made it more diversified.
We have seen a strong recovery in China in Q3 after the lockdowns were lifted. At the same time, our global travel retail returned to very good growth rates in Q3. Let's now take a more detailed look at our regional performance. All three regions, Europe, Americas, and Africa, Asia, Australia, were growing again in Q3 and have further solidified our strong nine-month results.
Europe is growing organically by 6.4%, while Western Europe grows slightly faster than Eastern Europe, which is negatively impacted by the war in Ukraine. In Western Europe, we are keeping up good top-line growth with the exception of a few markets in which ongoing difficult price negotiations are impacting our performance. Americas continues to be our strongest growth region in Q3, but also for the nine months with 24.5% organic growth.
Latin America's performance is driven by growth in Eucerin as well as Nivea. Countries like Brazil, Mexico, or Chile are leading the development in the region. In terms of categories, DEO, Sun, and Face Care are outperforming the market. North America's performance is clearly led by the convincing performance of Derma, but also our businesses around Nivea and Coppertone are growing double-digit here. After a weaker start to the quarter for La Prairie in North America, the trend turned around, and we recorded good growth in the month of September.
The region with the fastest acceleration quarter-on-quarter was Africa, Asia, Australia. We already mentioned the strong development of our portfolio in China after the easing of lockdown. Additionally, countries like Thailand, India, or South Africa performed particularly well in the third quarter, bringing the nine-month performance of this region to double-digit growth of 11.2%.
Moving to the Tesa business. There is broad-based growth in Tesa as well. Next to Tesa's growing consumer business, we see two divisions outperforming in Q3, leading to an acceleration of growth in Q3 at 14.3% organic sales growth. One area is the electronics business. Throughout the year, electronics has been the main driver of Tesa's performance. This continued in Q3, and we saw an encouraging favorable trend towards the end of the quarter where we achieved high growth in the Asian region.
Our market outperformance is driven by top-notch technology like structural bonding solutions, which gives us a competitive advantage when it comes to winning new contracts. One of these leading solutions is the patented Bond & Detach approach, which so far has been applied more than 2 billion times for batteries in smartphones.
Combining our expertise in electronics with our long-term experience in automotive, we are using this approach now in the construction of electric vehicles also. Europe is gaining speed in this area, and we are in close cooperation with key manufacturers. Automotive was a growth driver in the third quarter and will be even more important in the mid and long term. Before I finish my part of the presentation, let's have a look at our updated guidance for the full year 2022.
We are pleased to again have achieved an outstanding performance year to date and are therefore raising our guidance for the year. Given the macroeconomic and geopolitical challenges, as well as ongoing price negotiations with retailers in Europe, we are considering a factor of uncertainty in our update below. Assuming continued strong markets, we would expect performance at the higher end of the range.
For consumer, we are now expecting organic sales growth of 9%-10% for the full year, indicating a more normalized level of growth in the fourth quarter. We confirm the consumer EBIT margin to be slightly above previous year's level. At Beiersdorf, we raise our organic sales growth to 7%-9%. The increase in sales driven by the direct industry segment also enables us to increase our guidance for profitability.
The EBIT margin will now be only slightly below previous year's level despite the high levels of input cost inflation. For the group, this means we expect organic sales growth of 9%-10%, and the EBIT margin will be at previous year's level. To sum up, despite a more cautious view on the fourth quarter, we see governments reacting to the high inflation numbers, limiting the financial impact on consumers.
With our portfolio, we have mastered recessions previously and are now preparing for the next potential downturn. We are pushing our skincare categories, we're seeing our businesses become more profitable, and we are winning in former white spots. These developments make us confident going into the next year. Thank you for your attention. Back to Jens, who will start our Q&A session for today.
Thank you. At this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. Please remember that we have a maximum of two questions per caller. The first question comes from Guillaume Delmas at UBS. Please go ahead, Guillaume.
Thank you, Jens, and morning, Vincent and Astrid. Two questions if I may, please. The first one it's on Western Europe, where it seems your organic sales growth for consumer has slowed in the quarter from around 8% I think it was in the first half to I get to around 3.5% in the third quarter. Wondering what you are seeing in Western Europe. Is there some downtrading happening in maybe some product categories? Or can you talk maybe a bit about the price negotiations you're currently having with retailers and to what extent you've been facing more delisting than usual? More importantly, how do you see this situation evolving over the coming weeks and months?
My second question is on your margin outlook, because despite raising quite significantly your organic sales growth guidance for Consumer, you have left the division's margin outlook unchanged. I guess I'm curious to hear why this is the case. I would imagine you are getting more operational benefit from this stronger than initially anticipated organic sales growth. Are you reinvesting more behind your brands or is it a cost environment that is getting more and more challenging? Thank you.
Thank you, Guillaume. I will take the first question and Astrid will answer the second one. In Western Europe, you're absolutely right. You know, what is happening in the third quarter is that we are engaged in some discussions about prices. You know, we've been obliged like all our competitors to do price increases.
We even did two price increases in Europe, and we are now entering into the execution of the second price increase, which is pretty high. We have some tension, some irritation in some countries. Overall, you know, the acceptance of our price increase is pretty good. What you mentioned also is something we were afraid of, but we can testify that it is not happening.
This is what you call the downtrading. We have been able also to evidence, and especially in the last weeks or last months, you know, looking at the sellout data of, for example, Europe, France and Germany, that the price increase that is now really affecting our price in the market did not reduce, you know, the growth in volume. We are gaining market share in the last week of September, in August like before, both in volume and in market share. The truth also is, and this is one of the asset of Nivea, we have a pretty large range of prices.
You know, if you look at the most strategic category, which is face care, yes, indeed, we have Luminous, which is the best ever success of Nivea at EUR 90, but you can find also Q10 at EUR 9, and you will find the essential Nivea at EUR 4. We have a pretty large range of prices, which means that if people are willing to downtrade, you know, they can do that within Nivea. Again, we didn't see it so far, so we are optimistic for the fourth quarter and we will pursue our price increases as planned. On the second question, Astrid?
Sure. In terms of margin and leaving that unchanged, we are continuing to invest heavily behind our business in terms of A&P and continue to want to do that in Q4. Obviously, some big spend to go to really support all the activities, Double Eleven and so on in the business. We very much want to come out of this year very strong, and we're supporting the business significantly. We're also not seeing a decline, unfortunately, in terms of cost pressure that continues to be very high, but of a different mixture, energy related increases and so on. Certainly continued strong pressure from a cost perspective.
Thank you very much.
Thank you. Next in line is Fulvio Cozzolino at Berenberg. Good morning, Fulvio.
Yes, good morning, everyone, and thank you for taking my two questions. I guess I realize it's too early to really talk about 2023, but I was just wondering how we should think about the tough comparables that you'll be facing next year. I guess I'm asking, you know, how is your innovation pipeline looking currently compared to, say, this time last year? And then my second question is, again, sort of a little bit more forward-looking. I mean, as we are likely to, you know, head into a recession next year, can you highlight for us which areas or categories that the company's exposed to that you think could be the most vulnerable in a consumer downturn? You know, what actions are you taking now to ensure that the business, you know, competes effectively?
Thank you.
Thank you, Fulvio. I will take the first question and Astrid will take the second one. When we look at 2023, we are not yet able to give a guidance. What I can tell you that it will be the first year where we are doing fewer, better, bigger launches. You know, we have decided to globalize Nivea and to come with big initiatives that are spread across the world. And this is a change in the way we were managing the brand over the last year. We are coming with big initiatives, particularly associated to the Luminous world, and also in the case of Eucerin, to the Thiamidol world.
The second element which is making us more optimistic than pessimistic is the development of our premium skincare businesses and the fact that now we are in a very positive profitable situation with Derma and of course with La Prairie. Plus, you know, the opening of white spots. white spots in the U.S., for example, for Derma, white spots e-commerce, for example, for La Prairie, is also positive. also the fact that in emerging market we have some big launches in some key countries, like, for example, India. all of that is making us more positive than optimistic. We still have to go through a price increase, obviously not at the same level as what we have done in 2022. There will be still some discussions, some irritations.
I would say the tougher part of the job, again, if the material price increase is not worsening, has been done in 2022. Astrid?
Just with your second question, so we actually looked back at previous recessions, obviously to really understand what was happening. What we saw there is that while the business slowed, we didn't actually see a decline overall in each of our brands. Even within Nivea, for example, our mass market business, we saw a continued growth. What we did see is that certain parts of the world did decline, for example, Western Europe particularly.
Other parts of the world continued to grow. As I said, we continued to see positive overall sales performance at a much, much lower level. We think again that we have a diversified portfolio that can really help us deal with, you know, a recession, hopefully better than some of the competition, given our brands as well as our categories.
Most recent reminder also of when we saw, you know, COVID impact, we saw very strong business in face and body, which is really our core business and we want to continue to grow that. We would hope that during a recession our, you know, consumers again continue to really look after themselves in that way, even if maybe more discretionary categories might be impacted in the short term. What we also saw is a very quick recovery of the business. After recession, we saw quite quickly consumers coming back into all categories. And even the most recent corona crisis shows that as well.
Great. Thank you so much for that.
Thank you, Fulvio. We move on. Next in line, we have Iain Simpson of Barclays. Good morning, Ian.
Morning, everyone. A couple of questions from me, please. I just wondered if you could provide any commentary on sort of future pricing or at least the input cost picture. You know, you've gotten through the bulk of your pricing now. Is that pretty much it? If input costs don't do anything weird over the next sort of six, 12 months, do you feel happy that you're in a good place or will you need to push for more down the road if things stay as they are, rather? Then just thinking about next year, I mean, you sound pretty confident. You've clearly got tough comps, but flagging the launch pipeline and that sort of stuff.
Would it be reasonable to assume, sort of mid-single digit growth, next year based on what we currently know? I appreciate there's an element of, macro, volatility in there. Thank you.
Astrid, we'll take your first question, Ian, and I will take the second one.
In terms of cost, Ian, unfortunately what I just mentioned is that we're seeing a bit of a mixed picture with some, you know, materials really helping, but other things still continue to hurt, also driven by supply constraints. We continue to see bottlenecks that, you know, give us a hard time and that's being seen then also in our costs. As you might remember, we said all along that this year will not be able to cover 100% of the costs. We always had a target to cover about 80%, and we're well on our way with that, so that's positive. We're not at a 100%, so we are looking to still take pricing early next year.
On your second question, Iain, obviously the objective and the plan is to overperform the market. The level of growth you are indicating, which is mid-single digit, this seems indeed, you know, reasonable, but still we have to see the way the market is evolving. All the new price increases are hitting the market. There is a fear of recession. Still, you know, we don't see the way China will be open or not open, but that this is a scenario in which we are working. Yes.
Very clear. Thank you.
Thank you. We move on to Ulrike Dauer of Dow Jones, please. Ulrike Dauer?
Yeah, good morning. Can you hear me?
Yes.
Wonderful. Thanks for taking my question. Yeah. There were some, maybe that was already mentioned in your presentation. I had to log in late a little bit. On your price policy, which you mentioned several times, how are the negotiations with retail going along? Are there signs of store delisting because of the price demands? Thank you.
Ulrike, I will answer very precisely. You know, we are all facing the same issue. Retailers, we have private labels. They know the price increase of material price. What clearly we are doing, especially in Europe, we are transferring 50% of the material price increase to retailer, to consumers, so which is already, you know, we're sharing the pain.
We have been able to have pretty good conversations in most of the countries with most of the retailers, knowing that, you know, it's the first time we are really increasing prices. So far so good. A few issues, a few short-term delistings, but nothing really dramatic. We will not change our strategy. We will go with price increases the way we have decided to do.
Can we expect Nivea to be delisted in some retail chains or are you confident it will be there anywhere?
No. Nivea as a brand will not be delisted per se, but there might be some SKUs which are delisted. There might be some categories that could be a bit areas of irritation. What I can tell you so far, and we've been presenting the second price increase already four months ago, is that everything is doing pretty okay.
Good. Thank you.
Thank you. We move on. Now online we have Olivier Nicolai. Hello, good morning.
Hi, good morning. Just got two question, please. Just considering the move in commodities, are you still confident to confirm at this stage your mid-term guidance on margins of at least 50 basis points per year? That's the first question. Just a very quick follow-up on La Prairie. We've seen some lockdowns in Hainan in, I think it was in August. Is that 41% growth in China, is it sell-in? Is it sell-out? And did you see any real impact from that lockdowns in Hainan affecting your performance this quarter? Thank you.
Astrid will take the first question. I will take the second one.
Olivier, in terms of mid-term guidance, yes, absolutely we're continuing to confirm that. It does assume that there is, you know, market growth, obviously happening next year as Vincent just said. If there is a very deep and broad-based market decline, we would need to do a detailed assessment on, you know, what our performance would be. We're very, very committed to the profitable growth story that we've laid out and the 50 basis points.
On your second question, Olivier, in fact, the sell in and sellout figures of La Prairie are pretty consistent. What the chance we had in a sense is that we have been able to extend or to develop our ecosystem in China. We used to be very dependent on brick and mortar. Here, you know, we are doing a high single digit growth because in fact we are not hit in Beijing and Shanghai, which are our biggest area. What is bringing, you know, the additional growth and which is leading to the 41% you see, is the fact that we are able to develop our online business. You know, we grew with Tmall 20%. We were able to launch the JD.com.
A big impact of online business. We were also able, you know, to develop, to open new stores in Hainan. Hainan was pretty good also in the third quarter, so we grew 50% in Hainan. All of that together making the plus 40%. I think what is important for us is now to be less dependent on Beijing, Shanghai, brick and mortar, which was a little bit the issue we had at the time of the Q2.
Thank you very much.
Thank you.
Okay, next on our line here we have Chris Pitcher of Redburn. Good morning, Chris.
Good morning. Could I ask a little bit about the management team and sort of fixed costs? There's been some high-profile recent hires from outside of the company into some pretty important positions. Are you now largely done with filling the new management team? Secondly, headcount has been pretty much flat for the last couple of years, particularly in marketing and sales. Should we expect headcount to start to increase or can you generate the sales growth on a flat headcount? What sort of level of wage inflation are you expecting to see? Thanks very much.
Thanks for your question, Chris. I think we have a very strong management team and this management team is very stable and very performing, you know. I can tell you that the return on investment of all the last recruit is pretty high. Very happy with the team and no new changes to expect. Be aware of the fact, it's also something we're very proud of, that we have 42% of the board which is female. When I joined the company in 2017 was zero, so it's also a satisfaction pride for the company. A good return on investment. On the question of headcount, Astrid will answer.
What we've done actually, we've invested in headcount in the key initiatives that we're driving in terms of e-commerce, having the right capabilities there in terms of precision marketing, having the right capabilities there, innovation and so on. We're obviously also looking for efficiencies and are going to continue to do so.
We absolutely are committed to ensuring that we have the right people, resources, investments behind our key initiatives. In terms of inflation or, you know, wage inflation, it really depends on the region. We obviously want to make sure that we're competitive in markets and can hold our employees and, it really is aligned with what the market situations are in the various countries.
Thank you.
Thank you. I don't see any new callers here or new questions, so I think we can actually conclude the call. Thank you very much for having joined our conference call. We appreciate your interest in Beiersdorf. Thank you and goodbye for today.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day.