Coca Cola HBC AG CCHBF CEO Zoran Bogdanovic on Q4 2019 Results

Good morning. Thank you for joining our call today to discuss Coca-Cola HBC Bottling Company's results for the full year 2019. Today I am joined by our Chief Executive Officer Zoran Bogdanovic and our Chief Financial Officer Michalis Imellos. Following the presentation by Jan Gustafsson, we will open the floor to questions. As usual, can we ask you to ask your questions one at a time, waiting for us to answer one question before you ask another. The operator will keep your line open until we have answered all of your questions. Before we get started, I would like to remind everyone that this conference call contains various forward-looking statements. These should be considered in conjunction with the cautionary statements on the screen, and this information can also be viewed in our press release issued today. Now let me turn the call over to Zoran.

Thank you, Zoran, and good morning, everyone. In line with our practice, as I take you through our financial results for the year, I will refer to comparable figures which exclude the impact of restructuring costs, the mark-to-market valuation impact of commodity hedges, and specific non-recurring items. As Zoran just mentioned, in 2019 currency-neutral net sales revenue grew by 4.4%, or 3.7% excluding Bambi. Reported net sales revenue grew by 5.5% as we benefited from 1.1 percentage points of positive impact from currency movements in the Russian ruble and the Swiss franc against the euro. This growth was primarily driven by volume growth of 3.3%, or 2.6% excluding Bambi. All three segments grew volumes in 2019, with accelerating growth in the fourth quarter. Currency-neutral revenue per case grew by 1%, or 1.1% excluding Bambi. Excluding Nigeria, where we have made targeted price investments over the course of 2019, currency-neutral revenue per case increased by 2.1%. We are seeing strong results from our strategy in Nigeria, with volume growth in the fourth quarter accelerating to 24%. Gross profit margin declined by 20 basis points, while OpEx as a percentage of sales improved by 80 basis points. I will return to the components of operating leverage in more detail later. Comparable EBIT increased by 11.5% year-on-year, and comparable EBIT margin expanded by 60 basis points to 10.8%. Ten basis points of this margin improvement is attributable to the Bambi consolidation in the second half of the year. Depreciation of currencies, mainly the weakening of the Russian ruble and the Nigerian naira against the US dollar, resulted in a 7 million euro currency headwind, better than what we had initially anticipated. Financing costs increased by 62% to 67.1 million euros due to the raising of 1.8 billion euros of gross debt in May and November. Our comparable effective tax rate reduced from 26.2% in 2018 to 25.8% in 2019. Comparable EPS reached 1.44 euros, 10% higher than the prior year period. The growth was slightly lower than the comparable EBIT growth of 11.5% due to the higher financing cost mentioned earlier. Our working capital balance continues to be in triple-digit negative territory, and at the end of the year we generated strong free cash flow of 442.6 million euros, a 19.6% improvement compared to 2018. Turning to input costs, currency-neutral input cost per case grew marginally by 60 basis points, in line with our low single-digit guidance for the year. The main driver for this benign input cost growth was rising while sugar and aluminum improved. Good management of contracts, favorable hedges, mix shifts to low and no sugar variants, and our ongoing efforts in light-weighting helped us to deliver in line with expectations. Comparable operating expenses as a percentage of revenue improved by 80 basis points to 26.9%. Thirty basis points of improvement is due to operational leverage on logistics and administration cost efficiencies in the year. The rest of the improvement is due to lower marketing expenses as we are cycling the investments behind the FIFA World Cup as well as other one-off items. Turning now to the key financial drivers on a segmental basis, in our Established Markets, currency-neutral revenue growth of 1.3% was driven by 80 basis points of volume growth and 40 basis points expansion in price mix. This price mix improvement is due to selective price increases in several markets as well as strong package mix, which improved by 1.1 percentage points in the segment. We also saw transactions growing by 2.4%, evidence of the ongoing progress we are making on our revenue growth management initiatives in the segment. On the other hand, the discontinuation of Lavazza in the fourth quarter was a headwind to price mix in the segment. Established comparable EBIT grew by 6.4% and comparable EBIT margin expanded by 40 basis points to 10.2%. This strong margin improvement was mostly due to operational leverage effects. To a lesser extent, we also benefited this year from the strengthening of the Swiss franc. In Developing Markets, currency-neutral revenues grew by 4.2%, with volume of 50 basis points and price mix growth of 3.7%. The acceleration in price mix in the year was due to selective price increases in several countries as well as positive category mix driven by strong sparkling and energy growth. We also saw excellent progress on single serve mix, up 3.9 percentage points year-on-year. In terms of operating profit in the Developing segment, comparable EBIT grew by 6.9% and comparable EBIT margin expanded by 30 basis points to 10.8%. The main drivers here were the positive pricing and mix mentioned earlier. In Emerging Markets, currency-neutral revenue growth was 7.1%, or 5.6% excluding Bambi. The strong result was driven by volume growth of 5.7%, or 4.4% excluding Bambi. We achieved particularly strong performance in the fourth quarter with volume growth of 13.5%, or 10.6% excluding Bambi. The strong trends were broad-based across the segment, but it is also important to note the significant improvement in volume growth in Nigeria and Russia. Currency-neutral revenue per case grew by 1.3%, or 1.2% excluding Bambi. This is a slowdown in price mix expansion compared to the 2.4% we delivered in 2018, due to the targeted investments in pricing that we have undertaken in Nigeria. Given the timing of these investments, you should expect the impact to continue into 2020 with similar effect on the country and segment price mix. Excluding Nigeria, emerging price mix could have increased by 3.6%. The point here is that outside of Nigeria, we have seen improving trends on price mix. Zoran will give you more insight on our progress in Nigeria later. In terms of operating profit, comparable EBIT grew by 17.5%, or 13.2% excluding Bambi. This drove an improvement in comparable EBIT margin of 80 basis points to 11.3%, of which 30 basis points were due to Bambi. The remaining 50 basis point improvement was driven by operating leverage from our revenue growth, which more than offset negative transactional FX, in part due to the movement of the Russian ruble and the Nigerian naira against the US dollar. Turning to restructuring, we incurred charges of 57.8 million euros in the year, with the majority of this being spending in the Established and Emerging segments. Restructuring benefits within 2019 from 2018 and 2019 initiatives amounted to 30 million euros. Looking ahead to 2020, we expect restructuring costs of approximately 15 million euros with estimated annualized benefits of 7 million euros from 2020 onwards. The benefits in 2020 from initiatives taken in 2019 and those expected to be taken in 2020 are estimated to reach 32 million euros. We generated strong free cash flow of 442.6 million euros, up 72.5 million euros from the prior year. Strong operational profitability and working capital management allowed us to accelerate capex investments ahead of the strong revenue growth and at the same time generate the strong cash flow in the year. Net capital expenditure as a percentage of revenue increased by 50 basis points to 6.9%. Of these 50 basis points of growth, 10 basis points is attributable to the acceleration in capex investments, while we benefited from an extra 20 basis points of increased idle asset sales proceeds year-on-year. The remaining 60 basis points of growth are attributable to the impact of the adoption of IFRS 16 as of the 1st of January 2019. As you are aware, IFRS 16, which requires the recognition of all leases on the balance sheet, came into effect in 2019. This accounting change leads to a one-off capex as percent of revenue increase of half to one percentage point of revenue. Therefore, taking into account the impact of the adoption of IFRS 16 in 2019, going forward our restated annual capital expenditure target range has become 6.5% to 7.5% of net sales revenue. We see capex remaining within this range as we progress towards our 2025 plans. The working capital balance remains on our target level of triple-digit negative. Heading now to our balance sheet, during the course of 2019 we raised three bonds in a total of 1.8 billion euros of debt. We also redeemed 223 million euros of our June 2020 800 million euro bond, leaving 563 million euros outstanding. Financing costs in 2019 were 67.1 million euros, an increase of 25.8 million euros due to the higher level of gross debt on our balance sheet. The average interest rate on our bonds reduced by 60 basis points to 2.1% during the year. We would anticipate this interest rate reducing by a further 40 basis points after June 2020 when we redeem the last 563 million euros of our 2020 bond. Our net debt to comparable EBITDA stands at 1.54 times at the end of 2019, compared to 0.61 times at the end of 2018. We continue to expect this to move towards the upper end of our 1.5 to 2.0 times target range by the end of 2020. With that, let me now pass the floor to Jan who will take you through the operational performance in the year.

Thank you, Michalis. Now let me review the performance by category before we get back into a more detailed discussion of country and geographical segment performance. Sparkling beverage volume grew by 3.5%, higher than our total portfolio, a strong performance in a year where we experienced unusually poor weather in the critical summer months in several markets. What is particularly encouraging is that trademark Coke fueled our growth, and we saw even stronger growth in our areas of strategic focus: low and no sugar variants and adult sparkling. Low and no sugar sparkling grew by 26.7%, cycling 25.9% growth in the prior year. Adult sparkling grew by 7.1%, cycling 6%, and there are some very strong trends at the brand level. Let me give you a flavor: Coke Zero grew by 26.2%, while Fanta and Sprite low and no sugar variants grew by 90% and 157% respectively. Within adult sparkling, Schweppes grew by 8.3% and is gaining share. We also see good trends from our other adult sparkling brands, such as Royal Bliss, which grew volumes by 30%. What is particularly interesting is that adult sparkling grew the fastest in our Established segment, up 13.4%. Energy growth continues to be extremely strong, up 28.3% in 2019, cycling growth of just over 30% in 2018. Innovations are helping drive interest and sales in the category, and here I would like to highlight Coke Energy in the premium end of the market, Predator at the more affordable end, and a very successful flavor innovation of Monster Mango. Local water volumes grew by 1.4%, a slowdown from the previous year, impacted by the weather, some pricing competition in Russia and Hungary, and cycling the successful completion of a program in Poland designed to increase water volumes. Within water, it is encouraging to see good growth in smaller single-serve package types, up 4.7%, and to see transactions growing faster than the volumes, up 2.1%. Juice volumes declined by 1.7%, impacted by a declining category. However, price mix in the category improved by 3.5% as we focused on premium packages and brands, and we continue to gain value share in the category, with high share gains in Russia. Ready-to-drink tea volume declined by 8.4%, particularly impacted by the delisting of Nestea in its last three remaining markets. Fuze Tea volumes were up marginally by 0.1%. We have seen some heavy promotional activity by competitors in a few countries. Nevertheless, we remain focused on building the strength of the brand and its justifiable premium position with our customers. We are also encouraged by the very strong performance of Fuze in Italy, where we grew volumes by 48% in 2019 and doubled our market share. Premium spirits volume grew by 4.9%. We now have premium spirits offerings in 19 of our markets and have more launches planned. Our premium spirits portfolio is a perfect complement to our adult sparkling portfolio. These combined portfolios really strengthen our offering to our customers in the crucial HORECA channel and helps us to activate out-of-home evening occasions. Let me also share a few words on coffee. As you may remember, we are only a few weeks away from our launch of Costa in at least 10 markets. Our preparation work has been progressing well and our teams are excited to get going with this great brand and high-quality coffee. Coffee is a huge opportunity, nearly equal in size to the total non-alcoholic ready-to-drink market in our territories. We believe we are uniquely placed as a Coca-Cola bottler when it comes to coffee, since we have benefited from the past experience of selling a full portfolio of coffee in several of our markets for the last three years. This experience and the capabilities that we have developed give us the opportunity of targeting all channels across our markets with Costa Coffee, with a range of product and packaging offerings to serve at-home and out-of-home, with HORECA being the key opportunity as well as on vending machines. Coffee is just one of the examples of innovation in the portfolio. During the course of 2019, 4.2 percentage points of our volume growth came from packages, flavors, or brands launched in the previous four months. These new products we have introduced allow for profitable revenue growth today and into the foreseeable future. By providing the right product, package, and price combinations across our channels and consumption occasions, we will remain focused and disciplined when it comes to innovation, which means choosing the right products for our markets and activating them in the correct way to generate profitable growth. The key is quality rather than quantity. By picking the right opportunities, we can back them with a relevant route-to-market approach and talent for our sales force to generate profitable revenue growth. Turning now to our performance by segment and focusing on some of our bigger countries, in our Established Market segment, volume was up by 80 basis points in the full year. Sparkling volume grew by 1%, fueled by trademark Coke, and we are pleased to have made significant progress in areas of strategic focus like adult sparkling and low and no sugar variants. Low and no sugar grew high single digits, while adult sparkling growth was even better, up 13.4% versus last year, with growth across all our portfolio brands, namely Schweppes, Kinley, and Royal Bliss. Italy returned to growth in the year with volumes up by 2.2%. Sparkling volumes grew by 1.2%, with good performance from Coke regular as well as from low and no sugar variants. Coke Zero grew by 14.7%, Sprite Zero by 7.6%, and Fanta Zero by 90%. We benefited from stronger ready-to-drink tea volume, while energy increased by 30.7%, with Monster driving the positive results and supported by the launch of Coke Energy. We continue to benefit from the targeted route-to-market investment we have made in the country, the price architecture changes we implemented in 2018, and strong marketing promotions which are focused on driving transactions. In Greece, volume grew by 0.8%, with growth mainly from sparkling, energy, and water. The key contributors to growth and share gains in sparkling were Coca-Cola Zero, Fanta Zero, and Schweppes. Adult sparkling saw excellent performance, growing double digits in the year, fueled by the launch of new flavors. Energy continued to perform well, supported by new variants in Monster and the launch of Predator. In Switzerland, volume declined by 5.2% as the country was adversely impacted by bad weather during the summer months, having a negative impact on the whole NARTD industry. The price architecture changes we implemented in Q4 of 2018 are yielding good improvements in price mix. FX-neutral revenue per case grew by 0.4% in the period, with volume growth, price increases, and favorable package mix more than offsetting unfavorable channel and category mix. In our Developing Markets, volume grew 0.5%. Sparkling volumes grew by 2%, led by our low and no sugar variants, increasing by 9.1% in the year. Energy continues to see strong double-digit performance. In Poland, volume grew by 1.4% despite cycling a very tough comparable of almost 10% last year. Sparkling was up by 2.2%, driven by Coca-Cola regular and Coca-Cola Zero. Our adult sparkling portfolio saw excellent performance throughout the year, with double-digit growth in Kinley, our adult brand in the country. Energy continued to deliver excellent results, with volumes in Monster increasing by 49% and the category being supported by the launch of Coke Energy. Water was impacted by poor weather in the country during the summer period and the cycling of the water acceleration plan in 2018. Volumes decreased by 1.8%. In Hungary, we recorded good growth of 2.4% and gained share in sparkling during the period on the back of a good performance in trademark Coca-Cola regular and Coca-Cola Zero. Energy continued to deliver a very strong result in the country. Volumes declined in both water and ready-to-drink tea, the latter impacted by the delisting of Nestea. In the Czech Republic, volumes declined by 3.4%, with all categories declining except for energy. The acceleration we experienced during Q4 helped offset some of the volume lost due to the bad weather throughout the summer months. Sparkling declined low single digits, as the good performance in Coca-Cola Zero and Fanta was offset by declines in the rest of the sparkling portfolio. In the energy category, Monster continued its good performance, growing double-digit in the year. Currency-neutral metals revenue per unit case increased by 3.7% due to all successful revenue growth management initiatives. Volume in our Emerging Markets was up by 5.7%, or 4.4% excluding the Bambi acquisition, with nearly all of our countries in the segment posting growth. Sparkling, energy, and water were the main growth drivers for the segment. Schweppes, our main adult sparkling brand in the segment, grew high single digits in the period, and our low and no sugar propositions grew by 80.9% in the year. Volume in Russia was marginally up in the year by 0.1%. We cycled a tough comparable in the country, as in 2018 we had the FIFA World Cup combined with very good weather. The adverse impact of cold and wet weather during summer this year affected the entire NARTD industry. Despite this, we saw good growth and market share gains in sparkling and energy, and in juice, strong share gains driven by relevant innovation and improved promotions helped to offset the overall decline in the category. The other two categories where we experienced declines were water and tea, which happened to be particularly sensitive to weather. We are pleased with the mid-single digit acceleration in volumes we witnessed in Q4, especially given the tough comparables in the period. Nigeria returned to growth in 2019 with volumes up by 9.1%. There is continued intense competition in the market and consumer affordability is still a concern, but the price investments that we have made in 2019 have been very successful at driving growth. As a reminder, we made price investments in PET in the sparkling category in October of 2019, which complemented those we made in glass during the last quarter of 2018. Following these adjustments, we have seen a strong acceleration in our volume growth during Q4, with volumes growing double digits. Other categories outside of sparkling have had excellent performance in the year, with water and energy growing double digits. Volume in Romania increased by 5.6% with an acceleration in the second half. The country had strong results across all categories except for ready-to-drink tea. Romania is another country that has been affected by the delisting of Nestea. Sparkling saw excellent results, growing by 5.9% in the period, with contributions from all brands. Innovation supported growth with the launch of new flavors, including Coca-Cola Peach and Baobab Lime Raspberry. Within adult sparkling, new variants in Schweppes fueled double-digit growth in the period. Currency-neutral revenue per case grew by 1.3% in the year, or 1.2% if we exclude the Bambi acquisition. Removing the negative impact from Nigeria, FX-neutral revenue per case was up 3.6%. Building a more positive social and environmental impact is integral to our long-term growth and to creating value for all our stakeholders. In 2019, our actions across 17 commitment areas again demonstrated our commitment to doing exactly that. Our progress was reflected by our Dow Jones Sustainability Index ranking as Europe's most sustainable beverage company for the sixth time in seven years. We were also ranked second globally. Alongside this, we have the highest level of rating in MSCI, CDP Water, CDP CO2, and FTSE4Good. But rankings and ratings are secondary to action and impact, so let me give you just a few examples of what we have actually done. First, in the area of packaging, we collected 48% of all primary packaging, up from 45% in 2018. We launched four of our water brands across five markets in bottles made from 100% recycled PET. In three markets, we have 50% recycled PET packaging in half-litre packs of trademark Coke. We have also announced that we will replace plastic shrink seal on can multi-packs with recyclable paperboard by the end of 2021. On water, let me highlight two projects. In Poland, we have been able to save 60,000 metric tons of water annually through installing a reverse osmosis treatment step at our plant. In Nigeria, we set out to improve water availability for the communities around our production plant in Chibola. We invested in water infrastructure, drilling several new shallow wells, replacing aging pipes, and supporting the refurbishment of the local state water board water analysis laboratory. Through this, we have helped to ensure that 1 million people have greater access to clean water. Finally, on reducing our CO2 emissions, in Austria we are powering our largest plant with a photovoltaic system installed on the roof that allows us to save 725 tons of CO2 per year, the annual emission equivalent to 400 mid-size cars. Overall, use of renewable electricity at our production sites in the EU and Switzerland increased from 87% in 2018 to 89% in 2019, and our penetration in energy-efficient coolers with our customers rose from 19% in 2018 to 28% in 2019. These are just a few examples of the significant work we are doing. We intend to be as accountable on our sustainability targets as we are on our financial ones. So as we did last year, we will provide comprehensive reporting against our Mission 2025 sustainability commitments in our integrated annual reports, which we publish in March. According to external forecasts for 2020, the economic outlook in our territories continues to progress well, albeit not without global risks. And as we noted in the release this morning, we are aware of the potential for discriminatory taxation in our Italian and Polish businesses during the course of 2020, and we are preparing for any potential outcome. Overall, we expect volume to continue to grow in all three segments and at a faster pace relative to what we delivered in 2019. With that, let me hand it back to Zoran to wrap up.

Thank you. As a reminder, if you you would like to ask a question, please press star 1 on your telephone keypad. Please ensure your line remains unmuted locally. You'll then be advised to introduce your question.

The first question on the phone lines comes from Edward Mundy calling from Jefferies. Three questions, please. First is on your guidance. Appreciate that you're not explicitly quantifying it, but given the weather in Q4 and the challenging weather in Q2 and Q3, I wonder whether you could provide your level of confidence in hitting your medium-term guidance of 5 to 6% sales and 20 to 40 basis points in fiscal 2020. The second question is on how you're using the business to leverage your portfolio and to target a 24/7 beverage model. In particular, are you seeing much cross-merchandising within your existing portfolio and integrating that with Bambi, and are you also widening the distribution of Bambi products into new markets? And the third question is on Nigeria. Very good recovery in the fourth quarter. Are all the price reductions now done, and have you seen any competitive response price-wise to your price reset?

Just on my first question, I think you highlight why you've got a high degree of confidence in your medium-term 5 to 6% target on sales, but on the 20 to 40 basis points on margin — perhaps Michalis could pick up on that one.

Look, specifically for 2020, our target as we have said is a minimum of 11.2% HIBIT margin. The 20 to 40 basis points growth is more from 2021 onwards, on average every year. So we reiterate the 11.2% as the minimum target for 2020.

Thank you. The next question comes from the line... the Credit Suisse line couldn't connect. The next question comes from the line calling from Barclays, please go ahead.

Hi, three questions from me. The 70 basis point headwind from Lavazza in Q4 — can you just give us a bit more color as to when that will drop out, how we should expect your launches to be tied in behind that drop-out, and the intensity that you're going with them?

Technically, Lavazza on its own will be a year-over-year impact until the end of Q3 2020, because we will fully start cycling from October 2020. But then, as Zoran said, Costa will start kicking in from Q2, slowly, in a number of markets. Just to clarify, the non-compete will run until Q3, so those markets where you were with Lavazza, you won't be able to launch Costa until the non-compete finishes, depending on the country, either in April or May. Fully respecting that, this is how we lined up the country launches. And just to clarify my point — since we finished with Lavazza from 1st of October 2019, it will take 12 months to fully cycle the discontinuation of Lavazza. It's nothing to do with the non-compete.

Okay, very clear. Second point was on FX. It declined by 80 basis points this year as a percentage of sales, and 50 of that looked like it was marketing spend. Appreciate we've got the Euro football this year. Can you just give us an idea of where that might be versus last year and versus the Russian World Cup year, and what sort of level we should expect on a more normalized year going forward?

2019, with the exception of some small one-offs. But on the other side, in 2020 we will have call it two one-off investments related to the Euro because we don't have them in 2019. So all in all, you would see a very small increase in marketing expenses in 2020.

Thank you. And final one on innovation. Could you just give a bit more clarity on how you're defining that, and the 4.2% of volume growth that was driven by innovation? Can you just give us a bit of color as to how you expect that to evolve as these innovations in Costa and Coke Energy and everything come to bear more across your portfolio?

The next question comes from the line calling from Erste, please go ahead.

Hi, good morning everyone. I just wanted to ask about the implications of Costa on your existing business. For instance, in vending machines or convenience stores, where do you think the shelf space for those products is going to be coming from, and what can you say about the expected margins on Costa versus your existing portfolio? Should we see a margin mix benefit or not? Secondly, the Italy beverage tax — could you update us on your thinking about that, whether anything has changed, and what assumptions you're putting into the FY 2020 guidance with regards to that issue? And then finally, Coke Energy — how many markets is that in now?

The next question comes from the line calling from JP Morgan, please go ahead.

Good morning, gentlemen. Two questions, please. Firstly, with regards to your input cost guidance — the low single-digit per case growth coming from mix, then Costa Coffee and premium spirits versus overall raw material inflation. Particularly as regards to sugar, what proportion of your COGS is related to commodity sugar, and given the recent spike in sugar prices, should we see this as a potential headwind into late 2020 and 2021? And secondly, regarding your interest costs — given the retirement of the bonds in 2020, what would the full interest charge for 2020 look like?

Thanks. On input costs, the guidance for 2020 is a low single-digit increase. We have some different trends compared to 2019. In terms of sugar, we expect a mid-single-digit increase, coming from both EU sugar, where favorable contracts are edging upwards in the low to mid-single-digit range, and world sugar with a low single-digit increase depending on when our hedges fall and open quantities are settled. We have good coverage — nearly fully covered on EU sugar, pretty much fully covered in Russia, and more than half in Nigeria. When it comes to aluminum, we expect another benign year with a low single-digit increase. Resin is the commodity that will drive improvement — we expect a high single-digit decline in 2020 compared to 2019, driven by favorable market prices, lower oil prices, and ongoing lightweight initiatives. On finished goods, Lavazza coming out is a positive, Costa will come in very gradually, and premium spirits won't move the needle. So overall, low single-digit increase in 2020. For 2021, it's too early to call — we have some hedges in sugar but not much in resin or aluminum. On interest costs — we expect them to be at 2019 levels, maybe slightly higher. This small growth comes from two factors: lower interest income as negative interest rates hit, and the growth of finance leases within CapEx under IFRS 16, which hid the financing cost. So in summary, pretty much at 2019 levels with a small increase.

Right, thank you. The next question comes from Nico Stakelbeck calling from Liberum, please go ahead.

Hi, good morning. My three broad questions are on Diet Coke/Light, free cash flow, and ROIC, but let's do one at a time. On Diet Coke or Light Coke, it appears to be in decline. Could you tell me a little about the strategy? Are you positioning it more for women, like in Western markets? And can you talk broadly about the commercial plans for that variant, please?

Okay, excellent, thanks. On free cash flow, I appreciate it's a bit early, but after the strong year this year, do you expect it to grow year-over-year? Can you give any guidance at all for 2020, and are there any one-offs to mind?

Nico, as you said, early in the year. However, the objective is, with improved profitability and good management in working capital, to be at the levels we achieved in 2019, which are very, very strong.

Excellent. And then finally on ROIC, can you provide the return on invested capital for the year? I mean, I can calculate it, but what I was really looking for was ROIC excluding Bambi, just to get a feel for how it's developing.

Okay, it would be quite difficult, especially with our methodology which uses capital employed as an average over five quarters. But I would say that our ROIC for 2019 is around the 14% mark.

The final question comes from the line calling from Credit Suisse, please go ahead.

Hi guys, just a couple of questions. Firstly, on the balance sheet — Michalis, you've been talking quite a bit over the last year about leveraging to two times. You did a special dividend last year. However, if you do nothing through 2020, you still have a little bit of firepower. I know you've hinted at bolt-on M&A — is that proving more difficult or happening slower than anticipated? And is that the way you expect to deploy the capital?

Yes, as you said, in 2019 we closed just in the targeted range in terms of net debt to comparable EBITDA — 1.5 to 2 times — with all the debt we raised and the uses of cash we saw in 2019. Going into 2020, we estimate that in order to reach the higher end of the 1.5 to 2 range, we are looking at firepower of anything between 500 to 700 million euro. And we do have a good pipeline of bolt-on targets which we are working through. Clearly, timing you can never fully control. However, we feel optimistic that in 2020 quite a bit of this firepower will be utilized. And with this plan, we are going to be at the upper end of the 1.5 to 2, even if we have to straggle over into early 2021. That's the primary objective.

Presumably that will be done with the cash sitting on the balance sheet today, which, I think as you alluded to, is generating little income?

That's correct. This firepower is by utilizing cash that we already have plus the cash that will be generated within 2020.

We have no further questions coming through. I'd like to hand back over to your host for any concluding remarks.