Ladies and gentlemen, thank you for standing by and welcome to the RB First Quarter Trading Update Conference Call. After the speaker presentation, there will be a question and answer I must also advise you that this year at conference is being recorded today. I would now like to hand the conference over to your speaker today, Head of Investor Relations, Mr. John Dawson. Please go ahead.
Thank you, Sabina, and good morning, everyone. Welcome to RB's Q1 trading update. With me here today are Lakshman, our CEO and Jeff, our CFO. As a reminder, as the operator has already said, this call will be recorded and available for replay later on today. As usual, we'll go through our normal prepared remarks and then go straight to questions and answers.
So with that, let me pass you over to Lakshman for his opening remarks.
Thank you, John. Good morning, everybody, and welcome to our first quarter trading update conference call. We hope all of you are safe and healthy. We meet at an unprecedented time. It will be fair to say that none of us have ever lived through such acts to ordinary circumstances.
Our thoughts and gratitude are with the doctors, nurses and health care workers, and the innumerable others around the world who are fighting at the front line to make a difference. We are grateful to our customers suppliers and partners who are doing everything feasible to serve consumers and the communities. I am grateful for the extraordinary work being done by my colleagues across RB Worldwide while respecting everything that is needed to stay safe and well. It is indeed a privilege to lead them. I hope you all have a chance to review our first quarter statement.
I have 3 messages for you this morning. 1st, we have made an encouraging start on our journey to rejuvenate sustainable growth at RB. 2nd, We are managing the unprecedented environment presented by COVID-nineteen as well as possible, with a strong focus on the welfare of our teams, and working closely with our partners and customers. And finally, while we have started the year well, we face an uncertain outlook. At this early stage of the year, we expect to perform better than our early expectations, but would caution against being too positive as there are many uncertainties ahead.
Let me in our full year results for 2019. In February, we set out our plans to rejuvenate sustainable growth at RB. Our objective is to rebuild a strong growth organic revenue growth, mid-20s margins and 7% to 9% EPS growth. At that time, we outlined in detail how we would achieve this with a temporary margin reduction and an enhanced multiyear productivity program. Taken together, these allow us to invest around 1,000,000,000 in principally growth led initiatives in 3 phases that will initially establish consistent performance then build revenue momentum and finally achieve sustained outperformance.
From a strategic point of view, we have started our journey well with a strong focus on executing our plan, during this transformational period, one that lays the foundations for our success in the future. As we laid out in February, we are a good house in a great neighborhood. There are four trends that are shaping our business. Which are brought into even greater urbanization and global warming continue to drive hygiene as the foundation of health. Preasures on state funded healthcare are driving demand for self care to release pressure on health systems.
Sexual health and well-being are big societal issues that are good for effective protection and related products. And an aging and growing population is driving demand. And adult nutrition. At the same time, technology and e Commerce are changing the way consumers know what and how to buy and where to look for information and for advice. With this as background, we articulated our purpose.
Why we at RB exist is to protect heal and nurture in the relentless pursuit of a cleaner and healthier world. We recognized we would organize the business into 3 global business units: hygiene, health and nutrition, while China and our e commerce business in Digital RB, each with specific playbooks and focus. I'm pleased with the progress during this transformational period investing in our people, brands and operations improving delivery performance and While there may be changes to the pace and sequence of some of our investments, as we focus on doing what is right to serve the market's needs at this time, our destination is clear. We are showing encouraging progress towards becoming a great house in a great neighborhood. We remain on track to have our new organization largely in place by the 1st July and to deliver the expected benefits of our strategy, in the medium term, sustained mid single digit organic revenue growth and mid-20s margins by 2025.
Moving on to COVID-nineteen, our newly announced compass, purpose and fight have never been more relevant in these unprecedented times. Our response to COVID-nineteen is guided by our purpose to protect heal and nurture in our relentless pursuit of a cleaner and healthier world. A purpose that has been embraced by the organization at all levels. Despite the significant pressures presented by COVID nineteen, Our global teams have worked around the clock to ensure continuity of supply, while prioritizing the safety of our employees, partners, customers and the communities where we live and work. This is a uniquely challenging and uncertain time.
We exceptional demand has resulted in some customers and consumers facing shortages of some of our products. RB has responded with its typical Can do attitude. Ramping up production in a few cases to multiples of what we produced last year around the world. Streamlining our SKUs and working with customers and suppliers to overcome significant barriers, while incurring additional cost and investing with agility in the supply chain. Pretty grateful to all our employees and also to our partners and customers, for their patients as we work tirelessly to protect the frontline, increasing supply to meet the unprecedented demand.
Our strong brand portfolio provides RB with a unique position to help build healthier communities with a portfolio that includes not only leading brands at Getall and Lysol, which break the chain of infection, but also Mucinex, LENSIP, direct, neurofans, strepsils, as well as our nutrition and our vitamins, minerals and supplements portfolio. As our company embrace our purpose, we took up our commitment around our fight, our fight for access. We launched our RB fight for access on the launch. Through this, we will invest the equivalent of 1 percent per annum of our adjusted operating profit in a wide range of initiatives working with partner organizations to help frontline health workers, promote behavior change and help communities. Our fund has already been mobilized to meet the urgent needs, including a million investment to the frontline health workers and new mothers in Wuhan, China, a $2,000,000 commitment in the USA to support the Center for Disease Control Foundation.
The donation of Dental, Lysol, and Heartpek products in India and a partnership in Africa to distribute products to 22 Countries and with human aids to distribute products to HIV positive patients. On behavior change, the Detle India hand wash challenge with TikTok has reached nearly 88,000,000,000 views to date. And the COVID-nineteen myth busting website has reached over 1,000,000 views. These complement the many local initiatives that have led to significant community involvement and support for health services around the world, like the National Head Service in the UK. We have made an additional commitment on over £8,000,000 of COVID-nineteen cost savings through the RB5 for access funds in support of local initiatives and communities.
Turning briefly to our performance in the first quarter. Clearly, we have started the year strongly with like for like growth up 13% and consistent growth from both hygiene and health. We've also seen improving market share trends and delivered strong growth in e Commerce, where we benefited from our technology platforms and stronger customer relationships. As well as our focus on execution and customer service improvements. Looking at our performance in more detail, the impact of COVID 19 has been different in each market, reflecting our product mix and the timing of government actions, particularly around movement restrictions.
The brands most positively affected by COVID-nineteen are Dethol and Lysol, where higher penetration and frequency of use has led to exceptional and sustained growth. Given their exposure, this has mainly benefited North America, parts of Europe, and some of our developing markets, including China, where Detol has a strong presence in India. Higher penetration has also benefited several of our vitamins, metals and supplements products, where we have seen exceptional growth across North America. We've also seen strong growth from our OTC portfolio as customer service has improved. Although the proportion that is pantry loading is probably higher, and we'd expect that to unwind over time.
Several brands, including Durex, saw overall demand fall, although for Durex, We saw a strong shift to e commerce as a result of purchasing behavior and demand changes under lockdown conditions. Overall, as expected, our IFCN business declined 2% on a like for like basis in the quarter. As expected, developing market revenue declined, particularly in March, as the business lapped a stronger Q1 in 2019 when the business progressively improved product availability after the manufacturing disruption in H2 2018. And as we are going through a planned super premium product transition in China. Trade through Hong Kong was also weaker a year ago, reflecting the ongoing unrest together with significant COVID-nineteen effects on cross border traffic.
In China, The restocking in 2019 laid for a tough comparator, but adjusting for this, IFCN would have delivered encouraging growth in the mainland, consistent with positive consumer uptake. North American growth was led by a particularly strong March, as consumers dealt with the impact of COVID-nineteen, including some pantry loading and in Lysol, some penetration increase. In IFCN growth is strong for both unfamiliar to Amigen, although we do expect some patty unloading in this category. Finally, looking at e commerce, we saw exceptional and our total growth e commerce sales now over 10% for the first time in Q1. Turning to our outlook for the balance of the year.
We have seen strong consumer demand, particularly in March April, but the split between defensive buying and higher levels of underlying consumption is unclear. At this stage, it is uncertain how quickly this will change in the months ahead. Improved penetration and usage particularly for products like Dettol and Lysol may well sustain, although we will likely see some unwinding of pantry load as we work our way through the crisis. The near term operational challenges to meet additional demand and handle lockdown conditions with the associated costs are also likely to continue for some time. As a result, after an encouraging start, we now expect our performance to be better than originally expected.
However, the outlook for the balance of 2020 remains uncertain, with significant COVID-nineteen challenges across our markets. We expect to incur higher operating costs, particularly in our supply chain, as we keep our people safe, mitigate disruptions and serve the needs of consumers. We continue to make progress on the implementation of our new strategy. We're investing in capacity to meet growing demand. We're also investing to capitalize on new growth opportunities as they emerge.
However, we will need to adapt and reface some of our initiatives into the second half and we'll be in a better position at midyear to refine expectations and update our transformation plans. Looking to the medium term, our outlook for sustained mid single digit organic revenue growth and mid-20s margin by 2025 remains unchanged. Thank you for your attention. We remain committed to serving our consumers and communities as well as we possibly can during these unprecedented times. I would like to thank once again our people, our customers, our suppliers and our partners who are working tirelessly to make that happen.
And thank all those in the frontline who are keeping us safe and confident of a successful future. And with that, I'll hand you back to John and to open the call up for any
Thanks, Alexron. We've got some people in the queue already. I know the operator will reiterate their instructions to press star 1 if you wish to ask a question. But for the time being, why don't we go to, Celine Panuti for the first question over to you Celine?
Points, Liam. Sabrina, I can't hear you. Maybe it's me. I don't know, but
I think I managed to interrupt Celine's question. Apologies, Celine. Why don't we go to Richard Taylor? And Celine, if you wish to re leverage, we'll get you back in the queue. Vincent, would you like
the growth number. Obviously, 13.3 percent is a fantastic start to the year. But I just want to understand how we should think about it. So if we assume a kind of normalized growth number for record is around 4 that means that we've got 9% extra growth, I suppose. So how should we think about that in terms of stockpiling, but it's more interestingly increased usage.
I'm particularly interested in your thoughts on new customers, so new retail customers where you're gaining distribution and also on new consumer engagement because I think that's going to be pretty key sort of go forward momentum for the business. So that's the first question. And the second one, I want to also ask about guidance. I totally understand you want to keep expectations in check at this stage and there are lots and lots of uncertainties. But if we start the year off with a 13% and then assume sort of 0% in Q2 and 4% in the second half on easy comps, that easily makes a 5% for the full year.
And then of course on margins, I know we've got the 350 basis points reset But clearly, there's a big input cost tailwind. A and P is tough to spend right now. And then might also be some operating leverage. So I suppose it'd be really helpful if you could call out some of the offsets on the margins as well, please.
Well, thank you, Richard. Let me first start with the I'll just secure a tour of the business, if I could, right? If I go to the hygiene categories, I go to brands like Detoll and Lysol, what you see there is you do see increased penetration and increased usage. And that's happening at home, but it's also happening on the go. If you go to a category like infant formula, we did see a tick up in sales, particularly in North America, and that is clearly pantry loading.
If you go to the OTC part of the business where we have seen strong growth, we expect that that is also impacted by pantry loading and we expect a lot of that will unwind as we go through, the next, you know, 7 months or periods. If you go to the vitamins of minerals and supplement states, it's a bit of a big story. We actually have some where you do see increased penetration and usage at some where in fact, you will see, it unwind over time. So pretty much across the board, what you see is you see different dynamics play out. And I think it's a little hard to predict exactly how much of the penetration at frequency increases, particularly in the hygiene categories, we'll sustain.
But what is clear is that, what we are seeing from consumers and what we are seeing from customers is a greater desire to engage on this because they're too appealing that over time, we will see a, a step up in both penetration and frequency in, in the case of hygiene. On your question about customers, we have, we have really prioritized customers and engagement customers in a very substantial way over the last, 8 months or so. We're in constant interaction with them. And what you are seeing is systematically, we are seeing progress in terms of what we are doing with regard to customer service fill rates and our relationships with them. We've had to be incredibly agile to respond to, the changes in the outside world.
It has meant cutting skews. It has been partnering with them to ensure that the assortments we have reflect what they believe demand could be. It is about more tight integration of these customers into our supply chains, which is beginning to happen and has happened quite well in several of our markets. And so if you just looked at just the performance with our customers until February, uniform was really took off in a way that it did, what you see is steady improvement in a week over week, month over month, steady improvement. In terms of engagement, we are seeing, engagement with regard to new spaces and new places.
I think you saw our announcement last week, with the Hilton Hotels Chain, which was really around the brand Lysol, and the idea that Lysol would, in fact, be a part of a Hilton in the defining clean spaces inside hotels. So we are seeing new engagement as well. That is coming. So Back to your question about the overall numbers though, it is really hard to predict what will happen. I mean, if you have lockdowns in some markets, You have a shutdown supply in the case of others.
Just a few weeks can change the picture quite a bit, which is why we are All we can say at this point in terms of top line is we can say that we're certainly going to perform better than what we said in February, which is we'll grow more than we did last year. We think that's going to be more positive than that. But it's hard for us to give you a real firm guidance at this point in time. To your question on margins, let me first talk about some of the tailwinds. There's no question that you see commodity cost tailwinds in certain parts of our business.
You also see volume leverage, right? On the case of in the case of brand equity investments, we have actually invested the planning for the investments that we plan to make. And some of it is really about the messaging also. What we have done is we have shifted some of the message to drive behavior change. I think I mentioned this TikTok campaign, which is at 88,000,000,000 views, we're now scaling this across various markets.
We've partnered with various health authorities to drive public service messaging around behavior change. So on the A and P side or the PEI side, as we call it, plus digital where we've actually spent more. And I think it reflects a bit in the kind of growth rates you see on e commerce where we have had over 50% growth in e commerce. So PEI, I believe that we will continue to spend the way we had plan to spend, but we do see operating leverage, as you said. So I think it's a a little bit of a that there are pluses and there are minuses.
The thing about the minuses are the costs. If I take a look at some of the logistics costs, that we have incurred. Let me give you a couple of examples that actually give you a sense of what has happened. If you look at social distancing, and how we've had to implement them in some factories where we provide transportation to workers, it has meant we've had to double or even triple the buses we use in order to bring people into factories. We have in a very quick cycle fashion built cafeterias inside some factories.
That help us also ensure that people are able to eat, but do that within the rules of social distancing. Our Wuhan factory is a great example of this as well, where if you look at, raw material availability, If a factory in China that provides raw materials to the factory in Mohan shut down because of a lockdown, we've actually scoured the world to figure out whether there's any raw material available elsewhere and where it has been, we have bought it and we have air freighted it to China. So we do see increases of that nature. We have invested in the supply chain. We have bought equipment and advanced that.
In order for us to increase capacity. And we're going to make even more capital investments as required in order to increase the capacity to deliver on demand that exists. So it is a bit of a pluses and minuses. So on the margin side, I feel good about where we are and where we are, where we are going. We do get some leverage, no question, but we also get some increase in cost.
And I think what we will do is we will update you at the half year on, on our margin progression.
Thanks, Flashman, and congratulations on a great start.
Question from Ian Simpson. Ian, what's your question?
Thank you very much. So firstly, just digging more into that supply chain, even before COVID-nineteen, you said you needed to put more CapEx in. Since then you've seen demand step up, and presumably, COVID-nineteen makes it a bit more challenging to actually spend that CapEx given the need for social distancing during the construction phase. So how concerned should we be about risks to supply chain as we go through this year and how are you thinking about that and managing that? And I noticed that you've pushed back some investment into the second half and is that related to that?
Secondly, just digging a little bit into China
and formula
I think there's been a freeze on new products that regulators have introduced there. You were talking about transitioning your China and performing business to a super premium business. How is that new product freeze impacting that please? Thank you very much.
Sure. Thank you, Ian. 1st on supply, although we spoke in February, we have been working on this from September. Our planning systems are in a much better shape than they were in September. And I think what you're seeing is a title linkage to demand the supply.
Our supply team has done some very heroic things in order to really meet the demand. Just to give you a couple of statistics, if I could. In May, we will predict the hand sanitizer quantity that we produced in the number. If you look at some of the, some of the, other product areas, some of the ones that are highly popular We have cut down SKUs. In some cases, in China, for example, that's all.
We cut 80% of SKUs. But what we did was you had a massive increase in volume because of run lens that we had. Now by the way, that's back down back up already to, you know, we only have, a 20% SKU reduction in China and the volumes are back and we're growing. We have a bunch of partners we're working with, to ensure that we can ramp up supply rapidly. We have made investments.
An examples would be molds or, some of the, things that we need in order to ensure we have the raw materials in place. So we have made those investments. We have bought lines and we're bringing them into our factories. So my sense is that we are doing everything we can to further ramp up supply and I feel very good about the progress the team has made in order to ensure that they can get there. Now it doesn't solve the longer term questions that I think we've had and we're working through to further strengthen our supply chain and the investments that we are making.
We are making good progress on productivity. We are at or above our plan for productivity in the first quarter. The team has done a great job in that by the way. And we have the plans in place in order to further ramp up capacity that we have looked at and that we will approve them as appropriate. Now your point is absolutely correct.
That execution of some of those plans will depend a bit on our ability to, to pull that off in this kind of environment where there's issues around physical movement and the like. But I don't want to be for sure working with our partners, we will be able to ramp up supply in order to meet it. We may not ramp it all the way up to meet all of it and we're working with our customers in order to ensure that this is there. And clearly, it all depends on how long this goes and what behavior change we see over time. But we are preparing very aggressively in this area.
I mean, this is an area of great focus for the entire team and I compliment our supply chain team, our IT team, the teams and the markets were working incredibly hard to ensure that they stay safe. They put the investments in place to keep our people safe. But at the same time respond to the unprecedented demand. On China, on the question of IFCN, First of all, in the first quarter, we were lapping a pipeline fill in the first quarter of 2019 that came from the manufacturing challenges that we had in 2018. So there's clearly a lap there.
The other negative is Hong Kong. We've had disruptions there, which I think are very public. And the border closure, and the visitor market has essentially been completely closed, since early February. So clearly two, two negatives. The positives, we've been working through this premiumization that we have talked about.
And in fact, if you look at it, our super high premium brand Infinitas was 30% of our mix in Q1 of 2019, 30% of our mix in Q1 of 2019, and these are Nielsen numbers. And you know, it's now about 46% of our Q1 in 2020. So the super premiumization for us continues to grow. If you look at our shares, our shares, again, the Nielsen shares are marginally better. They're certainly sequentially much better than Q4, But year over year, they are marginally better, Q1 of 2019 to, Q1 of 2020.
You also looked at the performance with the stage 1 part of the business. Our shares at stage 1 have progressively improved. And then gain steadily from August until March. If you look at our e commerce shares, they have also steadily improved. So Q1 of 2020 was a C1 of 2019 Nielsen data, so that's 50 basis points of improvement.
We're also seeing momentum in the lower tier cities. We are seeing it, but clearly, big winners of the in the lower tier cities are the local competitors who have done a great job and have a great business. So that's the business in China. In terms of new product introductions, in China, we do have a couple planned for the later part of the year, but not for now. They're going through right now.
We've only introduced cross fed in the latter part of the year and that, and that kind of migration is happening even as we speak. It's not a new product we need to introduce this month, but it's certainly something we have plans for for the latter part of the year, and we will see how it plays itself out. Infin, China, it's still work in progress, but we're happy to see some green shoots emerge.
Thank you, Lakshman. Why don't we take the next question from Salim Puneke? Salim?
Yes, yes, I can. I hope you can hear me. Good morning. My first question is on hygiene. Look, I think you mentioned there was both increased consumption and pantry loading.
I just want to try to understand between categories, if you could dig a bit and tell us within hygiene the different performance within categories and whether if you have seen from customer surveys or any insight of exactly where they are using more products. So that's try to understand a bit the hygiene performance here. My second question is on emerging markets. Which was in fact slower for IG than the rest of the regions. And I saw that India was Steve.
So could you give us a bit of a color of what has happened in different emerging markets? Have you also benefited for some pantry loading in Latin America for on Middle East? And what should we expect in terms of ramp up in India? And just finally, I would like to, if you could clarify your outlook on the first question on margin, you put you talked about the positive and the negative Am I right to understand that nonetheless you expect the margin to be better than the guidance of minus 350 that you give at the in February? Thank you.
Thank you, Suneet. Let me go to hygiene categories that we talked about 2nd is emerging markets, if your 3rd question was on margins. To start on hygiene, brands like Lysol, And by the way, Dental too, are seeing increased penetration and increased usage. And I think you can understand the consumer sensitivity around this, particularly because, they're all anchored on this idea of protection. And breaking the chain of infection.
You also have consumers who are sheltering at home, And because they're sheltering at home, there are certain things they're doing both to keep their spaces clean inside the house. They're also cooking more, as you see that from all your food, companies, but also they're cleaning more the dishes and the like. So what you see there is a brand like finished benefiting from the fact that you have people at home who are behaving differently than they have in the past. You also brought the airway, that are actually benefiting from the fact that people are at home. So physical movement and physical mobility could have an impact on those brands, but disappointed time, they're actually doing well.
So in the hygiene business overall, what you see is, because of the fact that you have increased penetration frequency doing from an inside around high unit, the foundation of health. That one is one that we expect will actually continue for as long as there's sensitivity around this. Depending upon how consumers behave and where they shop and what they do with their time, will impact some of the other categories that are inside the business, right? The pantry loading effect is more pronounced in OTC, definitely and definitely pronounced in the case of the IFCN business, where we fully expect that those will, those will impact evolve over time. On to your second quest or your 3rd question on margins, We will update you in the middle of the year on our view and margins.
At this point in time, what I can tell you is really the pluses and minuses as I framed it. And we've also said that our performance overall will be better than what we said to you at the end of February. The specifics of that we will update you in the middle of the year. There are a lot of uncertainties out there, Celine, and it's very hard for us to really predict, how Q3 or Q4 is look like right now. I mean, we have all kinds of scenarios we're working with.
We have teams that have obviously modeled various scenarios. And they range, you know, all over the place. And so it's really hard for us to, to give you a number and hold ourselves accountable to it. So we, we really appreciate your understanding of this, and we will update you in the middle of the year to the best that we know.
It was a little bit in Celine's question about India and developing market selection.
That's right. Sorry. That was the third one. So overall developing markets, we had mid single digits growth in emerging markets overall. And, that is important particularly given the fact that, going ahead, you know, it's, it's 40% of our business.
And so it's important that engine fly. And what you're seeing here is clear demand for products like VASIA, in Brazil, Jake and Dettol across Africa, Dettol in India, which actually had a mid single digit performance, as well as if you look at some of the businesses in Southeast Asia and China, where you see very strong performance of brands like Netall, I think in the case of, the hygiene business in India, we did see a, a single digit decline again, driven by some of the shutdowns and some of the physical dislocations, we are seeing that our factories and our backup and running maybe not fully, but they are up and running close to fully. And I feel good about the trajectory of that business. And hopefully, we will see India continue to progress from a physical dislocation standpoint. But one you should know is that in even though we've had the sort of declines, as you've seen in the first quarter, if you look back over time, the kind of penetration increases we've seen with our brands in the hygiene business.
A kind of usage to principally have seen over time in the hygiene business in India have been very strong. And so we are good about the fundamentals of the business And we recognize we need to work through some of the physical dislocations in India that will help us get back to, I would say, stronger performance over time.
Excellent. Thank you, Alexran. We'll take the next question from Chris Pitcher. Chris, over to you.
Thank you very much. A couple of questions, please. Firstly, on the supply chain again, I imagine the first quarter as you mentioned, a lot of stressors on the supply chain. Are you comfortable that the some of the old issues of the past are now resolved? You mentioned in the statement that you expect lower revenues in developed market, child nutrition due to some, I think, some capital projects there that look like remedial rather than proactive.
And then secondly, in terms of the home hygiene business, Lysol was incredibly strong at North America and probably contributed, I'd say, 40%, 45% of the category growth. Can you tell us how much finish has grown by and whether you're think you're winning holding share in that category? And then finally, could you give us a bit of an outlook on, you mentioned that the full year results that you would expect working capital to work against you this year. Should we expect even more of a working capital movement given extended credit terms, payment terms and so forth? Thanks.
Just before I get started, I'm going to let Jeff take on the working capital when I get done with the others, but let me just put through first, the first one on supply chain and stresses. We've been working since September in order to address some of the challenges we have seen on supply. The areas we focused on were our planning and just ensuring a much tighter link into the demand signal to ensure that we had products where we needed to have them in order to improve our fill rates with customers. And that has actually happened. If you look at the performance at the end of February, with many of our largest customers, it was actually much stronger than it ever was.
And by the way, there's still more headroom, no question, and our customers have been very understanding and been working with them very closely. I've personally been very involved in this. And we continue to see steady progression in terms of the way our customer service has improved. In terms of your question on some of these capital projects, these were planned. We had the migration that's happening in China on a product.
It's actually much more regulatory driven. And we have a dryer in, in Latin America. There was actually plan an upgrade and it's happening now. Now, it would be great if it hadn't happened this time, but it is the way it is. It is something that was needed to be done and it has been in the plans for a while, and is being done and actually is done.
And so we would expect that Q2 will be obviously a time for wrap up for this business. You won't see it there yet. But in the back half of the year, hopefully, we will have that addressed. So that's your question on stresses on the supply chain. We also you should also know that we have invested in capacity, and we are continuing to look at plans to further invest in capacity.
Our partnerships with our co packers is very strong and we further that up and we really thank them for their partnership. All of that put together has led us to actually meeting the supply needs that we have. It has meant extremely agile movement. And our supply teams, by the way, these are calls that are happening literally every single day, are working extremely hard to meet this kind of demand and to deal with the physical challenges that you have if a board shuts down or if there's a physical flow locked in somewhere, or we have a challenge because of a raw material not being available in some place. It has required extremely agile working, and I really celebrate the can do attitude of the RB team worldwide, particularly in supply in IT and in our sales teams, who have actually really risen to the challenge because they know how important this is, and they've done it, keeping in mind safety.
On your question on Hygiene, yes, Lysol had a terrific quarter. On finish, the performance was strong. I think it's driven in great part by the fact that people are showing behaviors, when you're staying at home, they're washing more and finishes certainly benefited from that. Onto working capital, Jeff, perhaps you want to take that question on?
Yes. No, thanks a lot, Lexman. The bottom line is we're not seeing a lot of movement in our net working capital. We have seen some expansion of payables, but overall, it's not significant. At this point.
And so I wouldn't change from the guidance that we gave in February that we would expect working capital, to be increased modestly in 2020. So I don't see any reason to change guidance. We remain on track to deliver strong cash flows in 2020, and we don't currently see a significant swing in working capital.
Excellent. So let's take the next question from Martin Deboo.
Good morning, everybody. My question is really around supply chain. They've all been answered. The one small one I'd probably add is what was your sense of where you're in countries were at the end of the quarter both your own inventories and stock in trade and just how does that play out in Q2?
Maybe, last one, if I take our own inventory, and then I'll turn it over to you to talk about the trade. Martin, overall, our inventories weren't significantly down. We we clearly saw some areas, some brands, Lysol Dental, where inventories were down significantly, However, we're building up we're building up in terms of raw materials in significant areas So we have more raw material in the pipeline as we look to as we look to increase production So overall, inventory was actually flat, pretty flat versus a year ago and pretty flat versus December. So no significant movement in inventory on our own balance sheet.
Yes, in terms of the trade, I think, in some of the, products like Lysol and Detol, I think it's fair to say that the consumer offtake, has been strong. And it has meant that they clearly the inventory levels with the trade in some of those are, are not as high as they would have been last year. Now having said that, what we are doing with our retail partners is we're working very collaborative with them, not just to think about what that means, but also looking ahead. Come as well, right? So you've got to worry about that too.
So we're working on this. And we're working with our supply chains to ensure that we are meeting the demand as appropriate for what was needed for, for the flu season later in the year.
David Hayes. David, over to you.
Thanks so much for the opportunity to ask the question. So just two for me. The first one I guess is just to clarify maybe on the LATAM infant formula spray dryer capacity. Just to understand your comment Is that has that been a constraint of bottleneck on supply on sales levels in various geographies in the markets? And is that you're saying going to come off that bottleneck in the second half and will support better growth?
And then the second question is more broad. You talked about in the release, obviously significant management change that going to the 1st July, but a lot of top positions changing. Can you outline what you're expecting from those people? What they're going to bring that wasn't there before beyond just delivering the term targets, what characteristics have you got in those people that wasn't present in the people they were placing? Thank you so much.
Great. Well, on the left hand dryer, this has been a planned project for, for 7 years. So there's nothing new about it. If you look at our market shares in this business in Mexico, they've actually gone up. What we are doing is it's a planned upgrade of the dryer.
It will have an impact because you have to take down the line for a period of time. And then you will end up having to rebuild it, which is the way it is. We've obviously looked for ways to fill that demand from other places. There are obviously registration questions that are like that we have work through. So, to me, this is a plan upgrade.
In a very similar way, I think our that, that, that you would. It just so happens that, this is a factory that supplies a lot of our product in Latin America. All the management change, we have a combination of 2 things. We have a combination of, existing RB people, who are terrific, who have been promoted. And who are occupying key roles inside the company, and there'll be more of those you'll see over time.
In addition to that, we have made targeted hires of people to come in, And these people of people who are bringing in very specific expertise, experiences, and the ability to guide our organization to what we want to do, which is position this company for strong growth in the medium term, with a top line emphasis. Majef Carr, for example, is a great example of that. I know he's on the line here, but part of, part of the attraction of Jeff, as you know, as I mentioned in the previous call, was Jeff brings a great deal of experience for strategic leadership, operational leadership and the ability to build a great finance team, that will help us really strengthen the business for the future. And we've begun working really well together despite the fact that we are always doing this on Microsoft teams from the south. And so in a very similar way, we are bringing people in very specific expertise, and experiences to round out our team.
Thank you.
Let's take the next question from Alicia Fari from Investec. Alicia, how do you?
Hi. Good morning, everyone. I wanted to ask about the market share gains that you referenced in both your health business and in hygiene. Can you tell us whether those are versus private label, other brands? And how sustainable do you think this development is?
Secondly, R and D was a key part of the strategic evolution in FY 2020 prior to this crisis. What's the outlook for R&D new product development at etcetera, sort of near term as a result of COVID-nineteen. And then, finally, if I could just circle back on China infant nutrition briefly. You mentioned that growth was encouraging on an underlying basis. While that's positive, it doesn't sound especially dynamic.
Can you update us in a bit more detail what's kind of going on with the portfolio and your brands on the underlying basis and growth outlook for that.
Thank you.
First, your question on market shares. I think that, what you're seeing is, is actually is solid strong, performance and market share is pretty much across the board. And part of it is driven a bit by consumers, essentially migrating to large brands that they have trust in and, knowing that, that will help them through, for various periods of time. So our market share is, it's a broad question. There's many, many parts of our portfolio.
But I think what you see overall as a broad theme is as consumers move to larger brands, we're seeing the impact on market shares. On your question on R and D, This is a, this is a big priority and a big emphasis for us. And the RDT team is working incredibly hard to ensure that you know, we are reflecting what is happening in the world around us and translating that into ideas and innovation platforms. That will put the status in good stead for the future. So it's a very dynamic, a process right now.
We already have plans for next year. As we look at what's going on, we continue to look at this and update this as appropriate for new products that we will bring up over the course of next year. On your third question on China IFCM, this is still work in progress, but the progress is encouraging. And as I think I've given you some of the statistics on our premiumization, what we've been able to do at E Commerce, what is it that we're really doing? We are focused on offline execution, in stores in China.
And, you know, the team understands this and we are really focused hard and ensuring that we actually get that piece of it right. 2nd is e commerce is a big area of focus for the business, and has done well. We could continue to make investments and make that better. 3rd, we have invested in the competitiveness of the business. The questions that that was needed and we've done that.
And 4th is we are innovating with new models, help us, address the opportunity in Tier 2 And Tier 3, Tier 4, Tier 5 Cities. We're seeing momentum. It's clearly not at the level that the local Chinese companies have, which is why they have these big share gains, But our performance relative to others is not bad. It's not enough, but it's not bad. On the overall ICN business, I think the team understands clearly my perspective on this is that, performance is going to be important for us to deliver a consistent sustainable performance They are absolutely on it, but they understand my view that performance is going to matter.
And, I am all over them, if I could say that. In order to ensure that we get
So we take the next question from James Edward Jones. James, over to you.
Thank you, John. Thanks, and I under stand that you're reluctant to be drawn on the outlook, but you are much better placed than most of us to anticipate what's going on. In longer term, I know it's all very uncertain, but is your best guess, let's say, 2022 beyond that this crisis fundamentally changes things, or do you expect things to revert to something like the previous normality?
I think longer, we see the behavior changes that, consumers are being forced into the more pronounced the changes will be in the long term. Just so you know, in terms of how we're organized around this, We clearly have a team that is focused on our people and on safety. We have a team that is focused on supply, and doing all the heroic things in order to ensure we meet the supply requirements that we have. There's a team that is looking at demand in the near term. Looking to see what we need to do in order to ensure we truly understand the demand picture and respond to it with supply along with our people and keeping them safe.
That's sort of I would call it current business. I do have a small team working directly for me, And what we are doing is looking at the long term and what that means. And there's no question that, as we look ahead, you're seeing some fundamental shifts. I mean, take a look at our e commerce business. E commerce business today has grown north of 50%.
It's been pretty much across the board. Every single region, every channel within e commerce has had strong growth. We're in 40 three countries. We have 40 direct to consumer sites that are operational across our brands. And as I've said, on February 27th, e commerce and technology and digital is going to be a big emphasis for us.
And it's clearly proving itself out in Q1, and I don't expect that this will change. The level of change we see, particularly digitally, is massive. And we will intend to respond to that and make the investments as appropriate for it. So I do not expect that 2022 or 2023 is going to look similar to what 2019 looked because consumers are going for massive change in behavior, and we will respond to that with the appropriate investments. We have blessed with a portfolio that makes us play in the right neighborhood across both hygiene, health and nutrition.
And what we have to do is capitalize on that with the right investments, with the right execution, with the right talent and team, and the organization that has purpose and 5 central derivatives. And that's the real focus for us.
That's really interesting. Thank you.
Thank you, Lakshman. We'll take our last question, if that's okay, from Jeremy Fialco, for those who don't have a chance to ask questions, if you want to, please call me June, day my numbers in the press release and you can reach out at any time. Jeremy, over to you.
Hi, morning, Jeremy, Cialco HSBC here. A couple of questions to finish off. Thanks. Sitting me in. Firstly, could you just talk a little bit about the January, February results versus the March numbers?
Because clearly with March was when you had the the pantry loading and the biggest COVID effects. So just to get a sense of what the sort of the underlying momentum was pre the big demand spike in March and how that was comparing with your original expectations? And then secondly, expanding a little bit on the e commerce point. Clearly, as the customers are shifting more to ordering online, there's a natural boost that everybody gets through e commerce, I. E.
People buying Tesco online versus going into the store. And so if you could perhaps splits out a little bit what your e commerce performance has been like relative to the market and where think that you have been able to take advantage of your e commerce capabilities to do better than how the market is doing?
That's
great. Well, we were pleased with our performance in January February. We felt that there was real underlying momentum that, we're seeing initial progress on the strategy that we were implementing. For example, if you look at customer service, the improvements that we saw there, if you looked at some of the penetration increases we've seen, we were seeing increases there. If you looked at some of the us to move into new channels clearly there.
Our e commerce business was performing well. So I think if you look at it from an underlying perspective, just the brands, what we were doing, we felt good about the performance of Jan will be in February. They had nothing to be alarmed about, in fact, it was positive. That, of course, make hay, March came. And you saw some big shifts, particularly North America, but also in Europe.
And so I think that, our teams have held up very well, but it shouldn't take away from the fact. The underlying executional strength of the business was stronger in January February than we have seen for a while. To get to your second question on e Commerce, You know, we've grown north 50 percent in e commerce. And I don't think that's a, you know, that's a particularly, you know, that number. If you look at our shares, in some of the geographies, and I mentioned China as an example, where we have data on this, at least the data that is captured or the element that it can be, we are seeing share increases, over there.
Durex, despite the fact that the category was impacted, Durex grew double digits on e Commerce. So I think that, the portfolio that we have the investments we've made in the e commerce and ERB over time, that we are rapidly and agilely scaling up. I mean, we literally have increased the headcount in that business in the last 3 to 4 weeks by 10% to capitalize on the various opportunities. That has meant that the business is in the place that is performing with the rhythm, that is actually terrific, and I think more to come. Okay.
Thanks very much.
Excellent. Well, look, thank you all very much for taking part. We're up to the hour. So thank you all for your attention. As I mentioned, anyone who wishes to contact the team should reach out and we'll be trying it in, and have a conversation.
Thank you all for taking part.
Thank you very much.
That does conclude our conference for today. Thank you all for participating. You may now disconnect.