Good day and welcome to the Q3 2018 Trading Update Conference Call. Today's conference is being recorded. At time, I would like to turn the conference over to Mr. Richard Joyce, Head of Investor Relations. Please go ahead, sir.
Good morning and welcome to Avi's Q3 trading update. As usual, we will, we'll say a few prepared remarks and then we'll go straight over to Q And A. So, with any further ado, I'll hand over to Rakesh Kapoor, our CEO.
Good morning, and welcome to RB's Q3 trading update conference call. I'm stand today is a busy day for trading updates and hopefully are slightly later than usual start as a help to avoid any conference call conflicts. I will take you through a summary of today's announcement and then Adrian, our CFO and I will be pleased to take your questions I would like to remind you that this is a trading update only rather than a full set of results. I have 3 key messages for you today. Firstly, our new, more focused and accountable operating structure aimed at delivering growth and value creation which we call RB2.0 is firmly embedded within the organization.
We are starting to see some good momentum from this as you would have seen from our base health and hygiene home performance in Q3. Secondly, the integration of Mead Johnson remains on track as does our confidence in delivering on the medium term metrics to which we committed at the time of acquisition. I will provide you with some more details about the disappointing temporary manufacturing disruption we saw in Q3 but this does not change our confidence in the long term value creation opportunity that will be delivered. And lastly I want to give you a quick update on So let me give you some color around these messages. It was almost a year ago that we announced internally and then externally that we were working to create 2 focused and agile and fully P and L accountable business units, health and hygiene home to become effective from Q1 2018.
As you know, we have achieved a huge change program involving almost the entire organization in under 3 months such that RB2.0 was operational from January 1st 2018. This is now our 3rd quarter of results operating under RB2.0 and while we have much more to do I feel that we are making good progress on both improving our operating performance and creating strategic flexibility of 2 structurally independent business units. You will have seen from our trading update published this morning, that we delivered plus 4% like for like growth in both our base health business as well as from high heat home. Our top line growth is not where we want our ambition is, but Q3 was another quarter of progress and I am seeing good momentum returning to the business. I am particularly pleased that the increased focus and accountability from broad and his passionate team is showing better results with our business performing ahead of underlying market growth rates.
On the base Health BU, we also continue to make progress, up plus 4% growth in the quarter was a further improvement on previous quarters. We have seen good growth from a number of our innovations like our recently launched 24 hour neurofen patch and further progress in e commerce, including direct to consumer and cross border The HealthView has undergone a bigger change agenda with the integration of Mead Johnson. We have Mead Johnson people getting to getting used to the RB portfolio and the RB Wave Performance Management. And in the heritage RB we are having to learn more about infant nutrition. So overall, another quarter of progress, but we are not performing as we should within our health portfolio.
I have every confidence that we have the right structure, the right management teams in place to deliver our ambitions. Turning to my second key message around Mead Johnson. I remain tremendously excited about the value creation opportunity in this hugely important category where we can play a role in nurturing as well as on delivering the financial Year to date performer growth in the IFCN business is +3 percent, a significant turnaround on the minus 1 decline we saw in 2017. Market growth this year is certainly being strong particularly in China, but more importantly, we've undertaken a number of actions to address the share decline, improve operational performance, and we have made significant investments in infrastructure, innovation, and people to provide a sustainable platform for long term growth and outperformance. I've shared many of these with you already.
And whilst we have again so much more to achieve I'm very pleased with our progress so far around improved in market execution, our acceleration of the pipeline and our success in new channels, including e commerce. Now let's turn to Q3. You will have seen from our announcement to date that our IFCN business declined by minus 6% on a like for like basis in the quarter. And so I want to take a few minutes to explain the issue and our corrective actions. Firstly, our North American business had a good quarter with some solid growth of around low to mid single digits where we have seen improving share trends, innovation success with our recent launches of Inferment NeuroPro and good progress on the new channels.
We knew when we took on this category that we have work to do to build additional capabilities including innovation and supply chain. We knew that we took on a very concentrated supply chain And as a result, we approved significant CapEx to diversify the supply chain, increase capacity at existing factories and upgrade quality. During the quarter, we experienced a temporary disruption in manufacturing at our European Manufacturing facility. Which caused materially lower production and supply into several markets served from this factory. This principally affected Asian and European markets with the largest impact in Greater China.
This was more of a supply issue rather than an on shelf consumer availability issue. However, the restocking timetables begun in Q4 imply there will be some shelf availability constraints and consumer losses in Q4. Clearly I'm very disappointed. Q3 would otherwise have been another very good quarter of growth for our IFC and business. We are working hard with our channel partners to minimize the disruption for parents and babies.
The issue was resolved in the quarter and manufacturing resumed. However, you will have seen from today's results that the impact of around $70,000,000 includes in Q3 12 net revenue. The bulk of this impact has occurred in Q3, but there will be some residual impact in Q4 and into early 2019. At the same time as achieving the promise synergies, we've increased investments in infrastructure, innovation and capabilities, including the approval for the purchase of a spray dryer and manufacturing facility in Australia last year to increase capacity to key Asian markets. So we are doing the right thing to create a sustainable platform for long term quality growth and our performance and we remain confident we can deliver the medium term financials as explained at the time of the acquisition.
So on to my final message. My final message is that we are reiterating our full year net revenue target of 14% to 15%. This is better momentum there is better momentum in both the U. S. IUCN business and in our base health and hygiene home businesses.
We remain confident with our target for the year and therefore reiterating it today. So to conclude, while we have still a significant amount of work to do, we are for sure making progress and we have some good momentum in the business under RB2.0. The Mead Johnson integration is progressing well, and from an operational perspective, we are on track for delivery of our medium term objectives. In the nearer term, we have reiterated our increased full year net revenue target of 14% to 15% as we see good progress and momentum throughout the business. With that, Adrian and I will be pleased to take your questions.
Thank
you. Okay. Thanks very much. We've got a few questions here lined up. So first one's from Salim Panuti at JP Morgan.
So please go ahead, Salim.
Yes, thank you. Good morning, everyone. My first question on IFCN, you said that you at increased market share in North America. So good. This is the minus 7 number that you have produced today.
Would you be able to tell us what is the sellout number in the quarter? And specifically, could you tell us what has been your performance in China? My second question relates to that and to the full year outlook. So you had 1,000,000 lost sales in the quarter, how much of a drag should we pencil in for Q4 and presumably the first half of next year? And I think done 2% year to date like for like, you said that you want to be at the top end of the 2 to 3 for the year.
So It seems there should be an acceleration in the 4th quarter. Could you give us a bit of a building block behind that? And if you could also reiterate that you're happy with the consensus, which I think stands at 26.7 percent margin for the year? Thank you.
Right. I think you'll ask the questions, Selene, as usual, which would last the whole call. So but let me try and see if we can decompose it. So first of all, we said there is an improving market share trend in the U. S.
Clearly when we acquired the business in the U. S, we were losing market share and we were quite open about that. And we solely, but surely reverse that And now the trend in the latest period is a big positive, which is very, very pleasing. A lot of work still to do But as you've seen, we've accelerated innovation. We've improved our performance in growth channels and that seems to bode well for the future.
So that part is clear. But in terms of your other question on what is the sellout performance in the quarter? And in particular in Greater China, as we said, that the quarter was more impacted by sell in because of the stock issues that we had from a production point of view, from a technical supply disruption point of view, and less of a sell out problem because there was channel inventory in, let's say, in the whole channel in both warehouse channel, but also in our customers. And therefore, in terms of consumer disruption, it was less of a consumer disruption in Q3. As we restock in Q4, clearly there will be some sales benefit in Q4, but clearly also there will be temporary disruption issues on shelf availability and from a consumer point of view.
And this, we want to flag as we consider that there are cohorts in this category. And if we do do not fulfill consumer supply needs, there could be disruption into Q4 and into potentially 2019, which is what we've called out. You asked how it impacts what it means in terms of Q4 guidance or what it means in terms of the as I've said, our whole the guidance that we've indicated for the year, which is reiterating our 14% to 15% bakes in all these factors clearly. And you've asked also a question in terms of what we mean in terms of like for like. And we said that our full year guidance implies the upper end of 2% to 3% in like for like.
And we we are also reiterating that. Now how do we get to that? Clearly, as I pointed out, we have improved momentum in our base business. Both health and hygiene home. And also there is some restocking impact from a channel point of view.
So I do feel that we we are we are comfortable in our guidance for the full year. Your last question was around margin and maybe Adrian should explain that so that maybe
Sure, yes. Yes. So obviously, Selene, this is a trading update and we haven't matched it formally given any quantified guidance for the year. That said, as your question implied, this issue is clearly harmful to revenue growth and it's clearly not helpful to margin in a way we had not expected in the year. And of course, it does come on top of, some pressure from right input costs that you've heard from elsewhere.
But frankly, there are also positives in the business for margin the progression of the underlying business or main parts of most of the business is going very well. And you will have seen in the position of particularly, but high head of growth between price mix on the one hand and volume, some early encouraging, I emphasize early, but encouraging signs on price, which is also help So taking that in the round, frankly our broad view on margin for the year has not changed.
All right. Thank you.
Thanks, Elaine. Okay, next in the queue, we've got Robert Walvismith from Liberum. Go ahead, Robert.
Good morning. Just wanted to ask a little bit more about infant and supply chain, if I may. Firstly, can you give a little bit more detail as to the nature of the disruption? Secondly, Can you you mentioned that you licensed plants in or there are licenses for manufacture in different markets. Can you tell us a little bit more about the nature of these licenses?
Are you saying that it's contract manufacturing? Or not. And lastly, with respect to this, is there any business interruption insurance as well, which if, if there is, could offset some of the $70,000,000 loss in the period? Thank you.
Yes. So Robert, the nature of the disruption, it was a technical engineering issue at our Netherlands facility, which is our main European facility. It does supply Europe, although as you know, our infant nutrition business in Europe is quite small. But it also is a significant supplier to the Far East China in particular. And the reference to licenses is around there are many market in the world where you have to license to a specific plant, which of course means you're not completely fungible in your sourcing and supply to a particular market.
So that was the reference to the licenses. When we had a disruption at the Netherlands facility, it had a knock on it back on the specific markets that were licensed for that facility. And just, on the question of business interruption insurance, there is nothing material that we have that will mitigate that issue.
Okay. So just to clarify, So you have a technical engineering issue. Is that now resolved?
Yes, absolutely. So just again, maybe just maybe slightly expand on our catches after the previous question. And yes, so the issue is now completely resolved, supplied back up to normal. And just to sort of, against fully decomposed the impact on the numbers, the impact in Q3 was the result of a reduction in sales to the channel. So we had the technical disruption We did not have the supply available to sell to the channel.
So therefore, you saw the GBP 70,000,000 of lower revenue. In Q3, Much of that was absorbed by the channel, right, having reducing its inventory. So there was limited impact in Q3 on the consumer offtake on the shelf. But then as we get into Q4, certainly, we are now unhappy for much of the month of October 2, but we are in a position where although we are supplying and restocking them, restocking the channel. Up to the ability of our supply to do it and the pace and extent we can do that is supply constrained.
We are now in a phase because there is some absence of product on shelves where we are losing customer demand. And why we flagged the Q4 and the and a little bit into 2019 is that in Q4, we'll have the net of the positive of the restocking of the channel. Clearly and unequivocally positive, but at the same time, there will be some consumables. And that's clearly a loss the first time a parent comes in and tries to buy our brand, and can't get it. But then, of course, as the question, what does that do for the repeat purchasing, which is too early to tell, which is why we have in to be completely transparent, we said out there, we do expect some impact on that demand knocking on.
Of course, we're doing huge number of things in all the markets that have been disrupted in particular, China to make contact with the mothers and the parents in general and to mitigate that. But we do expect there to be some effect. So that's Robert. What we're trying to say in the full is obviously the transparency.
Good. Thanks, Bob.
Thank you.
Right. Next on the line is Martin Deboe at Jefferies. Go ahead, Martin.
Yes, good morning, everybody. Martin Deboe at Jefferies. I'm sorry, but I'm gonna to obsess about Q4 along with everybody else and slightly regret doing that, but I think given the pressure under it's understandable. The simple maths are, 1st of all, can I ask is can I confirm the full year target is an LFL not pro form a target? Assuming it is, you need 5% to 6% sales growth in Q4 against a tougher comp and with the issues in IFC and you flagged.
I'm just trying to use plain language here, gentlemen. I'm just trying to understand, is the guidance I'm just trying to understand the difference between the restock effect and the falling demand effect, are you essentially saying that you expect a big swing back in IFCN in Q4 from the restart that will be greater than any underlying diminution in consumer sales. Is that the sort of logic of the guidance? Because I observed that the comps in OTC get tougher, and the comps in wellness and hygiene and HIGO are broadly similar. So I'm just sort of struggling a bit to understand the moving parts of of Q4.
Sorry for the 1, the year.
All right. Just take a step back. First of all, it is like for like guidance. And I clearly, that was the guidance we set up at the start of the year. That's the guidance we're redirecting.
The I mean, I don't quite see the sort of numbers that you just quoted at 5% or 6%. The I mean, we see a first half, which had a 3% like for like. Growth, we've delivered a disappointingly low 2% for the reasons you've described. And I hope we've given you the best sense we can of the Q4 dynamic And we said we're going to be the higher end of 2 to 3. So I don't quite see the issue that you're referring to, Martin, and again Adrian,
it's based on 9 month LFL of 2%. That was what lay behind the comment.
Right. And of course, you know, we do do integer reporting. So you you've got to go behind it. So when you look at 3 months, 3% for the half year and 2% for the quarter, you can take a view perhaps hate to say this, but on the strength of the 2, so I really don't quite see the level of angst in your question, Martin. If I'm missing something again, please come back.
We'll maybe come back Richard afterwards.
Okay, all right.
And Martin's question about whether Q4 is driven by a big uplift in IGM?
Well, again, that is a very good question, Mark, not for the rest of it, but that is a very good question. And we are signaling the truth. There will be there will be channel restocking. I mean, there has been a significant channel restock. We are in full supply.
There is channel restocking going on as we speak. There is also a loss of consumer demand. And we can see the 1st month's impact. We are going to have to see that in our place.
I think the full impact of this is only going to felt during the course of the quarter because as we said, the last quarter did not see much of a on shelf availability issue. It is much more would be much more in this month and maybe to an extent in the 1st couple of weeks in November. And therefore, what how the 2 forces play out will be seen. But I think like I said, we are not going to give you a target by by category by quarter. We've given you the whole picture as it as we seed and we are comfortable with where we are with the whole picture.
Okay. Thank you. Okay. Thanks, Martin. So next on the line, we've got Carol from Kepler Cheuvreux.
And so I'm say your surname, Carol, because I might mispronounce it, so apologies. But go ahead.
Yes, good morning. It's Kaul speaking. Thanks for taking the question. I got two questions. First one is on the, on the supply chain issues in infant nutrition.
According to local press, there was some ammonia leakage in freezer, is this the incident you were referring to? And also in 2017, there was an incident at the NYMAFSA facility, So a more broader question is how do you kind of assess the quality of the safety systems at this facility? The second question is on pricing in Health. That is now turning, is nicely positive during the third quarter. Can you talk a bit there, what you see in terms of where pricing is actually improving expectations from here onwards?
Thank you.
Right. I think the first one is quite simple. It has got nothing to do with ammonia leakage and there's no connection to 2017 issues that you might be flagging, which I'm not aware of, by the way, and therefore, and there's no quality and safety issue here. So I would say it's just a supply technical disruption of supply. On a second question on health, I would say that you might have seen from our previous reporting also there was a modest pricing in health in the 1st 6 months to.
And the last quarter, we've indicated on base health about a split of price mix and volume. So I would not take anything more in the trends of pricing on health. On Hygiene Home, clearly there has been a material change from the 1st 6 months of the year on pricing to the last quarter. Again, I don't want you to read too much from the pricemix combination in 3rd quarter because the 3rd quarter, I think from a 4% growth, we have 2% volume and 2% pricemix We do see and I did flag that a number of times actually in previous quarters that I did expect to see in the second half of the year some pricing return in the market as a whole. And clearly, we will be carefully looking at our pricing and our competitive situation in that context.
And make the right calls. And I'm not saying that, therefore, there is full blown price increasing going forward, but clearly that evidence of early pricing in the market and where we have also participated seems to have happened in Q3 as we've shown. In our results.
All right. Thank you. Very helpful.
Right now we've got Richard Taylor from Morgan Stanley. Go ahead, Richard.
Good morning. A few questions from me. The first one, it would be really helpful for us to understand a little bit more about the nature of the issue. In the manufacturing facility just so that we can judge a little bit more about the impact. So were obviously a full month after the end of the quarter.
So I'd be really curious to know when exactly the issue came up. How long did it last for? What exactly was the nature to you? I know you said it wasn't to do with ammonia. And given the impact we're seeing on the share price today, how you thought about the timing of announcing the issue?
So that's my first question. The second one, obviously, another strong quarter of growth from OTC So maybe if you could give us a little bit more color around how you're thinking about that and the sustainability of that growth? And then thirdly, just on pricing, can you give us some color around pricing discussions and how you're thinking about pricing going forward? You pre been a little bit more cautious than perhaps some of your peers who were sounding a little bit more optimistic?
So let's address your first question first, Richard. The it was a technical engineering issue at the at our Netherlands product and I made them pass the previous question I referred to. It, it issued development over time. It took a while to investigate thoroughly. You absolutely expect us to investigate, but something like this, extremely thoroughly.
The, it then took us a while to develop remedial actions, both in terms of within the facility, but also in terms of within the supply chain to make sure our customers were served as best as we could given the difficulties And indeed, there still is some uncertainty today about exactly how consumers will respond to stuck outages. When they return to the next purchase. So this was developing through Q3 in terms of identifying the issue identifying the root cause and making sure we have proper remediation in place and start up full production again working with working with the customers with the inventory we did have. And as we spelled out actually, because, we have a substantial new facility coming available in Australia at the end of the year. And the growth in the market served by this plant in Netherlands has been strong.
It's been a a tight supply chain. We've had less inventory than those ideals. And that also need meant we needed to manage it particularly carefully. The, and then I think very importantly, we're reaffirming our full year revenue guidance. So I think those were the, those were the sort of issues that we've been working on since time and felt that in that context, the absolutely appropriate thing was to do was to bring it to investors attention along with these along with these numbers, Richard.
So that was our logic as we went through for identifying and then remediating and then amediating dealing with this issue.
I think there were a couple of other questions, Richard, from you. One was about pricing going forward. Clearly, as I said, we should see pricing mortgage price increases in the market going forward, which we saw some evidence of in Q3. And I would imagine that over the next several quarters, you would see some more trending of pricing in the market. This is my expectation.
Now clearly we operate in a competitive market. And we operate in a market which has many other factors to be seen, but I do expect better pricing environment in the next several quarters than we've seen in previous several quarters, if you take the last quarter out of the discussion. In terms of OTC growth, generally speaking, actually over the last many, many years, we've had good growth on OTC. Many of the health growth rates have actually been swung around by the negative performance of Shoal in the past. And you're seeing that OTC has generally performed well ahead of the market.
And clearly 6% is materially ahead of the market because we are and we are making good market share progress here. But I would not say that OTC growth rates at 6% is something that you can write in a model because clearly there are lots of changes that happen in quarters and over maybe sometimes years. Based on seasonality, based on innovation and based on several other factors, including, for example, the Mucinex factor of tribal private label entry or reentry rather in this case. So I would I'm not giving you any specific, you know, a target or guidance for OTC growth rate, except to say that the underlying performance of our OTC brands remains very solid, very good and ahead of the market.
Okay. Thank you. Thanks Richard. Right. Now we've got Guillaume Delmas, it's Bemel.
So go ahead Guillaume.
Good morning, gentlemen. A couple of questions for me. The first one on the Haiho division. I mean, in the press release, you're again saying that the category growth is toward the lower end of the 2% to 3% range. But for the 3rd consecutive quarter, you've reported 4% like for like sales growth.
So you're basically growing at twice the pace of your categories. Wondering what's supporting the substantial share gains and whether this is sustainable or not. The second question is on Rest of Health. And within this, the other subdivision, we've seen 2% like for like a small improvement relative to Q2, where it was a flat organic sales growth. I thought we saw now in the base and some ratably easy comps for data in the Middle East.
We would have seen a stronger acceleration in that third quarter. So what are the key moving parts there? And is Shoalria out of the woods?
Right. Okay. So on the first question, I think, Guam, you're right. The IO performance has been very consistent this year actually. I'm very pleased with this.
Really, first of all, we need to be I mean, this is a business that we always believed had the potential of growth. We had good innovation going into this year. So we and we have indicated those, Eric had a strong pipeline of innovations with a misproduct on Finnish, we've had a new launch in the U. S. So I think the innovation going into this year has been very good.
I personally judge that the increased focus and passion from Rob and his team has actually made sure that the innovations have been maximized to their fullest that we've actually got the wins that we needed to get behind these brands. We've invested more in some cases. And you can see some of that showing into slightly better, we are gaining modest market shares too. So I can't write this gain as a trend because it is early days, 9 months is not a lifetime, but we are very encouraged by the performance of HIFO. I think that is that I did not I would say I knew that the intrinsic opportunity in High Ho to do better was absolutely in front of us and RB2.0 unleashes that.
And that makes me happy because obviously, this is what I wanted to see. On the rest of health, I think you're talking about the OTC, non OTC part. Yes. So it's a very, very big subset. So clearly there's some moving parts here and some parts doing better than others.
Shoal is less of a drag in the quarter, then it is not out of the woods. I would not say it's in growth. It's not a tailwind, but it's not a material headwind. And I think that's the that is the one thing I would want you to take out of this slightly better trends on wellness and so on. But, I would not, I would not, on the rest
of health, I would say, there
are better things. Okay. Also, Yes, that also better trends in Q3. Middle East is still, I would say, is still a drag. It's not as much of a drag, but it's still a drag.
I don't think there were favorable comps in Middle East in Q3. They might have been in Q4, but not in Q3.
Thank you very much.
Okay. Thanks, Gil. Now we've got Marion from Raymond James. Go ahead, Marion.
Hi, everyone. Well, thanks for the question, but actually they're all been answered already. All been answered.
Excellent. Okay.
Thanks a lot. Now I've got Eddie Hargreaves from Investec. Eddie, go ahead.
Yes, good morning. Just returning to the full year guidance, on sales over upper end of 2% to 3%. I'm taking it that by definition, that means 2.6% or above And it would be really helpful to get some idea of the 2% year to date reported, whether that's closer to 1.6 or to 2.4 or somewhere in the middle. I know you don't like talking decimals, but give an obvious uncertainty about what you need to do in Q4, it'd be really helpful if you could give us some color at least on where you stand within that range year to date?
Yes. I think we're not going to go into the into the decimal places as you can imagine, but given that you and Martin earlier and others I'm sure are focused on this. I think what we can point out is look at the half year number, it was a 3 And then we've got a 2 there. So I think you can reasonably infer if a strong 2 in the year to date. And therefore, I think you can see perhaps why we are not we don't come to the same conclusions that Martin's maths was doing, which is maybe branding in other ways.
In fact, with an underlying business, with a business excluding IFCN growing 4% as we've just been discussing. And an ISC in Q4 as we've described. I don't think we see the maintenance of guidance as being a remarkable thing for us to be doing. Paul.
Okay. Thank you. Good. Thanks, Hadi. Now I've got James Edwards Jones from RBC.
Go ahead, James.
Good morning, guys. I'd say the sort of repeating of a technical engineering issue, it isn't very helpful, but on the basis that that's all we're going to get. Can I ask if the disruption for Netherlands plant was a result of work you've been doing to take costs out of Mead Johnson? And how confident are you that it won't happen elsewhere?
So James, an extremely fair question. And I would say we are absolutely clear. This had nothing to do with cost savings at the the Nijmegen plant or anywhere else. And as you can imagine, as this thing came to light, that was one of the questions firmly on our mind. It's very, very clear here.
This would have happened under previous ownership And we are very, very clear that actually in the period since we've owned this, we have been investing in capacity and price equality and other aspects. And in particular, the significant new capacity that's coming online in Australia at the end of this year. So we couldn't be more categoric. So very, very fair legitimate question, James. And we could not be more categoric, but the answer is wholly unconnected with that.
Can I just remind, everyone on the call that the synergies that we had top targeted at the time of the Mead Johnson acquisition had much more to do with procurement synergies and back office synergies? Procurement synergies in the form of raw material packaging material rebicard cardboard boxes, we buy tins and we buy media together. And on back offices, also as a head office synergies, just to which tend to quite significant actually in nature. We did not put a huge synergy target. We have been emphasizing over the last many quarters as soon as we got the Mead Johnson that we've been investing more in this business in terms of innovation capabilities, in terms of supply chain, in terms of other quality and capabilities.
This has been a business unlike any other that we have taken. Both in the magnitude of the savings that we've targeted from a synergy point of view and the extra investments we've made to actually bring back the business from where it was trading at minus 1% last year, actually minus it was, I think, minus 3 in the 1st 6 months of last year. 2 where it is now, which in 9 months has been plus 9 and with a desperately disappointing third quarter. Plusly sorry, plus in the we're the desperately disappointing. I cannot tell you how disappointed I am.
I'm really disappointed. But this is something we need to do well. This is a category where we need to handle even the smallest technical issue with the greatest responsibility. This is what we want to do. And if it means that there is a technical issue to be a technical thing to be taken care of, so be it.
And the part as disappointed I am that all the great work we've been doing in this category and the momentum we created does not show in the third quarter. But equally, I feel that if we do not take these things as seriously as we do, it's not also the right thing for the long term of this business. And that's what we've done, James.
Just to be clear, I'm sorry to harcon about this, but can you categorically assure us that the issues in the Netherlands plant won't, are not issues in any other Mead Johnson plants?
Yes, absolutely. Yes.
Yes. We have looked at the big issues, looked at it technically. We looked at all the other parts or something for similar. See, a huge, huge amount has been work has been done on that.
Got it. Thank you.
Thanks, James. Right. We've got Rosie Edwards from Berenberg. Go ahead, Rosie.
Good morning. Infant nutrition, but maybe slightly different angle. And just, is the Australian plant approved to supply into the Chinese market? Does that have the required regulatory approval?
I think so the Australian plant comes on stream in Q4 in towards the end of this year. And will be in time, approved for China supply. Although what we are going to do is to take some parts of the easier supply that we are doing from the current Dutch facility off into the new plant and therefore create a more supply chain optionality.
Okay. Sure.
And you say in the press release, market growth in China moderated. I think in the first half, you were referencing mid teens. Is it still in double digit levels or are we into single digit in terms of the market growth now?
I don't think we have a reference referencing mid teens market growth rate in. Did we Richard, did we? Mid teens in the first half? Okay. My memory failed.
But certainly in Q3, it has moderated to, more moderated as we expected it to. And actually, there are some predictors of market proceeds again to reference what I said at the July call. Stage 1 growth, stage 1 is 0 to 6 months. Stage 1 growth is the lead indicator for what might happen into stage 2 and 3. And we see stage 1 growth rate to be flat to modestly declining.
Now that's in that's a full reflection of birth rates. That over 'seventeen, what a decline over 'sixteen. How can we judge exactly what the birth rates in 'eighteen are going to be and how that impact 'nineteen? Of course, something to be seen, but there is still pricing stroke premiumization in the market. And that pricing and are we Mead Johnson plays in the premium segment of the market, what we call the high premium and super high premium segment of the So the markets in which we are or the segments in which we are operating basically do show good growth.
Now we know that the Chinese government on the other side is also working on relaxing the opening up of the one child policy. And looking at whether incentives need to be given. I'm not so sure what exactly the endgame out from this will likely to be, but I know that the Chinese government is not happy with the progress that they have made in encouraging birth rates with the opening up of the one child policy and whether they are going to do more to boost growth rates going forward is something to be seen. But clearly, China remains an important opportunity, we should not forget that we are still under, I would say, under leverage in new growth channels like mom and baby stores ecommerce versus our traditional channels. And there is a huge amount of work we are doing to gather pace here.
For example, as I spoke about potentially in our half year call, we partnered JD dot com to go into many more cities. I think in the third quarter, I saw the data. We are nearly in 250 more cities than where we were at the start of the year. That's significantly higher than what we would otherwise have achieved and there's a plan to ramp that up going forward. So there is a huge amount of underlying work that looks very good.
Even in a very disappointing desperately disappointing quarter that we've seen on IFC and which is, which of course we have to move out of and get back to our positive, positive momentum in this category. Great.
Thank you very much.
Thanks, Tracy. Just a reminder, if you want
to ask a
question, you need to push style on your phones. Right. We've got a question from Pinah at UBS. Go ahead, Pinah.
Hi, thank you, Richard. I have two questions. The first is a very quick technical follow-up. I believe last year, the cyber attack was around a 2% drag on your Q3 growth. Could you please remind us whether it disproportionately impacted any of your divisions?
And so when we look at the 4% growth rates in the HIFO and base health Q3. Should we bear the easy comps from fiber in mind when we think about the growth rates, gross run rates as we go into 2019? And then my second question is on IFCN. You've indicated in trade loading in this division this year as you rolled out new products. And today, you've made some comments about moderating market growth rates.
Do you think consensus expectations for more than 4% growth in IFCN next year are aligned with your expectations for market growth and your own performance?
Let me take the first one, Pinar, on the impact of cyber last year, flowing through to the year. Yes, there's no doubt Q2 and Q3 last year were clearly harmed by the cyber experience. And therefore, yes, as you look at the numbers in Q3, this year and particularly when we talk about high go, why was it 4% when the market is 2 we think the market is lower in the 2 to 3 and we are growing a little bit more than marketable difference. Essentially cyber. The, so yes, Q3 does, you know, a cyber tailwind involved in it.
Not quite sure about what you mean by 'eighteen to 'nineteen. I'm not sure that by the time we get to 'nineteen, there's any cyber effect going to be less in the year on year numbers, but you're quite right to point out that that does exist in the Q3 numbers, yes. And in terms of the growth rate in ICN, for 2019?
I think clearly, we are not talking about 2019 targets today. There will be a time for doing that and I'm not convinced we are going to give you targets by category by a business unit, but we will give you aggregate targets for 2019 as we come into 2019.
And I would also say that our view of 3% to 5% medium term range for IFCN growth is completely unaffected. I mean, clearly China is going through some gyrations. At the moment and is coming down from some extraordinarily high growth in the last year. So but that does not affect our confidence of 3 to 5 medium term IFCN market growth.
Okay. Thank you.
Thanks, Pinah. Well, there's no more, there's no more people in the queue. So, thank you very much.
This concludes today's call.