ARYZTA AG (ARYN) Earnings Call Transcript & Summary

Welcome here in Dagmersellen. It's geographically, almost the center of Switzerland. There is west, east, north, south. It doesn't look like this. It's a countryside but it's from a logistic point of view, really in a good place. Welcome for this Capital Markets Day, 8th of June. The moment we announced this, we didn't know what the world is. It's 8th of June. They are most probably easier moments and easier times to give guidance for a 3-year period. So we take all the circumstances in consideration, and we'll do our best to be as precise as possible. You have received the ad hoc today morning, which is the shortened version of this presentation. Today, we are here in the room with people being present and in a live stream via webcast. This is the agenda for today. The first point, we obviously managed, the arrival & coffee. It's a good thing to work with or in a bakery. It's much better than for a technical company or projecting, so we can welcome guests with our own products with good coffee. This is basically our business. Bakery products are always an emotional calorie. It's a good thing to have a good coffee in the morning, good pastry. It's an indulgence. It's connected with memories and this is the business we follow. It is, by the way, as well the most efficient calorie you had today morning. There is no other calorie, which is more efficient than this from an economical point of view and from an environmental point of view. It's a primary calorie. It's not feeded to a pig or a cow or whatever it was. And it's a very economical, very cheap calorie, okay? It's in the -- on the breakfast table, the most efficient calorie. That's why we are quite confident that, especially in these days, in this time, our product will keep or even expand its place on our table. The first hour we will spend together with my part of the presentation, we call it where to play, how to win. So where is ARYZTA present? What is our business? What is the size of the business? We have what is our plan to keep the business growing into the right direction. Then 10:00, there is no way out in a food company, Food Testing, driven by our French friends and Swiss francs. French friends from Coup de pates. This is a Food Service business we have in France. It's, by far, the leader in this part of the world with all you can think about food, everything. It's dreamland for food-sensitive people. We have our Swiss friends with the Swiss assortment. All the products you know. Then 11 to 12, Martin Huber, the CFO presentation, the figures and numbers, then the bakery tour here in our ARYZTA bakery. It's 25,000, 27,000 tonne output machine. Here, it's quite a small bakery, but it covers Switzerland. That's the way it is. The biggest bakery we have is more or less factor 10 to this. We are producing all product lines here, breads, rolls, pastry, snacks, artisan breads in a second location, a small location, wood oven bread. And this is driven by the circumstances in Switzerland for our foreign guest. Switzerland is quite protected market, protected business. And as soon as you move with your product close to the agricultural world, the protection becomes even bigger. Bakery Tour. And then before we close the day, there is a nice lunch. We will have time to discuss, and we will give you a takeaway with home to explain to your family and friends what the day was today. Paul reminded me for the forward-looking statements. This is the life insurance. You all know this. We are living and working in difficult days, difficult times. So you know this best and please take this in consideration. First, allow me to explain the market dynamics and ARYZTA's position in this. So what is the business? What is our position in this business? Where do we play? What is the ambition of ARYZTA for the time window '23 to '25. So all what we are saying today is covering '23, '24, '25. Our '23 starts already in '22. Last time, we had a bit of confusion about this. The first of August is our new year. It's the first business day of the fiscal year '23. And we closed business year '25, 31st of July 2025. So we are not in the calendar year. We are in this fiscal year. And then Martin Huber, with the growth drivers and the capital allocation, an important topic and even more important in times when interests are going into another direction, hopefully, that's the actuality about this margin improvement, capital efficiency and cash flow and capital structure. With this day today, we, first time, direct our view into the future. You remember there was an election, a Board election 2020. Heiner told me this -- remembered me on this, and I will tell it now. The first 6 months, we had Board questions to solve and shareholder questions to solve. We started with the business renovation 18 months ago only. So before we had other challenges to manage. It's a short time. We are working on that business. So what is our business? You can see here the bakery market as a entire view. There are small artisan bakeries in town, in cities, driven and managed by families. I grew up in a bakery like this. Then we have the fresh business, the 17% share. The artisan bakeries are covering 27% of the share, more or less. The fresh bakeries driven in Switzerland by the big retailers or by bigger other protagonists in Europe. Daily delivered fresh products packed, unpacked to the outlets to the market. Then there is a packaged part of the business, a 31% share today, and there is a bake-off part of the entire bakery business, which is the premium segment and which is the segment ARYZTA is playing in. So ARYZTA is not, obviously, in small artisan bakery, it is not in fresh. ARYZTA's history covered fresh. We had a fresh business in Switzerland. In my time, I had a fresh business in Poland. There were other constellations ARYZTA had fresh business models in the portfolio. This is all gone. Today, we are only in the bake-off segment. There's a packaged business, this bake-off at home part of the business, the ambient. You remember the rolls or [indiscernible]. This is not our business. We have some exceptions there. We are doing some packaged lines today still in Poland. We have one or the other in Germany filled baguettes for example, we have one or the other in Malaysia bake-off at home. But basically, this is not our core business, and this is less than 1%. Our clear focus is bake-off. This is the premium segment. Our semifinished products, preproven or prebaked products sold in boxes or in pallets to our customers and then bake-off at point of sales, wherever it is. In a hotel, hopefully, today morning, in retail stores, in petrol stations, in convenience, wherever it is, adding a freshness and a total availability over the entire day. In my days, we have here some people doing apprenticeship here up there in my days. When I did this apprenticeship, the business with bread baking was over 6:00 in the morning, and then delivered to the hotels, to the restaurants, to the stores and having a fresh bread meant you had to go up early morning. I remember my -- Yes, my mother opened the store 5:30 in the morning. They were fresh. The first people there picking up bread for the working day. People took lunch these days to work or these days the schools were on [ Julys ] school trips. That was always a Sandwich Day. And then 9:30, 10:00, the bread business was over. Then there was a lunch business with sweets, cream shake. I don't know this in English. But next time, we will offer you. I don't think like this is not the best thing for your health, but definitely a good thing for the humor. And the afternoon in a bakery was tight, sluggish. 90% of the product and of the turnover these days was done between 6:00 in the morning and 12:00. Today, it is the other way around. If you go to petrol stations, convenience stop, retailers, discounters, there's an evening shopping taking place. People are going there, taking breads, meats, whatever it is for the evening dinner. If you go to a petrol station at the sunny afternoon, Sunday, you'll think that there is something for free. People are going there, and they just take 3 things out there, just 3 things: beer, sausages for the grill and bread. This is the business. So the dynamics completely changed, and this is bake-off. Bake-off became the premium standard. Bake-off is the outgrowing pillar in the business. Bake-off is growing from 25% to 28%, plus 3 over the next 3 years, whilst the packaged business is slightly shrinking the way we see or the analysts see. The industrial fresh more or less will remain where it is and the independent bakeries are becoming a bit compressed as well. So bake-off is clearly the outgrowing part. It's growing 2% to 3% annually. It's expected to increase shares up to 28%. Whilst the total bakery market is having a growth of more or less 1%. 1% is the population growth. Bake-off is outgrowing this market. Now what is driving this bake-off growth? There is definitive component of freshness. The expectation today is to have a warm bread during shopping. This is clearly the standard set today in the business. There is an expectation on availability, 6, 7, 8:00 in the evening, you expect to have a more or less full assortment with all these breads, a superior quality. Bake-off does not mean a bread finish produced, being frozen and then regenerated again. So it's just a bread which did have for 3/4 of the journey in the production process and then get it finished in the point of sales. So there is a clear quality expectation and an innovation expectation. Food-to-go, food out-of-home, innovative products are clearly driving this trend. A retailer treats or discounter where it is, bake-off products, bakery products as footfall drivers to bring people into the stores. It's increasing the shopping frequency. Penetration continues to grow in grocery and Food Service. There is a lot of ground to cover. We can do a lot more with bake-off stations with assortments with clever concepts to increase basically the bake-off and our position in the market. This is ARYZTA's landscape. It starts in the west with Ireland. It goes then to New Zealand. You can see that we have 7 Food Solution sales organizations in various countries, 13 bakeries like this. We have 13 quick-serve restaurant bakeries, burger buns, shortly coming to this. And we are active basically with presence in 27 countries. There is a higher presence with export activities, but we have people on the ground in 27 countries. A bakery is a bakery producing breads, rolls, laminated dough, pastry, snack all these types of products, a quick-serve restaurant bakery is producing mainly quick-serve restaurant products. Different technology, different equipment, and different dynamic, burger buns, flat breads, crumpets in English muffins, all these type of products, but for quick-serve restaurants. And burger bun bakery is a different thing to a bread bakery. You bake it in trays. It's a different machinery. It's a different dough mixing rationale. It's a different packaging. It's a completely different logistic pattern, but it is a bakery. So 13 quick-serve restaurant bakeries can't be used for other assortments, 13 bakeries the way we will see today afternoon in 27 countries. This is the spread all over the world -- all over our world. Let me say it like this. The business we do is basically based on 3 different models. This is important to understand. We quite frequently have these questions and this -- yes, these approaches we have in a food solution business. A food solution business is a direct store delivery business. So it means a truck, an ARYZTA truck or lend truck or a contracted truck is delivering boxes to a customer, not pallets, boxes. We did a tour with our French friends. They are preparing tasting. They are not here. It starts 4:30 -- 4:00 in the morning. The truck is a midsize truck. It's not a big one. It's a midsized one. There are 24, 25, 26 customers on the truck and every customer gets 1, 2, 5, 10, 15 boxes delivered. It starts in the Metro in Paris, the first -- with the first delivery because the trains, they start to move 5:00 in the morning and then hotels into caterers, wherever it is. We did a tour, Martin with the driver and me some weeks ago. So you have then the occasion in this business model to have a sightseeing tour for e through Paris, starting 4:30 the morning and you are back 10:30, 11:00 around noon. It's a logistic-driven model with a big assortment and that assortment is bought in finished goods assortment. It can be bought in from our own sources. It can be bought in from even competitors. It's not connected with manufacturing. Manufacturing happens in the other 2 models. This here is a distribution and marketing a sales model. This is a strong sales focus driven business, serving thousands of customers every day, 7 days a week, 6 days a week with the variety of products we have. Then we have the bakery model, which is basically oriented to grocery and wholesale. The model you can see here, a few customers, but large customers. It's obviously Coop and Migros in Switzerland. It's Aldi, Lidl, Edeka , Tesco, [indiscernible] Coop, ICA in Scandinavia, all these type of customers. With customized SKUs, products produced only in our bakeries. So big lots tailor-made products to big customers. It's a production and logistics models. The Food Solution model is a logistic model. Bakery is a production and logistics model. It's a central warehouse delivery model. The bakery guys, they think in pallets. The Food Service guys, they think in boxes. They count boxes. The bakery is counting pallets. We provide 13 bakeries like this. The biggest one, having an output of 300,000 tonnes, which is the German one. A smaller one is 25,000 tonnes of output, several lines for rolls, breads, baguettes, all these type of products you know from grocery and wholesale. Then on the right side, the quick serve restaurant model, which is as well a bakery model, we provide 13 bakeries, which are tailor-made only for this business model. So very little volume out of this quick serve restaurant is being sold into retail or discount packed burgers, but this is just minor. It's clearly focused on the systems of the customer. It's all own produced, they don't do any trading, and it's an integrated product -- production model. It's very close. It's basically in the good sense of the word, a follower or a slave of our customer. It's an integrated model. There is no break. In some circumstances, in some constellations, the bakeries are even in the logistic premises of our customers. So the logistics means you take a forklifter and you bring the pallet to an elevator and the elevator ends in our customers' warehouse or lorry or wherever it is. It's a very dedicated and customer-orientated model. These are the 3 business models we are doing. And basically, you can say that the bakery model is more or less half of the business we are doing, plus/minus. The quick serve restaurant is a bit north of 20%. And the ARYZTA, the Food Solutions business then is a bit more than a quarter. That's the way it adds them up to 100%. So half bakery, good 20% quick serve restaurant and a bit more than 25%. The rest then is the Food Service business. Different dynamics, different pricing, different rationale. It's all about bakeries. These 3 models are covering the bake-off pillar I've showed you. All these 3 models are in the bake-off pillar. Even though some products from the quick-serve restaurant business are not frozen. But they are refreshed, rebaked, retoasted, warmed up at the point of sales. You know all the protagonists there with those who have kids may be on a weekly basis, which is good for us, all bake-off. The landscape we are covering from Ireland to New Zealand, as I told, is EUR 18 billion business, EUR 18 billion. We can see this a bit later. It's mainly plus/minus 15 in Europe and 3 in Asia. Asia is catching up with the bake-off penetration. There is still a big, big step to do. This EUR 18 billion are divided in category -- product categories, breads, rolls and artisan loaves by half. This is, by far, the biggest part of it. Savory and other close to 20% and sweet baked and morning goods of Kwasants in Manila, bar chocolates, Pain Au Chocolat in the French-speaking part of the world by 31%. So half more or less breads and rolls and baguettes, and the rest then 19% savory, strongly growing. This is the out-of-home, the coffee to go or the lunch occasion-driven model. 31% sweet baked and morning goods, all the things you know from the morning stop at the petrol station. Then by channel, it's a retail-driven model, more than half still. It's Food Service then close to 40%, and quick-serve restaurants are covering roughly 6% of this. So the retail model always means the bake-off station in the store. It's not the shelf. It's the bake-off station. Everything which is freshly baked there in the retail store is in there. Food Service, it was the hotel breakfast issue, at the occasion today, it's the catering thing. You will see in the afternoon. It's the -- all these type of occasions, quick-serve restaurants, you know the 4 big protagonists. There are excellent opportunities in all categories. There's an outgrowing part of the assortment, which is the savory part. It's -- it addresses the way we live and we behave today. The home office behavior is not the best thing for this, but the home office, as Elon Musk told, is going away. So the savory pillar there is outgrowing the average growth, the 2.6% market growth of this part of the business. Sweet baked and morning goods, more or less in line with the market growth. This is a learned and repeated behavior. Breads, rolls and artisan loaves are a bit slower growing on a bigger scale, as you know. So we see the overall growth of this business -- of this market of 2.6%. We, ARYZTA, is outgrowing this. We are growing faster than this. The reasons I will explain a bit later. There is clearly a need for new taste, new look. You saw the artisan style of products. There are products in the business not being there before. We see this a bit later then. There is an artisan trend, mainly in breads and rolls. It goes a bit away from the White Baguette to the artisan product to the hand style, looking product to wood oven products to products with fibers, protein added products, all these type of things. The health component is coming in there. There's an ethical and vegetarian and vegan component in this, mainly in the savory part of the business. This is the same picture as we saw here -- that's the product group view this is the channel view. Quickserve restaurant is clearly outgrowing in our days this business due to several reasons. It's a very economical way to invite family for lunch, for dinner. It is a very well-organized business in all aspects, and the organization clearly drove business over the last month and 2 years and most probably as well for the next years and months. Quick-serve restaurant is well addressed these times and is any way under a big renovation -- in a big renovation. If you remember what a quick-serve restaurant was 15 years ago and if you see what it is today, these are 2 different things. 15 years ago, it was a lunch occasion for kids for food, which was allowed by mom. This was the first thing. So the fun for the kids, which was somehow accepted by mother. Today, this is a business which starts in the morning with breakfast. There is a lunch you can eat there, easily a lot of things being very healthy. You can have a good dessert and you can even have there an evening occasion. So it's mutating in the assortment and in occasion. It was a kid thing for lunch, and it became an entire day occasion for the family. This is the outgrowing element of quick-serve restaurant. Food Service being nicely back now after COVID. All these events we have now during the summer days or whenever it is Food Service and Retail is picking up there as well, a bit less total market growth by 2.6%. This is what I told before, the EUR 18 billion across the European market, across the world market, the EUR 15.5 billion with a 2.5% CAGR for Europe. This is the addressable market we are in, in Europe from Ireland to [ Hungary ], Romania, Bulgaria, Poland and the Nordics we are in -- mainly driven by retail, by almost 60%, 39% Food Service and 3% by quick-serve restaurant. Asia, a completely different picture, the way you see. Retail, more or less 40%. Food Service, quite similar. There is a huge component in quick-serve restaurant. This is clearly the trends. I was in Japan, first time for Hiestand in the late '90s Already then, they had chain food offers. So this concept was there being developed, is very trendy and very rich in occasion, in product, in availability, whatever it is. It's a different picture. It's a EUR 2.5 billion business market with the CAGR, which is roughly 1% higher than the European CAGR. Now we travel to the other end of the value chain to the customer landscape. This business appeared in our world 25 years ago. So you will find today still a lot of founders in this landscape, family-owned businesses in this landscape, which were set up by the first generation. You can see here the assortment split and channel split, we tried to place here all our friends or the most important protagonists in the businesses we are. You can see that ARYZTA is very well placed with manufacturing and commercial footprint. So we cover wealthy economies, it's the way we call. We have an exclusive focus on Food Service, whilst others are in different businesses, in fresh, in ambient. We are only in bake-off -- exclusively in bake-off and we offer all categories across all channels. So for this bake-off of approach, we cover the entire landscape. We are most probably the most focused protagonist in this bake-off part of the business in the world, we are from Ireland to New Zealand. Many of these other businesses, again, are family-owned, private owned, are founder-owned still. There is a watch ticking obviously, biological watch. So this consolidation there will come, and there is maybe as well then a new phase launch. But at the moment, this is the landscape. Now, what is our ambition? Our ambition is to become the best partner for bake-off solution across all our channels and markets where ARYZTA is present, ARYZTA is #1. And our value proposition is to deliver the gold standard in this business. We are the one who others have to be compared. We are the gold [indiscernible] if I can say so the Swiss guys will know, the international ones as well, will understand this, we are the gold standard. In some markets, we are the gold standard. In some others, we are heading towards this working on this, but this is clearly our goal. We are the one setting the standard and the measures. There is a but in our world. I don't think that I have to explain this too long. You experienced this in the other businesses you are covering or invested in, more in supply chain disruptions, driving inflation across all the input costs, it's not only a flour thing or a wheat thing, we think in flour. We observe wheat but we think in flour, flour is a local good. Wheat is a global good. If Ukraine, Russia and Kazakhstan are covering 30% of the global wheat supply. This has an impact on us, but we feel this then in flour. And as we discussed already before, we do not believe that we will experience this shortage -- shortage of supply because we are in wealthy economies, but we'll experience this in higher prices. The first flour manufactured in Germany was EUR 200 a ton. Now we have bakeries not in Germany, paying EUR 800 a tonne. It's a very specific flour. It's a high protein flour. It's a flour with really high specs. But this is the journey. With the first butter we bought in Germany 25 years ago was a EUR 2.30, EUR 2.35 butter per kilo. Now we could easily end up with EUR 7.20, EUR 7.30, EUR 7.30. So it's then by [ 3% ]. Energy, you know you are buying fuel or you are paying heating bills or whatever it is. So this inflation will continue. There was a discussion we had at the year-end, there somebody told inflation came to stay, and that's the way it is. Inflation will become a constant impact into our business. There's a little respite in near term. We are seeing a need for a higher rationalization for more efficient product processes, but as well for more frequent price increases. Nobody in this business not being able to recover with pricing will survive. Nobody. It's so significant. The toxic inflation is the 2%, 3% inflation. This is then being expected to be offset by the producers or by the offerers. The 30% inflation, not anymore. In Switzerland, there is a spend -- salary spend of 11% for food. This came down from 30% down to 11%. Germany is slightly above this. This will change. The German Minister for agriculture and consumers told times for cheap food are over, and he's right. Several reasons. The war is one. The shortage in wheat is one. There are other impacts. There were some misconstellations over the past in the market. So these days, I believe, are over. There's a food consumption habit, which might -- could be impacted or can be impacted by the situation we have. There is a defensive approach visible in some parts of the business. But carbohydrates, the way I told at the beginning, are the most efficient calorie in our world. There are regions living from bread because it's the only calorie they can afford. In our world as well, a bread or a roll is the most efficient calorie a mother can offer to the kids for dinner. And you always win with bread, by the way. It's never seen as a bad thing, a good warm piece of bread is always a very welcome thing. There were diets and trends against carbohydrates, bread is there and will be there. There is a trend we see that packaged goods are losing a bit of share. This is perceived as a bit old style, consumer value freshness, they like to have a quality assortment being available. The bake-off market despite the crisis will continue to grow. We observed this in the past, and we will see this in the future. There will be ups and downs. But overall, the bake-off market is a megatrend up. ARYZTA mainly is focused on wealthy economies, high consumer spending ability with a robust social support system. This is important. We are not in countries where all or nothing questions are coming up. We are placed in wealthy economies. So our business, despite all the difficulties everyone is facing in this world, the bake-off business and ARYZTA's business will continue to grow. The midterm targets '23 to '25. We expect an organic growth, a CAGR of 4.5% to 5.5%. All of this on the assumption of constant pricing based on fiscal year '22. There can be a lot of warm air with inflation -- but if you would assume that the pricing would remain constant, we would be between 4.5% and 5.5% organic growth. There's an EBITDA margin we will achieve similar north of 14.5%. This is, I think, a good step towards the right direction. And ROIC, which is justifying an investment in our business, ARYZTA was value destructive, value burning for many years. So we turn now into the value creating mode with an ROIC 11% or higher revenue, which is heading towards or beyond EUR 2 billion, again based on constant pricing if we would freeze the pricing end of fiscal year '22. Our CapEx in percentage of revenue of 3.5% to 4%, ARYZTA is well invested. We are running on a capacity usage of 80%, 78%. So there's a lot of space to gain. There are efficiency projects and the usage of capacity can trigger an investment not necessary, can trigger as well a change in the assortment. So give less profitable products away and manufacture the others. Just to create a picture for you, you will see in an hour -- with an hour manufacturing place. It's a total investment of maybe EUR 50 million, 5-0, EUR 55 million. It started at the beginning, then there were reinvestment changes, take EUR 50 million north investment, minimum. We do not own the building. We rent the building. So with the building, this would be [ in-house ] taking and everything that would be an investment more than double of this. So it would be EUR 100 million north, easy. With the efficiency program we have, which is man hour per tonne and line hour per tonne, we will gain annually minimum 3% capacity. If we manage 3% capacity gain through rationalization every year, we will get every year a production plant like this for free. This is the game in a picture, we will manage over the entire group. And this is massive, and this is the projects we are working on. That's why the 3.5%, 4% CapEx in order to let the business run with some line extensions here or a capacity acquisition we just recently did in Asia. We will be fine there. And this then leads to the elephant in the room, the leverage ratio we have. Total net debt leverage, including hybrids of more or less 3x, driven by operational results. This is the lighthouse we are heading towards. You can see that ARYZTA changed now its focus from Phase 1, first 6 months of its life to renovate that was then the last 18 months, and we are now in the phase build. So we are heading towards a normal company, a value-creative company. This is basically the message of today. This is the bible we have every day [indiscernible] picture, innovation and category that we are not a branded business. You'll find some [ Hiestand ] products in Switzerland. [ Hiestand ] is now in Switzerland. Cuisine de France in Ireland, we know Coup de pates in France. We know Mette Munk or Pré Pain in other countries. Basically, the consumer, the buyer in the store does not know ARYZTA or where the product is coming from. The product is not branded. That's why we have to win the fight every day. We are in a daily business, which is a good thing. We are in a daily business. We have every day the opportunity to do something right. But there is another thing as well in the daily business. We have every day the opportunity to do something wrong. Innovation and category know-how is key. Innovation is not only product, it's a lot about product, but it's not only product. It can be processed, can be in the technical part, it can be in the ESG part, it can be with power, with renewable energy with all these type of things. Channel solutions in order to offer the Food Service, Retail and QSR their dedicated solution. Not something they can use, they need their solution. Quality and efficiency, quality is key. Quality is the magnet bringing customers, consumers back into the store, once wrong, other store the next day. This is the clear rationale. If you do a bad experience with the bread or with somebody else, but with a bread in our case, you change the point of sales. And customer development, strong focus on dedicated customer needs. This is the wheel we change, be the category captain, be the one who sets the standard and be the strategic partner for our customers. Our growth strategy is driven by baseline growth as I told, the 1% market growth, the 2.6% bake-off growth and on top of this, the premiumization and innovation. ARYZTA is outgrowing the market by premiumization and innovation. The baseline growth is the one who gives us the tailwind in the business. I explained this, the bake-off trends, the freshness, the quality expectation and the consumption pattern and the premiumization and innovation is key. This is a baguette from Pré Pain Holland being sold in all the big retailers in Holland, based on a new stress-free technology, which makes the insight the texture of the product more attractive, the product more moist, and it makes the difference in the market. So premiumization is even possible with the commodity products. It's more moist, it's more crispier, stronger in flavor and in the appearance. It's hard to see, but even in quick-serve restaurant, there's a huge change ongoing, an upgrade of the quality of products of the buns, for example, not only it's better in taste. It's better in look. It's better in crispiness. It stays longer, fresh, and it's all based on new recipes and new technologies. Every change here in this part of the business is triggering an investment chain reaction. ARYZTA invests. This burger project is a big, big thing for us. And the restaurant invests because having a burger, which is just 5 millimeters higher is changing the entire logistics system in the chain. So the toaster, the oven, the freezer, the reg, the packaging, everything. We did here -- I apologize, a nice installation and nice innovation with the pastry line, you will see it. And the outcome was that the product was bigger, which is basically good. The issue is the packaging is too small. This box is too small. So we did a good thing and the collateral effects then are significant, exactly the same here. This is a big change and a big trend in quick-serve restaurants, rolls, spreads, away from the white breads, from the white commodity bread into a more attractive product, rolls with new artisan look with intensive flavor, it's not a setting [indiscernible] or a thing to keep your hands free of fat because you like the meat in between. No, bread became a real taste carrier adding raisins, seeds, olives, whatever it is and having them at the end of the day, a good product for breakfast or for a good lunch or dinner. The good old baguette, the wide baguette is on its way to go away, let me say it like this. There are more artisan new style of baguettes in trend. Stone-oven baked products with longer dough fermentation. The dough fermentation in the good old times was a night. We did dough in the evening 6:00 and the bread in the morning, 2:30 or 3:00. So there was a dough resting time overnight. And we try to simulate this here in this process. You will see the tanks. There's liquid [indiscernible]. We have other systems, similar systems, which is adding time to the process, 4 hours, 6 hours, 8 hours, simulating this. And this gives taste. This gives color. This gives crispiness, freshness, moist, this is the effect. Baguette is a good product to work on this. Then we have here in bread rolls, as you know, I explained at the beginning, it's a bit the same with the white bread roll. I have to watch, an eye on time, yes, 2 minutes to go. The same idea to add value to the commoditized product. Another example of bread, a crafted look, roasted aroma, crispy crust, longer freshness with a well-rested dough for a good oil or with good oil and good olives not being correct, but with a good glass of wine it's even better. Then products are approaching the healthy trend of our world with fibers added, with proteins added, low-carb content, then this is a very nice and popular product in Switzerland. Then the plant-based products, the vegan and vegetarian product here a chicken snack, tastes like chicken but no chicken inside. The good old Toast Hawaii. So the more experienced generation, experience this. It's coming back now. It's having a revival. Yet, no more comments on this every Friday, Toast Hawaii we sell it. It was a nightmare for me, but it's back now in our world. Snacking, a big trend in our times, this is a bump in finished goods with new fillings, new shapes, new taste with a wonderful, nice laminated dough, the way you can see here with the -- on the dough and the healthy stuff for the rest of the day, carries you calorie-wise to the end of the day. We had huge promotions with exactly this in Asia of omelet to pancakes and in between Nutella, a huge thing in Australia, really well done. We have a cooperation with them here, a filled muffin wonderful products. So the variety is big. And all this combined with cost efficiency and manufacturing excellence. This is a line we drive in Poland for burger buns, obviously. This is the way a modern bake bakery looks based all on improvement programs, simplifications of measures. So we know every day where the performance is, leveraging procurement became a clear need of these days, streamlining of end-to-end processes adding every day in efficiency more. And this is transforming ARYZTA from a value-destructive acquisition-driven model, which ARYZTA was in the past to a value-creating organic growth model. Our best way, our most profitable, our safest way in our business is the organic growth, the innovation, the renovation in our products, in our business to get to a value-creating organic growth model. This was the first part of the presentation. The next point would be tasting. You don't get away in a bakery without eating. It's a good thing. We are not a winery. If we would be a winery, we have to do this in the afternoon in a good hotel. So we can do this in the morning. But maybe we opened around for some questions before we go for the Tasting. We shouldn't wait -- let them wait too long because you have seen the chef there. He can become angry, being too late. So we can then maybe as well add one or other question then for the rest. Paul?

[indiscernible].

Paul is giving me the right point. Let's do now just some questions, and then we hurry up and will raise the questions then mainly in the Q&A session. But if there would be something for now, for a picture or for something I told, feel free.

Very -- 2 quick questions. The commitment of management, yes, your marketing and given your experience here during the last couple of products, how big is this commitment? Also you continue to maybe executive Chairman and CEO at the same time. And the second question, just a standard question, but important for fiscal year '23, can you give us an indication on potential price increases and assume that there is steady total but not a small bump in the road. [indiscernible]

The second question I will leave to Martin. To just give you -- let me give you a remark. If you could give us a commodity price guidance for this, we could answer this question most probably without pressure. Yes. Okay. Let me give this question later then to Martin. Jan, there is not only a management. There we have first time a Board, which is a Board, which is the advocate of the shareholder. I didn't see this in ARYZTA for 15 years. We are well balanced support with people from the industry, with people from other industry. People having a finance background. People are being well connected. Heiner Kamps, a Baker, you know him. Alejandro been well experienced in many businesses. Helene, finance in several functions. Gordon traveled around the world for many businesses in the commodity part in the bakery. Goodman Fielder we met first time in Australia many years ago in a pub in the evening. Jörg Riboni, well-known in several industries. So it's not only management. It's a team. We have Armin Bieri here. We have country managers. You will see Dieter Salzmann. [indiscernible] our boss from France was not able to come. They had a tragedy there in the -- with an employee in France, so his best man is here, Arnaud. So there are many people in place, understanding the business and driving this every day. ARYZTA came away being a beaten company to a company where people allow themselves to tell in the evening mutation where they work. 10 years ago, that was the running deck. ARYZTA, oh, that must be funny. That changed. So it's not only about the top management, our commitment this year. This is our journey and our work we have to do every day. Martin now, you had time to think about inflation and margin.

The pricing, I think, it's important what we do to you today. We do here today is to explain you our midterm target and what are the building blocks and the value creation framework to achieve that. If it comes to your very specific question on 2023, I would wait until we present the full year results for '22 and then give the clear guidance for the '23 year. So I think it's a bit premature to enter into these details on the '23 -- particularly the '23 guidance. Patrik?

Patrik? Patrik has 3 papers handwritten that becomes dangerous now.

I'll stick to one. Patrik Schwendimann, Zürcher Kantonalbank. I just realized that you are underexposed in the Food Service channel. I mean, you've mentioned that in the whole market 39% of the market is Food Service, and you were just roughly at 28%. So there's also a target to get more into this channel and maybe to dilute a little bit the retail channel because typically, in the retail, you don't earn a lot of money.

Basically, companies are going there where the margins are. And the Food Service business is a very safe business. We don't work with 2 or 3 or 4 big protagonists. We are working with 30,000 customers in France, for example. So you can lose one, you gain 2. But if you lose one, you didn't lose half of the turnover. And this is clearly a place we show our excellence and our strength we have to outgrow this market. It was difficult in the last 2 years with COVID. The French business is back now on pre-COVID levels, slightly ahead, slightly below, but they did really well. The other Food Service businesses are a degree measure of the COVID restrictions or not. But at the end of the day, there is a good potential to expand the business. It's -- I think the -- from the complexity point of view and from the know-how intensity point of view, the most difficult business we have, but the most safe. So you can be sure that we will try to gain their ground. It's -- I mean it's very complex. There are hundreds of lorries every day on the road. We have 1 main hub in Paris, for example. And we have sub-locations with their own lorries, with their sales teams, with their manager a big assortment you can see there are products in there, you would never connect with bakery. So it's a very complex model and a very safe and good model. That will be one of our focus in the next years, yes.

Yes. Maybe just a question of understanding on the market size. So let's say, EUR 15.5 billion for Europe. I mean I assume that's the consumer value and how much would be there basically on, let's say, players who have in-house capacities just in case we want to calculate the market share.

This is the industrial. This is not -- this is sell into the retail. It's not a consumer value.

That's including, let's say, Coup produces themselves. So how -- what share would you see there of the, let's say, own produce compared to the people who are independent.

From. From the retailers or from...

From producers like ARYZTA.

I mean we cover more or less 10%, 11%, 12% of the market. Now there are constellations, we cover 40% of the market with some products in some countries. It can be 30%, it can be even more. So it's a question we would have to answer based on what is the business constellation, what is the region, what is the product? So it's difficult. But you can -- I can give you one number. There is Berliners market at [ Deutschland GmbH ] [indiscernible] Berliners. We are doing in Germany, more than 40% of these Berliners. There is a bread and baguette market, there we are doing maybe 20%. It's always a bit the question what do you count to this product, but it's -- there is not one number I could give you. We should have a discussion constellation product and what is really trend.

Okay. Then I have 2 strategic questions.

Think about the French chef.

One is -- so the first one is on your Food Service business. So this seems -- if I look at your presence, this seems to be concentrated on, let's say, a few markets and not all markets you have and it's a logistics oriented business. Can you expand into new regions organically? Or does must this be done via acquisitions? If you wanted to go into, let's say, Germany?

We are in Germany, with Food Service business. We are in Germany. We are in France. We are in Ireland. We are in Poland via wholesalers. We are in Switzerland, we are in Japan and in Malaysia.

Alright. Alright. [indiscernible].

Yes, exactly. To expand in a new world would mean acquiring, but we are focused on -- focusing on the existing organization, leveraging these organizations using there our strength. This is the plan we follow. You don't build it from 0 in a place you are not present yet. That's unrealistic.

Okay. And then the last one on the retail business. It seems to me quite industrial-oriented, super cost-oriented. What is ARYZTA's advantage or in-house or competitors with regards to that cost structure. I mean are your people cheaper? No. I mean, I guess, you're using the same machines. Do you have size advantage?

They have been in Holland. These are leanest models based on well-managed product assortment, very efficient and highly innovative. This is a business which is investment intense and very -- with the pressure under renewal, you need to take these small steps every day. And this is the strength we have. We have a good footprint. We have a good assortment coverage. We have, in some circumstances, a very strong market position. We have a good innovation trend towards artisonality to value-added products. This is the cards we play. There is something else we realized that there is a -- there were years, many years with overcapacity in this market. This overcapacity slowly disappearing due to the fact that there are less investments. The money becomes more expensive. The risks are there. And this is normally good for those who are driving the business in a good way. It's the most cost-sensitive business, absolutely correct, big volume and strong protagonist on the other side, but with good innovation and good processes, there is a life in this business. Okay. We would then divide in 2 groups for the tasting. We have a Swiss group and the French group. I would suggest that maybe Martin is taking the right side, from our side, and heading towards the Swiss tasting in the canteen, the place we had coffee today. And the rest is coming with me and we would go to the French tasting. After half of the hour, we would then change. So French to Swiss and from Swiss to French. Okay. [Break]

So welcome back. I hope you enjoyed the tasting and looking forward for the lunch. I will now guide you through the value creation framework of our midterm plan. In the period 2023 to '25, we will evolve from an inherited value destroying to a sustainably value-creating business. The 4 key or the 4 key elements of our value creation framework for this period are: the continuous and consistent growth ahead of market momentum paired with prudent CapEx allocation, margin progression supported by disciplined cost management, acceleration of capital efficiency and the use of cash flow from activities to improve our capital structure over the period of the midterm plan. At ARYZTA, we have developed a strategic planning process. And through this process, we can analyze our businesses in a standardized and consistent way. In fact, the business plan we're presenting here is based on this tool. With this tool, we evaluate all our -- over 100 cells and evaluate their ability to win and the market attractiveness. A cell, just as an explanation is a combination of a market, a category and a channel. And based on the result of that tool, we determine the resource allocation. Resources, we understand in CapEx and fixed cost. On May 30, we have published our 9-month trading update, and we have delivered an acceleration of organic growth to 16.3%. This performance was strongly supported by a continuous strong volume growth and a significant contribution from pricing. Given the strong market momentum, we have increased our guidance for 2022 to 14% to 16%. This will build the basis for our midterm plan. Urs has presented in the 4 levers of the gold standard, our growth building blocks. And through this, we will deliver in the period 2022 -- 2023 to 2025 annual organic revenue growth of 4.5% to 5.5% at consistent pricing. The 2 key components of that growth are fully capturing the market momentum, which grows around 2.6% per annum. And our strong innovation and premiumization pipeline. The innovation pipeline is built as we have learned and seen upstairs on health, on artisanal and on ethical trends. Around 55% to 60% of our growth in the period 2023 to 2025 is coming from the baseline business. The balance through the innovation process. In order to support our growth and aligned with the outcome of the strategic planning process, we will invest CapEx of around 3.5% to 4% of revenue on an annual basis over the period of the midterm plan. Around 30% of that CapEx is dedicated to our innovation and premiumization pipeline. The majority of that CapEx goes into new technologies and manufacturing capabilities. Let me give you one example. We have talked about the famous baguette -- the traditional baguette and the fact that we are investing there to improve the quality we are putting [indiscernible] capabilities to our existing line by installing fermentation and maturing tanks at the beginning of the line to produce the dough, let the dough rest for over 20 hours. That will create this specific structure that you've seen in that video, increase the taste and the overall consumer experience. Around 70% of that CapEx will be dedicated to our baseline business, where we will invest in improving the efficiency. We will make sure that the reliability of our invested or current capacity is maintained. And we will invest our CapEx there in initiatives related to health, safety and environment. Part of that CapEx of the 70% is also going to capacity increase where we have reached the limits of our installed capacity or to geographic expansion in areas in our baseline business where we are not yet fully present. Two examples to this, to illustrate that. In Poland, we are operating in October, a new bun line supporting the growth of our key QSR customer. And we have recently acquired, and we have announced that, the bakery in Malaysia, which allows us to produce pastries and Urs has talked about that. So we'll no longer or we can also start producing the pastries that are used there in the Asia-Pacific region locally, and we have increased our laminated dough capabilities to service the Food Service market. Important to highlight also with that growth that we are generating. The existing capacity will be increased by -- or the usage of the existing capacity will be increased by 5% to 8% over the period of the midterm plan. In 2021, we have delivered an underlying EBITDA margin of 11.4% for the continuing operation. We expect to deliver for 2022, as we have guided in the fourth quarter pre-IFRS EBITDA run rate of 12.5% and for the full year, delivers a significant improvement of our profitability versus the previous year. This is the basis of our long-term or midterm plan and we expect, as Urs indicated before, to accelerate our EBITDA margin over the period by the end of 2025 to at least 14.5%. This will be delivered through improved product mix driven by premiumization and our innovation pipeline as well as through disciplined cost management. Over the next couple of slides, I will give you some details or specific details on our disciplined cost management program. Before we go into that, what are we addressing? We're addressing our total cost base, which has a split of about 2/3, which is variable consisting mainly of all our expenses on raw packaging materials services, indirect material and the variable labor cost of the shop floor and around 1/3 of the cost is fixed. Our disciplined cost management is addressing that block with the 4 levers through continuous efficiency program addressing our bakeries, simplification of our recipe structure, the leveraging of our global procurement and the streamlining of our end-to-end processes to drive fixed cost leverage. The first 3 levers are clearly dedicated or in its majority dedicated to protect our gross margin. While the fourth lever is there to really leverage our margin progression. The first lever of our disciplined cost management program is the performance control system. Performance control system is the program to drive continuous efficiency in our factories. This program has started in 2020, and we have now already covered 20 of our bakeries. The remaining 6 bakeries will be covered step-by-step by early 2023. Eight of our bakeries have already achieved highest levels of PCS standards and have delivered significant improvement in efficiency over the last couple of years. We have there 2 examples of this efficiency contribution. I'll elaborate on the second one on the line efficiency. Since the launch in 2020 of PCS in these bakeries. These bakeries have achieved a line efficiency increase of 4 percentage points compared to the other bakeries. By addressing the downtime, the planned and the unplanned downtime, the crew have been trained to make sure and to observe what are the factors that are causing unplanned downtime to increase the reliability of the lines when they're running. And we have worked on improving the time windows we need it for planned downtime like cleaning changeover and maintenance windows. You have to imagine, it's like a Formula 1 pit stop. The crew is trained to change tires as fast as possible and as reliable as possible. That's how we have worked with the team as this is really focused on empowering the local people on the shop floor to drive these improvements together with their team leads. And this has delivered the 4 percentage points improvement over the last 2.5 years. Going forward, we expect to deliver efficiency gains of 2% to 3% on an annual basis and we're using the base of our conversion cost. Conversion cost is the sum of fixed and variable manufacturing cost, excluding raw and packaging material, and includes also depreciation. Plus, we also add to that our waste levels. On this, we expect to deliver 2% to 3% efficiency gains through further driving line efficiency improvement by 5 to 10 percentage points with all our locations, reduce our waste levels by about 50% by improving the accuracy on the production rate and reducing the rate of rejects. And also by increasing the labor efficiency by about 20% through automation but as well as through training. The second lever of our disciplined cost management program is project Simplex. This project aims at reducing the complexity in our portfolio and recipe structure. By bundling and driving scale, making sure that we -- that our supply chain and sourcing is derisked and by reducing the number of vendors we are dealing with. This allows us to drive efficiency and cost and capital. Important to highlight that through the simplification through this project Simplex, we are not compromising on the quality of our product. We have already started with this project Simplex and we have 2 pilots running and we have concluded that. I elaborate on the first one in Germany. In our 2 big manufacturing sites for all the SKUs we are producing there, we have been using a total of 87 different shipping cartons. We have run this exercise. We have identified an optimization potential of 53 shipping cartons. We are now producing the same number of SKUs, but we're just using 34 shipping carton SKUs to ship these products. This has enabled us to reduce our packaging costs in the 2 locations by 7%. In this project, we have obviously considered the leverage we can generate in purchasing, but we have also considered the cost of -- for the operation. What that means if we reduce the number of SKUs, and we have considered the implication that this has for our distribution setup and for our customers. Project Simplex is a project that focuses on the whole value chain. And for new products, we include the philosophy of Simplex into the new product development project in order to develop simplicity by design. Through Project Simplex, over the period of our midterm plan from 2023 to '25, we expect to deliver EUR 10 million to EUR 14 million of cost reduction. And we expect to cover all our manufacturing sites fully by the end of 2023. The aim of the implementation of our multi-local business model was to reduce our management structure and to drastically increase the focus of our local market organization. To support our local market organization with cost competitive supply and derisk our sourcing, we will plan to elevate category buying above market, improve process rigor of procurement and by that, increase the coverage of total spend of procurement, which is currently at around 60% to over 80% by the end of our midterm plan. In 2022, our procurement organization has already contributed significantly to the result of the company. They have achieved cost optimization and cost reduction on total spend of 14% through strategic procurement negotiation, but also through adequate risk management. Over the period 2023 to '25, we plan to deliver another EUR 16 million to EUR 22 million of cost reduction to support the business. At ARYZTA, we are using 5 different key ERPs. Process and data standardization is low and requires focus to achieve transactional efficiency. The digital interaction with our vendors and customers also is an area of opportunity around 60 to 65 of our European retail orders are managed through EDI processes. Standardization of our IT landscape beyond ERP is another area of opportunity. We are addressing these efficiency areas through several ways. One -- let me give you 2 examples. One is the implementation of the new ERP in Switzerland. We're using the change to SAP 4HANA in Switzerland as the pilot to define the process standards for our 5 key end-to-end processes: order to cash, procure to pay, plan to execute, idea to launch and record to report. These processes will be standardized for the Swiss market and then will be rolled out to the different locations of our operation. Important to highlight as well that with the implementation of SAP 4HANA in Switzerland, SAP will now be covering over 60% of our group revenues. Another area to drive efficiency in processes is the launch of our web shop platform to service our Food Service and Retail customers. We have implemented this web shop platform in 4 of our key Food Service markets: Switzerland, France, Germany and Ireland. Through this web platform, we have -- which has been launched in 2019, we have increased the revenue share on total group revenue from 1.5% in 2020 to 2.4% year-to-date 2022. So through process end-to-end standardization and process efficiency will be leveraging our fixed cost and fruit that will limit the growth of our fixed cost to a minimum of 30% to 40% of our organic growth over the period of our midterm plan. So in summary, as I mentioned, the first 3 of these cost efficiency programs, continuous efficiency, simplification of our recipe. The leverage of our global procurement is driving the protection of our gross margin and through the fourth one, the process standardization and the efficiencies of the processes, we will reduce our fixed cost growth. And with that, we will -- our fixed cost as a percentage of revenue will decrease to about 90% of what they are in 2022 in -- by 2025. This is our biggest lever of margin progression together with the product mix that we have indicated before. We have changed our methodology to calculate return on invested capital. For the numerator, we will now use the trailing 12 months of net operating profit after tax. Previously, we've used the underlying EBITDA. The denominator has also changed. In the appendix of that presentation, you will find a complete reconciliation between the old and the new way of calculating. And based on this new way of calculation, we expect to deliver for 2022 a return on invested capital of circa 5%. Over the period of the midterm plan, we expect to accelerate the return on invested capital to at least 11%. The key drivers for this result achievement are the margin progression driven by disciplined cost management and premiumization of our product portfolio, the disciplined CapEx investment, further improvement of our working capital through integrated business planning as well as the extension of our supplier financing program and we'll complement that with analytics and an adequate incentive plan, a long-term incentive plan, which includes return on invested capital for management. As guided in the H1 result presentation, for full year 2022, we expect to deliver operating free cash flow of EUR 80 million to EUR 90 million. The resulting cash flow from activities for 2022 will be in the range of EUR 5 million to EUR 15 million. Over the midterm plan, we expect to accelerate our operating free cash flow by circa 2 to 2.5x and our cash flow from activities by circa 8 to 10x where we are today. This will be possible through the increased performance and improved absolute EBITDA levels, the continued focus on our disciplined CapEx investment and improved working capital management over the period. The generation of cash flow will support step-by-step the reduction of our total net debt level, including hybrids from 2021 to 2025. And combined with increased absolute EBITDA levels, we will reduce leverage of total net debt and hybrids from currently 7.5x to around 3x by the end of the plan. With the cash generated from the activities, we plan to repay our Euro Hybrid principle in full in a staged way. Concrete methodology and timing will be communicated in due time. This will be entirely financed through the performance of our business. And we will achieve interest savings once the complete Euro Hybrid principal has been paid back of EUR 15 million to EUR 17 million on an annual basis. This part is planned of the -- of our achievement of the leverage of 3.5x by 2025 or 3x by 2025. So in summary, the key levers of our value creation framework is deliver annual revenue growth of 4.5% to 5.5% at consistent pricing, fully capturing the market momentum and leveraging our innovation and renovation pipeline together with the premiumization activity. Margin progression of at least 4.5% by 2025, supported by our disciplined cost management program. Our prudent CapEx investment of 3.5% to 4.5% to drive capital efficiency. Acceleration of ROIC to at least 11% by 2025, supported not only by improved profitability, but also by further increased efficiency of our working capital, driving an improvement of our capital structure by the cash flow generated through operations and paydown of Euro Hybrid. Thank you for your attention.

Now we would open for questions. And for questions, I would hand over the microphone to invite our guests in the live stream to listen as well. Just -- its board. Patrik [indiscernible]

Patrik Schwendimann, Zürcher Kantonalbank. What do you see as the major risks to not reach this 14.5% EBITDA margin for the next couple of years? That's my first question. And second question regarding the hybrids. There's also a variable confidence with it also for the Eurobond as well as for the Swiss Franc bonds. It seems that you're partly hedged for the variable components of the Eurobond. What about the Swiss Franc bonds. So if interest rates, let's assume it go back to 0 or even in positive...

So let me take the second question first. In terms of the interest rates, the Swiss bonds are actualizing on a quarterly basis. The Euro bond is fixed until March 2024. So that hopefully clarifies your question on if we are hedged or not. So until then, the rate of [ 6.82 ] is fixed.

Great. But for the Swiss Franc not so if at the end of the year, maybe interest rates would go back to 0, then you would have to pay it higher?

Yes. But the -- if the question goes to the EUR 14 million to EUR 15 million -- EUR 17 million interest savings, that is calculated, obviously, based on a consideration of evolving interest rates. In terms of the risk, do you want to take that Urs? Or should I elaborate?

I mean, there is a world out there, which is -- which became quite [ levy ]. We believe we are well organized on the commercial and operational part, in the finance part of the business. There is -- not every impact can be anticipated. But if the picture continues the way we see that inflation will continue to grow, price pressure will be there. Competitors from us will be stressed, hopefully more than we are. And the consumers in [ consignments ] will continue to look after their money. The environment is a good one for us. Now we do not know what the war does. We don't know where the inflation goes, and COVID will come back like a warranty in September. There will be regulations, but we had this in the past. We did a good learning curve. We protected our operations, manufacturing plants, our logistics towards COVID. We didn't have -- well, we had twice a short closedown in Asia. We are very well balanced in the customer portfolio. So if this part loses, this part wins. But I think we are well prepared to manage these targets. And the reality will then bring the rest.

And I think we have highlighted the context before we presented our ambition. It's about -- it's on us to manage that context in a meaningful way to deliver these results.

We are living in an economy where the necessary spend of the lower 1/3 of the income is more or less 50%. So if you take rent, if you take food, you take transportation, insurance and whatever it is, this 50% became 60% or 65% or even 70%. There are Eastern European countries, there are Asian countries where this is even more extreme. As I told, and this is not just a saying, it's a good place to be in bread. Bread, again, is an efficient calorie, an ecological calorie, and it's an economical calorie. And this will be for our favor. And this is not from me. The big chocolate men in Switzerland, Ernst Tanner, told many times, when people can't afford the big luxuries stuff, they we buy the small ones. So I think we are well prepared for a longer period of difficulties.

It's Jörn from UBS. Two questions, please. The first one is on your regions, in particular, looking on Germany. I mean, we can see the accounts in the Internet. What are the next steps you are doing in Germany to fix the regions? And how long do you think it will need until it is generating sufficient profitability? And the second question would be, please, Martin, to you. On the EBITDA margin bridge, you stated the exit rate is confirmed 12.5% pre-IFRS by Q4 2022. This is 14% post-IFRS roughly. But then until 2025, it's in 14.5% plus, so minimum 500 basis points -- I'm sorry, 50 basis points. So this is, over 3 years, 50 basis points margin improvement. Is this a conservative target of 14.5% and you're looking for 16%, 17%? Or what should we read into this one?

I think we said at least 14.5% I think it is a reasonable target. We are committed to that. There is some seasonality in our business clearly. But we see that as a reasonable target, which you can base your plans on.

Maybe the Germany question, let's divide Germany in 3 parts. We have a quick serve restaurant part, which is the burger bun part you have seen. So we exclude this. This is a QSR business. We have a foodservice business, similar to the French business we have. So let's separate this. Basically, I think your question is towards this -- the retail and grocery business. This is a big business. Simplex is helping us to streamline processes to have a good close eye on costs. Pricing is key, just the way we told. It's important to follow with pricing and to make sure that the investments which are going there are efficient. I think the challenge we have there is on a good way. It never ends. So it's like an escalator. It's running against you. You have to run faster than the movement towards you. But the activities, we are now harder and harder pushing, are finding their results clearly. There is a premiumization of the product. There are some products we then maybe just stopped to produce or mutate -- moved the lines into other product categories. It's not one thing which leads us to the target. There are all these activities we mentioned, and it's an ongoing game. That's the way it is. JP.

Jean-Philippe Bertschy, Vontobel. You showed a slide this morning. It was your bible apparently, as you said. I didn't see any comment on ESG. If you can share with us probably some comments on ESG and if you have some targets, if any. And a second one would be on your long-term incentive plan. You gave us some financial targets now for 2025. What are the components or the parameters for the long-term incentive plan? I think, Martin, you gave working capital as one.

No. ROIC.

The ROIC. Sorry, the ROIC. What are the others? And what is the weighting? And you have -- if you have ESG targets in the LTI.

Martin will then go for the numbers in -- or the rationale targets. ESG was the stepchild in the past for ARYZTA. We just started almost from scratch. It's on a good progress. We will report on this with the annual report. There's a lot of progress done and, by coincidence, progress done which is supporting the business performance as well. I mean, having megawatt-hour prices, which almost doubled in the last 6 or 12 months with other impact factors which as well are significantly higher, there's a clear interest to go after this. There are close projects with customers, developing this not only with the big ones. So this became a very, shall I say, in the real life, used topic. In detail, we will report on this at the year-end. Now the LTIP is a new design that's in line with these targets we have and is based on pillars. Martin?

ROIC, EBITDA and relative TSR evolution.

New definition of ROIC, that -- the one we have seen.

And the weighting of these 3 elements?

So ROIC and EBITDA is each 40%, and 20% is TSR.

TSR. Andreas?

Yes. Historically, there have been a lot of adjustments in the accounts at ARYZTA. I mean, you have presented now your '25 target. Could you update on if there's any onetime/restructuring costs in '23, '24, '25? Or can we now just expect kind of pure numbers going forward? That's the first question. Second one is on the CapEx. I mean, that's higher, I would say, than what we had in the past. Historically, I think often, it was spoken about 2.5%, something like that. I mean, probably rather for the maintenance part, do you think that 3.5% to 4% is a similar level than your competitors have? Is that just the reality of bake-off? Then the last question on the -- you mentioned net working capital optimization. Could you give here an update on, let's say, magnitude or how big -- important the relative pillar that could be in the free cash flow expansion? And here also, I mean, what part securitization will play for ARYZTA going forward?

Okay. The last one, free cash flow and securitization, I will then hand over to Martin, apologize. There is -- there are some adjustments for this year, fiscal year '22, single -- some single millions, and then it is over. So we stopped this practice. '23, '24, '25 will be clean. The investment of 3.5%, 4%, it's hard to compare with competitors. It's more comparable with the past, and I think this is a supportive target but a doable target. It's all about value creating. We still have spare capacity, which is a good thing in my belief. We are close to 80%. So there's a 20% way to go. We have seen what the volume growth will be over the next 3 years. So I believe 3.5% to let the business run. And to add one or the other capacity is a valid and correct target. Competitors can be lower the moment they start to milk or to slow down the business. They can be higher in moments investing in projects, whatever it is. But I think this number, below 5%, is a bit the industry.

So on the securitization, we have a program that's a total of EUR 130 million. At H1, we have used EUR 76 million. When looking over the period of our midterm plan, we will gradually notch up to that limit of EUR 130 million. So over the period of the midterm plan, we will use up the complete envelope that we have -- that we currently have, let's put it like this. When it comes to the contribution of working capital, so what we have started to measure working capital on not just in terms of the contribution of cash but also as a percentage of revenue. And we are measuring the organization on their own working capital, excluding the securitization, and have given them targets to improve their working capital as a percentage of sales. We're not looking just at the working capital at the end of the period. We're taking a 5-quarter average. So they need to consistently manage their working capital. They cannot just slash and burn activities, do a good thing at the end of the year to polish the number. We want to see a consistent improvement of working capital. And as an internal measure, we are starting to look and we are starting to orient the organization towards that. When it comes to your question of what is the contribution to the cash generation of working capital benefits, it is at the beginning in -- of our plan in '23. We expect it to be in the range of 15% to 20% on the cash generated from activity. And towards the end, it will be around 8% to 9%. The majority of the cash is coming from the improved absolute profit levels that we achieve through the organization.

Working capital management is not a challenge towards the reporting. It's a challenge towards the capital costs. It is the way we treat it.

It is like -- it is sort of one of the first health indicators that we preach to the organization like gross margin protection. So it's gross margin and working capital management. That is key elements to drive the performance.

I think just to add to JP's question, the timing around the LTIP, that this is a 3-year period. More questions?

Yes. I forgot that one.

Yes. More questions?

Stefan Frischknecht from Schroders. I was wondering regarding the hybrid payback. What is the reason to focus on the euro tranche only? And there's 2 Swiss franc tranches, if I remember correctly. Is that just outside of the planning period? Or how did you decide it should be the euro that you're going to pay back and not any part of the Swiss franc hybrids?

It is our most expensive instrument.

By far. The euro hybrid loan is the most expensive. It's almost 7% in interest.

6% interest.

And it's adding interest on interest. So it's the closest one then.

I'm fully aware that currently, there is a very small difference between longer-term fixed interest rates in Germany and in Switzerland. I mean, this is a quite rare situation that the [indiscernible] and the bond have almost the same yield over 10 years. But typically, in Swiss francs, your base interest will also be lower. So that makes me wonder, is it just a snapshot consideration of cost? Or do you think also longer term, you're paying a much higher currency-adjusted spread in the euro?

Look, we are looking at, obviously, constantly at our capital structure and the way we can further optimize our interest cost. What -- clearly, it turns out that the euro hybrid is the one to address. And the continued business performance will allow us also to look at other options to address our capital structure over time. And it will certainly take these into consideration once we can manage that within the covenants that we currently have. Over the period of the long-term plan or the midterm plan, we have ample room in our covenants both on the leverage as well as on the interest. And I think we have done a good job in renovating our RCF at the right. Moment that has allowed us to secure for the next couple of years very competitive interest rates.

More questions? Yes, Patrik.

I'm Patrik Schwendimann, Zürcher Kantonalbank. Could you just have a word on your competitive situation currently? How do your competitors behave in the market? Are there good and bad competitors? Or how do you see this?

There are indeed good and bad competitors. At the moment, we sold the quick serve -- the burger bun business in Brazil to Bimbo that told, "You are a good competitor," with the meaning you have a business and you've provided us a business, and you're looking for margin which protects their margin as well. And there was a time at the beginning of this wave when some protagonists just tried to build a time bridge to hope it would come back to good old times. There was a time when the conclusion came that this does not work, and then this was then the hectic phase. But overall, there is a conclusion in the share, the common understanding in the market that the pricing needs to be correct everywhere. It's in Germany, the case. It's in Asia, the case. It's in QSR, in foodservice, everywhere. There is always somebody who tries to knock out gravitation. This works then for some days, weeks, maybe months, but then it is over. So the big and the good competitors, they are going after pricing. There is a bit resistance from time to time from some protagonists. The issue is bakery. Rather, the issue bakery products have is that the bread -- some basic bread products are in price index baskets. So it's then measured what the inflation is, not only the inflation in the market, as well the inflation for a customer. The customers are comparing themselves according to this price index. So there is one or the other discussion around then more needed. But at the end of the day, every customer has an interest to have a financial stability in the supplier landscape. Not having this, ARYZTA customers experienced this over years to have a not really solid partner. If this not really solid partner disappears from the landscape, the capacity disappears. So this is not in the interest of the entire value chain. So therefore, there is -- if we meet somebody or talking to somebody in the industry, pricing cost is the big elephant everywhere.

And what about insourcing? Is there any risk for the next couple of years? Or...

So it's been over. Insourcing -- a lot of insourcing was done into the fresh business, which is anyway not our business. The last bigger project was -- had been finished 2015, which is the [ Coolback ] investment. And I think we need to see clear. The environment for bigger investments became much more difficult. The uncertainty is here. Nobody knows what the raw material does, the energy does. We all hang on gas. There is almost no bakery, not being provided with gas. The salary costs are increasing. The money costs, the interests will go out. So there is a phase closed with this insourcing. There is no bigger project out there at the moment.

I think you had a question.

Yes. You've done several price increases already, of course. Have you seen any direct impact on the volumes afterwards?

It's an up and down. Some volumes, you lose. Some volumes, you gain. That's the way it is. So we profit or give away. But let me be honest that there is no other way to deal with this. So the volume growth you have seen, it's quite solid for Q3 And the big target we have is that product volume customers is correct priced. If somebody else have a different version of Excel or whatever it is, and this brings better results, we leave them with the volume. But overall, our volume is growing. But if we don't -- wouldn't get the pricing for a certain volume, we would give the volume away. That's clear. Having underpriced volume running into capacity shortage is toxic, and we will avoid this.

You have seen in the first 9 months, we have strong double-digit volume growth. Despite the pricing that we are taking, we have at -- up to the last month of our Q3, it was over 7% pricing. So it continues to grow. And we'll -- as we indicated, we will continue to increase pricing in this quarter. So there is negotiation happening as we speak.

There is something else. The -- just -- Patrik asked about the capacity. Not only capacity, investments became less, as well transportation became more difficult due to availability and costs. And bakery products travel badly. it's big volume for a low price. So the sourcing environment for bakery products became more narrowed, which is good. We have a nice footprint. We are present in Germany, in Switzerland, in the other countries. We are -- you have heard about the French platform system. This is a good protector. At the bitter end, if volume is not priced, again, to your question, we need to increase the prices or we have to lift the volume away. That's the clear rationale. Everybody looking forward for the factory tour most probably? Last questions? Really, all done? Okay. Now to the organization. We messed up today morning the tasting. We went all first to the Swiss and to the French. Okay. We need to be more precise now. Otherwise, we lose each other in the bakery. We will divide the group into 3 subgroups with 3 guides. You will get the headset. You then would have to leave your rings and watches and everything here. We then collect this and sell it via Internet, that's a joke, financing the year-end invitation. Okay. We would have a short introduction session now with Cornelius. Cornelius is the Head of Operations here in this nice plant. He'll show you some figures and numbers and some safety guidance and would then go for a tour. You will see Swiss Sunday breads, breads and rolls, vanilla bar and [indiscernible]. So all the products being sold mainly in Swiss Retail, Swiss Foodservice, and -- were released here. We stay for a moment here. I will pick up Cornelius, and then we would do his short part here and moving then from here to the factory tour. We will have 2, 3 minutes, and then Cornelius will be here. Perfect.