Société BIC SA (BB) Earnings Call Transcript & Summary

Welcome to this investor update, an interim update for all of you, our stakeholders, on the advancement of our all-important Horizon plan. Now as I think back to when we launched our Horizon plan, we were 5 months into COVID. We couldn't see 3 months ahead, but we wanted to chart a bold and ambitious strategy for the company that would allow our 12,000 highly engaged team members, to chart through on difficult waters, choppy waters. We face those with human consequences, geopolitical crises came next, supply chain disruptions and the list goes on and on. It was a very tough test for this strategy. And I'm extremely proud to show you the interim update results that we're going to set forth for you today, and that give me the confidence to chart our path forward through 2025 for you. Now when we decided to do this update for you, I wanted also to have a wider panel of my team members for you to interact with. And so there's Chad Spooner that you see often and love so much. Sara LaPorta, our Head of Strategy and Business Development, and she's going to talk to us about both of those things and Chester Twigg, our Commercial Director, valiantly making sure that every BIC seen in distribution off-line and online is a BIC sold. The way we've laid out the presentation for you today is sequential. I'll tell you where we've been, what happened, where we won, where we lost, what we learned, how we adapted and overcame. And we'll give you a clear understanding of where we are today, how we see the world, where we see challenges, where we see opportunities and the pillars for continued growth and success that chart our course forward, through the end of 2025. And we'll tell you some numbers and some actions that we're going to be taking over the next 2.5 years of this beautiful 5-year horizon journey. But I couldn't go on without telling you how important, appreciative I am of you being here or following us virtually today. Because your support and interest in the company and what we do is so important to our engagement, our success and how we view the world. So we eagerly anticipate the Q&A session that will come at the end of this, but know that all of you who did and have engaged with Kimberly and the team over the last few months, has helped us craft today, and helps us craft our strategy and how we operate the business going forward. Who's got the clicker? Somebody's gone nuts on the clicker. Thanks, Mark. All right. So many of you know us very, very well. You followed the company. You know our products. Some of you are newer to us or are coming here or joining us live, with interest in the company. So I'm going to take one slide, and I promise it's one slide only, to remind ourselves of who BIC is. BIC, first and foremost, is 30 million products every day in the hands of billions of consumers around the world, who over 70-plus years, have come to trust the quality, the value and everything that we represent every day. Now a lot of you may be thinking, yes, my BIC pen, it worked when I started. But don't forget, after 3,000 meters of writing, it's those last 10 that the consumer remembers, when they're going to go repurchase. And so we put a tremendous amount of time, energy and our engagement into making sure that your BIC products, and all BIC products are amazing from the beginning of their life, to just before their end of the life. And we'll talk about sustainability a lot today as well. We've also made a lot of organizational choices, business model choices, route to market. And you're going to hear a lot about that from Chester. How we focused, invested differently, really made sure that we're front and center with all our core, new and exciting products. And we've had a couple of big blockbuster hits that we'll tell you about in a little bit more detail today, including EZ Reach and EasyRinse, but there's more to come. I mentioned them before. This business exists because of the engagement of 12,000 amazing team members, spread out in all the countries of the world. They're making products, they're designing products, they're testing the quality of the products, they're marketing them, they're selling them, and then they're collecting the cash, which I know is so important to this audience here today. This is a company that has gone through a transformation, 2.5 years. We've changed a lot. We've changed our operating rhythms, our operating models. We've talked to new suppliers. We've engaged in new things. All those today, give me the resilience to look forward and chart our path forward with you. So how have we framed our time together today? I'm going to have some opening remarks, set a framework, and then Chester, Chad and finally -- Chester, Sara, and then Chad will take you through 3 different sections, delivering sustainable growth. Because first and foremost, our Horizon plan is a plan for growth. It was reconnecting with the consumer and reconnecting with growth, and making sure that we have forward capacity, new growth relays and opportunities, that we can decide in which we want to invest in. But also, not changing our excellence in operations, but finding new efficiencies. And as we look forward to the next 2.5 years, I think you're going to be very interested in some of what Chad has to tell you and the impacts on margin and cash that those have for all of us. And then we're going to talk about capturing cash every day. Finally, I'll have some closing remarks. But as I think back to the start of Horizon, November of 2020, why did we do this? Ultimately, we were at the end of one of those growth sigmoid curves. We needed to jump to what was going to make us successful. That absolutely did not mean that we were going to give up the underpinning, the fundamentals of our organization, the strong commitment to manufacturing, the excellence of brand, making sure that our distribution on and off-line was excellent, and make sure that consumers could find our products. That we've kept, we've built on, and it remains the foundation of what we do today. But undoubtedly, we had to change our operating rhythms, our operating models, Fundamentally, as I told you 2.5 years ago, we had to look outside the company, become much more externally oriented, look for partnerships, look for partners, understand our markets better and look to our competitors more closely for lessons and opportunities. We also, with Horizon, wanted to make a real step change in our commitments to sustainability. Sustainability has been core to BIC since its beginning. So my grandfather, first designed the Cristal pen. It was absolutely the least amount of product and materials that you could fit in it. And we've done that ever since with all of our products. But when we launched Horizon, we wanted to go big, have larger impact. And so we wrote first, writing the future together and finally, made some really big commitments that I'll give you an update on, when it comes to how we interact with plastic. A topic that's societal, urgent, important and on every one of our team members' minds every day. And then finally, a view to all of us, the investors and make sure that our company is resilient and has both the operating wherewithal and resources to weather storms in the last 3 years have been that test and we've learned a tremendous amount. So Gonzalve, where have we been? How -- what have we done for the last 2.5 years? Let's start with EUR 600 million of growth. We wanted to make a step change in our momentum, and we have. And that momentum is absolutely key, as we look forward to making sure that we understand why it's there? How it's come about? Where the challenges are? And what we're going to do moving forward? And that, I'm very proud that the teams have come forward with. But we've done it while maintaining free cash flow generation, while investing in the all-important CapEx, to make sure that our next sigmoid curve of growth is also available to us. Investing in research and development and investing in 2 things that we had stopped or really slowed down historically, investing in people and investing in the brand. And over the last few years, I've talked to you a lot about the brand. And I think if you turned on your iPhone anytime in the last 2.5 years, you've definitely seen the brand differently and more, and I'll tell you a little bit more about how we've been investing in people. All this leads me to the conviction for these objectives for 2025. These are the north star for [them to lap for] the second 2.5 years of our Horizon plan, sticking to growth. This is a business that has to grow, 5% to 7% net sales annualized growth. Now those are tough markets, worthy competitors, but I believe between what Chester and Sara are going to tell you in their parts, you're going to be as convinced as I am, that we have the building blocks to achieve that growth over the next few years. But in doing so and continuing on that momentum, start to improve operating margins, gain the operational efficiencies and drive the value that we want and had baked into the plan, that will allow us to improve our adjusted EBIT 150 basis points through the end of the period, and the trickle on effect of improving and generating EUR 20 million more cash annually moving forward. Those are the 3 big building blocks of what stands in front of us for the next 2.5 years, and that I want to engage with you on for the next 60 to 70 minutes. Now of course, each of those is underpinned by pillars, and under these different projects. And we spent quite a bit of time these last 2 years refining them, learning from our mistakes and our successes. And each of my teammates is going to tell you about each of these. But don't think that they're separate, and we don't understand and look at the interdependencies of each of these. The interdependencies of these 9 are critical, and they are, in many cases, how you unlock the true value of so many of these projects. Understanding the growth and RGM are linked, of course. When you're doing value engineering, it allows us to be competitive at the point of sale for consumer. When we improve inventories, it has an effect on all the rest of the operations, both efficiencies in the manufacturing organizations, but also ultimately, EBIT and cash. So I'm going to turn it over to Chester, who's going to talk to you about delivering sustainable growth. Thank you.

And thank you for giving me the opportunity to talk about how the commercial organization is driving that sustainable growth, and we'll continue to drive it over the next several years, in developed markets and developing markets all around the world, wherever we try to bring simplicity and joy to our consumers. Sara is going to talk later, about the other twin engine of that growth, which is our innovation and our M&A work. But I'm going to focus primarily on the commercial growth drivers. Indeed, the commercial organization thinks of itself as the main sail on that ship, that Gonzalve captains, driving towards our Horizon agenda, and we are working to make sure that we deliver that across the line in time, ahead of time and with the best possible result. So I'm going to talk about 5 areas to bring this to life, to illustrate what we are doing to drive commercial growth. First of all, we'll talk a little bit about our go-to-market choices. The country regional portfolio choices that we made with Horizon to drive growth. Markets we disinvent -- disinsected ourselves in, and markets in which we grew behind new opportunities and investment. We're also going to talk about how we drive our marketing. Gonzalve talked about the fact that we have reinvented our brands, a great brand legacy that we've inherited, we continue to now connect closer to consumers with some great marketing we'll illustrate for you. We also made choices around where to play in terms of channels. Obvious choice in that to talk about is e-commerce, where the consumer has shifted, COVID has accelerated that shift, and we have continued to win in this segment, and we'll show you how we continue to believe we have the growth opportunities to do further. We'll also talk about our investment in revenue growth management, an area to invest further in the other capabilities. Essentially, how are we driving value ahead of volume, how we're investing in the analytical capabilities, the science and the art and the discipline of revenue growth management, to make sure we drive both the top line and the bottom line. And we'll bring it together with our focus around people and capabilities. The commercial organization has transformed itself. We'll talk about how we believe that this is an enabler of the growth, not only for today, but into the future. So let's first focus around our choices around geographies, our country, regional choices that we made. I think you're well aware that at the time of Horizon, we made some choices to get out of some markets, where we believed we did not have the right to win from a profitability standpoint. We exited some of our Asian markets because we could not see a way to win today, tomorrow or even into the foreseeable future. And we decided that we would focus on the markets where we did have the right to win. And you'll see some examples here. Now you're also probably thinking West North America. That's your biggest market, how come you're not talking about it? It's because we talk about it a lot and you hear about it a lot. You asked questions about it. But to reassure you, we are growing at 9% CAGR in North America as well. So that's our biggest market where we are growing at a tremendous pace. You hear about it a lot. I want to focus, however, in some markets, we don't talk that often about. Let's take Western Europe, for example, a very mature market, which you know, has some sluggish market growths. But even in this incredibly competitive, challenging market, we are growing almost double digits. And that's behind leveraging the strong BIC brand, the legacy we have in these markets and driving forward both mental and physical availability, awareness for the consumer, physical distribution to win in this market. We're also winning, as you can see, significantly in our second biggest country, Brazil. Brazil is a market where we have a strong presence. We've been there for a long time. We have some of our highest market shares in this country across all of our 3 categories, Human Expression, Flame for Life and Blade Excellence. And we are continuing to win there at a very, very fast pace. As once again, we build off our strengths and drive distribution, physical availability and great marketing campaigns. Africa is another market that we see as the next Asia. This is where the demographic dividend will play out. This is where growth rates of population and income are the fastest growing. And we've been in Africa. We've been in markets like Morocco and in South Africa for many years, and we are winning there and continue to win, but we're also augmenting that with our growth in markets like Nigeria, Kenya and Ivory Coast, which are new markets for us organically and through acquisitions. And you can see that this portfolio of choices we've made is delivering us the kind of growth that we hope to see in the markets in which we choose to play in and win in. Where to play is important, how to win is equally important, and we have invested in really building the BIC brand. Our BIC brand has a legacy of strong marketing, but it is something that we lost a little bit of our way around over the years, and we have now rejuvenated, reinvigorated and refreshed our marketing to connect with consumers, to be relevant to consumers and drive great mental awareness and connection with consumers. Just a few examples. EZ Reach, which we'll talk about as well from an innovation standpoint, is a very versatile great product that the lighter category brought to us. And we have connected with consumers through some awesome marketing that has gone viral. Using celebrities like Snoop and Martha and now Willie Nelson. We have made sure that we have brought the opportunities for different lighting occasions to bear in our great advertising campaign, that has gone viral with over 6 billion impressions, as we've driven this marketing campaign. Recently, we launched EasyRinse, which Sara will talk about in our innovation schedule. And you'll see that we have clearly communicated to consumers, the promise of this great wonderful new innovation, patent protected, which really talks about eliminating clog and focusing on shave. No clog all shave is a simple message but very creatively communicated. Again, leveraging some celebrities that we have brought along the way. And hopefully, you saw earlier when you were walking the booths. In our Human Expression category, we also brought this marketing campaign into our Rocketbook business. We leveraged cast of characters from the long-running office television serial, to convince consumers that they don't need reams of papers and many notebooks, to deliver what the Rocketbook can do as a sustainable, almost endlessly reusable notebook, that is also a smart notebook that allows you to upload your notes to the cloud. Marketing has been an asset to this organization, and we continue to leverage it and drive our consumer connection with some great marketing campaigns. We're investing behind it, but we're also getting very strong ROIs on the investments we are making. We also made a choice around which channels to focus on and where to play, and e-commerce, as you know, is obviously the example #1 that everyone wants to talk about. We were starting from behind, but we created a center of excellence, a COE at the center, leveraged it also at the regions, clusters and countries, and we have now been growing at almost 3x the pace of our competitors in the market in e-commerce. We had a goal by the end of Horizon to deliver 10% of our business in e-commerce. We've already achieved that goal, and are building from there. And this has come behind focus on the fundamentals. The fundamentals of e-commerce, which we've delivered day in and day out, in every market around the world. Starting with search. If you think about your own e-commerce journey, that's where it all begins. If you don't find the product that you're searching for, you're not going to be able to complete that purchase or do the research that you need to do before you make that purchase decision. It is the 0 moment of truth and that search is critical. People joke that the best place to hide a dead body is in Page 3 of search. Nobody goes there. And we are making sure that we are measuring ourselves, on how often we show up on Page 1 and within the top first search algorithm that comes up. We are also making sure we have the right portfolio, when the consumer finds us, they find the right portfolio, the right hero SKUs that they wish to purchase, but also the ability to navigate down to those SKUs, which they have a niche interest in, but must be able to find in order to complete the purchase. You can see the tremendous improvements we've made in search and product and price availability, making sure that we have the right price for the consumer, the right price also for our customers and for ourselves, to ensure that we are profitable in this channel. We're driving assortment. We're also driving ratings and reviews. If you think back to your own decision-making online, you are guided and validated by the ratings and reviews of your peers and others that have already purchased the product. We make sure that we are getting as many 5-star reviews as possible, to reinforce that the consumer is making a smart decision, a good value decision when they find and they buy our products. And all of this is driven through content. It's the place where you will see the maximum improvement, as we made sure that we have the best content that drives that conversion, the awareness to conversion for the consumer. We've invested in images, in videos and user-generated content, to make sure that the consumer is compelled to buy our brand when they find us online and when they look at the ratings and reviews. We've also focused on the important area of revenue growth management. Once again, we were, prior to the Horizon strategy, playing from behind. But we've caught up and accelerated, and we believe, in many cases, are ahead of our competition and the market. Revenue growth management is all about driving value ahead of volume. It's making sure that we follow the science, the art and the discipline of making the analytics to support the portfolio choices, as well as the pricing that we need to see in the market. We start with the portfolio, our strategy around the portfolio, making sure we have good, better, best products for our consumers. We then architecture this for the right price pack. Making sure, for example, in today's inflationary environment, consumers are looking for both affordability, in terms of the right shop opening price points, as well as on the other end, consumers are looking for value packs, because they are okay to pay more as long as they get more value when they trade up. And we are making sure that our architecture is designed to provide that in today's environment, and we will change as the environment changes. We're focused on promotion effectiveness. We had many of our promotions, like the industry that are loose, loose. They don't gain for BIC and they don't add value for our customers. We are focused on moving our promotions to those which drive our retailers, categories as well as our own business. And we've been investing in analytics to design more effective promotions, get better ROIs for that. We've been focused on mix management, to make sure that we are driving value and better GPs around our products, and we're ensuring that our teams are supported with the right tools, to drive trade optimization and be more effective. And this probably plays out in another area that you are interested in, which is complexity reduction. We have made a significant reduction in the number of SKUs that are in our system as you can see, over the years, and we continue to do this to make sure that we have declogged the entire supply chain all the way to our customer and consumers. They -- the complexity reduction is done with detailed work, looking at the long tail of our portfolio, understanding the analytics of volume transference and then making sure we eliminate the right SKUs and ensure that we are getting more and more efficient. This complexity reduction has benefits through the entire chain, from less SKUs to forecast and, therefore, the chance to get them forecasted better, to less raw material ingredients to purchase, which means that you're more efficient there, to less changeovers at the factory because you're now moving more SKUs more effectively through scale. But also in terms of inventory in our warehouse space, less valid positions, less freight and distribution challenges because you have more efficient, larger volume around the key SKUs you're driving. And this is important for our customers as well, because they very much value a more efficient portfolio that they can leverage. The interesting thing is that actually consumers reward us for this complexity reduction. It is the paradox of choice, where the consumer is actually able to make his or her decision more easily, when they have fewer choices to decide from. And all we have to do is ensure that we have meaningful choices and no duplication in our portfolio. And this is an effort that we will continue to drive with our RGM agenda. All of this is supported by our investment in people and the organization. The commercial organization has been focused on ensuring, that we build the algorithm for growth around the world in different markets, leveraging our organization, the great strength that we have in talent. We've made sure that we are driving what we call talent to value agenda. We're making sure that our best people are working against the biggest value opportunities for our business, whether they be tenured, experienced BIC talent or in some cases, bringing in new talent into the company, because we have a shortage of those skills and capabilities that they bring to us. Very decisive choices have been made to make sure that we have the right talent against the right value opportunities. We're also investing in training the entire organization. Training them on every opportunity that we see around the business. For example, 2 areas I talked about e-commerce and RGM. We ensure that everybody in the organization was trained on the basics, the 101 of RGM and e-commerce. Everyone from Gonzalve, to the most junior account executive in our smallest market, was trained, and we continue to make sure that everybody is kept relevant, sharp around these areas as we learn new things. We also operate as one BIC, making sure we have global scale but also local relevance. Making sure that we win, where the point of contact is, with consumers and customers operating as one team. Everyone at BIC, their job is to ensure that we can win with consumers wherever we are operating, and through our retail partners, all of our customers to ensure that we are one team supporting that effort. And to do that, we've also delayered some of the organization, so that we can have more agility and speed in decision-making and be able to have people empowered to make the right decisions. Probably most important in this algorithm, has been our effort to drive a performance culture. We've made sure that we have common scorecards and KPIs that drive what the outcomes we've decided that are part of the Horizon strategy, and execute with excellence, measure and improve our performance. The perfect store is the ultimate view of that. At the end of the day, that's when the consumer is choosing, whether it be online or off-line. It's the first moment of truth, when they choose us over our competition, and we make sure that the store or the storefront is compelling to them, and that's where execution really matters. We've supported that through things like Salesforce automation to drive it forward. So I can assure you that the commercial organization is committed to making the tough choices with Horizon that we need to make, investing where growth is, disinvesting where growth is not, making sure that we deliver with excellence, executing that and measuring that performance. That's -- we are also well aware that even when we are succeeding, we have to be relentless in understanding the mistakes we've made so that we can keep changing and improving our performance. The commercial growth is obviously focused on the core, but we're also very much working with the company around driving our innovation and M&A agenda, because that is indeed, the twin engine of our growth. We are committed to deliver that. I want you to know that the commercial organization, while delivering many things is -- has a simple way of boiling down all the complex work that we do. We say that our mission is to sell more, spend less, collect faster, forecast better and build market share in the organization. And you have my commitment and the entire commercial team's commitment, that we will continue to do that into the future. With that, I would like to hand over to my friend and colleague Sara, who will take you through that other twin engine that's so important to our growth. Sara?

Hi. It's great to be with you this afternoon. As Chester just said, I'm here to talk about the 2 other engines that are driving our sustainable growth agenda for Horizon. The first one is innovation, whether it's new product innovation or new business model innovation. And back in 2020, when Gonzalve introduced the Horizon plan to you, he told you we were going to be creating a new innovation model, a new innovation engine. And in fact, we've done just that. It's beginning to deliver right now, and our key KPIs for innovation is our innovation vitality. And we've grown this key metric over 30% since the beginning of Horizon. Innovation vitality is the percentage of our net sales, that come from new products introduced in the last 3 years, a common CPG metric. And we've targeted 10% of our sales to drive from new innovation, and that's what we're going to be delivering and have delivered so far this year. So we're right on target for that. We're also right on target in terms of sustaining our investment and commitment towards R&D. And as Chester mentioned, our patent activity, where we've delivered over 300 last year and continue to do so. We wouldn't be able to get these results, if we hadn't reengineered our processes from the beginning to the end on the innovation pipeline. And perhaps the easiest way for me to share that with you, what's been achieved just to give you one example. And here, I've got EasyRinse, which is a product that we launched at the end of last year in the United States, in the Blade Excellence category. Now EasyRinse came about from really deep consumer insight about the frustration on all of that clogging that happens in the blades when you shave. And the difficulty it is rinsing that out. 92% of consumers frustrated by that in their shave experience. Well, we got together our engineering, research and development team out in our Athens area, and we have really found out a way over the last several years, how we can solve this problem by widening the space between the blades, which sounds super easy, but it's absolutely not. Because at the same time, you have to increase the number of contact points you have with the skin, so that there's less irritation. So as Chester said earlier, less clog, less irritation, more simple shaving. So on that, our patent team has really protected our anti-clog technology, and with 21 patent families filed around the world. And our marketing teams got to work on the consumer proposition, the name and all the marketing, got a top scoring super star score for that, which then translated into real market results within the IRI in the North America market, having the #1 and #2 new products in our category for that quarter. So just one example, one of many, where innovation is really driving our sustained growth. Now our innovation teams have to do more than just that. As Chester said, in categories that have lower growth, you are trying to drive revenue growth ahead of volume growth. And one of the core things that the innovation team need to provide to the commercial engine, is value-added innovation that consumers are willing to pay more for. And we measure this through a trade up in our average net selling price or ANSP. So our innovation teams, they're not just innovating for new products, they're innovating to be able to help our revenue growth management team and our commercial team deliver trade-up innovation and higher revenue price points. So 3 examples of this. For example, in our Stationery category in Europe, our European commercial team have taken a product that's been around since the 1970s, and have found a way through wonderful decors and colors, that consumers just love, and they apparently here in France, they really adore collecting them, to drive 10% unit growth. But because this product has 6 times the average price point of our category average stationery product, every time you sell a 4-color pen, you're actually adding significantly more, in terms of revenue to the top line. Similarly, in Flame for Life, as our innovations team looked at how can we expand our unit volume, how can we grow this category. We've looked at all the different occasions that consumers use Flames for. And in countries like the U.S. and some here in Europe, actually creating a home ambience is through lighting candles, be they scented, unscented or Incense, whether you're doing yoga, whether you're meditating, whether you're having a family meal, there are multiple occasions where consumers are using candles to create a new atmosphere. So by focusing on this, actually, the long wand of the EZ Reach is ideal for meeting that occasion. And not only has that allowed us to drive expanded unit growth and expanded share, because every unit of EZ Reach that we sell, is 2x the price point of our average lighter category, we're doubling down on revenue growth. Similarly, same story in Blade Excellence, with our women's Soleil brand, where we've introduced scented products, such as our jasmine and eucalyptus scented, where consumers are willing to pay 4x the category average, for just that moment of sensorial escape. Well, maybe let me change the direction here a little bit, and talk now about business model growth and how thinking differently about our business model has led us in our Wet Shave category and Blade Excellence, find new opportunities for growth. Those of you familiar with this category, you'll know that there's a segment of the category, in which the BIC brand plays, where it's a smaller the one-piece segment, in the larger refillable category of about EUR 8 billion. This is the systems-oriented category, where several years ago, the disruptor brands, the direct-to-consumer brands, entered the category, and at this point have about 10 points of share in that category. Now for us, our brand was never playing in that category. So as opposed to thinking of this as a problem, we've seen it as a solution, and basically said, if you can't beat them, let's join them. And I think in 2021, Gonzalve, you announced BIC Blade Tech, a new business-to-business business model, where we would specifically partner with disruptor brands to enable their growth. We have the technology. We have the capacity. We have the manufacturing, to be able to deliver systems products. We just don't have the brand. They have the brand. They have the lifestyle. And so putting those 2 things together, we can participate in this larger segment of the market, that we've never been able to be a part of going forward. So BIC Blade Tech is up and running, and as of last year, delivered 15% of the growth of our Blade Excellence category. So let me move on from talking about innovation, and turn instead to M&A. This is, as Chester said, the third capability we're looking at, in terms of driving our sustainable growth. Now in M&A, we're looking for strategic and accretive growth. And to guide our M&A decisions, we have a clear framework that we apply and clear criteria that we use. So here we go. Maybe the best way to explain some of those criteria, is to describe to you perhaps in our core -- when we look at M&A within our core business, what are we looking to try and achieve. We're being very selective in this area. And any M&A we're considering here, needs to play a strategic role to strengthen our portfolio, as well as play a synergistic and value capture role, so that we can deliver BIC value add to -- for value creation. So good illustration of this is Djeep that we acquired in 2020, a small lighter brand from here in France. The strategic role for Djeep is to diversify our portfolio in lighters, and to be able to stretch up the price point that we're able to achieve with consumers. It has fabulous looking decors. It has a wonderful tactile feel. And as a result, we're able to present Djeep to the consumer at 2x our price point of our reference product. And hence, playing a strategic role back to that theme, of being able to trade up the consumer, creating more revenue for each unit we're selling. Now from a synergy point of view and value capture point of view, our commercial teams, despite COVID, have been able to double the size of the business and our industrial and manufacturing and procurement teams, have been able to expand our EBIT margins by 600 basis points. So I think this is just one example of how within core, we're being very focused about how strategically we can add new businesses to our core. Now let me move over to the other part of M&A, where we're very much looking to expand our growth horizons, and find long-term strategic opportunities to bring new categories or as our founder, Marcel Bich used to like to say, products of the future, where we can be in a very disciplined way, adding new businesses to sustain the future growth of BIC just Gonzalve was saying. Maybe the best way for me to illustrate this, is with the 2 categories that we've made acquisitions in so far, some of which you'll have seen out in the lobby. So we use a very disciplined framework to help us identify categories that we think have long-term growth potential, that we can be interested in. So for example, in temporary tattoos. This is [indiscernible] temporary tattoos. Well, there's an interesting connection, in terms of our DNA. This is an area where art has gone from the paper, to the canvas and onto the skin, where an art form that has been around for thousands of years, is actually gaining mainstream acceptance today. Perhaps more importantly, we also like the market structure, the market growth and the margin potential. This is a business which is a part of a much larger addressable market that we call Skin Creative, a $6 billion category that has 10% growth rate. And the temporary tattoo is 1 segment of that, that we think is a very interesting adjacency for us. We like the consumer habit. It's a repeatable application. Brand is appreciated, as is quality. And from an industrial perspective, it's an asset-light business and one in the product development cycle and in the manufacturing, there are some overlaps with some of our expertise, such that we view that we'll be able to expand margins on a go-forward basis. So we ended up in 2022, acquiring Rocketbook, the leading temporary tattoo brand. It has a rather unique technology that looks very much like authentic tattoo. It lasts about 1 week to 2 weeks. And it started online, with today has about 800 active user, 800,000 active users and 1.5 million followers on Instagram. Our role with this brand is to grow its scale. We want to use our retail partnerships and channels, to give the brand more exposure, to give the brand more usage or more shopping occasions for the consumer. As a result, in the spring, we launched at one of our retail partnerships, with one of our retail partners in the U.S. And fairly limited SKUs to start with, we've expanded over the summer. We'll be moving to a permanent placement in the floor. Feedback has been really good. and the brand, overall, is growing at 15% year-on-year. So if you haven't seen it already, check out the booth at the back. You can also see Tattly, which is a small acquisition we made in the same area, as well as BodyMark, one of our homegrown brands. Now the other area that we have also acquired in is digital writing. This is an area where, we are firm believers in the power of handwriting and believe that there are lots of opportunities to connect that more easily and efficiently, into the digital environment to store, to share, to adapt to your notes that you've written in hand or the creations that you've made. We believe that this -- the addressable market of digital writing will be about 4 billion by 2025, and it has multiple different components. Smart notebooks, as Chester referenced, stylus, smart pens, e-writers. And so as we've looked at this category, we've entered first with an acquisition of Rocketbook, the leading smart notebook, that Chester referred to earlier. And this is the perfect -- was the perfect pandemic a complement, if you like. Endlessly, reusable for school or office note taking. You could capture those notes, put them away. There was no need to go out and buy reams of paper. And in fact, during COVID, Rocketbook was off to an extremely strong start. Sales were hard to keep up with, and we introduced a whole plethora of new products. While the supply chain challenges that the team faced, as well as the complexity of the SKU proliferation that came, was actually too much for us to manage, and as a result, we've taken a bit of a step back with Rocketbook, to focus back on the core set of products and to simplify our operations and ensure the team delivers consistent results, that we know that they can. So the last acquisition we made here and most recent in digital writing. We got the team over here is AMI. Super interesting technology, which I'm sure you saw outside. As you can see, AMI, basically, is a magnetic technology, and you can put in a magnet into your paint brush, into your pen or even into your consumer mouse. And if you have the magnetic sensors, either on the page that you're writing on, or on the computer that you're applying to, it will make that automatic trace for you. It's absolutely fascinating to see, as you can see from the demos outside, where the team here might take this idea. So they have brought to us science in magnets and electronics. We bring engineering, manufacturing, the ability to scale up, understanding of the writing. And together, I think it's going to be super interesting, in terms of where we're able to take the opportunity and be a thought leader around how BIC can transform writing into the digital world. So go check that out if you haven't seen it already. Well, like temporary tattoos or digital writing, we continue to examine other adjacent categories to our core, so that we can drive long-term sustainable growth into the future, and discover those products of the future that will be the growth engine for BIC in the years to come. We are being very choiceful about how we're making those evaluations. We have our M&A criteria that we use to keep us focused, both on the nature of the category, as well as the nature of the specific deal. So that we can be very clear that we are really investing appropriately in a value-creating way for the future. We're in no rush with M&A to drive sales. We remained very disciplined about our approach and about our criteria. So let me just wrap up this section on growth, as Chester talked about, the twin engines that involve both M&A and innovation, together with his leadership and his team's leadership on the commercial growth drivers. So with that, let me hand over to my friend, Chad Spooner, our CFO, who will cover operational efficiencies in capturing cash.

Thank you, Sara. So now you've heard Chester and Sara, both talk about how our teams are driving sustainable growth. And now I want to talk to you about how we're driving operational efficiencies to help improve our margins for the company. So first thing to note, is that this is a new capability for BIC. And if you go back into what we were -- the company was like several years ago, we were known for one thing is one part of our DNA. And that is what Gonzalve referred to, which is our ability to produce high volumes of high-quality products, at a very attractive price for our customers. Now this was done through our manufacturing efficiencies mostly, and these manufacturing efficiencies were really done at the individual factory level. So one factory was responsible for driving that productivity for itself, and it wasn't really on a global scale. So with the creation of our global supply chain team in 2029, we started to take this to the next level. And we did this by really investing in the capabilities of what a global supply chain team really should be doing across the globe, and not just within an individual country and an individual factory. So this, you're going to see through the results that we've had to date, has really been helping us drive our Horizon targets. And there's 3 areas that I'm going to go into in more detail. The first one is around procurement, and what we've done to really focus on lowering our direct costs, both direct material cost and our indirect costs and the numbers speak for themselves. So far since 2019, since we started delivering over 40 million of benefit to the company. So we've talked about this area quite a bit, as we talked about RGM and procurement, 2 of the real pillars that have driven us over the last few years. The second work that I want to talk about, is what the team is doing around value engineering. So we have these capabilities around engineering and design, and value engineering really takes that and figures out how can we reduce the cost or the amount of material used in our products, so we can reduce the overall cost of our products. And so this, over time, it's currently doing it, and we'll continue to do it, you'll see a boost in our margin rate. So we talked this year, for example, about gross profit improving, right? And these things that we're doing, such as value engineering, these are some of the projects that are help driving that gross profit improvement over time. And the third element that I'm going to talk about more, is how we're using manufacturing supply chain efficiencies to really reorganize our company, to get a regional footprint and be closer to where our customers are. So historically, when we did manufacturing efficiencies, cost of production was focused in 1 area. That's all we focus that, factory has always said, how cheap is it to produce this part? And that was our standards have gotten lower and we felt good about it. Now we're thinking about end-to-end supply chain, and what is our total cost to deliver that part, and how can we use that to really drive down our cost structure. So this, once again, another fabulous area, our aim here is to deliver over 30 million of benefit across the Horizon period, and we'll talk more about how we're going to do that. So first, let's delve into value-added procurement, right? And here, I didn't say the word just procurement, it's really value-added procurement. And this is helping drive down our operational costs across the company. So how are we doing this? A little history, of course, before I'll tell a little story. Our global supply chain team started in 2019. Before that, every factory bought their own materials, negotiated with their local vendors for the cost for their products, et cetera. As we formed our global supply chain team, we totally changed the game. We said, now we've got a team of experienced negotiators, who can go across the globe, negotiate contracts with better terms and pricing that impacts all of our operations globally. And the second benefit -- so what do you get from that? Obviously, volume discounts. So most people think of procurement, and they think, oh well, they're just going to cut our cost. Well, that's only the first element. The second thing that they did is really focused on reliability. And when does that -- we saw that really came to roost during -- as Gonzalve said, all these global supply chain challenges we had over the last few years. So for the first few years, our procurement team, taking cost out, first focus. Then the world's changed around us, and we start to realize that we're struggling to get supply of the products that we need to actually keep the factories going. It wasn't about cost out, it's about making sure that we get the cost in. So it was great to have this team in place because they didn't miss a beat, and they were able to keep us, when a lot of other companies weren't able to, our factories running with all the parts that we needed. So now you say, that's great. They're cutting costs. They're making sure you have reliability when no one else does, but then there's a third element that's really added to what our value-added procurement team does, and that's really to help us around sustainability. So they've actually been able to help drive our sustainable development efforts by focusing at the first step of the process, which is where we source our materials from. Making sure that we are buying products in a way that are more sustainable in nature plastics, et cetera. So they've got a threefold kind of mandate, that's really helping us from a procurement standpoint, that most people don't think about. So now they've been in place since 2019, and they've consistently been performing throughout. As you can see and we talked about, they've delivered over 40 million of benefit, and it's going to be even more as we get through the rest of Horizon period. And one thing you'll notice is we're not just focusing on the direct material, which is where a lot of people think, oh, you're just taking cost of your product. The dark bars underneath there are indirect sourcing as well, and that's starting to play a larger and larger role, in where we're starting to get our savings from, from this procurement team. So the benefits are going across all of the different products that we see, all the different cost areas that we have. So how have we done this in such a short time? What are we doing? What tools? How do you know this is a repeatable process? So first thing that we've done is we've actually done some investment. Single platform system. We never had it before, right? We've got all these global factories and never before, was there one system capturing all the information from all the materials that we need and all the demand. So we now, might sound strange, have invested in and have put in place, one of these systems. So we have visibility to all the different products, and we can see which products have the most issues in terms of reliability, which was very important during global supply chain, where are we going to run short, where is our supply chain, not fast enough to supply the customer needs. And second, we can clearly see where there's cost opportunities across the globe. So that was very important to us. The second thing that we've done is we put this balance between direct costs and indirect costs. So this way, we can focus on when times like last year, when you have inflation going through the roof, and it's very hard to be taking costs out of your products, they're going up. Focus on the indirects and find other areas to take cost out of the system. And then the third area is what you'll hear is a balance on the future work that we're doing on the direct material. So what I'm going to talk about in a few pages, is how we're working on network optimization and bringing a more regionalized supply network, closer to where our customers are and buying direct materials closer to the customers as well, will be one of those things that we're going to see the benefits from. So obviously, as we do things like that, and we bring our supply closer, what does it do? It has that environmental impact of us having less distance to travel to bring those products to market. So we've talked about the great work that's being done in procurement. And so now let's move to the next part of what I call the process of global supply chain, which is where we have our engineers and our design people making the products that we have today. And this is what we call value engineering. So here, we take that BIC, which considered our high-quality value for money proposition, and we really take it to the next level, by thinking about what the customer is really looking for. And what we do then, is we design the products around what that customer cares about, but not about the excess. So in many cases, you overdesign. We talk about engineers who overdesign things. And our engineers have really done an amazing job of saying, here are the elements of the product that the customer cares about. And he are the ones they don't see or don't even notice, that we can actually take cost or material out of our process. So what we have here is 3 examples: one for each of our categories, to kind of show you, in real life, what are we doing and how is it making a difference. So the first is our iconic 4-color pen, which we talked about earlier, everyone in France loves more than anything else. And what we've done here, it's kind of novel. If you look at the cap you'll see the clip, right? You say, okay, it looks like a normal clip. But what we've done is we've actually taken out 10% of the plastic that we use in that cap, just by redesigning the molding and saying, the customer doesn't care about how much plastic's in the clip, and they can still have the same functionality. And while we did it, we had a little nice little marketing by putting in the BIC-boy silhouette in there as well, right? So ingenious ways of taking out material cost and you might say, okay, so how much is that 10%? It's 24 million -- 24 tons of plastic. Now to me, that sounds like a lot, some people might say, Chad, you're BIC, that's not that much for a company your size. But it's 10% of that one piece of that product. If we do that across more products, think of the impact we can make, right? And that's what we're doing. The second one, what you see there, which is -- it's called a tray for convenience stores, for what we use for our pocket lighters in the United States, okay? So what do we do with that? We actually went from a virgin plastic tray, to using recycled plastic. Now you say, that's great. So that helps you with your sustainable development goals, but it actually also reduced our cost by 40%. Amazing, right? So there, we've got significant impacts on sustainable development and on cost in 1 product. And on the third example, which you see, is an example from our Blade Excellence business. And there, we were able to reduce the thickness of our blade by 26%. Think about that 26% less metal in our blades, without impacting the quality of the shave. So these are just 3 examples of the kind of work that we're doing in our value engineering. This has been up for 12 months. Remember, this is a new capability for us. It's been around for 12 months. We've already had 200 ideas. And let's be honest, a lot of these ideas come from who? The people who work in our shop floors, who've been with the company for 20 or 30 years and of course, our amazing engineers. There are so many more ideas and opportunities out there. with us executing just on 15 of them, right? So it's not that the other ones aren't good. It's how many have gone through the process and approved. We're already delivering 7 million of incremental benefit year-over-year. Think about that, 15 projects, 7 million already, and we've got hundreds more to go through. So this is an area that you can be sure is a Horizon capability that we've built, that is delivered and will continue to deliver more and more, and you'll see it in our gross profit going forward. And now the final piece of the puzzle, the area of operational excellence, I want to talk about is how we're driving manufacturing supply chain efficiencies across our supply chain, okay? Now as I said earlier, this is about reorganizing the way we think of our global supply chain. And we're developing what we are calling an end-to-end supply chain in our major markets. What's end to end? So what we do now is we think of all the things that we do. We purchased the material. We manufacture the material and we deliver to the consumer. But now, we make all of those decisions as one, procurement, manufacturing and supply and deliver all sit together and say, what is the optimal supply chain that we should have for this region to support the customers in this region, so that we're not buying material in Europe, producing the material in Mexico and shipping the material to some other country where it is. So how do we optimize that. So it's really a rethink on the way that we look at our network and we optimize it. So -- in doing this, our global supply chain is really going to get closer to our customer, which is going to have a few benefits, right? A few benefits. Number one, it's going to help us with our service levels with our customers. We're going to be able to react faster to the demands. Number two, it's going to make sure that when things happen like in 2021, and we have these global supply chain challenges, we're not waiting for containers to come across an ocean to meet our customer needs. And then number three, it's going to reduce our costs significantly, as we have a lot of that transport. And four, of course, we're going to have an impact on the environment. So as we think about this, those are kind of the 4 KPIs that we look at, as we look at our manufacturing and supply chain. First, it's always about the customer. I think Chester talked about it and Gonzalve as well. Customer centricity. So the first thing we do is measure our service levels with our customer, first and foremost. And that's why service levels matter. Number 2 is the profitability, as we get the supply chain closer to the customer, the cost reductions will be massive and you're going to continue to see what, our gross profit improving. So I've talked about it this year, these are the kind of things that are driving our gross profit improvement. We've talked about the flexibility and reliability in the CO2 reduction, from less miles and kilometers driven positive impact on the environment. So we're actually in the middle right now of our first network optimization. We looked at our supply chain and we said, we're making certain products in North America that the customers are mainly in Europe. Why are we doing that? Let's move the production to Europe to support those customers. And we said, you know what, we've got the same thing in Europe. We have production being made in Europe, shipped all the way to the U.S., for the majority of what they're doing in those product lines. And so we're doing that. So we're actually in the process of moving equipment and supply, to where it's close to the customer. We think these impacts are going to be pretty significant. We're very excited about them. So now that we've talked about how the company is delivering sustainable growth, how we're driving operational excellence to improve our margins, we need to make sure that all these results end in what? Strong cash flow generation for the company. And that's where we're focused very much so, as you know, on how we're delivering our free cash flow on an overall basis. So one thing that I want to talk about is we started with Horizon is what? It's a growth plan, 5% to 7% growth. As we all know, growing the company usually consumes cash. It doesn't generate it. Why? Higher sales, usually equals higher accounts receivables. Higher sales means you have more customers, you have more demand, you need to meet to make sure that you fulfill their service levels and you're on time in full all the time. And it usually requires more capital expenditures, because you need to make sure that you have equipment to produce a higher sales or in the case of innovation, it's always something new, so it's new CapEx. So we are laser-focused on working capital management now in BIC and making sure that we can drive the most efficient working capital. So as we grow, we don't have to fund it with more and more cash. So how do we do this? The first thing we have to do is get a mindset in the company. I have to be honest, not a lot of people think of working capital and cash flow, they say leave that to the accountants of the finance team. But in order to achieve this, it has to be pervasive throughout their organization. Chester talked about everyone having from the lowest level up to the top, having training on RGM and on e-commerce. Well, the same thing has happened with cash flow. And what we've done is we've rolled out global trainings throughout the company, so that everyone understands what is working capital, what is the cash conversion cycle? A lot of people haven't heard of that. What does it mean? How is it measured? How can I impact it with my job every day, so I can help make sure the team achieves its goal. And why would everyone want to do that? Because we've put the entire company on a common matrix -- a common metrics, where everyone is incentivized to make sure that we hit our working capital and cash flow conversion goals. So whether you're in their tax department, guess what, there's a way that you can help generate cash, right? In terms of optimizing things. If you're in accounts receivable and we'll talk about that, you've got a daily function that you can do. If you're in sales, they did a fabulous job, and we'll talk about that in terms of helping driving our collections efforts. So everyone in the company is part of this effort. So some quick results. Guess what? I think the results speak for themselves on DSO, drove 11 days reduction since the start of Horizon. That's pretty impressive. On inventory, we're down 17 days from the peak of the pandemic, when we went to the market and had to build up inventory. And here, we know that our inventory is high, but we have a commitment to reducing that inventory by 10 days DIO for the rest of the Horizon period. And we'll talk about -- you've heard a lot of things that Chester said, on what the team is doing for less inventory needs. And you heard me speak also about all the things that the global supply chain team is doing, that requires less inventory. Those are things that were going to help us achieve that inventory goal. And it's not only about working capital, when you talk about free cash flow, there's also capital expenditure, right, CapEx. And we've talked about maintaining about 100 million of CapEx throughout the Horizon period. Some years, it's a little less. Some years, it's a little bit more. But on average, it's going to be about 100 million over the Horizon period, to make sure that we're not overspending as we are growing as some people will do. And how do you do that? What we like to say is the days of everyone gets the 1/3, 1/3, 1/3 for the different categories are over. Now we look at which projects have the best financial return for the company? And how do you do that? Every project requires an IRR model to be run. So we look at the return profile, and that's how we prioritize which CapEx we're going to invest into. So a few seconds to dig in more into accounts receivable. We talked about it. The entire organization last year was rallied behind accounts receivable and DSO reduction, right? As you put those metrics in, it's amazing how metrics drive behaviors and the entire organization, understanding that DSO and accounts receivable is something that they can impact. So -- and it's not rocket science. All this is day to day, day in and day out execution. So what do we do? We put the right tools and the right metrics in place for our accounts receivables team. We align them with commercial key managers, key account managers. So that way, when there's these issues that customers always won't pay, you've got that sales lead in there to say, "Hey, your next order or next shipment, we need you to help us out to get these collections done to keep those things going. It was an amazing partnership. And as a result, you can see what happened. 11 days reduction in 1 year, in accounts receivable. Now as a result, we've actually hit our Horizon target for DSO in the first year. We're really proud of that. And now we said, energy, this isn't something that's a onetime effort, right? It's part of our DNA. It is part of the way that we will operate day in and day out. So that can't change, because our CCC targets don't change. But now what do we do? We now move the entire organization's focus on the DIO and inventory reduction, right? So if 2022 is a year of DSO, guess what 2023 is? It's a year of DIO and inventory reduction and how do we streamline our inventory management. So what I first want to start with is a little bit of history of our inventory story. You can see it on the graph here, just to understand significant events and how it's impacted or what's happened to our inventory and where we're going. 2020 was what? The year of COVID. And we, like all other companies said, we need to find a way to make sure we can serve cash, because we don't know how long this is going to last. So we did what everyone probably tried to do is cut inventories pretty quickly and make sure that we're optimizing our working capital. 2021 starts, we didn't expect it. And I don't think many companies did at how quickly it rebounded. And so we were left with some shortages and some unhappy customers, where we couldn't supply at the levels we usually do. So what we did in 2021, as you remember, as we said, we're building strategic inventory at the end of 2021, to make sure we can get back to those levels, where we can rebuild our trust with our customers from a customer service standpoint. And we did. In 2022, we did a great job. Got back to those levels to attain the trust. And now we can get off of that strategic inventory levels and start to reduce back down where we need to be, without putting any risk to our products being on shelf on time. So what we're doing here, as I talked about, is SKU reduction, is inventory reduction. And there's 3 different things I'm going to talk about how we're going to get there, right? Several things. You heard Chester talk about SKU reduction and sometimes we talk about good and bad inventory. Well, with the SKU reduction, now we have less inventory that needs less safety stock behind it. Less SKUs, less safety stock. That's the first and obvious thing that we have. The second thing is you heard me talk about global supply chain, right? And all the work that we're doing to bring our network closer to our customers. And by bringing that network closer to our customers, and responding faster, there's no need to have buildup of inventory, transit across the oceans all the time, because you're right there, you're producing it faster, you're responding quicker. You can have lower inventory levels. So we'll see that reduction there. And the third thing, you may have heard us talking about it before, but if not, you'll probably hear us talking a lot in the future is what we call our IBP process, and that's our integrated business process. It's like Gonzalve said before, all of this Horizon, everything we're doing is integrated across the company. Every initiative is integrated. So with our integrated business process, what does that mean? It means that we start to take the demands of our customers at local regional levels. We now have our system we talked about. We roll it up into a global database or a global model that we have, and now our supply and our manufacturing teams know exactly what products need to be made, at what time and where it's being shipped to, so we can plan better and produce less or produce, I'll say, more appropriately the inventory that we need. So all of these things put together are the initiatives that we're doing that are going to help us drive down our inventory and to get to where we need to be at the end of it. So I think you've seen now the teams talked about how we can -- how we've used, operate commercial excellence, operational excellence and finance excellence to really drive to the results that Gonzalve talked at the beginning, which is our Horizon targets and our midterm results, which we're very happy about, and how we think these capabilities, they're reusable and we're going to keep using them, and they're going to drive us to the next 2.5 years to make sure we hit the Horizon goals we've talked about. And with that, I'd like to hand it back over to Gonzalve for closing comments.

Thank you, Chad. Hopefully, these last 60 minutes have given you a much clearer understanding of the company that you see before you. And how it operates, what's important to it, and the laser focus that all of our team members have on what, at the end of the day, is a relatively selected set of KPIs, goals to achieve, the goals that we've set ourselves for the next 2.5 years. Now those capabilities that didn't come overnight? I'm not going to lie to you. Some of them were hard to come by. In some cases, we got it wrong the first time, couple of cases wrong the second time and select number wrong the third time. And I'm sure that in 3 months, I could be here saying, and we got another one wrong, but what's important is we learned from it and we overcame. And I want you to be confident that we'll keep building those critical capabilities of a company of our size and scale, much more importantly, our ambition. Some of those capabilities have yielded small impact, some a little bit bigger. Some haven't translated yet into our results. And when so in a couple of minutes during the Q&A session, somebody is going to raise their hands and say, Gonzalve, why are you so confident? First thing I'm going to say is the excellence of my people. The second thing I'm going to say is we've built the resilience and the track record to overcome. It's extremely important that I be clear to you today, as you move forward. We are a very consumer-centric organization. Yes, we have. You heard Chester talk about those all-important customer partners. Through them, we build the business. Through them, the products are visible on a day-to-day basis. And so those relationships, in some cases, 1 decade, 2 decades, and in a few cases, generationally long, we want to make sure, cherish, nurture and invest in those, and we do on a day-to-day basis, even with my executive team. We also invest in the capabilities of tomorrow. We're starting to use artificial intelligence in different parts of our organization, to forecast better, to look forward to what markets are going to be doing, also to reduce human bias and error in some of our systems. We're in a test and learn phase but we like testing and learning. We like investing early in making sure that we're grabbing the best thinking moving forward. We also do it, as you heard the team talk about in innovation and sustainability and procurement, to make sure that when we can, which is every single time, we're mindful of our environmental impact and a little bit shipping away at those big goals that we set ourselves. Today, at the end of last year, we announced to you that we had reached 70% of our packaging with sustainable, reusable or compostable. That didn't happen overnight. We didn't start at 65%. We're going to get to 100%. And slowly, we're going to chip away at the product as well to get to our long-term goal by 2030 of arriving at 50% reduction of all the virgin plastic we use in our products, a big and impactful goal. All these capabilities, all the impact that it translates into the business, is very clearly what allows us to continue to be entrepreneurial, to seek those opportunities that Sara talked about in new product, new business models or new companies and businesses that we can enter in. Some of them will be small like Tattly or Inkbox and Rocketbook. Some of them might be larger, as we look out past our Horizon trajectory, we need to make sure that when we finish in 2025, we have those growth relays that I can talk to you about then, that will fuel our growth for 2030. So I'm going to start by concluding with a thank you. Again, it's so important for us that you've shown your support and your interest in our organization, what we're doing and the mission that we're on. This Horizon plan has not been easy, and I'm sure we're going to face some more challenges in the years to come, but I'm confident that we'll continue to be a growth company. We will be growing our organization and our sales, 5% to 7% on an annualized basis. We'll be an ever more resilient company, a more profitable company, as those operational efficiencies and the operating leverage, translate into our financial results every day, basis point by basis point. We are a manufacturer of millions of things every day, and that's how we do many of the things that we do, we chip away and we chip away. And ultimately, the results that I talked to you about and Chad gave you a lot of color on, those come from incremental efforts every day, and they make big impacts. And finally, the return of our organization, because the resilience of a 70-plus year organization, it does come from financial resilience, and we'll continue to build an incremental free cash flow. So again, we're going to move to the Q&A session, but thank you very much for being here or following on the webcast. And I look forward to continuing these dialogues with you in the future in person, but in some cases, as early as tomorrow morning at the Kepler conference. Thanks very much.

And just if I could ask, as we open the Q&A session, if you could introduce yourselves, because for the people who are following us virtually, they can't necessarily see you as you ask your question, there are 2 people with mics roaming. So if you could just raise your hand. Thank you, Kate. Kate's got the first question or Marie-Line got the first question. She was faster than the mic.

Marie-Line Fort from SG. I've got different questions. The first one is about the Stationery division, which is one that experienced strong collapse in operating margin over the last 10 years. In your opinion, what is the normative margin that you can expect from this division? And what are the levers for improvement? Second question is about your Blade Tech. You've got the ambition to achieve 20% contribution to your sales. It looks to be a bit ambitions. Could you detail what will be the phasing to achieve this target? Last question is about your 5% to 10% annual net sales growth by 2025. Could we have an idea about 2024? Is it only by 2025? Or can you expect that you will achieve the same level for 2024? And last question, conjunctural question. We read that the back-to-school period was a bit difficult for the Stationery business. Could you mention -- could you share with us any feedback from this crucial period for you?

Thank you, Marie-Line. So I'll start with question 3, then you can do Back-to-School and then -- so the 5% to 7% is annual growth. So 2024 and 2025, that's the goal or better. Back-to-School?

So the good news on Back-to-School is that we have been consistently growing market share. There's no doubt that the market has been challenged, but we've had, for example, in France, our third consecutive year of growing market share. In fact, at one of our biggest customers in France, we achieved, for the first time, 50% market share. So we are focused on winning in the category, no matter what the headwinds are, but we -- and that's where the organization focus has been, will continue to be to drive growth.

Thanks, Chester. BIC Blade Tech. So let me rewind BIC Blade Tech is a business that's less than 2 years old. Very, very happy with the initial results, in that it's exceeded a little bit our expectations. How do you get to the numbers that you're talking about, which were a longer out objective than specifically to the end of '25, Marie but I'll give you the big building blocks that will get us to those numbers. First, it underscores everything that we do the quality of the products and being recognized not only by consumers, when they see the brand on the product, but now what we track is our customers' quality scores. So Chester and I are absolutely obsessed with star ratings. So we're constantly looking at how their products are doing, because we know we manufacture them and making sure that we do that through excellence of manufacturing and incredible R&D is absolutely critical. Then when we set out to build this business, I told you that I wanted to have a mixed portfolio. I wanted to have some big customers, some medium customers and some small customers. And why not just a bunch of big customers, because I think 1 or 2 of you have asked me that question. Because the medium and the small ones allow me to adjust, when the big ones have the peaks and troughs of their business realities, because now I have a further step in our business process where I'm at the mercy, not only necessarily of consumers buying at a customer, but that intermediary step as well, because we're operating within the chain. We have some customers. And you often ask me, how many? Did you get a new one this quarter? And I'm sure you're going to ask me that when we do Q3 results, but it's important for us, also, to build with our customers, to pick the right ones who are growing. And then every time they want to do a new product, we build into that. And as I've shared with you, our current and biggest customer, we have been doing that with them. I'm very proud of that. So over the years to come, we'll continue to build out our portfolio globally also, not just 1 or 2 markets to make sure that we reach those types of numbers, and that remains our midterm goal. 20% of blade excellence -- not the total business.

And then with your question, Marie-Line, on Stationery, let me start with the second half, which is the levers, right? And I think today, we try to demonstrate throughout what you heard, for example, Chester talking about RGM, has been a fabulous tool no matter which category we're in, to help increase our margin through all the different elements you mentioned. And the second is the work that our global supply chain team is doing, right? We heard about 2 things. One is procurement, how do we get materials cheaper, but number 2 is really value engineering as well. So I think the example on the 4-color, when you look at how do you take out that material and that cost, all of those type of things are going to help us take cost out of the product, right? And then the procurement levels, buy the materials that we do get cheaper. And then the commercial team will help get the right price and mix to help increase our profits as well. So as we say, what's a rate, we've never really given a target rate per category. But what I'll say is, where we ended last year, we won't be there again. And you can see by the results in the first half, how strong the Stationery margins have been. We're on the right trajectory. Historically, over the last 5 years, it was about at 8%, give or take. And those kind of rates aren't unachievable, let's put it that way, when you look at what we're doing today.

Okay. Just use the mic because it's web streamed.

Kate Rusanova from UBS. So I have 3 sets of questions. First of all, on your organic sales growth. So would you be able to provide some color on the composition of your growth, between price/mix and volume? Especially for the next year, if possible? Would it be fair to assume that mix is a bigger component of that? And how should we think about this target for the 3 divisions? So does the 5% to 7% growth applies to all the 3 businesses? And more broadly, what will be the kind of key swing factor between 5% and 7% growth? So are you allowing for some variability, for example, in the volume growth in lighters? Next, on your operating margin. So it would be great if you can give us a bit more color, on how you're thinking about the pace of this margin progression in the next few years. Basically, shall we expect a big chunk of that margin expansion to already happen this year, and then modest expansion in 2024 and 2025? And what would be the key kind of upside, downside factors of that margin expansion? And lastly, I wanted to ask about your ambition to reach 50% of sales from added value lighters, from -- within the Flame for Life portfolio by 2025. So basically, does this target still stand, because it implies quite a steep expansion, nearly 15 percentage points increase, as far as I understand. So if I remember correctly, in one of your investor education materials, you mentioned that the gross margin of this value-added lighters is 9 percentage points higher, versus the divisional average. So just wanted to kind of check on that and do you understand how important is that target for your kind of margin goal by 2025?

So Kate, why don't I take your first question on net sales. What we've said for the year, price volume mix is that this year is going to really be driven by price and mix, right? In the combination of the 2, we really don't separate the 2 out. But we're expecting -- we've done a very good job with RGM on attaining price and mix across all of our categories. So we'll be seeing that benefit across all 3 categories this year. In terms of swings between 5% and 7%, going forward, the way we look at it, we have to leave some room for all these unseen events, right? If you look at what's happened over the last few years, there's been a lot of volatility in the market. And we've been really, I think, strong at executing and being at the top end of our range, but there's a lot of unknowns that happen every single day, in terms of global wars, et cetera, that we need to leave some room for that. But we feel very confident. Because if you think of mid-single digits that we talked about before, one would argue that was a 4% to 6%, mid is 5%. We're now talking about 5% to 7%. So realistically, I think that shows the strength and how we feel from a top line perspective of where we're going to be.

Okay. Is It still on? The only thing I would add to that, Kate, to give you -- because I know one of the questions you really came here to understand is to understand us better, how do we operate? How do we think? How do we model things? And if we've learned anything in these last 3 years is business modeling in the face of certain types of uncertainty. We can use models, we can use all sorts of big data and then sometimes you just got to guess, because nobody knows uncertain things. One of the things that this team and the rest of my team has done a lot of, and I think is important for you to know, is to understand the cost of optionality. So when we build our different scenarios, we also build out what is the cost of optionality. So let's not talk about BIC, but if you were in the car industry, one of the things you would want to know is what's the optionality cost on semiconductors? Well, we do the same thing on the number of things that are important to our business. And in some cases, we invest a little bit ahead and say, I want to have that security, so that if A happens, I know how to react and we're not out of stock. In other cases, we leave it on the table, cost is too high of optionality. I feel good with my forecast. So when you ask, because I really like the way you framed it, swing factors, that's how we think about swing factors. We identify them, we try and understand the cost of optionality and then we build our A scenario around that and a B scenario and so forth.

In terms of margin and the pace of progression over 2025, so what I'll say is, we ended last year at 14%, and we've said approximately 150 basis points. So if you assume that progression doesn't happen overnight, right? And it's over time, which is why we've talked about it over the 3 years. We haven't given specific guidance for current year as well. But I think this gives you a flavor for where we started and where we're going and what that curve looks like. And I think if you follow that curve, that's a good feeling for the direction that we're going to go. You shouldn't expect a step function and then flat or anything to that nature.

And then added-value lighters Chester, then I can complete.

So that's our -- we do know that value-added lighters obviously come with higher margins as well. We are driving that. We've had great success with our decor lighters that we've introduced and including different countries have had very particular to their country, decors, for example, if you go to Brazil, you'll see lighters with Rio and the various locations of Brazil there. So that's been a driver. Of course, we also have to factor in that these lighters are at a higher margin because they're also at a higher price, and so we need to make sure that we are competitive as well with the rest of the industry. So we remain committed to the goal of driving value-added lighters. I'm not sure exactly about what percentage we -- when we will achieve that 50%.

Sebastian from [indiscernible].

Just 1 second. It's not turned on.

[ Sebastian ] from [indiscernible]. You mentioned free cash flow and you already got a strong balance sheet. You didn't mention much on capital allocation and especially acquisition. Have in mind the Stationery business should -- especially competitive landscape should evolve the coming years? What are your plans, big deals, small deal turnaround, complementary deal?

One question? Okay. Great. Thank you very much for your question. So our use of cash policy is very clear. And let me reiterate it. One, we invest in the business. Roughly that's CapEx, and we, as Chad said, our goal is an average of 100 a year, sometimes a little bit more, sometimes a little bit less. One of you will probably ask me, but why more, why less? So I'm going to preempt the question and say that a lot of that has to do with research and development. When we're in a big research into development, into the launch of EasyRinse cycle, the number goes up. The year after that probably goes a little bit down and so on and so forth. But 100 million of investment in the business. Then we said, on average, 100 million of M&A a year. Now for those who have been keeping score, we have not met that track record in the last 2.5 years. And as you heard Sara said, we have not rushed in to growth. We've been very diligent. I know you and your team sometimes have been a little bit frustrated because we did a lot, a lot of work and at the end either we met financial metrics, after due diligence that didn't fit our financial criteria or we found something else. And that's the importance of due diligence. We're absolutely committed to deploying that capital on the right targets that fit our business model, the way we want to look at the future and in those growthy businesses for the future. The size is going to depend on the opportunities. But today, we're looking at a little bit bigger than we've done, without being completely transformational for the business.

P Yes, Christian Devismes from CIC Market Solutions. I have 2 questions. The first is a very quick question. Just to check about the annual sales growth, do you include -- is it a constant perimeter? Or do you include more acquisition? And if you include some of the acquisition, could you talk a bit about that? . And the second question is about the adjusted EBIT margin guidance for 2025. So it's true. It's 150 basis points above 2022, but it's 150 basis points below 2019. And so 2022 is a very low point in the history of BIC, in term of margin. So could you explain a bit what are the element which pushed down the margin? I don't know, raw material change in the mid, huge investment in R&D, in people, in brand, but is it a normative profit for BIC, 15.5%? Or could you expect improvement in the year after?

Okay. So let me start with net sales growth. Yes, that's at constant currency. And right now, we don't contemplate any new M&A. So everything that we have in our portfolio today is part of that, but no new M&A, okay?

Which doesn't mean we're not looking at it, but we can't we're not forecasting it for you.

And the second is your adjusted EBIT margin below 2019. So I'll start and maybe Gonzalve, you might want to tack on at the end. The first thing that I've talked about often is, I'm just going to take last year as an example from a margin perspective, and this is the whole price versus inflation. So we've talked openly about 100 -- over 100 million of inflation last year. And if you look at our business, which roughly has a 50% gross profit margin, and you applied that 100 million of inflation on that, that's 280 basis points of margin -- or 560 basis points of margin degradation, just from the cost, right? Going up. And if we could have matched that with 100 million of price last year, which we, of course, couldn't match that level. The impact on the calculation of margin rate would have still been 280 basis points. So that and of itself, that 1 year of inflation is 280 basis points on a margin impact, right? Now that being said, us transforming our business, from where it was before and to go through everything that's happened in the market in the world today, to go from a company that was probably low single digits declines, to a company that's now mid-single-digit growth, it requires investment. And I think you've heard today about all the things we've invested in with our RGM, with our e-commerce, with our global supply chain team, with our M&A. All of these capabilities required investments that are in the long term, getting us 5% to 7% growth, and we're going to get accretive margins going forward. So I think that that's an investment that we're very proud that we've made and is paying off.

So I will -- because he invited me, so I will tag on. I think when I started, I said we launched Horizon because we were at the end of the sigmoid curve of growth. Well, we were in decline, let's face, right? So in part, yes, we reached very high margin levels that a lot of people really liked, but that decline, if we hadn't made the changes, would have been much worse. And we wouldn't have grown EUR 600 million of sales. And so what we have done is to build an algorithm that works for us. Do I target higher? Of course, in the long term, I target higher, by launching more new products at higher margins, by improving the margins through value engineering, network optimization, RGM work. And back to your question, Kate, I think we've done, Chester and his team have done a fabulous job on elements of the RGM mix. But on mix specifically, I think we can do better in the years to come. That in CPG land takes time. It takes to your point, dedication. It's quite easy to do the PowerPoint slide. It's quite easy to roll out a policy and do an e-learning, then it's about making sure that every day, we're rigorously switching products out, changing press pack architecture. So that's the long term.

[indiscernible]. So I have 2 for you. The first one is on the consumer. Could you talk about consumer behavior in the context of the cost of living crisis, basically consumer has been trading down. Have you benefited from that? Could you give some example maybe in the main regions? The other one is about what you touched on the regionalization of your supply chain. I want to link that to the fact that for 4 years, there's been a mismatch in terms of your cost in euros, revenues in dollars. Is there a future where there will be no or only incremental mismatch, because of the efforts that you are taking on in terms of regionalizing the supply chain?

Maybe Chester, do you want to start? Yes, please?

So there's no doubt that the consumer is stressed right now. They've been stressed, first with the pandemic, then with supply constraints and not getting all the products and right now, with inflation. If you look at the last couple of years, then overall, CPG prices are up about 18%, and that obviously takes away from even the pandemic savings that they had. So we have a consumer that's, that's certainly more stressed. They're making smart choices. We believe that plays to our strengths, because we are the value but smart choice for the consumer. The key for us is to make sure that we are communicating that to our consumers, through our communication, through our in-store presence as well to take advantage of that -- the fact that we will always stand for great value and a smart choice to be made. It's not for granted, though. We have to make sure that we make the marketing effort to drive that home to the consumer when they are obviously in a mental state, which is difficult. That also needs to get reinforced online. A lot of consumers are doing research online to find the lowest price, et cetera, as well as research products, and we want to make sure we're winning. That's why that important investment in search, that we talked about was so critical as well.

And in regard to the regionalization and our costs, so we sell in 160 different countries, right? And so we are a global company. So FX will always be an impact to us. But what we try to do is take the big currency. So the U.S. dollar, euro, for example, we hedge, right? So we tell everyone we hedge this year about 370 million euro dollar, and we do that. So we have what a consistency or a known amount of cost that we're doing operationally between where we're getting material and where we're producing and where we're selling. As we do more regionalization, you bring it closer to, you'll have less flows, back and forth. So you might have less. But at the end of the day, where our sales are, if there's a majority of sales in the U.S., we'll continue to hedge between the currencies.

Alessandro from Kepler Cheuvreux. I just had 1 question on your activities in India. Maybe if you could provide us with an update on that and which, if I'm not mistaken, there's still a drag on your margins. And I was wondering if an improvement in those margins were factored in your 2025 targets?

So the answer to the second last part, which is, is it baked in? Yes, everything is baked in, but then I'll let Chester, who's very close to the topic, tell you about our operations in India and the evolution. Because there's a lot to be proud of, even if it's still a difficult context.

So the India market for us has been challenging, as you well know, for many years. We are very proud of where we are today, which is well on the path to a breakeven opportunity by next year. So that's where we are focused on. We, for example, consolidated some of our factories in India, to be able to get better leverage from that. We've made difficult choices with our structuring. And we are also obviously focused on driving growth in a market, which is a high-growth market for the Stationery category, the Human Expression category, which is where we currently operate in India. So our margins and profitability this year will improve versus previous years, but will still not be at the breakeven level. And then next year is when we expect that we will get to that breakeven level.

[indiscernible] Finance Connect. Just 2 questions. Raw materials, right now, it was an increase. It seems to be stabilizing. How do you feel in front of this point? And how do you see the future for 2025? And my second question is, I know the company since a very long time. And for quarter-on-quarter, you have 1 campaign in -- for market advertising for -- to launch a product. So the operating margin is going down on this branch for this quarter. How do you manage this problem? And what is the weight of marketing and promotional cost in each of your branch, if it's possible?

So I'll start on raw material stabilizing. So definitely, I'll go back to what we saw last year. It was brutal, right? The cost inflation of over 100 million. And what we said is this year, the impact was in the first half of the year, because as we've talked about, we buy materials at the end of the year, so you're getting that impact and it flows to our P&L for the first 6 months. But the second half of the year is where we're seeing a lot of the favorability, because the products that we bought in the first half are much better pricing than what we had before. So all in all, it's not that we're seeing obviously deflation, but we're seeing much, much less of an impact from material cost inflation this year than last year. So we make the best estimates. So we have a very experienced procurement team, and they do the best to forecast, right, the markets. and we put those kind of assumptions in there. But we aren't giving guidance on inflation for 2 years out, because we make the best estimates we can.

So Dr. Byron Sharp, one of the leading marketeers, is fond of saying that, what sales you get today is because of the advertising you've done for the last 20 years. And so we have to, of course, invest in our brand building and we are, but we are very conscious about making sure we do it in a way that drives ROI, in a way that converts consumers today, not just drives awareness but converts consumers. And we are obviously making sure that we are also competitive in the categories in which we operate. So we spend more brand support behind great innovation like EZ Reach, when we have it. But the Blade Excellence category is also a category in which we obviously see a lot more advertising relative to, for example, Lighters, where the industry doesn't spend too much on marketing. And so we don't spend as much, but we do when we have a great innovation like EZ Reach which is -- it's a tremendous opportunity to get our message across to consumers, as I talked about.

I think what I would add, just so that you understand how we operate globally and EasyRinse, the launch of EasyRinse, the shaver is really important. So you launch and you're building distribution, building distribution, let's take a market like the U.S. could take 6 to 9 months till you get to 85, which is the critical number that you're trying to get to. But you have to launch your advertising in that first quarter, because that's what drives people there so that -- and I mean I understand. So in that first year, you get that WACC. But as you heard both of them say that investment is actually something we should all be thrilled about, because it means we've developed the breakthrough innovation that's going to fuel growth, not for 2025, but for the years to come.

Is it possible to have an idea of even the global idea of the cost of marketing and support to the?

Think of it as each of the businesses, as Chester mentioned, are relatively different, right? So in Lighter, we have nobody against us. So really, that's only going to happen when there's a big launch. Conversely, on the other hand, we have 2 very big global competitors, who invest massively in advertising. So that's going to be a higher percentage. And that's the only detail I can give you. All right. Well, since there are no more questions, thank you so much. Again, we sincerely appreciate your support and interest in the company, and we look forward to speaking with you as early as tomorrow, but no later than our third quarter. Thanks very much, and have a great afternoon.