Good morning, everyone, and welcome to Nestle 20 12 9 month sales conference call. For your information, this is being recorded as well as webcast. As usual, I will start with the presentation and then we will take your questions. I'm sure that some of you have already heard the press conference. In fact, I think it's running over a bit, but anyway we need to start.
Hopefully, I can give you a bit more detail than you heard on the press conference. I will start by taking the Safe Harbor statement as read and go straight to the highlights. Total sales increased by 11.1% in the 9 months to CHF67.6 billion. We benefited for the first time in several years from a positive evolution of foreign exchange as well as from the inclusion in the numbers of our Chinese partnerships. RIG or real internal growth momentum was robust, unchanged at 2.9%, contributing to organic growth of 6.1%.
And we continue to grow both in developed and emerging markets. Looking forward, we do not see the 3rd quarter as a good guide to the full year. There are a number of events which I will touch on that will not repeat or that will balance out favorably in the 4th quarter. I will touch on these as I go through my presentation. On the next slide, you can see the detail of the makeup of our sales growth with for the first time since 2007 all elements being positive.
We had a 2.7% positive impact from acquisitions net of divestitures and a 2.2% from foreign exchange. You should be aware that Yinlu no longer be included in the acquisition line from December 2012. I will now start to dig deeper into our performance with a regional overview of our total food and beverage business. All three regions achieved positive growth both organic and room internal growth. Europe reported 2.5% organic growth and 1.1% real internal growth.
Clearly, the environment in Europe remains particularly challenging with low consumer confidence, the general economic malaise and the accompanying austerity programs. This performance is therefore notable relative to the environment in which it was achieved. The Americas achieved 6.1% organic growth and 1.5% real internal growth. Again, the environment, particularly in the North, is not conducive to growth. So this performance, continuing positive growth in the USA should be seen in that context.
The Asia, Oceania and Africa region achieved 10.8% organic growth and 7.5% real internal growth. This region was the only of the 3 not to report higher rig in the period than in the first half. I'll go into the detail when I review the operating segments. On this next slide is another way of looking at our overall performance. Emerging markets and within that the brick markets are growing double digit.
As I've already said, the developed markets are also growing, but Portugal, Italy, Greece and Spain remain a slight drag on growth. Although those markets are not growing, our market share performance there is pretty good. Globally, our property position products or PPPs are also growing double digit. The fact that their growth is slightly below the level achieved by emerging markets is to be expected as we have PPPs in developed markets too. Let's now look at the operating segments, all of which are delivering positive growth.
I will start with Zone Americas. The Zone achieved 5.5 percent organic growth and 0.4% real internal growth. The real internal growth has returned to positive territory after being -0.1 percent at the half year. This is wholly due to an improvement in the rig in North America. In North America, our organic growth has improved slightly as the improvement in the rig has outweighed the decline in pricing.
Pricing was lower in the quarter in all categories to varying degrees. The improved rig performance is also broad based and is generally supported by the latest market share data. You might remember that we had already seen an improvement in RIG at the half year. We would expect this trend of improvement to continue into the final quarter. Frozen food continues to be challenged as a category.
Our performance measured by share is slightly better than the category for both Stauffer's and Lean Cuisine. The pizza category also continues to be challenged. Here, the regional expansion of the Jack's brand has gone well. Exciting for us is that we have meaningful launches in the coming months for both Lean Cuisine and Pizza. We've also seen an improvement in RIG and ice cream in the last quarter, again continuing the trend of improvement seen earlier in the year.
The category saw higher pricing at the start of the year, you might remember. The impacted volumes across the category this impacted volumes across the category and contributed to share gains in premium by private label. We are seeing better performances in snacks, brands such as Haagen Dazs and Drumstick. The slow churn relaunch has also helped. The coffee made and Nescafe businesses are seeing positive growth.
Both categories have seen new entrants. In the case of creamers, where we are the leader with over half the market, our share was initially impacted, but has trended better in recent months. In soluble coffee, we have gained share with good performances from the Nescafe variants, Classico and Memento. Our U. S.
Chocolate business is also performing well with growth and share gains. In Latin America, we have seen growth in all categories and good performances from almost all regions and countries. Brazil had a slower third quarter as it has pushed its confectionery shipments for the Christmas season into the Q4. It should therefore have a strong final quarter. That said, it is achieving high single digit growth for the 9 months in any event.
Mexico is also performing well. Next is in Europe. Royal and China had accelerated during the Q3, but organic growth is down due to pricing easing. As you might have heard from the retailers, the quarter was short run shopping day, which obviously had an impact on our organic growth. This will be recovered in the final quarter.
In Western Europe, we are seeing good continued good momentum in soluble coffee and pekka as well as a good Q3 in ice cream. Looking at the markets, Germany has been tough all year and continues to be. France is rather more resilient, though the recently announced austerity measures there could be a risk factor for growth going forward. Nescafe Herta, Maggie, Brutonie and the chocolate business are all among the highlights. The UK is also growing well with the big two categories confectionery and soluble coffee, both contributing as well as the as well as ambient culinary to Maggie Juicy range.
For the Escoffier, I'd highlight the refill packs as a particular success story. This is a value proposition well aligned to today's environment. Among the pigs, I'd pull out the performance of Greece. I think the decisive factor is the local nature of our business there, including our decentralized management as well as our strength in key categories such as soluble coffee. This has enabled us to grow in Greece.
In Eastern Europe, Russia has continued its positive momentum, reflecting decisive action to rebalance the pricing between the different segments for the soluble coffee category. Other categories are also performing well, confectionery, ice cream and Nesquik included. So in Asia, Oceania and Africa slowed somewhat in the Q3. Despite this, it reported a still impressive organic growth of 9.4% and real internal growth of 6.3% for the 9 months. It's interesting to note also that the reported sales are up 25.9% from the corresponding period in 2011 due to the inclusion of the Chinese partnerships this year.
We often call Zone AOA Zone CNN. It is the Zone's feeling that the Q3 was particularly impacted by issues beyond its control. Specific examples would be the demonstrations in Pakistan that caused 5 days in lost distribution and the typhoons in the Philippines that resulted in a week's factory closing. Beyond this, there is disruption from the election in Egypt and other aftershocks from the Arab Spring as well as the impact of the sanctions in Iran. Issues will not be present in Q4.
Let's turn now to the business performance in the zone. The emerging markets have continued to deliver double digit growth. China also reported growth in the high teens with most categories double digit. The Philippines had a weak quarter for reasons I just mentioned. The Malaysia Singapore market, on the other hand, is performing well this year with double digit growth heavily weighted to RIG.
Dairy, Milo and Maggie are among the highlights there. The South Asia region, which includes India, is running near double digit. Calgary chocolate and milk beverages are among highlights. We have seen extremely good growth in Africa in the high teens for 9 months. The 3rd quarter number is meaningfully weaker though than the half year as we are cycling the Cote d'Ivoire recovery in 2011.
Growth in Japan also continued to be positive and SKU Bay, KitKat both doing well. Among the zones categories, dairy, culinary, powdered and ready to drink beverages and ice cream were double digit. On the next slide is Neste Nutrition. The organic growth of 6.6% and real internal growth of 2.4% reflect increased rig and pricing over the half year numbers. We have continued to see strong growth in emerging markets in both formula and cereals, double digit in AOA as well as in Russia and most Latin American markets.
This continues to reflect the benefit of our broad based innovation programs in both the cereal and formula categories. You may have seen last week's headlines about U. S. Birth rates being at all time lows. This makes for tough environment in which to grow our business.
That said, we continue to see improving momentum quarter on quarter. The first key driver here is the pouch category for our Gerber Graduates brand. We entered the category relatively recently, We have already taken leadership. The second driver is our rollout of our anti colic formula. The European environment is somewhat similar to that in the U.
S. With birth rates down generally in Western Europe and particularly in the Southern countries. In this environment, our performance is relatively good measured by generally positive market share performances, including in France where we are growing the business. The trends in the 2 smaller businesses in the division are unchanged. Performance continues to grow, weight management doesn't.
Nestle Waters is next. They reported accelerated real internal growth to 4% and organic growth to 5.8%. In North America, we have seen good growth for the 9 months. The international brands, Espellegrino and Perrier as well as regional brands, Saffae Hills, Ice Mountain and Poland Spring have contributed well. Our market share story is less strong, but this simply reflects that we have responded to higher PET costs by pricing up.
We have been able to do this ahead of competition, much of whom have longer term supply contracts than us. We are protecting our margins even if this is costing us some share short term. The European business had a good quarter. France, Italy and the U. K.
All contributed as to the number of smaller markets. I think our U. K. Business is worthy of note. A few years ago, we had no meaningful presence.
Today, we have a market share in the mid teens and are continuing to see impressive share growth. We have a good domestic brand Buxton with a well situated source whilst our International Waters and Nestle Pure Life are also performing well. The emerging markets have continued to see double digit growth both in Asia and Latin America. Next is other activities incorporating Nestle Professional, Nespresso, Nestle Health Sciences and our joint ventures. Nestle Professional has maintained its growth momentum from the first half with accelerated real internal growth compensating for a lower level of positive pricing.
Its performance is certainly strong relative to its industry, the out of home sector under pressure in the current economic environment. Professional has delivered double digit growth in the emerging markets with double digit growth also in North America, with only Western Europe being slightly negative. The legacy beverage and ingredients businesses are proving to be defensive in the current environment, providing good value alternatives for operators. But we are also seeing strong growth in our beverage systems business as well as in our services to chefs within the food area. Nespresso continued to deliver double digit growth.
Its innovation programs are running apace with 3 limited edition copies and 2 machines launched in the 1st 9 months and is on track to have over 300 boutiques by the year end with about 30 openings this year. Nestle Health Sciences has performed well. There is good growth in the U. S. And Canada where Boost is a highlight and in Northern Europe as well as in AOA and Latin America.
The acquisitions announced in the last couple of years are all performing well. The joint ventures are all performing broadly in line with their markets. The next slide is the overview of the product categories. Just a few comments to build on my zone commentary. Powder and Liquid Beverages are near double digit.
The Milo and Nespresso Billionaire brands are double digit and Nescafe is high single digit. Perhaps you might be interested by 2 of the overlooked Nescafe businesses. First is Nescafe ready to drink. This is doing extremely well in emerging markets such as China. 2nd is the legacy Nescafe large can business in Neste Professional.
This is growing near double digit. Nescu Doctor. Gusto, meanwhile, is now the number one coffee system in Europe in the retail channel. Nespresso is, of course, the overall market leader. Also, it is small but special tea by Nestle available in France and Switzerland has been rolled out into 5 new countries in Europe, Germany, Belgium, Austria, the Netherlands and Luxembourg.
Dairy and ice cream is mid single digit. In dairy, our adult premium milks are performing extremely well as their benefit platforms resonate clearly with consumers. The family of cereals businesses, brands such as Golden Morn are also growing rapidly. Our ability also to support PPP dairy range with claims is also a clear differentiator enhancing our nutritional profile within the category. In ice cream, our global coating business has continued to perform well, so local adaptations such as cups in Greece and international innovations like peelable ice cream.
Peelable is now in Europe and the Americas as well as in Zone AOA where it was created and is now available in various flavors. Prepared dishes and cooking aids is growing slightly, having had a small increase in pricing in the Q3. The ambient business, generally Maggie, has continued to grow double digit in AOA, and I've already touched on some of the key markets. This is despite a sharp slowdown in the big Central West Africa region, which was lapping the period in 2011. We had had strong growth following the war in Cote D'ivoire.
The European market is tough. Very interesting is the continued success of the introduction of the Maggie brand to the U. K. As part of our international rollout of the Juicy Roasting concept. I've discussed the U.
S. Frozen business perhaps it's just about reminding you that we took a decision to reduce our level of promotional activity at the start of the year. We knew this would impact our growth and so it is proven, but it will also improve the economics of the category for us particularly as we enhance product quality, drive innovation and restore growth to the category. I've already talked about confectionery. The quarter was impacted by the changed shipping pattern in Brazil, which is our biggest confectionery market, but growth picked up pace in Russia, the U.
K. And Japan. Pet Care delivered 7.8% organic growth for the 9 months. We grew share in all major regions and all major segments. Growth in emerging markets continued to be strong, driven by double digit growth in Latin America and in Central and Eastern Europe.
The North American market was weak, growing about 2%, but we continue to outpace category growth driven by good performances in cat food and dry dog. Innovations included Benefal Baked Delights, a new line of baked dog treats and Fancy Feast Morning Medleys. In addition, Be Happy, a new mainstream Jai brand was launched within the mass and grocery channels targeted at value conscious consumers. In Europe, Felix, Pirena 1, Dry Cat and Pro Plan all delivered strong results. In addition, Felix Party Mix, Cat Snacks has now been launched in 10 markets and is gaining market share.
In Russia, we are also seeing share gains helped by the Felix Wet Cat single serve rollout. That concludes my presentation. As I think is clear from my speech, Q3 is not a good guide to Q4. A range of things from the Brazilian Christmas supply to the missing trading day in Europe, to the pickup in the North American business, to some one offs in AOA, point to Q3 being the year's weakest quarter. Importantly, with the trend in pricing reflecting an easing in a number of raw material costs, our real internal growth is solid and even improving in some areas.
In conclusion, therefore, we are confirming our guidance for the full year. Thank you for your attention, And let's now open up the discussion. I'll pass the call over to Roanne, the operator. Thank you, Roanne.
Thank you. Ladies and gentlemen, your question and answer session will now begin. The first question comes from Warren Ackerman from Societe Generale. Please go ahead. Your line is open.
Good morning, Roddie. It's Warren Ackerman here at SocGen. Welcome back. Can I go back to the one offs you mentioned in Zone AOA, you've obviously talked about floods in Philippines, Iran, Pakistan, Egypt? If you had to aggregate all those issues, what drag would that have been on growth?
I know you probably haven't worked it out, but just wondering what would be your best estimate because you said that Q3 zone AOA is not a good guide to Q4. Just wondering which of those issues do you think will not reoccur in Q4 compared to Q3? And then is there any reason to think that the Q4 zone AOA growth won't go back to double digit growth that we saw in the first half? So what I'm really trying to ask, Roddie, is bigger picture, can you confirm that there's no underlying slowdown in your emerging market business? Thank you.
Thanks, Warren. Sure. So I don't have a sort of a basis point impact number for the one offs in Zenera. But I think if you look at the one offs in the group including the European Trading Day and everything else, it's certainly north of 100 basis points. And this one in particular, I mean, I think those of you who listened to the press conference will also have heard Nandu answering a similar question from some from one of the media, and he was expressing his confidence that Dazen will bounce back in Q4 and indeed next year as well.
Now it's clearly we don't call it Zone A away, Zone CNN for no good reason and every quarter has issues. And so to strip out the particular issues of this quarter, I think, is difficult. But it is clear talking to the zone that their feeling is that it was extremely impactful. But if I look across the all the markets, it is evident that there is a broad slowdown of maybe 100, 150 basis points across the different markets, emerging markets. Asian and Japan improved.
And the exception is Africa that was more like a 500 basis point dip for the 9 months relative to the half year. And that really is a result of Central West Africa region and the Cote d'Ivoire comparative from the prior year. So that's a pretty big move in itself. So I mean that's a bit more depth for you on it, but I haven't got a precise number.
Okay. So what you said so you said north of 100 basis points. So can I interpret that as if I kind of look at the Q3 organic growth in isolation, which was around 5% that would kind of in underlying terms sort of be slightly above 6%? Is that what you're saying?
Well, what I said was that the north of 100 basis points is for the group as a whole including the U. S. Lending. I haven't quite had a number for
AOA. Okay. But I think
the AOA impact is probably bigger than that if you think about 500 basis points in Africa.
Okay. And I'm sorry, buddy. Just on this 100 to 150 basis point slowdown in emerging market growth, what would that go from and to then in terms of the absolute percentages do you think roughly?
Well, I mean, we are still slightly over double digit for emerging markets in the zone. So it's gone from the very low teens to just below the low teens.
Right. Okay. Thank you.
Thanks, Warren. Next question please.
Thank you. The next question comes from David Hayes from Nomura. Please go ahead.
Good morning. Good to see you back. Just a couple of quick questions. Just a follow-up on that AOA discussion in terms of those one offs and sort of just taking the point about them not being there. But I guess some of them may well reverse in the Q4 in terms of catch up.
Just whether you can talk about which ones you've mentioned where you actually see a benefit in the Q4 because it's just a lag effect effectively. And then also in terms of Europe, we heard from one of your competitors yesterday that since September, particularly in Southern Europe, things have got a little bit worse, partly around Spain, I guess, with the VAT rise. Just wondering whether you would say that you saw that impact or whether you think that may affect that pigs dynamic in the Q4 as well? Thanks very much.
Thanks, David, and thank you, Ryan, for your kind welcome back. AOA, I mean, I think in Africa, I mean, it's Africa is cycling a quarter issue. So that's a clear example of something that should bounce back a bit. Elections that I mentioned have happened. So hopefully, that will bounce back.
We're back in operations in the Philippines. We're back in operation in Pakistan. Those are very clearly incidents related only to the quarter. Now we're never going to make back the sales we lost, but it doesn't mean it doesn't it doesn't mean we won't see growth coming back in the Q4. So I think a lot of those issues are very specific to the Q3 only.
In the Portugal Libre Spain, the pigs, we saw a slight slowdown in the 9 months relative to the first half in Spain. We're consistent with our competitor in that comment. But we're not I mean, we are not seeing dramatically negative numbers in these countries. And you should we published the number for you for the sake, so you're sorry. And in fact, Greece is 4% positive, which is the smallest of the 4 countries, but nonetheless, it's positive.
In Spain, a highlight there is coffee, which is still doing well. Curiously, Dolce Gusto as well is still doing well in Spain despite being a very premium offer. I know also that the Nestle Health Science business is struggling a bit in Spain because of the reimbursement changes that have happened there. And I think that's also a consistent message from what you've heard already this reporting season. So that would be my comment on Spain.
Okay. If I could cheek in, just do one follow-up on the espresso. I mean, obviously, you give these kind of broader growth levels. I mean taking those as numbers, if you like, you may conclude that the Q3 growth would have slowed to around 6%, 7% on the basis of saying high double digit in the first half, now double digit. Is that the kind of thinking that we should have?
Or is that just a sort of nuance of the definitions and be pessimistic on
I'll try David. No, you don't be pessimistic on Nespresso. The slowdown in other is an order is an order is an order is an order more due to the joint ventures than it is to the Nespresso or Professional or Health Sciences.
All right. Thank you very much. Thank you.
Okay. Next question please.
The next question comes from Alan Oberhuber from MainFirst. Please go ahead.
Yes, good morning, Rody. Alain Oberhuber, MainFirst also from Two questions. First question is about Germany. Could you elaborate a little bit more on the German development, which category were weak and which were good and what we could expect to the second or for the last quarter? And the other question is also about Europe.
Excluding this one day, which we had of what would have been the underlying growth rate? Would that be similar to Q2 for Europe?
Thanks, Hela. Basically, Germany was weak more or less across the board. We are not we are very focused on ensuring that we are achieving value with our retailers and we are not willing to be overly promotional in that market and that has impacted our growth across basically all the categories. The I mean, I think you can work out the impact of a trading day in Europe. I mean, it's one day out of 3 months.
So it's a relatively straightforward piece of math for you to do I think.
Okay. Thank you very much.
Okay. Next question, Jon. Next question, please.
The next question is from Jon Cox from Keyclar. Please go ahead.
Yes. It's actually Kepler Capital Markets, soon to be Kepler Cheuvreux. But just welcome back, Ronny. Good to see you back in the saddle as it were. I have a couple of questions for you.
Just on the commodities side of things, basically, you seem to be alluding to the fact that there actually could be a little bit better tailwinds in the latter part of the year than maybe you implied in the first half. That's just the first question. Just on the second question, I know you're probably a bit bored of talking about Nespresso. I think Wanling alluded to the fact that there could be some sort of security type innovations coming through with Nespresso. I'm just wondering if you have any sort of time frame.
Should we be expecting a machine with a chip reader anytime soon? You alluded to a couple of new machines being launched. I'm just wondering on the sort of time frame of some ways to sort of block copycats other than legal measures. Thank you.
Thanks, John. I think I mean, if you look at our guidance in the first half, we already talked there about input costs easing in the second half. So this is not a piece of new guidance. It's the same wording we used in the first half that we expected input costs to ease in the second half of the year. And I guess the only change is really to input costs that are meaningful for us are actually probably more on the less good news side than the good news side in that we've seen input cost pressure a little bit in nutrition and also in pet care as well with the grains going up.
Nespresso, I didn't hear the Wang Ling comments. I'm not aware of what she said. But in terms of chips, all I know about chips is that we have in the boutique in France, we're using the RFID chip in one of the boutiques, which is something new that we're doing to get a better feel for consumer behavior in the boutique. But I don't know about anything we're doing around security on machines. And anyway, I wouldn't really want to talk about coming innovations.
The 2 machines that I talked about in my speech that we've launched are already out. 1 is the U and one is the Maestria machine, but they're already on the market. Okay. Thank you very much. Thank you, John.
Next question, please.
The next question comes from Eileen Khoo from Morgan Stanley. Please go ahead. Good morning, Ravi. Eileen Khoo here from Morgan Stanley. Really nice to see you as well.
I just had a really quick question on pricing actually. So it looks like pricing decelerates in all the other categories apart from nutrition where it seemed to be really strong almost 7 percent. Could you give us some color on this and maybe just comment in general on pricing given the outlook for input costs? Were there actually any price reductions in the Q3? Or was it just a lower pass through effect?
And what should we expect for the remaining of the year? Thanks.
Thanks, Eileen. I mean, clearly, the big impact on our reported pricing is that the pricing we took in 2011 is obviously now falling out of the numbers. Effectively, it's rail level pricing disappearing. Then when you look at individual categories, you clearly have categories where either we've increased promotions or we've adjusted prices. An example of that would be, for example, soluble coffee in Russia.
And I don't know whether you know, but we have a fairly standard price gap between our super premium Nescafe and premium Nescafe. And that's pretty standard across the world. In Russia, however, the price gap was a lot bigger than anywhere else. We've effectively brought that price gap down by lowering the price of the super premium esophagus. And that's clearly helping us to drive growth in that market in Russia in that category in Russia.
So that would be an example where we have adjusted pricing. Beyond that, I mean, as you know, pricing decisions are taken locally. And I'm not surprised to see the pricing coming off, because apart from the rollover effect, we clearly have less input cost pressure this year than last year and therefore less need to take pricing. As you say, nutrition is going up. Also Pet Care, as I just mentioned, has got some raw material pressure, and they've taken pricing.
So there are places where we're taking pricing. But broadly, there's not much pricing being taken this year.
Thank you.
Thanks, Annie. Next question please.
Thank you. The next question comes from Robert Volschmidt. Please go ahead.
Good morning, Ravi. My question relates to the Americas region, in particular North America, where it seems like we're seeing a little bit of signs of improvement, albeit perhaps increased price or sorry, reduced price or promotional activity. Can you just give us a flavor in terms of how you see North America as a whole in Q4 beyond just the frozen area?
Sure. First of all, I mean, when it looks at market shares, with the exception of Waters and Nutrition, all our shares are either up or they're on an improving trend from having been negative. So broad based our share performance is improving. The reason for our weakness in the watermark is share I've already touched on which basically is that we've taken pricing. Private label suppliers are locked in on their contracts, can't take pricing.
And in a somewhat price sensitive category, we are losing share. But clearly, we are prioritizing the bottom line. Looking at the categories individually, I touched on these in my call. But looking at the frozen aisle, 1st of all, the category remains weak and I mean you can put in that in the frozen aisle pizza, frozen entrees, lean cuisine, even ice cream. I mean the categories are weak.
We are seeing improving trends. We also have you asked about Q4 and next year. We also have some big innovations in the frozen meals and pizza businesses coming through end of this year into next year. They've tested very, very well, so we're excited about that. And we need some innovation to bring some growth and consumer excitement back into those categories.
We're also working on broad on a broad communication strategy, not product specific, but category specific, addressing perceptions about the relative healthiness of frozen against fresh. And hopefully that will also start to impact categories positively as well. PetCare is doing well in terms of market share. That's true, by the way, across the world. And actually, even in Germany, from the earlier question, petco is doing well in Germany as well, probably the exception there.
But in North America, pet care is performing well across all categories relative to the market. The weak category and the reason for the slight dip in pet care in North America in the Q3 is the wet dog category, which is weak as a category and also weak for us. Chocolate is obviously is a small market share business for us, but it's doing well. You know the story there. Skinny Cow continues to perform well.
I touched already on soluble coffee, not much more to say there, both the Hispanic business, Classico and the newly launched premium Memento doing very well. Nestle Professional is a standout I think in North America. For an out of home business in North America, it'd be growing double digit. It is pretty extraordinary and all credit for them for doing that. Also Health Sciences is growing high single digit in North America.
So it's broadly a very good story. Nutrition, I mentioned the birth rate issue, but again within the context that we're operating, we're doing okay. And the recent innovations I mentioned in my speech are certainly driving growth already and we'll continue to do so. Does that answer the question, Robert?
Yes. That's very helpful. Thank you very much.
Okay. Fantastic. Thanks, Robert.
Thank you. The next question comes from Patrick Schindman from Switzerland. Please ask your question.
Patrick Schindman from Cannondale Bank. Also a very warm welcome back to you, Roddie. Firstly, again, on the U. S. Did I get this right that overall, you would say you would expect some more improvements in the quarter 4 in the U.
S. Compared to quarter 3? And secondly, regarding input costs, could you give us a first idea what your expectations are for 20 13? Thank you.
Good morning, Patrick. Thank you. Yes, we expect the U. S. To be better in Q4 than Q3.
On input costs for next year, I would rather wait until February to give you the guidance. As I always say, it's hard to guide on input costs and later we leave it, the more likely we are to be accurate. So we'll do that in February.
Okay, fair enough. Thanks.
Thanks Patrick. Next question please.
Thank you. The next question comes from Jeremy Thieleko from Redburn. A
couple of things from me. First of all, on the press conference, I think Nandu talked about some trading issues in Australia. So if you could talk about what they were what the impact might have been in Q3 and whether you should see some resolution of those in Q4? And the second thing is that the FX has now turned positive for you, which is a bit of an unusual thing. Can you say whether that is going to have a positive effect on your margins this year?
And what that might be? Obviously, I know that's independent of the guidance you're giving, but just some sort of indication would still
be helpful. Thanks. Thanks, Jeremy. In Australia, I mean, I don't know if you know the Australian retail market, but I mean, there are basically 2 large food retailers. And it's somewhat like the UK market in terms of the level of competitive activity between those two players.
Also a number of the managers down there come out of the U. K. Market. So there are quite some similarities between Australia and the UK for us food manufacturers. And we have had some tough negotiations with those players.
The negotiations are resolved. And hopefully, therefore, that's another relative positive for Q4 over Q3. In terms of the FX, I mean, you're right, it's certainly relatively unusual in recent times for us to have positive FX. I mean, I think you can work it out for yourself. I mean, you know that we have different levels of profitability in different markets.
You know to what extent you know which markets are higher margin and lower margin and you know what the currencies have done. Our results are always characterized by a mix effect, Whether that mix effect will be different in 2012 than 2011, I don't know. But it doesn't change our guidance, which obviously has improved margin in constant currency.
Okay. Thank you.
Thanks, Jeremy. Next question, please.
The next question is from Pedro Gil from Santander. Please ask your question.
My question has been covered already.
Thanks, Pogo. That's an easy one. Another question?
We have another question from Alan Ueberhuber from MainFirst. Please go ahead.
Yes, thanks so much. Just Roni coming back. You mentioned a couple of specific issues why AOA growth was lower. But you also mentioned in your presentation that the emerging market growth was at 11.5 percent almost similar to the previous quarters. Could you help me on that?
Why are emerging market was still stated to be strong whereas in AOA it was slower?
Yes. Anna, we had a good improvement in Eastern Europe. LatAm was fundamentally unchanged. And I think the globally managed businesses also contributed. Nutrition contributed positively to the Airway result.
So it was obviously not in the zone number. Waters continue to perform well. But I think the big swing factor probably was Eastern Europe and Nutrition.
Great. Thank you very much.
All right. Thank you, Ann. Next question, please.
Thank you. There are no more questions in the queue. I will hand you back to Mr. Charles Villas. Thank you.
Well, thank you. First of all, thank you very much everybody for making your well, for your very kind remarks. But also thank you for joining us today and for your questions. As I said, the Q3 growth performance will prove to be the weakest of the year and we reconfirm our guidance for the full year unchanged from February. Thank you again.
It's also very nice to be back and I look forward to talking to you soon. Goodbye.