Welcome to the half year results conference call and live webcast. I am Moira, the current call operator. I would like to remind you that all participants will be in listen only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. Webcast viewers may submit their questions or comments in writing via the relative field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Martin Hug, Chief Financial Officer. Please go ahead, sir. Ladies and gentlemen, it is my pleasure to welcome you to the Lindt & Sprüngli half year results conference call and webcast. The presentation and transcript of my prepared comments will be uploaded to our website this morning. The presentation will take approximately 15 minutes-20 minutes. Following the presentation, I will hand over to the operator, who will then manage the question and answer session. The agenda points of the presentation can be seen on this chart and include a detailed review of the H1, an update on the key topic of sustainability, our expectations for the full year and the medium and to long term, and a chance for you to ask questions. I would also like to refer you to the disclaimer at the end of this slide deck. Despite an exceptionally difficult global operating environment with sharply rising costs and the need to implement above average price increases, Lindt & Sprüngli was able to continue its post-pandemic recovery. Over the past years, we have continued to invest in projects that drive efficiency, especially in North America, but also Europe and rest of world. We can see the benefits of this work. Overall, we are pleased with our progress and are optimistic about our future prospects. I will now take you through a detailed review of these results, starting with the overview of our business performance. Before I begin, those of you who are new to Lindt & Sprüngli should bear in mind the seasonal and gift-oriented nature of our premium chocolate business, which is queued to the H2 of the year. It is important to remember that H1 sales absorb roughly half of our annual fixed costs. As a result, both sales and profitability are always lower in the first than in the H2. That said, the Lindt & Sprüngli Group has made an excellent start to the year. Organic sales in the first six months achieved a very positive growth rate of 10.1%. EBIT came in at CHF 255 million, delivering a record H1 EBIT margin of 12.2%. This margin expansion was driven primarily by the successful implementation of price increases, while still benefiting from longer-term hedges in material costs. Net income was CHF 205 million, with a net income margin of 9.8%. Again, a H1 half record. Free cash flow reached CHF 137 million in the first six months, a decrease of CHF 67 million over the H1 of 2022. The key driver of this decrease was a deliberate decision to increase the inventories in cocoa beans in order to safeguard business continuity and higher CapEx to prepare for future volume growth. Our net debt position, which includes a lease liability of around CHF 415 million, increased to CHF 939 million. This is higher than a year ago, when net debt was CHF 667 million. The driver of this net debt increase was our CHF 1 billion share buyback program, which started in August last year and currently stands at CHF 490 million of repurchased shares. It will be completed by mid-2024. Total net sales reached CHF 2.086 billion in H1, which means that for the first time, we achieved net sales of more than CHF 2 billion in the H1. H1 sales grew by 10.1% organically, despite a tough comparison of +12.3% in the same period last year, and +17.4% growth in 2021. Over the last two years, growth in our global retail business and also in travel retail was disproportionately strong in the H1, driven by the catch-up effect post-COVID. Our Streamlining for Growth initiatives are also continuing to pay dividends in the U.S., where our two brands, Lindt and Ghirardelli, both grew organically at double-digit rates. Overall, we are pleased that underlying consumer demand remains strong despite the price increases we implemented. As we are in time of high inflation and most stakeholders are interested in the net price increases implemented, we are showing you this chart split by price increases on the one side and the combination of volume and mix separately. Price increases were at +9.3% and much higher than usual. due to much higher input costs, pricing actions had to be taken in all markets. Volume was slightly negative, offset by a positive mix, resulting in a volume mix impact of +0.8%. Positive channel mix impact was primarily driven by the rebound of our own global retail channel and the travel retail channel. From a product viewpoint, we saw strong results in seasonal and gifting occasions, including LINDOR. In general, we are seeing consumers trading up towards these occasions, which have a stronger price per kilo and enhance our mix. Reported sales growth was once again negatively impacted by the strengthening of the Swiss franc and also the closing of our presence in Russia. Reported sales in Swiss francs rose by 4.7%. On the following slide, I would like to give you an overview of the sales performance by segment. In our biggest region, Europe, organic sales increased by 8.9%, representing an excellent performance. We delivered positive growth in all European markets and double-digit growth in important markets such as Italy, the UK, Switzerland, Spain, Eastern Europe and the Benelux region. North America grew by 11.2%, with Lindt in the U.S. and Canada, and Ghirardelli all enjoying a very positive H1, growing double-digit. Russell Stover also made positive progress in line with expectations. In the US, we continued to make solid progress on the various projects aimed at further leveraging the Russell Stover business and on our overall Streamlining for Growth initiatives. These areas include production, merchandising, logistics, procurement, and IT. Bottom line benefits had already started over the last two years, this has continued into the H1 of this year. We expect more benefit to come from these projects in the H2 and over the coming years. As explained previously, part of the efficiency savings will be reinvested back into our brands to encourage future growth. In the rest of the world segment, we also grew above the group average with +11.1%. In the H1 of this year, travel retail recovered strongly, while our retail stores in the region performed very well, leading to double-digit growth in the markets like Japan and Brazil. There are many large traditional chocolate markets within the rest of the world segment, where we see significant premiumization potential for Lindt. As a result, we are convinced that we can maintain double-digit growth in the region over the medium term. Let's move on now to the important topic of costs, category by category. We'll start with material costs. Material costs, which have been adjusted for changes to inventories, came in at 30% of sales, 100 basis points lower than in 2022. One key reason for the improvement of this cost ratio are our price increases of + 9.3%, meaning that we achieved a far higher net sales per ton. We still had strong hedges in cocoa and other raw materials in the H1 of the year. We are anticipating higher costs in the H2. Looking forward, we estimate that our total material costs will be slightly higher in 2023 compared to 2022, driven by packaging and certain raw materials such as cocoa, milk, and sugar. We expect cost inflation to continue into 2024, mainly driven by cocoa and sugar. I would just like to take a quick dive into our most important commodity, cocoa. Prices for futures, for cocoa futures in London, are trading at their highest level in nearly four decades. A still relatively strong demand, combined with a global shortfall in production and the risk of bad weather in Ivory Coast and Ghana, are the key drivers of the high cocoa prices. Cocoa futures prices in New York and London have surged by more than 30% this year, also driven by speculators with very long positions. At the same time, the cocoa butter ratio has remained more or less flat in the last 12 months. Most players in the chocolate industry hedge cocoa for six-12 months. In other words, for most players, the impact of the very steep cocoa future prices increases will only kick in from the H2 of 2023. Despite the absolute increase of CHF 9 million, personnel expenses increased at a lower rate than sales, leading to a cost ratio decrease by 60 basis points. A large part of our personnel expenses is fixed, so the sharp rebound in overall sales has reversed the diseconomies of scale experienced in 2020, as we predicted at the time. Operating expenses increased by CHF 21 million. The ratio decreased by 30 basis points, driven by lower logistics costs in percent to revenue. Those improvements are coming from various efficiency projects in the area of logistics, especially in North America. Secondly, in line with our high growth strategy, we continue to increase advertising investments and to invest in our brands across all geographies. At At CHF 255 million and 12.2% of sales, EBIT set a new H1 record, increasing by 290 basis points compared to the H1 of 2022. The increase of CHF 70 million is primarily the result of strong organic growth, leading to positive economies of scale and an improved EBIT margin. At the same time, we were able to increase prices to offset 2023 steep cost increases in the area of raw materials and packaging materials. H1, EBIT margin improved, mainly in the segments of Europe and North America. Net income also reached a new H1 record, coming in at CHF 205 million or 9.8% of net sales. Lower net financial expenses helped, coming in at CHF 4.6 million compared to CHF 7.8 million one year ago. This was mainly due to higher interest rates on deposits and no negative interest rates in Switzerland. The tax rate in the H1 was 18.3%, which is below our midterm guidance, driven by higher half-year profits in locations with tax rates below the group average. We are currently analyzing the impact of the 15% minimum taxation, which was accepted by the Swiss public vote in June 2023. It is too early to give a tax rate forecast for the full year 2023. We expect 2023 to be an exceptional year and below 20%. I would like to take you through the bridge of the main cash-relevant developments of the H1. In the period under review, we managed to generate a positive free cash flow of around CHF 140 million, which was about CHF 60 million less than this time last year. In the face of a challenging and unpredictable crop situation in West Africa, we decided to build up our cocoa bean inventories more than in recent years, leading to an additional cash outflow. Capital expenditure came in at CHF 148 million in the H1, CHF 27 million higher than last year. This is in line with our revised plans, which postponed certain growth-related investments from 2022, from 2020. We continued the share buyback as planned. Together with regular dividend payments, we returned around CHF 560 million to our shareholders. At the end of the H1, net debt reached CHF 939 million. When assessing our net debt, please also bear in mind the ongoing impact of IFRS 16 on our lease liability, with a negative impact of around CHF 415 million. On a pure cash basis, net debt would be around CHF 500 million. Sustainability plays a key role in ensuring our business success. Lindt & Sprüngli has been around for over 175 years now, which demonstrates that we are a long-term-oriented company, continuing to deliver exquisitely manufactured, high-quality products. The Lindt & Sprüngli sustainability plan is our pathway to becoming more sustainable along our entire value chain, demonstrating our commitment for a better tomorrow. This strategy addresses the sustainability issues that are impacted most through our business activities, both from a risk and opportunity perspective. I'm pleased to be able to share that we have continued to make progress against our commitments across the plan. We are proud of the remarkable progress we have achieved over the past few years. As you can see from the slide, there are a number of key achievements across 2022 and 2023, and I would briefly like to talk you through some of them. Last year, we started sourcing cocoa powder through sustainability programs. We are now sourcing 67% of our cocoa, including beans and butter, through sustainability programs. With this, our farming program has massively increased in size and now benefiting over 112,000 farmers. As part of our engagement to tackle the root causes of child labor in the cocoa supply chain, we committed CHF 1.25 million to the Child Learning and Education Facility in Ivory Coast. Beyond cocoa, we also address child labor as part of our dedication to respecting human rights. Last year, our board of directors approved a new group-wide Human Rights Policy, which formalizes our commitment to respecting human rights and establishes a commitment to conduct due diligence. One of our greatest achievements so far in 2023 must be the publication of our new Deforestation Policy just a few weeks ago. As a consumer goods company, sourcing agricultural ingredients, we recognize our role and responsibility in addressing commodity-led deforestation in the landscapes we source from. Through our Deforestation Policy, we set our Lindt & Sprüngli aspiration and approach in addressing deforestation in supply chains. Tackling deforestation will also be key for achieving our science-based climate targets by 2030 and 2050. We have also made further progress on our commitment to define science-based climate targets. We have submitted our climate targets to the Science Based Targets initiative, and we'll announce the verified targets before the end of the year. With this commitment and our decarbonization roadmap, we are contributing to the collective goal of limiting global warming to 1.5 degrees. These are only a few of many great achievements across 2022 and 2023 so far. For more information, I welcome and encourage you to read the 2022 sustainability report. It was prepared with reference to the GRI Standards. More information on the farming program is additionally available on the dedicated website. As I have already mentioned, we had an excellent start to 2023, with a recovery of our Easter business and continued strong growth of our core brands, mainly LINDOR. From a general perspective, global retail and travel retail both experienced strong double-digit growth rates due to the post-COVID catch-up effect. For the H2, we still expect a strong performance. We shall face some headwinds in some areas. For example, global retail will face a much tougher comparison as it laps the strong results of 2022. Given a faster than expected recovery in the H1, we are raising our organic growth guidance to 7%-9% for full year 2023, versus previous guidance in March of 6%-8%. As we also reached record levels of profitability in the first semester, we have increased our EBIT margin guidance to 30-50 basis points from our 20-40 basis points guidance in March of this year. The H2 of the year is much more important to our full year profit performance, and we expect significant cost pressures that were not present in the H1, coming from raw materials such as cocoa and sugar and also some packaging materials. As mentioned earlier, we plan capital expenditure of around CHF 250 million-CHF 300 million. Also, we are currently analyzing the impact of the 15% minimum taxation, which was accepted by the Swiss public vote in June 2023. Therefore, it's too early to give a tax rate forecast for the full year 2023, but we expect it to be below 20%. Our medium-term guidance is unchanged. The group remains confident for 2024 and over the mid to long term in achieving its goal of an organic sales growth between 6% and 8%. In 2024 and thereafter, we expect to deliver an average annual increase in EBIT margin of 20 basis point- 40 basis points. For the next few years, annual CapEx should be around the CHF 250 million-CHF 300 million level, while the tax rate will increase to about 23%-25% in the medium term. Thank you for listening to my presentation. I will now hand over to the operator, who will manage the question and answer session. We ask you to limit yourselves to a maximum of three questions so everyone can participate. Please note that written questions asked via the web will be answered by email after the webcast. We will now begin the question and answer session. Anyone who wishes to ask a question or make a comment may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Webcast viewers may submit their questions in writing via the relative field. Anyone who has a question or a comment may press star and 1 at this time. The first question is from Joern Iffert from UBS. Please go ahead. Thank you. Hi, Martin. I would have two to three questions. We'll take them one by one, if okay. The first question would be, please, on the overall cost basket for 2024 and the expectations of the chocolate industry price increases. Shall we expect a similar level in 2024 versus 2023 in terms of industry chocolate price increases? Or is it some lower cost support coming from again, packaging or energy? How do you think about this for 2024? This will be the first question, please. Hi, Joern. Great to take one by one, so it's a bit easier for me, so I don't have to remember three or four questions. Yes, I expect it to be a bit lower based on today's costs, right? I mean, it can change, of course. Cocoa could go much further up. I mean, you've seen a 30% increase over six or seven months, and, you know, if this increases another 30%, then, you know, my answer will be different, obviously. If the cocoa bean price and the sugar price stays where it is today, and if all the other important materials, such as milk and packaging, remain at the same level as they are today, I would expect slightly lower price increase need across the chocolate industry than what we have seen in 2023. There will still be cost pressure, and most likely, most of all players in the chocolate industry will feel this cost pressure and will therefore most likely feel a need to adjust pricing. Thanks for this, Martin. The 2nd question would be, please, on the volume slowdown, can you split volume versus mix, would be great? Sure. Volume was slightly negative. As you know, I think it's important to bear in mind that in the current environment where you see this trade up towards more expensive products within the seasonal range, or also towards pralines, like mono pralines, like LINDOR. I think it's important to always look at volume and mix combined. You know, if you look at the overall market, if you look at wholesale Nielsen or IRI market, actually, the market overall is down by about between 2% and 2.5%. Lindt in wholesale is down by -1.5%-ish on volume. If you just look at volume and wholesale and sell out data, I think that's the most important data to look at. That varies obviously country by country, but overall, we are somewhere in this neighborhood between -1% and -2%, and mix is quite positive, driven by channel, but also driven by the product mix, where we see this shift. I mean, the seasons really, especially Easter, did really well. Thanks, Martin. The last question is this: you mentioned it a little bit, the premiumization. I mean, the chocolate market and volumes never has been so weak, I think, in the last 20 years or 30 years, given the price elasticity, we still observe accelerating premiumization, consumer trading up for some product categories. How do you explain this for Lindt? Look, I think our strategy was clearly in the last two years, three years, even during COVID, you know, to really invest behind our brands. I think that was critical, you know, that we have not stopped during COVID. We have not kind of only protected EBIT, but we have really thought long term. We have continued to invest in strategically important markets, and I think we can now see the dividends of that. You know, because of our efficiency projects that we implemented also, especially in North America, where we gained significant, you know, tailwinds with regards to the EBIT margin, and obviously some of this we were also able to invest. I think it's a combination, right? That we... During COVID, we continued to invest over the last three years, five years, we invested heavily behind our brands, and we worked behind the scenes on increasing also efficiency. That also enabled us to even invest more. For me, that's the key reason why actually, you know, we have still been able to grow or to see this uplift towards more premium within our portfolio. Yes, but we are not immune to price increases at the same time, of course. I mean, I think there's basically no brand out there that is completely immune to price increases. We have also seen a certain slowdown in the H1 as regards to volume, as the whole chocolate market has seen. look, the good news is that we have seen this trade up towards the more expensive products. The price mix is positive, which for me is a very good indicator. Sorry, the volume mix. The volume mix is positive, which is a very good indicator. Yeah. Thanks a lot, Martin. Thank you. The next question is from Jean-Philippe Bertschy, from Vontobel. Please go ahead. Good morning, Martin. The first one is around retail. If you can share with us the sales compared to pre-COVID levels in own retail and in travel retail. It'll be the first one. The second one is two markets. The first one, Italy. I derive like 15% growth following 20 last year, more or less. What's happening there? What is really the game changer versus pre-COVID? On the other side, once again, Russell Stover store, which is again, a bit suffering, probably with very weak growth. How do you see that, and this related to a Jörn question on premiumization? It looks like midterm, the prospects for Russell Stover are not so positive. Thanks. Let's start with Russell Stover. I mean, I'm quite positive on Russell Stover. You know, as I always say and always have said, Russell Stover, you know, will grow somewhere in the low to mid-single digits, right? That's where we are as well this year in the H1. We are exactly where we said we will be. Last year, we grew double-digit. We always said that's exceptional. We are in line with expectations and with our business plan. I think that's positive news. In terms of Italy, what is the game changer? You know, we have done a lot of work there, also in the background in the last two, three years, you know, we have actually merged the organizations of Caffarel with Lindt. you know, that's now one Italian organization, we are tackling there the, kind of the traditional trade jointly, which gives really good momentum to do that together. We also acquired the small retail organization there, right? with the Lindt stores. We are managing retail on our own now in Italy. That also gave a boost. The combination of all that, plus, of course, the investments, similar to what I said to Joern, the investments behind our brands over the last years gives an acceleration within our wholesale channel in Italy as well, which is mainly, you know, Lindt there, less so Caffarel. Caffarel is more in the traditional trade, so it's the combination of those things. Where is own retail and travel retail? you know, at the end of this year, we expect own retail to be above 2019, slightly, you know, probably around 5% above 2019 levels. Just store, same store, right? Those are the same stores. I mean, we have some additional stores also. Taking those ones out, just store comp store, comparable store growth. Travel retail will still be below 2019, actually, by about, I would say, around 10% below 2019. Thanks a lot. Thank you. The next question is from Patrik Schwendimann, from Zürcher Kantonalbank. Please go ahead. Patrik Schwendimann, Zürcher Kantonalbank. Hi, Martin. Congrats for the excellent results. I also do my questions one by one. I do have three questions. Firstly, there was a record margin achieved in H1 in Europe. ... by 470 basis points to 17.2%. Is this a sustainable margin for future H1s, that we have now a much higher margin level also in the future in Europe, in H1? That's my first question. Yeah. Hi, Patrik. You know, the driver of the high margin in Europe, I think there are mainly twofold. I mean, on the one side, as we had announced, we had to do price increases in Europe. In 2022, it was clear that we did more price increases in North America, a bit less in Europe. In the H1 this year, it was the other way around, right? I mean, Europe, we had kind of a catch-up effect from 2022, so we had to do price increases. That has helped our margin in Europe, in the H1, because we still had good hedges. Those good hedges, they will, you know, they will not be there anymore now in the H2, we definitely will see a hit there with regards to the EBIT margin or with regards to the raw material costs. Therefore, I would not necessarily expect the same high EBIT margin going forward in Europe, in the H1. The second reason is really some of the more mature markets grew double digit, as I had mentioned, right? Like Switzerland, like Italy, etc. The whole mix kind of also helped us in the, in the profit. It also depends, you know, going forward in 2024 and beyond, you know, how is the which subsidiary is growing how much? It's more the mature ones, which, because they are longer out there, they tend to have a higher EBIT margin than the younger subsidiaries, right? It also depends on that mix going forward. I would not necessarily expect that level of EBIT margin in the H1 going forward. Mm-hmm. Okay, thanks a lot. My 2nd question, I mean, regarding the EBIT margin guidance for the full year, this implies a substantial decrease in the EBIT margin for the H2 of the year versus the H2 of last year. I mean, you have mentioned higher raw materials and the marketing spend, it seems still quite conservative. What is behind this conservative guidance? It's exactly those two things, right? At the end of the day, we did the price increases early on because we knew that there will be massive cost increases coming from raw materials and pack materials and the cocoa bean prices, you have seen the huge increase. I think it was definitely the right thing to do, these price increases. Can you repeat the last part of the question? No, I mean, just, this implies. The EBIT margin, yeah, right, so low using the H2. I mean, you know, it depends how much advertising we'll invest as well, right, in the H2. We are planning to heavy up the advertising spend, because, you know, of course, after the price increase, our volume was not up, as I mentioned before, and our goal is obviously for the H2 to have an acceleration from a volume perspective. We plan to invest heavily in advertising in the H2 in some important markets. That's those two things really drive that slightly lower EBIT margin in the H2. Yes, it's EBIT higher costs from material side, and it's higher advertising. Okay, thank you, Martin. My 3rd question regarding the rest of the world, I mean, it's still double digits, but probably a little bit below normal expectations. I mean, you have mentioned that two markets have been greatly, but was there some slowdown maybe in other markets or some disappointments maybe in Australia? I don't know. No, Australia grew nicely, high single digits. You know, it was actually, it's phasing at the end of the day, right? We expect for the full year still, a growth in rest of world in the neighborhood between 12% and 14%. In the H2, we expect growth in rest of world of around 15%. It's phasing. You know, it always depends a bit with the supply chains, you know, what is ordered. It's not sell out, right? Bear in mind, it's sell in. It depends, you know, when the orders are coming in from which customer in which country. Overall, we are as optimistic as ever in rest of world, because it is phasing now. The H1 was 11%, but yes, I'm optimistic for the full year and also for the H2. Perfect. Thanks a lot, Martin. See you on Friday. Thank you. The next question is from Warren Ackerman from Barclays. Please go ahead. Yeah, good morning, Martin. It's Warren here at Barclays. I've only got two for you, not three. The 1st one is, can you quantify the EBIT impact from hedging gains and pricing taken ahead of when the cocoa price impacts? I'm just trying to understand the kind of, you know, the timing benefit in the H1, and then maybe kind of, you know, the assumption for the H2 on that front. So just really one on timing. The second one, if I can just squeeze it in quickly before answering the first one. Just on the vol mix of 0.8 in H1, can you quantify whether you think vol mix will remain negative in the H2? Do you think volumes remain negative in 2024? I know pricing won't go up as much next year as this year, but nevertheless, it's still going higher. You know, I know you're reinvesting, but do you expect that reinvestment to actually drive volume mix positive either in H2 or 2024? Thank you. Yeah. Hi, Warren. Hi. Let's start with the 1st here. Yeah, it was about the impact of raw materials, right? Of the hedging, basically. Yeah. It's difficult to isolate one effect, obviously. In general, it's surely unusual, let's say, if our guidance is 20 basis point - 40 basis points, that in the H1, we have 300 basis points improvement on the EBIT margin. Typically you would expect a more normalized development, right, of probably... Because the H1 is not so profitable, sometimes it can be a bit more or a bit less than the full year, but normally you would expect something between 20 basis point and 60 basis points or something, right, in the H1. Because it's close to 300, you could say that the positive impact of the hedges is the difference, right? Around 150 basis point-2 00 basis points or so. Okay. yes, for volume mix, your volume mix question, right? I mean, first it was actually positive, right? The combination of volume and mix. Yeah ... was positive in the H1, +0.8%. Yeah. I think that's important to bear in mind. For the H2, just in isolation, we expect volume, you know, it's always difficult to predict volume, but I'm not expecting it to be at -1.5% in, let's say, in the sell out. I expect it to be better in the H2, the volume. It's a bit difficult to say if it's zero, is it even small growth? Is it slightly negative? That's difficult to predict. I expect volume and mix combined to be about flat in 2023. Mix is always difficult to predict because it depends on various factors, obviously, you know. How is the tablets business going? How is the season going? Overall, I would say volume mix for full year 2023 to be about flattish. You know, volume, we are expecting to pick up in 2024. You know, we are really doing our utmost. As I said, you know, we are investing more behind the brands in the H2. Next year, I'm expecting, if the cocoa stays at the current level, we will have to do some pricing, most likely. As I mentioned earlier, at today's cocoa prices, it will be less than this year in terms of pricing, therefore, the volume impact should be less. I expect to pick up in volume in 2024. Just on the reinvestment, how much increase in millions of CHF do you expect in the H2? You know, what kind of quantum of spend uplift, and where is that money gonna be going primarily, and what kind of return are you expecting on that stepped-up investment? Look, you know, we don't disclose really the marketing investment and how much is to heavy up. Okay. All right, fair enough. It's, you know, we will invest in strategically important markets, in the big, in the big markets, like in the U.S., like in the big European markets, et cetera, because there, the benefit is the biggest, obviously. We also have some new launches, which we will... For example, in the U.K., we are launching wafer, which should be an exciting launch. We'll spend some money behind that. We'll spend behind LINDOR, we'll spend behind Christmas to make sure that we have a good sell-through. We'll definitely spend the money wisely, and, you know, with the key goal really to gain household penetration, which then leads again to a positive volume mix, hopefully. Okay, super. Thank you, Martin. Thank you. The next question is from Tom Sykes from Deutsche Bank. Please go ahead. Hi, morning, Martin, Siobhan from Deutsche Bank. I've got three as well, if that's okay. I'm happy to do them one by one. Sure. Maybe if I could start with the dynamics that you're seeing in your non-seasonal business, I guess the more personal consumption bits. I think this had previously been a bit softer, with cost inflation, and it sounds like H1 was a bit more driven by the seasonal. Could you maybe just start by talking a little bit about what you're seeing there? Thank you. Yes. I mean, for the last few Nielsen periods, you know, we have seen a softening in terms of the tablets business in general, right? The tablets market has been kind of a bit soft in the last few periods. I would even say in the last couple of years, post-COVID. I mean, it was really strong during COVID. We saw a big pickup, huge pickup in self-consumption, right? The bars, the tablets really did well during COVID, 2020, 2021. But 2022 and 2023 became a little bit softer, so negative on volume, right? Actually, over the last few months, there are a few markets where we can see a this trend reversing, especially on EXCELLENCE, in our EXCELLENCE. We see certain reversing in the trend, not in all markets, but, you know, this gives us actually some positive momentum and some belief that we can actually see a turnaround there with regards to the volumes as well. Definitely in the H1, we saw what I said, right? I mean, we saw that permanent products like tablets, they did a little bit less, well, on volume. I mean, you also increased prices. Overall value was positive, but in Nielsen, it was negative, and we saw this kind of trade up towards seasons and towards LINDOR. Great. Thank you. Maybe for my 2nd question, just on the personnel expenses, because I know you sort of, have run through them in the presentation. Are you seeing any pressure going into the H2 or into 2024 from wage inflation? Yes, definitely. Wage inflation will continue. I mean, you see that in Europe, but also in the U.S. We definitely will see some kind of pressure in absolute values there. For the full year, you know, the ratio is probably going to be around 20%, and, you know, in 2022, it was above 20%. We see overall a good trend compared to 2022. Looking forward, 2024, 2025, we definitely see some wage inflation. At the same time, we'll grow top line. I, yeah, I'm not expecting this to be too difficult to manage with regards to the EBIT ratio coming from EBIT ratio impact coming from personal expense. I think the biggest watch out are really material costs, right? That's the material costs will drive, further price increases, most likely. It's not coming from the personal expense, from the wage there. Great. Okay. Then just for my last question, could you talk a little bit about how the Chinese market has performed for you year to date? I couldn't see any comment on it in the release. Yeah. Has it been any slower or quicker than expected? How are you thinking about it into the H2? Thanks very much. You know, we didn't comment on it because, you know, China is a market that is heavily tweaked towards the H2 to even the last two months, three months of the year, right? We have 11.11, we have the Chinese New Year, which is in January, you know, we ship basically everything in December. That's why I would not draw any conclusion based on H1 on China. Even if it's, you know, growing strong double-digit, or if it's growing single-digit, it is so small volumes and so small values that it's, I would not even look at it too much in H1. We should really focus on it in H2. It's in line with expectation. For the full year, I'm very optimistic on the Chinese business that will grow a nice double-digit number. Great. All right. Super clear. Thank you very much. Thank you. The next question is from Pascal Boll, from Stifel. Please go ahead. Yes. Good morning, Martin. Let's start with first question on pricing. You mentioned that cocoa prices will hit chocolate manufacturers, probably starting H2, and probably everyone needs to increase prices further. However, there are different options, I think. There is the increase in list prices. Maybe there are also other revenue management measures, like smaller packaging. What do you expect, how the most manufacturers will react to increase prices from here, especially as the pressure on consumers start to build up again and again, and how does Lindt or plans to react here? Well, good question. You know, it may be that I mean, we have seen in the past that more mainstream brands, they have tended to reduce packaging. You know, we have a global initiative, which we call RGM, Revenue Growth Management, we are looking at all areas of pricing. Let's say, primarily it is around the net price, right? I mean, it could also be work together with the retailers to find best ways, what should the promotional price be in terms of, you know, what drives the category most? It does not always have to be a straight price increase, we are analyzing this market by market. I personally believe, looking at the past, actually, in the past, we did never have a 30% cost increase in cocoa. Even if you had quite steep cocoa bean price increase in the past, basically all the players in the chocolate market normally did price increase. It's, in the short run, it's really difficult to manage. If you change packaging, it takes time, right, normally? Look, it's difficult to predict what the others will do. The fact is, I think that there will be pressure on the costs and that, either through size reduction or through straight price increases or a different way of approaching the promotions, there will be a way to kind of increase the average prices going forward, because it definitely is unprecedented, right? + 30% in at least the London futures is at a 40-year high, so this has an impact on everybody. My 2nd question is on your own retail. I mean, we have seen a double-digit growth in the H1 of the year. What is it really driven? Is it just a rebound in traveling, or are there also other reasons like that your concepts are more resonating with consumers, and what do you expect how the growth will go from here? Look, I think it's a combination of many things. I mean, first, I think we have a very professional global retail organization here in Kilchberg, that works together with the local organizations, that are also very professional. We constantly find new ways of how we can actually even increase our comp store growth. This is a number we are looking at a lot, you know, how are we growing, you know, compared to last year, also compared to 2019. We still had a catch-up effect from 2019, right? Which we said last year, that we were at still comparable stores, roughly 5% below 2019. There was still a catch-up to do, especially now in H1. That was very positive. I mean, we have product innovation and, you know, we have different measures also. We did of course, also price increases, which also helped the global retail. There are different ways of driving this growth. You know, some of these retail stores are also in rest of world markets, where we anyway have still a lot of premiumization potential. That also helps. It's really a combination of many things. All right. Maybe my last question on the consumer strength in different markets. I mean, there are some rumors signs that we see a weakening of the consumer in North America, for example. We also hear everyday news on inflationary pressure in Europe. However, it seems that Lindt has really done really well in that environment. Would you say that is only attributable to that effect of premiumization? Do you confirm that you still believe that this will continue into H2, or is it just, yeah, the strength of the Lindt brand? Well, I think it's both, right? I mean, we are driving the premiumization. The strength of our brand is driving the premiumization, and we are, you know, with our measures, right, in the markets, be it on the point of sale, be it with retail, our own retail, be it with marketing investments, you know. Our key strategy is to gain household penetration, so to gain new consumers into our brands. I think we have done that for the last many, many decades, I would almost say. We have intensified it over the last few years. We have also intensified it during COVID. You know, our product is affordable, I would say. It's affordable luxury. That's also important, right? It's not luxury, like if you buy an expensive watch, it's an affordable luxury. I think the combination of all those things have also shown in the past, even during big inflationary pressures, be it during a period of lower consumer confidence. If you look at the last 20 years, in general, chocolate has done quite well because people still want to have this little treat. You know, Lindt, I think, is really well positioned also for such a if the environment was going to worsen even further, we will be prepared for that. I mean, we cannot necessarily see that currently in the US, as an example, you know, this consumer confidence that it's going down so much, as you can see in our numbers. Look, overall, we are super confident for the H2 and also for 2024 and beyond. Thank you very much. The next question is from Bruno Monteyne, from Bernstein. Please go ahead. Hi, good morning, Martin. My first one is on the sustainability sort of improvements in the new report you mentioned. Now, I'm sure you're aware of all the new European Union legislation landing, and I think more recently, the due diligence, sort of Corporate Sustainability Due Diligence Directive. To what extent is, in a way out of your program, sufficient of all the latest legislations, or do you feel the latest European legislation is further raising the bar, requiring furthering investment and efforts from you? Is the legislation catching up with you, or do you actually will have to go further in your efforts? I'll take that as a first question and take the other one second. Yeah. Yeah, look, I mean, good question. You know, the legislation is definitely evolving really quickly, we are studying that. You know, the good news is some of the groundwork, a lot of the groundwork we have done over the last 15 years, you know, when we started, for example, on cocoa with our traceability, which, you know, I think has always been or has for a long time been quite leading in terms of. You know, we have built up our own programs, and, you know, we have full traceability on the beans already, by 25 on butter as well. All the cocoa is coming from our Lindt farming programs. There we, you know, we are studying the legislation, and if we have to adjust, it's likely we can do that. Overall, you know, it is definitely for all corporates or corporations, the new legislation, it is, you know, it will mean extra work in terms of reporting and, you know, some other measures. It's not like we don't have to do anything, right? It will keep us busy for the next many years, probably. It is a lot of additional work for companies like Lindt, for sure. On the volume measures, I think you said -1%, -1.5% at the wholesale level. Now I'm just trying to think, does it include the volume growth you saw in your retail stores? And if so, would that imply that the volumes outside the retail store, let's say in the grocery network, are a lot more negative than that, or does it not include your retail stores? The numbers I quoted, which are sellout data from IRI and Nielsen, which I think is the best way of looking at it, and because you avoid having kind of, you know, phasing, you know, then you have no phasing, because sometimes we ship something earlier or later to the retailer. If you look at Nielsen and IRI consolidated, the chocolate market overall is down by about 2.1%, Lindt is down by about 1.5% on volume. We are outperforming the market on volume. I, again, as I said before, you have to look at it together with the mix because of this kind of trade up to more expensive products in gifting, in Lindor, in seasons. I think it's important to look at volume combined with mix. There we are, as we have reported, positive 0.8%. Yeah, if you look purely at the volume, we are at about minus 1.5% in H1. We expect this to be better in the H2. I mean, it's really... I feel like it's the impact of the price increase, that the market is so negative. You did mention that with Russell Stover, you thought it was in line with your medium-term guidance or expectations, at least of low to mid-single digit. In a market with that high level of inflation, I still think it's quite disappointing for Russell Stover to only grow in line with that level. Maybe a different way of phrasing the question is, has Russell Stover stopped losing market share in the U.S. market share? Surely one of the minimum requirements you would want is for Russell Stover to roughly keep market share. Are you still losing market share with Russell Stover in the H1? Russell Stover is losing a little bit of market share. Yes, absolutely. We are doing also price increases in Russell Stover. You know, we have done price increase, so this should help going forward. You know, if you talk about Russell Stover, it depends a little bit on what product range you look at, right? We have seasonal items, we have pralines, we have sugar-free. For example, in sugar-free, we are growing quite nicely. Yes, I look, it's as we have always communicated, don't expect Russell Stover to grow double digits going forward on a CAGR basis, right? It is at mid-single digit or so, and that's where we are today. I remember at the end of last year, you said you had very good shipping, sort of shipping in for Russell Stover in anticipation of Valentine's and all of that. Mm-hmm. You were hoping that sort of 2023 would be the first year where Russell Stover was, like, turning a corner. Based on the sellout you saw from Russell Stover in the H1, is it where you wanted it to be, or is it still somewhat not as good as you were hoping for when you were doing the selling at the end of last year? No, it is more or less as expected. Okay. Thank you, Martin. Thank you, Bruno. Your next question is from Jon Cox, from Kepler Cheuvreux. Please go ahead. Yeah. Hi, Martin. Thanks for the call. I'm going to ask them one at a time as well, so I can shove in maybe five or six. Just to start off, I wonder if you can just talk about the volume developments in different regions. I presume, Europe was worse, the worst, and, North America, maybe not so bad, and, Asia, you know, probably the best. Is, is that a, is that a fair, a fair guess? Or, that's my 1st question. Yeah. It's a fair guess. We don't disclose details, but rest of world was slightly better than the rest of the average. Yeah. In your own retail, I know historically, the mix in terms of the profitability of your store network has been lower than your wholesale business. Has that changed now? Because obviously you've been doing adjustments, and I'm just wondering if that's helping the overall profit mix- Yeah. is it still weighing? It's much closer to the average now than it was a few years ago. This kind of negative mix, you can almost ignore it now because we have made significant progress in our global retail with regards to profitability, now also driven by the North American store closures, right? Which we announced in the beginning of 2020, I think it was. That has helped as well, you know, because we have really gotten rid of unprofitable stores. If you think about global retail, think about it as a division that is more or less at Group average, actually, in regards to EBIT margin. Okay. Then duty-free, you or rather, travel retail, you're talking about a 10% decline still versus 2019. In a lot of regions, Europe and North America specifically, you can see passenger numbers, and the rest of it are actually in line, if not slightly better than 2019. Just wondering what's impacting you. Is it the mix maybe skewed more to, I don't know, China or, you know, the Chinese traveler, and they're only starting to come back? Is that the issue for you guys specifically? Yeah, that's the main reason, yes. All right. again, you know, it's as expected. Yeah. you know, I think we always communicated we expect travel retail not to be back in 2023 to 2029, 2019 level, but only in 2024. Yeah. We are where we expect it to be. I mean, it's a nice growth, but yes, we are not quite yet back to 19. Okay. Then just on the volume mix, it seemed that you mentioned earlier in the call to Warren Ackerman that your mix would actually get worse in H2, or you implied it, because you say volume mix. Right ... you know, would be, you know, and volume will improve. Just wondering why you're saying that, because, you know, if it's all the seasonal items doing great and you're maybe, you know, the mainstream lower part of the, you know, daily snacking or whatever, is under pressure. We're going into Halloween, we're going into Christmas. These are the most, well, Christmas certainly is the most important part of the year, in terms of seasonality. Are you just suddenly worried people won't be, you know, doing the gifts and spending more on Christmas? You know, just wondering why your mix would turn negative in H2. I mean, we had a very positive mix, because of the above average growth of retail in the globe, global travel retail and also, our own retail in the H1 and the Easter season, right? Which has a lot. Yeah ... Bunny's Hollow Figures, which is quite expensive, more expensive per gram than a tablet. In the H2, you know, as I mentioned, we are having a more difficult comparable with regards to global retail. Global retail will not grow as fast as in the H1, so the mix impact there is less positive. Also, you know, Easter is more favorable to mix than Christmas overall. The combination of those two things will lead to a, I think, a better volume in the H2, but the mix will not be as positive as in the H1. Okay. Just the last one. It's more of a, you know, overall, you know, you guys and the chocolate industry generally, probably benefited in terms of that, you know, cost environment because, you know, soft commodities were generally pretty weak while everything was just taking off. Now, you're basically the cocoa and the sugar, as you mentioned, is taking off, and I guess combined, that is, you know, close to 60%-70% in some shape or form of your, you know, raw materials, and then the other parts may be packaging or whatever it may be. You know, going into 2024, it looks like you guys now have to start really increasing prices to offset that. Are you worried there's a certain amount of fatigue from consumers who've, you know, been taking higher prices in grocery for the last few years, with that sort of, you know, inflation levels coming down, maybe it'll be more trickier for you guys next year in the chocolate industry overall, given, you know, this fatigue coming in just when you actually need to increase prices? I mean, as you can see now, in numbers, I mean, last year and also this year, we have done price increases already, and, you know, the key drivers were packaging and milk and sugar. I think now, of course, yes, you are right. Cocoa is now the last one, kind of, that goes up. Sugar remained high. You know, milk and packaging is coming down slightly. If you look into 2024, if it stays as it is today, it's mainly the cocoa that drives the cost up. On the other side, hopefully, we have some relief from also on energy, for example, right? As I said earlier, you know, if things stay as they are today, with the cocoa market at GBP 2,500-GBP 2,600 per ton, the futures market, if it stays where it is today, I'm not expecting the need to do exactly the same price increases as we did this year. Yeah, it will still need price increases from most players, I assume. Will the consumer get, you know, worried about it? I mean, it's something we have to see, of course. I mean, at the same time, we are investing in marketing and other areas, right? You know, if you have to increase mid-single digits, and if you take that as a%, from your price of a chocolate bar, in total, it is an amount that in the past at least, has been kind of accepted by the consumer. Of course, it's difficult to tell you now how the consumer will react. In general, you know, more premium chocolate has been less elastic. The less elasticity has been less than for, in mass market in the past as well. I'm not seeing that as a, as the biggest risk for us. I mean, yeah, we have to see. Yeah. Great. Congratulations, you guys continue to positively surprise. Thank you. Thank you. The next question is from Andreas von Arx from Baader Helvea. Please go ahead. Good morning. Thank you for taking my questions. I'll try to make it quick. First one is on depreciation. Here, that number is clearly lower in the H1 compared to the H2 of last year, and even lower compared to the H1 a year ago. Is the CHF 128 total depreciation and amortization kind of the level we should expect for the H2, or could you give here an indication? That would be my first one. You know, we are expecting the ratio for the full year to come in slightly below last year. I think last year it was at 5.5%, we're expecting the overall ratio to sales to be slightly below that. Great. Thanks a lot. Okay, that's clear. I think I missed your comments on marketing spending for the H1. I mean, you know, given your total operating, marketing, and distribution expenses are 30 basis points lower as a percentage of sales in H1 2023 compared to 2022. I mean, if you just look at the marketing spending, was that also down year-over-year, or was it down in percentage of sales? Any indication would help. Thank you. That would be the second one. We had nice headwinds, sorry, nice tailwinds from logistics in the H1. Logistics was really the key driver of this high, lower margin, lower% on operating expenses to sales. On the other side, in terms of marketing, we spent more in absolute than the H1 of 2022. We had higher marketing investments and lower logistics costs. Okay, thank you. The third one is, you're pointing to a lower margin for the H2 as compared to a year ago. Given the in the H1 now, the margin jump has been mainly in Europe, with an increase of 500 basis points. Is it then correct to assume that the reversal will also happen mainly in Europe? Maybe just to summarize again, what are the key drivers that just here affect Europe? Thank you very much. Look, it depends a little bit in which markets at the end we will invest how much, right? Will we invest more in Germany, UK, versus the US? If you're saying we are having up marketing investments behind our brands to drive volume growth, you know, that decision, of course, we have already made some decisions, but we are still working on it the next couple of months. That's why it's really difficult to give you now a guidance on these, on these margins. Overall, you know, it's just important to bear in mind, you know, we have quite a cost inflation as we can see, you know, sugar prices, packaging, milk, et cetera, which we announced already in the beginning of this year, in March. This will come into effect in the H2. In the H1, we are not seeing it in the material cost, margin, but we will see it in the H2. I mean, that's the reason why overall in the H2, the profitability will not be at the same level as last year. It's really it is the marketing investments, the strategic investments behind the growth, and it is the higher costs in raw materials, mainly. There's no mechanical item, you know, from the hedging that per se will drive down the margin in the H2, that has been driving the margin up in the H1, specifically in Europe. I mean, you know, a 500 basis point margin improvement in Europe is kind of numbers that we do not usually see, you know, at a fast-moving consumer good-oriented scope. No, I mean, it is the combination of price increases with the hedges that we still had. You know, Europe, if you go three, four years back, pre-COVID was also higher than post-COVID, right? There was also still some catch-up. Then, you know, as I mentioned, you know, in mature markets, we grew double digits, like Switzerland, like Italy, like the UK. You know, as I mentioned earlier, those tend, without disclosing now, EBIT by subsidiary, but, you know, the markets where we've been around for close to, or for even more than 100 years, for some of them, of course, you have a different EBIT margin than in a subsidiary where you have been around just 10 years. It is really mixed as well, that has helped our EBIT margin in Europe. Thank you very much. Very clear. Wish you nicely. Thank you, Andreas. The next question is from Farhan Bhai from Credit Suisse. Please go ahead. Good morning, Martin. I will keep it very brief and ask three very quick buyer questions. Could you quantify the material cost inflation you expect for the full year? I'll begin with that. Material cost inflation for the full year. I mean, we are expecting actually, that, our material costs will, as a percent sales, will come in slightly higher than in 2022 for the full year. Last year we were at 33.8%. We expect this full year rate should be slightly above 2022, overall. Great. We should look at the... Yes. Okay. Mm-hmm. The 2nd, so you're expecting full year organic sales growth of 7%-9%, with volume mix broadly flat. Assuming you deliver the top end of the guidance, which is 9%, entirely driven by pricing, as you suggest, that would suggest you've taken the entirety of the pricing you expect for the year, despite there being higher cost inflation in the H2. Is that a fair rationalization? Correct. That's correct. Absolutely correct. Right. What you said, yes. Then the final one, quickly. You've helpfully given us guidance for the full year for the rest of the world, top line growth, 12%-14%. Are you able to do something similar for North America and Europe, please? I can, of course. Look, first and foremost, you know, our guidance said 7%-9%. You know, we said something similar in March, right? When we had the guide 6%-8%. Surely, the whole organization here at Lindt & Sprüngli, you know, is trying to get to the higher level of 7%-9%, that's for sure, right? You know, the geopolitical situation, the kind of the economic situation, there is a lot of uncertainty and, therefore, we have to 7%-9% as a guide, but surely everybody will try to get rather than 9% and 7%. If you look at the different segments, you know, we said, rest of world will probably be in the area of around 12%-14% or so for the full year. North America will be at, higher single digits to 10%, and Europe will be in the neighborhood of 6%-8%, more or less, for the full year, based on today's best, estimates. Thanks, Martin. Really appreciate that. Great. That excludes Russia, right, as in the H1, by the way. All right. Any other questions? One more I think. For any further questions, please press Star and One on your telephone. The next question is from Mikheil Omanadze from BNP Paribas Exane. Please go ahead. Hi, Martin. Just a quick housekeeping question for me. Do I understand correctly that going forward, you will be disclosing volume and mix together, as opposed to price and mix, as you used to do before? Yes, there are two reasons, right? I mean, on the one side, you know, if we sat here now and we showed a price mix impact of above 10%, everybody would ask: Okay, what is price? Everybody is really interested in the price in this inflation environment. That's why we decided to show you the price. At the same time, when we look at our portfolio, now, we are not selling beer or selling a commodity, right, chocolate mousse or something like that, but we have a portfolio which we manage. We can clearly see a trade-up towards seasons, towards products with a higher sales per kilo. That's why we think it's more accurate in the current environment to combine volume and mix. It gives better information. That is as long as we have this high inflation environment, I think, surely it makes sense to continue doing that. That's very clear. Thank you. Just one more. On Russia, if I understand correctly, if I look at FY 2022, like, for like of 10.8%, it was including the negative impact of Russia, and now, the headline 10.1% doesn't include it. If I were to... Am I correct? Yes, correct. You know, we took it out. Number one, everybody else reports it as we do, and number two, Russia is now zero. This year, the base is zero, right? Last year, we still had something in our base from 2021 and in 2022. Now in 2023, it's really zero, right? That's why we decided to disclose it. I mean, you can see it there, right? Yes, the organic growth is 10.1. If you excluded Russia, it would be around 9.5. If you included Russia, it would be around 9.5. I think it's the most accurate way of reporting it, because it's zero this year. The like-for-like guidance is on ex Russia basis, 7%-9%? Correct. Very clear. Thank you. Any other questions, or was that your questions? We have a follow-up question from Patrik Schwendimann, from Zurich Cantonal Bank. Please go ahead. Patrik Schwendimann, Zurich Cantonal Bank. Just three quick follow-up questions in terms of the net financial result. This was better than expected. What is your best guess here for the full year? 2nd question, net working capital, what's here, your best guess for the full year, a similar increase as we have seen last year? Sorry, can you repeat the 2nd question? Sorry, because I was just talking to my colleagues here quickly. Sorry. I got the first question. Can you ask the second one once more? Sure, Martin. Networking capital increase, what is your best guess for the full year? A similar increase as we have seen last year or more limited increase? Last question, we have seen this Russia impact in H1. In the H2 of the year, there won't be any impact, or was there still some sales in the H2 of last year in Russia? Thank you. Yes, here we go. In Russia, the Russia impact in H2 is there's nothing, yes, because we didn't have any sales in the H2 last year. From that viewpoint, you can ignore that. Mm-hmm. Okay. In terms of the financial expenses, that was the other question from you, right? Then the networking capital. On the networking capital, you know what I can say, it depends a lot what happens with inventory, right? I mean, we have it up massively, our cocoa bean inventory, you know, because it is risky not to hold enough inventory at the moment, right? Because there are certain issues with the crops in West Africa. I mean, that's also one of the reasons why we basically saw the increase in the prices, right, in the futures prices. We have heavy, really heavy, quite much heavier, cocoa inventories or longer cocoa inventories, and it depends, you know, how we assess the situation over the next six months. It's really a bit a challenge to give you net working capital forecast for the full year. What I can say is, you know, in terms of free cash flow, our midterm goal is, of course, to be double-digit as a% of sales for free cash flow. Depending on what we do on the cocoa beans, we may be slightly below the 10% for this year. It really depends on that, for the midterm, I'm very optimistic that we will get to the double-digit free cash flow to sales ratio. In terms of net financial expenses, we expect them for the full year to be slightly worse than last year, actually, by about CHF 4 million, because hedge costs go up, you know, because of the higher interest rates and especially the ones in outside of Switzerland, right? That's the key driver of it. Some of these benefits we saw in the H1, we won't see in the H2. You said CHF 4 million worse than last year for the full year? Roughly, yes. Mm-hmm. Okay. Perfect. Thanks a lot, Martin. Thank you. We have a follow-up question from Warren Ackerman from Barclays. Please go ahead. Yeah. Hi, Martin, it's Warren here again at Barclays. Again, apologies, I missed the start of the call. You may have gone over this, but what is actually happening on the ground in West Africa, and particularly the Ivory Coast? Because it looks pretty chaotic from what I can see with, these torrential rains flooding a lot of the farms, and the fact that the Ivory Coast is sort of making certain restrictions around futures contracts. I'm just sort of thinking about this from a kind of a supply shock point of view. We are sort of seeing processing across different factories way down. Are you able to shed some light as to what's happening in terms of availability of supply? Because we're also reading about multi-decade lows in inventories. You know, are you gonna be able to get a hold of, you know? Well, can you just maybe talk about your visibility on supply and what you all may be seeing on the ground? Thank you. Yeah, absolutely. I was in Ghana in November myself. I mean, definitely, there are a few things going on. I mean, first and foremost, in the last few years, we had bumper crops, right, in West Africa, super high crops. Yeah. It was always clear, as in all agricultural crops, you normally have kind of peaks and troughs, so it's kind of not that unexpected that we see a kind of a downward strain with regards to the supply situation. It always depends on the weather pattern. As you may have heard, El Niño, which is a weather phenomenon in the Pacific Ocean, in front of Peru and Ecuador, comes into play also every 10 years or so, and there is now an El Niño, a kind of a possible El Niño, which means that the sea temperatures go up by a few degrees, right? That leads to more rainfall in Peru and in Ecuador, leads to normally, it always depends on how it shapes out, but normally in the past, if you had this El Niño, it led to less rain in West Africa. It led to kind of, therefore, not an ideal rainfall pattern, that led to a lower supply. At the same time, you know, it depends a bit what happens with the grindings, right? What happens with the demand. In the last couple of years, we had a higher demand than supply. Will that be also the case for 2023, 2024, we will see. You know, because we had a higher demand than supply, yes, the stock level at the moment, overall, right, worldwide, compared to the crop, is at about one third, about 33%. I mean, it's still 33%, right? It's still a cover of about four months overall. It's not a problem, right? I mean, I'm not that worried about that, but still, you know, we want to be on the safe side, and we want to go along on cocoa beans, just to be sure that we don't have any disruptions. I'm quite happy that we did that, even if, of course, from a pure financial point of view, free cash flow gets a bit impacted by it. We believe it's a temporary thing, and that will correct itself over the next three years again. I'm not awfully worried, but with regards to the supply situation, but of course, this led to a huge price hike. I mean, 40-year high in London, that is definitely unprecedented, and we will see if this goes further up as well. I mean, it may be, you know, speculators also came into this market. It's a market that is not so liquid compared to coffee or oil. If speculators come in, it also drives the market further up. Yes, I mean, we are watching the situation. We are, you know, we have had a good coverage. That's good news, right? I mean, physically and also from a future point of view. That's why you see relatively okay material cost of% to sales of 30% in the H1. Yes, it's something to watch. When would you need to kind of re-hedge, or when? Just to be clear, then on your inventory position, it's good that you've got long cocoa beans, but where, how much? Yeah. cover do you have? Sorry, I don't know- We don't disclose that. We don't disclose that because we don't wanna tell our competitors, what we do. Okay. Yes, look, as you have seen, you know, we are confident to increase our guidance for the full year to 30 basis point- 50 basis points. At least in the short one, it will not impact us. Yes, from 2024, as I mentioned, as most of the players in the chocolate industry, there will be a lot of cost pressure from the cocoa and most likely, we may see additional price increases coming. I'm just slightly surprised that you're saying the price is gonna be lower next year than last year, when it seems like the cost pressures could be higher. Just not sure how to square. What is lower? What is low? I didn't get it. What is lower? Well, no, you're saying that the rate of price increases will be lower in 2024 than 2023. Oh, I see what you mean. It seems to me like the actual costs, given cover, potentially could be even higher in 2024 than 2023. Why would the pricing be lower year-on-year? It depends, you know, because cocoa is not the only one, right? We also have milk, we have sugar, we have packaging, we have energy, you know, we have wages. I mean, there are other things that impact our overall cost of goods. Mm. It depends. I mean, milk prices have come down. Packaging material costs are rather on the downtrade. I mean, it's really sugar and cocoa that remains high, it's kind of a mix of different things. Some have decreased, others have steeply increased. The net of it may mean for many that hopefully it will be a bit less. Look, that's status today, right? If the cocoa bean market increases another 20%, then we have to release it's a very dynamic market. Look, we have to observe it, then we have to make the right decision. Okay. Got you. Thank you, Martin. Thank you. There are no more questions at this time. Great! We are done. Thanks a lot. It was good probably to have a shortly, a slightly shorter script, so there was a bit more time for questions. Thanks to everyone once more for your questions, and have a wonderful day. Thank you very much.