Robin Tickle - Head, Corporate Media Relations Paul Bulcke - CEO Francois-Xavier Roger - EVP & CFO Wan Ling Martello - EVP & Head of Zone Asia, Oceania and Africa

James Targett - Berenberg Eileen Khoo - Morgan Stanley Jean-Philippe Bertschy - Vontobel Ralph Atkins - Financial Times Adam Spielman - Citigroup Jon Cox - Kepler Celine Pannuti - JPMorgan Alain Oberhuber - MainFirst James Edwardes Jones - RBC Warren Ackerman - Societe Generale Jeremy Fialko - Redburn

Good morning ladies and gentlemen and welcome to our 2015 full-year results conference here in Vevey. The conference will be held in English but you can also follow it in French or German using the headsets. If you're watching the webcast you can choose the right language by clicking on the respective webcast page. On the podium we have our CEO, Paul Bulcke and our CFO, Francois-Xavier Roger and we also have the members of the Executive Board and the COs of Nestle Health Science and Nestle Skin Health. I take the Harbor statement as read. Now let's start. Paul, you have the floor.

Well, thank you, Robin and good morning ladies and gentlemen. Welcome to our 2015 full-year results conference. First of all, I want to thank you for your presence here and I want to also extend a warm welcome to those who are following us, this conference, through the webcast. Thank you all for your interest in our Company, in Nestle. You all saw the results of last year which we published this morning and let me briefly give some comments on these figures. On the back of consistent performance in previous years, we were able to deliver in 2015 profitable growth which is at the higher end of the industry and this in what is still considered a challenging environment. With softer pricing, our organic growth of 4.2% was supported by increased momentum and real internal growth and was also combined with continued margin improvements. Additionally, we grew or maintained market share in the majority of our categories and markets. It is important to note too that at the same time we continue to invest for the future, with increased support behind our brands and further development of our new platforms in nutrition and health as well as further development of ecommerce. We also kept up the focus on portfolio management, turning around, among others, our frozen food business in the United States, disposing of non-core businesses and forging a new partnership to create a leading player in ice cream. Our free cash flow was at the top end of the food industry, at 11.2% of sales. This was a result of our focus on margins, with discipline in capital expenditure and working capital. And as such we propose to increase the dividend, again like we have done now for the last 20 years. Now for 2016 I anticipate the same trading environment, the same challenges, even maybe softer pricing. And as such I expect Nestle to deliver organic growth in line with 2015, with improvement in margins again and underlying earnings per share in constant currencies and capital efficiency. But now, without further ado, let me hand over to Francois for a more detailed look into the results of 2015. Francois? Francois-Xavier Roger: Good morning everybody and thank you, Paul. As usual I will discuss the key point of our performance before we open the lines for Q&A. Our environment in 2105, as you know, has been volatile, with three key main developments, an economic slowdown in emerging markets, deflation in large part of the developed world and an erosion in commodity prices. The last two items have translated into a lower level of pricing, especially in the latter part of the year which we expect to continue throughout 2016. In that context we're satisfied with our industry-leading growth of 4.2% which is made of a healthy balance of RIG at 2.2% and pricing at 2%. We're particularly pleased with the acceleration of our RIG throughout the year from 1.4% in Q2 to 2.7% in Q4. And we're happy to report that we grew or maintained our market share in the majority of our categories and markets. Group revenues reached CHF88.8 billion in 2015. The strength of the Swiss franc impacted sales by minus 7.4%. Our organic sales growth of 4.2% has been achieved while we also improved our trading operating margin by 10 basis points in constant currencies which is fully in line with our guidance and with our expectations. We're satisfied with this profitable growth that has been achieved while we invest, increase investment in the future, in marketing, in ecommerce, in R&D and in NBE. At the same time we have also absorbed the impact of exceptional event, such as Maggi noodles in India. The Group's free cash flow stands at 11.2% of sales and shows our capability to deliver industry-leading cash flow which has been achieved through disciplined CapEx and working capital management. Finally, our underlying earnings per share increased by 6.5% in constant currency. I will now go through some of the details of our results, starting with the performance by geographies. Looking at our three zones inclusive of our globally managed businesses, growth was broad-based, with positive momentum across the board. Americas finished with good organic growth of 5.8% and RIG was also solid at 2.4%. EMENA showed again an impressive resilience in a difficult environment. Organic growth was 3.5%. And we're pleased with our RIG of 2.8%. AOA improved in Q4 in both organic growth and RIG, finishing the year with 1.9% and 1.2% respectively. As mentioned before, the noodle withdrawal in India has weighted on the zone performance. Looking at our sales between developed and emerging markets, in developed markets which represent 57% of our total sales, we saw an encouraging acceleration year on year to 1.9% OG. We're pleased with this momentum which is driven entirely by RIG and which demonstrates our capacity to drive growth through innovation even in difficult circumstances, like moderate economic growth, population decline even in some instances and deflation. Emerging market which accounts for 43% of our sales, have seen some marginal deceleration to 7% OG. This represents a solid performance in the context of well-known economic challenges, particularly in large markets such as Brazil and Russia and, to a certain extent, China. Now turning to the results by our reported zones and globally managed businesses and I will start with AMS, Zone Americas achieved good organic growth of 5.5%, of which 1.6% was RIG. Briefly touching on the macro environment for the zone, it is fair to say that we have seen very little improvement in consumer sentiment in North America over the past year. Latin America, on the other hand, is mixed, but Brazil, Argentina and Venezuela are particularly challenging and will likely remain so in 2016. In this context we were pleased to see growth in the zone, gaining momentum as the year progressed and we made very encouraging market share gains in most markets in both North and Latin America. In North America organic growth increased in 2015 by 120 basis points, largely led by the turnaround of our frozen food franchise. The innovation and renovation behind Lean Cuisine, Stouffer's and Hot Pockets have all been well received. Pizza has also seen accelerated momentum. Overall our U.S. frozen food franchise delivered positive organic growth in the second half of the year, with mid single-digit RIG. Results so far in frozen food are justifying our portfolio management approach to put investment back into this business. Moving on from frozen food, Coffee-mate remains a strong driver in our portfolio. This billionaire brand brings constant renovation of flavors and packagings and delivers accretive growth. Petcare in North America continued to grow, with strong performances from Fancy Feast, Purina ONE and cat litter in spite of some pressures with the Beneful range. Moving to Latin America, we saw good performances in many countries in a volatile environment. In spite of a recession in Brazil, our business achieved positive growth in both value and volume. Nestle soluble coffee, KitKat and Nesfit biscuits were clear growth drivers. Nestle Dolce Gusto is growing very strongly and our recent investment in local production will support our profitable growth in the future. Mexico delivered good growth across the entire portfolio. Petcare in South America continued its good growth momentum across the region, benefiting from expanded capacity in both Argentina and Mexico. The zone's improved profitability, with 80 basis points of trading operating margin expansion to 19.4% is based on strong delivery of operational efficiencies and reduced input cost which enabled us to increase investment in consumer-facing marketing support. Turning now to zone EMENA, the zone faces a diverse mix of external challenges, with deflation in Western Europe, currency devaluation and inflation in Eastern Europe and political instability in the Middle East as well as in North Africa. In that context organic growth of 3.7%, including RIG at 2.5%, represents a positive result driven by volume. The major part of the growth came from three product areas. Firstly, Nestle Dolce Gusto has maintained double-digit growth 10 years after its launch and is close to being a billionaire brand in EMENA alone. Petcare was the second largest growth driver for the zone and we improved our market share in 19 out of our 20 largest markets. The growth is driven primarily by Felix, ONE and Pro Plan. Lastly, Nescafe soluble coffee accelerated its growth, with good momentum in the Middle East and in Middle East and Eastern Europe, while premium offerings are doing well in Western Europe. The other highlight was a solid performance in frozen pizza. If we look at the three main geographic areas within EMENA, in Western Europe we experienced negative pricing but good RIG and positive organic growth overall, driven essentially by innovation and premiumization. In Eastern Europe we're pleased with our performance in Russia, with double-digit organic growth and positive RIG in a very challenging context. Our moderate pricing strategy has proved to be effective and enabled us to stay relevant to consumer and therefore to grow volume and market share across categories. The Middle East and North Africa have been affected by political instability, particularly in countries like Syria, Iraq, Yemen, Libya which makes our performance with positive growth even more satisfactory. On a more positive note, Turkey has been a highlight, with strong performances across our portfolio. We're happy with the zone's trading operating margin improvement of 50 basis points. This came as a result of careful pricing and significant cost reduction which were partly reinvested in promotional and marketing activities to generate growth. Moving to zone Asia, Oceania and sub-Saharan Africa or AOA, we finished the year with positive organic growth of 0.5% which represents a meaningful improvement in Q4. The improvement in the zone's performance at the end of the year was largely driven by a better performance in China. We have regularly flagged China's volatility and we believe that this will continue throughout 2016. China has delivered positive organic growth both for the zone and on an in basis which means including our globally managed businesses. Progress has been made with product reformulation, launches and execution improvement with Shark wafer, with coffee, with ready-to-drink beverages and Hsu Fu Chi, where results have notably picked up. Ambient dairy as a category continues to be soft in China and Yinlu has weighted on the zone's growth. As far as Yinlu is concerned, we will pursue innovations, better answering consumers' needs on healthy lifestyles. Moving to India, at zone AOA level, the absence of Maggi noodles from the shelves from eight months impacted organic growth by around 170 basis points and also impacted our trading operating margin by around 80 basis points. The good news is that production restarted in November and we're now back on the shelves. All five of our factories are now up and running, although not at full capacity yet. Consumer acceptance is encouraging and we're supporting the brand with marketing investment. Please remember that we will continue to see negative year-on-year results for Maggi noodles in India in H1 2015 and possibly, to a lesser extent, in the later part of the year. Elsewhere in emerging markets within AOA, growth remained positive overall but with a broad-based deceleration, reflecting the slowdown in many of the economies, like the Philippines and sub-Saharan Africa. Developed markets also delivered solid results, with another year of impressive mid single-digit growth from Japan, driven by innovations in KitKat and Nescafe. Japan has really been a success story for Nestle and is a great example on how to grow through innovation and premiumization in a deflationary environment. Oceania also grew with a much improved performance. The zone's trading operating margin declined by 80 basis points to 18.4%. It's largely explained by the Indian noodle impact. Moving now to our globally managed businesses, we will start with waters. Waters has delivered another strong year of organic growth of 6.8%, driven entirely by RIG. The trend towards healthier hydration is dynamic, driving robust category growth. Consumers are increasingly drinking water over CSDs and other sugary beverages. And our balanced portfolio and footprint of international brands and leading local brands means that we're growing in all categories and geographies. Our billionaire brand, Nestle Pure Life, has seen double-digit growth, whilst the international premium brands of San Pellegrino and Perrier are achieving high single-digit growth. Major local brands such as Buxton in the UK, Poland Spring in the U.S. and Santa Maria in Mexico are also making strong contributions. In addition to the sustained top-line momentum, trading operating margins have also increased significantly by 110 basis points to 10.8%, thanks to volume leverage and operational cost discipline. Part of the savings that we made on input cost and especially on BT have been reinvested behind the brands as we remain focused on growth. Waters has seen an impressive development in the last couple of years. It is now accretive to sales growth, accretive to margin improvement, to ROIC and cash flow generation for the Group. As we look ahead to 2016, we're confident that RIG can sustain a good momentum, but pricing will continue to be negligible. Moving now to Nestle nutrition. Overall nutrition remained solid, with 3.1% organic growth. But this was a deceleration from previous year. The lower growth reflects a combination of factors which includes moderate pricing due to lower dairy cost, volatility in the Middle East and Russia, economic pressure in Brazil and some moderation in category growth in Asia. Our infant formula and gums business saw solid growth. There was good momentum from China, although at a lower level than in previous years as the category softened. Wyeth's infant nutrition remains a key driver via its premium brand Illuma which benefited from some reformulation towards the end of the year. Sales of Illuma now exceeds CHF600 million in China alone despite only being launched five years ago. Baby food was also solid, with broad-based growth across its results. Infant cereal did well, with strong market share gains across all markets, particularly in the U.S., in China and in Eastern Europe. Meals and drinks also contributed positively. Overall, nutrition's improvement in profitability has been achieved alongside a meaningful increase in our investment behind the brands. The margin expansion of 110 basis points was driven by strict control of fixed cost, lower milk prices, less restructuring and some portfolio management. Moving now to our final reporting segment, other businesses which as you know contains Nestle professional, Nespresso, Nestle health science and Nestle skin health. We achieved 5.3% organic growth and 3.7% RIG. Nestle professional growth was solid, driven by emerging markets, particularly in AOA. The focus remains on the strategic platforms of food and beverage solution. Developed markets remained weak, especially in the U.S. As a reminder, we completed the divestment of Davigel at the end of November. Moving to Nespresso, growth remains good, with solid delivery across all regions. The growth rate has slowed in Europe, where the business is more mature and the base is larger, but this is being entirely offset by greater contribution from North America and Latin America. Nestle health science delivered another good year of accretive growth to the Group, driven by RIG. Consumer care which is the first part of our business, enjoyed a solid growth. Our key brand, Boost, grew over 20%. And Carnation Breakfast Essentials also grew double digit in the United States. The rollout of the Meritene range across Europe also supported growth. Our second sub-division, medical nutrition, saw good results in the allergy portfolio, particularly in China. And our third leg, novel therapeutic nutrition had a more challenging year, with generic competition impacting Lotronex and we have now sold Lotronex. Meanwhile, we're optimistic about the long term potential of our recent investment in Seres, a leading microbiome company, for which we have acquired the marketing rights for four of their main products outside of the United States. Nestle skin health achieved good double-digit growth, also accretive to the group, in spite of the rebate adjustment that we took in the third quarter. Esthetic and corrective and self-medication with the Cetaphil brand achieved very good growth through a combination of innovation and geographic expansion. However, the prescription business faced pressure from some generic entrants in the U.S. and in Europe. Overall, the other business segment has seen a margin contraction of 330 basis points, mainly impacted by skin health which saw increased investment behind innovation and geographic expansion, as well as some impact from the pricing adjustment. There is also a dilution in impact from the consolidation of skin health for the full year compared to just the second half of 2014. Aside from skin health, Nespresso margins have experienced some pressure, coming largely from the foreign exchange, with its fixed cost base in Switzerland. Next we briefly turn to our performance across our product categories and I will start with powdered and liquid beverages which is essentially coffee. We finished the year with organic growth of 5.4%. RIG remained very satisfactory at 3.1%, but pricing softened in the latter part of the year. Overall, the good performance was driven by Nescafe soluble coffee, all of our coffee systems and ready-to-driven beverages. The sustained double-digit growth momentum of Nescafe Dolce Gusto is particularly pleasing as it gains further penetration in its original markets and as it continues to expand internationally. Nescafe Dolce Gusto has a leading presence in over 80 markets which makes it the most global coffee system. The margin decline of 180 basis points was mainly due to the impact of the strong Swiss franc on Nespresso and higher input cost in green coffee, largely linked to our hedging policy. We also increased our marketing investment, particularly in AOA, to help strengthen our brands. Next is milk products and ice cream. This product group which includes ambient dairy, ice cream and creamers, delivered both positive growth and margin contribution from all three segments. Organic growth has decelerated to 1.7% which is due to reduced pricing coming essentially from lower dairy prices. The trading operating margin improvement of 180 basis points reflects not only reduced input cost across the segment, but also a favorable mix and optimized distribution in ice cream. This increase has been achieved whilst also reinvesting back into the business. Next is prepared dishes and cooking aids. Organic growth for the year was positive at 0.1% with negative RIG. This business segment has obviously been impacted on RIG and OG from Indian noodles which we discussed earlier. Margin increased though by 40 basis points, driven by frozen food in the U.S. which benefited from volume leverage, lower input cost, as well as better structural cost absorption. Confectionery delivered a good organic growth of 6.2%, driven largely by pricing in emerging markets, like Brazil and Russia. China has seen a significant improvement year on year, with Hsu Fu Chi and Shark wafer driven by innovation and renovation. KitKat, our global billionaire brand in the category, sustained its good growth momentum in most countries and accelerated year on year with organic growth in high mid single digit. Margins in confectionery improved by 20 basis points this year, with a modest tailwind in cost of goods thanks to the pricing we have taken which has also allowed us to step up our marketing spend. I will finish the category review with petcare which has had another good year of organic growth, accelerating to 5.9%, comprising solid 3.5% RIG. Europe and Latin America continue to be growth drives in the category and are major success stories for the Group. As you know, we have added capacity in both Argentina and Mexico this year and this will help us to sustain our momentum in 2016. Petcare margins improved 100 basis points, driven by positive pricing along with favorable input cost thanks to a decline in corn and soybean prices. Looking now at our trading operating margin, as you can see from the chart, we increased margin by 10 basis points in constant currencies. Foreign exchange had a 30 basis points negative impact, mainly coming from the appreciation of the Swiss franc. This has resulted in our reporting operating profit margin finishing down minus 20 basis points at 15.1%. At Group level, the impact from Maggi noodles for the full-year organic growth is around 30 basis points and on trading operating margin it lies between 10 and 20 basis points. Let's look at our margin drivers. Cost of goods have decreased materially this year, resulting -- representing a 160 basis points improvement. The full-year impact of the consolidation of skin health contributed to around 20 basis points of this improvement as skin health brings a different P&L structure, with lower cost of goods but higher SG&A. Lower input costs have also helped, although only modestly. The decrease of our basket of commodities represented a saving of about CHF300 million in 2015 versus 2014. This benefit from commodity prices might be lower than some of you have been expecting but, as you know, there is a timing difference between the time we buy commodities and their P&L impact and hedging may also delay the impact of market pricing in our P&L. The rest of the improvement in cost of goods mainly reflects the benefit of price increases we took, combined with favorable product mix and operational efficiencies. Then, as you can see from the chart, we have reinvested these cost of goods savings with a significant step up in marketing and brand support. In total our increase in marketing and administration spend represents an investment of 170 basis points. Approximately a third of this marketing and administration increase actually relates to the full-year impact of consolidating skin health. The rest of the increase which is around 100 basis points, comes from a 12% increase in consumer-facing marketing spend in constant currency with a specific focus on digital. R&D also increased slightly, finishing at almost CHF1.7 billion for 2015. And finally, the decrease in net other trading expenses of 20 basis points comes from lower litigation and restructuring expenses. Next is a summary of our operating profit and earnings. Net other expenses have fallen because 2014 included a CHF1 billion goodwill impairment related to our direct distribution in the U.S. Our underlying tax rate is 27.6%, in line with our guidance, slightly higher than what we had the year before. Income from associates and JVs has reduced as we recorded the one-off income from the L'Oreal and Galderma transaction in 2014. We now have a lower stake in L'Oreal which means that we now receive a proportionally lower share of their profit. Our underlying EPS increased 6.5% in constant currencies, fully in line with our guidance and expectations. The Group's free cash flow remains strong at CHF9.9 billion. Although this is lower than in 2014 when we booked the proceeds from the partial disposal of the L'Oreal stake, amounting to CHF4 billion. Stripping this out, you can see that we have increased our free cash flow as a percentage of sales from 10.9% to 11.2% in 2015. Now let's look at the drivers of this improvement in cash flow generation, starting with working capital. We have been putting a lot of focus on working capital in recent years, with progress in both inventories and payables, enabling us to deliver a working capital cash inflow of close to CHF1 billion in 2015. As a percentage of sales, based on a quarterly average, not only of the year-end value, based on a quarterly average, you can see that we have made strong sequential progress in reducing total working capital by almost half over the past three years, from 8.5% in 2012 to 4.7% in 2015. We can do more and we will continue improving on this front. We have also remained disciplined when managing our CapEx, broadly holding at the same level as last year, with absolute spend of CHF3.9 billion at 4.4% of sales. This is fully consistent with our strategy to remain disciplined with our CapEx while supporting growth. In 2015, as examples, we have opened our third Nespresso factory in Switzerland. We have inaugurated our first Nescafe Dolce Gusto factory outside of Europe, in Brazil. We have opened new petcare factories in Poland and Mexico to support the strong demand in those regions. And we have also upgraded our product technology center for frozen food in the U.S. Moving to net debt, the Group's net debt increased by CHF3.1 billion from CHF12.3 billion to CHF15.4 billion during the year. The increase was driven by our CHF8 billion share buyback program over two years which we completed in December and for which we spent CHF6.5 billion in 2015. Our dividend amounted to CHF6.9 billion this year, increasing again over the previous year, as it has been the case over the last 20 years. These two items illustrate our commitment for returning cash to shareholders whilst maintaining the appropriate capital structure. We have returned to our shareholders CHF13.4 billion in total during the year 2015. In summary, we're satisfied with our organic growth for the year at 4.2% in the context of a challenging trading environment. In particular, we're happy with our RIG which is showing sequential acceleration and has allowed us to gain and maintain market share across the majority of our categories and markets. We have grown our margins in constant currencies in line with our guidance while absorbing some significant headwinds which shows the strength and the benefit of our diversified portfolio and whilst materially raising our spend in consumer-facing marketing. Our free cash flow generation has remained strong thanks to an improvement in working capital and thanks to a continued discipline on CapEx. And once again, we have raised our dividend, maintaining this track record of increasing it in each of the past 20 years, even in spite of the regular strengthening of the Swiss franc. Finally, Paul has already shared with you the guidance for 2016 so I won't repeat it. I will emphasize though the point that the current environment allows for some limited pricing in developed markets. I would also like to highlight that the delivery of our growth in 2016 might be slightly more uneven from quarter to quarter than you are used to. Especially Q1 will be impacted by unfavorable comps from India mainly and growth is expected to be soft as a consequence in Q1. With that, I have concluded the summary of our financials for 2015 and I will hand back to Paul.

Okay. Thank you, Francois. And, well, ladies and gentlemen, that was 2015. Let us now look and talk about 2016. And, as I mentioned before, I don't think 2016 is going to be much different from 2015. It is going to have the same uncertainty, the same challenges like 2015. But this is not new. Dare I say, we have seen that before. We have been there before. And it is exactly in such an environment, exactly in such an environment that it's even more important to keep disciplined execution behind a compelling strategy. Our strategy of nutrition, health and wellness, a strategy that really differentiates us as a company and that brings us really the base for profitable growth. And in that sense even -- and even more so in 2016, it's important to do, firstly, to keep focus on what works, keep focus on the businesses and the brands that are performing well. Secondly, that we continue to support the turnaround of businesses and brands that we believe in and brands with opportunity, but which are or were challenged. Thirdly, that we combine this with embracing and looking for new opportunities, like digital and ecommerce. And lastly, but definitely not least, is that we keep being sharp on cost so that we can put the necessary resources behind what really drives profitable growth for the future. Let me first go to the first point, keeping supporting the brands that are doing well. We have many strong brands. And it is about permanently maintaining the relevance of these brands through innovation, through renovation, through brand support, communication, distribution and even also expanding them geographically where it makes sense. And Purina is an example, a very good example of that. Purina has worked so well for us in its home market, the U.S.A. And we have successfully rolled out that brand and portfolio strategy that works well in Europe, in Latin America and in other parts of the world, allowing us to gain market share almost everywhere or KitKat, an 80-year-old or young brand, would I say, that is growing almost double digit still. And that allows consumers to have a break in now more than 80 countries around the world. And then we have Nescafe, that continues to reinvent itself, now with Nescafe Dolce Gusto. Not existent that brand 10 years ago, but today, an over CHF1 billion business, present in around 80 countries and more countries to come. And speaking about coffee, there is a lot happening in the coffee world. And coffee is important to us, you know that. It has been a very strong, important part of our Company for over 75 years now. And we're uniquely positioned in this market with two very strong brands, Nescafe and Nespresso, with each a very clear and distinctive strategy and positioning. With Nescafe and Nespresso we're covering the different consumer occasions and segments, from mainstream to premium to luxury, accessible luxury, I would say. And with Nescafe and Nespresso we have been inventing and reinventing the coffee category. And we have the intention to continue doing so in the future and lead in this fascinating competitive growth category. We have the plans in place to accelerate here. I spoke also about categories that we believe in, categories with a lot of potential but which are perhaps challenged, brands which have to connect or reconnect even with the changing, fast-changing consumer expectations. And our frozen food business in the U.S.A is such a good example for that. We're turning this business around, with promising first signs. We have relaunched our brand Lean Cuisine. We have relaunched Stouffer's, Hot Pockets and DiGiorno. We have adapted the entire market mix and especially the products themselves to be able to respond to the consumer expectations for organic, natural, low-fat, low-sugar, tasty product, high protein etc. This strategy is bringing consumers back to the category. It's bringing back to our brands these consumers in a very remarkable way. And the same works for us in China. We have invested substantially in China over the last years. And the economy in China has grown slower the last few years. We know that. But GDP remains robust and it is moving from investment-driven expansion towards private consumption. That is what touches us. It is clear that China has been and will remain an important growth driver for us. Mind you, Nestle has never stopped growing in China. Even in the last couple of years of slow growth, Nestle always has grown in China. And looking forward, we're confident in our ability to accelerate our growth progressively and sustainably. And we have a very solid structure in China. We have ?- and that is led by experienced and motivated teams, combined with a strong product and brand portfolio of local and global brands together. And here again, consumer expectations have been changing. I can tell you they have been changing very fast. And also here we're connecting our brands with these expectations. We have also here again clear signs of promising growth acceleration. Acceleration is already a fact in a number of our categories. In confectionery, for example, with Hsu Fu Chi and coffee with new launches, Nescafe soluble coffee and ready to drink and also for this year there's a robust innovation pipeline coming onstream for Yinlu. It is also about understanding the importance of route to market in China. To cover the entire consumer landscape, from PPP to mainstream to premium and adapting to the new channels offline and online. And talking about online channels in China, ecommerce is of extreme importance and we have heavily engaged with this. And already 50% of our sales in petcare goes via ecommerce in China, 30% in coffee, 30% also infant formula. And last year, for example, alone, our ecommerce business in China almost doubled. And this will remain a key growth driven also in the years to come. And that actually brings me then in general to digital. It's my third point, to embrace the new opportunities that are there. And in 2012 I have been very explicit about our commitment as a company to digital. And I made it one of our priorities on Group corporate level for this Company. And since then we have moved fast. And we have embraced digital in very different ways and dimensions. And first in social media, where we have attracted and built digital talent throughout the whole organization, specifically on listening and engaging in social media conversations with consumers. And we have driven that and rolled it out throughout the whole organization in many, many markets. We have done the same with ecommerce. We already have a long standing in-house expertise via Nespresso. The business model of Nespresso is actually e-based. We deployed one Group-wide e-business strategy that embraces digital marketing and ecommerce at the same time. It is inducing permanent learning and execution in this fast-moving area everywhere in our Company. We have rolled out this strategy together with clear roadmaps in already more than 20 of our most important markets with concrete structures and engagements. We're working with our partners, such as retailers, as well as pure players like Amazon, Alibaba and others. For us, if we were to consider ecommerce, as such, in Nestle as a market, it would already be a top-five market in sales for us. So it is substantial and it is important and it is accelerating in growth materially. It is growing fast. But there's so much upside. Our brand strength offline is not yet truly reflected online. So we have a motivation there. And now an extremely important point. We strongly focus on costs, operational and structural cost or should I say resources actually? To have -- to be able to put the resources behind the things that matter, the things that drive, create profitable growth. And we at Nestle have always focused on cost on a continuous basis, hence our Nestle Continuous Excellence. Nestle Continuous Excellence involves now already for many years all employees, all 335,000 of them, constantly looking at cost, looking for efficiency in their immediate environment, driving waste out, going for zero. It is a permanent effort that has been instilled into our minds and our organization, as such. And yet considering what is happening out there, we want to intensify that. Nestle Continuous Excellence is more relevant than ever. This is also where Nestle Business Excellence comes in, Nestle's back line setup which combines Nestle Continuous Excellence efforts and structures and mindsets with globe and our shared services. How can we better leverage our scale and skills? How can we standardize? How can we share? How can we, in the end, simplify even more and serve us better the generic demand I mentioned, the frontline of this Company? I have high expectations on the constant delivering of these initiatives to enable us to have the necessary resources to continue growing at the higher end of the market and to continue to invest in the future, like we have done already last year and we continue doing that this year and in the future. Ladies and gentlemen, to sum up, this is fundamental logic of discipline and execution behind our strategy of nutrition, health and wellness, combined with, first, supporting what works. Second, turning around what is challenged but what matters. Third, embracing new opportunities. And finally, relentless continuous focus on cost is what actually at the end delivers consistent profitable growth over time, that component. I personally believe so much in strength of alignment of an organization like ours. I believe in the strength of consistency in an organization in a company like Nestle, especially in turbulent times, turbulent times which, in spite of all, offer so many opportunities that is consistently delivering that we focus on. And again, that is what we have done over 150 years. Indeed, in 2016 Nestle celebrates its 150 years of existence. It's a year to celebrate. 2016 is a year to celebrate. And 150 years stands for 150 years of passion for nutrition, built on quality, quality that drives trust. It is 150 years of consistent performance. Well, with that, I really thank you very much for your attention. And, Robin, I give it over to you for our questions.

[Operator Instructions]

Now let's take the first question from the call. We have James Targett of Berenberg. James, go ahead, please.

A couple of questions from me, firstly, just two quick ones on the U.S. business. You mentioned the mid single-digit growth in the frozen category. I just wondered if you could say is now your portfolio renovation complete in frozen? Are all the new launches in and trading well or is there still more to come in the first half of next year? And then also in the U.S., just in terms of petcare, particularly in the Beneful brand, how did that exit the year in terms of trading and are your market shares back to where they were? And then the second question is on margins. You mentioned margins impacted by a number of marketing and R&D expenditures. Just in terms of the breakdown of that, is there anything which is non-recurring or brought forward from 2016? Just thinking how we should consider your marketing costs going forward. Thanks.

Maybe first answer the U.S. business. The frozen -- there's an echo here. The frozen business is not fully out-rolled yet, so there's more to come. This is going to be continuous. So we have done Lean Cuisine and we have done already also Stouffer's. There's I think in Hot Pockets more to come. And DiGiorno is going to be a permanent innovation pipeline. So there we're growing back. The categories are growing back. We're growing faster than the categories back so we're gaining market share. But I totally believe this is a permanent innovation drive that we have to have not to disconnect and consumers were moving on. So I think we have some learnings that you have to keep really very focused and very on the edge of innovation in these categories. I remind you this is an important category for us. And I personally and we at Nestle, are a true believer in this category. So we're pulling resources in innovation behind that. Petcare Beneful, Beneful was affected by a negative unfounded campaign. We know that. But we have to connect with consumers and that is all built on trust. So we have reengaged. Are we back where we were? It had a material impact, I can say. Beneful is an important brand for us. It is a very important brand for us. And trust matters. So the product had all ingredients for the trust but perception was not there for us because of an unfounded campaign. Now we're reengaging. I think we did all the right steps there. Are we back 100% where we're? No, but we're moving in that direction. Our objective was always to get stronger out of a crash than we went into it. Same in Beneful. Same in Maggi noodles in India, where we really want to get out stronger than we went into it. And that is quite an ambition because we were very strong in the case of Beneful and in the case of India. So not back, but doing everything to get back and with the strong belief we will get back. Marketing and R&D and I do believe that the increase you saw last year goes above, on top of increases the years before. So there is a trend of deeper and high commitment of, first of all, R&D. I truly believe that nutrition, health and wellness, that fundamental agenda that we have as a company is linked with knowledge. It's linked with understanding how nutrients interact with the human body. It's linked with how do we bring our driving calories out of our product portfolio, less salt. How do we drive this with the newest insights? So it is linked with deeper research and development. The platforms, like Nestle health science or skin health, are intrinsically linked with deeper knowledge. And it is a competitive advantage to have that, to invest in that and to connect with these newer insights. The same goes then with the same logic for marketing span, engaging, reengaging, connecting with the consumer. I know that digital and we've deeply engaged there, has higher return on investment there I would say if you do it right and you're in the front line there. And we're. Yet at the same time our deeper innovation, more present connection with consumers, talking about nutrition, is more communication-intense and I feel that's where we have to invest in. There is investment in differentiation of our product and brand portfolios to the consumer. And third part is geographic expansion. We're expanding quite a few products and I have mentioned this progress we have, that we do believe we have to focus in also expanding them worldwide. KitKat is a fantastic example for that. It is a very strong and, yes, over 75-year-old brand and yet there's so much potential in the markets where it is because it is growing very fast and even in the UK where it was born. There is so much potential to drive these brands out also in more geographies, like we have done in Brazil. It's growing in many other markets. So that is I would say brand-support-intensive. It's the right investment. And so I see that going up in the future. And that's why we speak about really putting the resources where they should not be and putting them where they should be.

The next question is from the call. Eileen Khoo, Morgan Stanley, go ahead please.

A couple of questions from me, I just want a bit more clarity on the margin. You reported COGS benefit of 160bps for the full year but marketing and admin was more like 190bps. So does that mean you invested more than the benefit you saw from commodity costs? And, if so, does this reflect pressures in the market, for example from local competition? Should we expect this for 2016 as well? And also can you just if possible quantify the one-off impact this year from skin health, India noodles etc., on your Group margin? And then a very quick follow-up if I can, but I'll start with that. Francois-Xavier Roger: On the one-offs, as I mentioned, India noodles has an impact of 170 basis points on the top line for AOA and 80 basis points impact on the bottom line for AOA and at Group level, at organic growth level it was a 30 basis points impact and 15 to 20 on the bottom line. Nestle Skin Health, we indicated I think last quarter it was a Q3 event and the amount of the adjustment was around CHF70 million to CHF75 million. As far as the reinvestment that we did, so as I mentioned earlier, we benefited significantly from pricing actually more than commodities. The commodity tailwind that we had was around CHF300 million in the year which is probably not as much as many of you might have expected, linked to, as I mentioned earlier, the fact that there is a time delay between market prices and the time we record it in our P&L, first of all because we have a few weeks of inventory and, second, we're taking some positions in terms of hedging. So the bulk of the tailwind that we got came from pricing, the fact that we raised our prices. Commodity participated into it as well as the benefit that we had from the full year consolidation of skin health which marginally increased the gross margin by around 20 basis points. Likewise, it had a negative impact on our spending because we had about 30 basis points of additional spending due to the full year consolidation impact of skin health.

But it's important to add something here. Our increased brand support [indiscernible] and investment in research is not -- we have a tailwind; let's use the money. It is something we drive proactively. And, yes, indeed we had some softer raw material prices, commodity prices. I must say that I feel out there that you see much more than actually our basket had because every company has a basket. And we had, though, so welcome. But it is because of Nestle Continuous Excellence, driving costs out in our operations. We have this Nestle Continuous Excellence that we have in commenting much more explicitly over the last years where we have over CHF1 billion savings a year. That is actually what drives continuous resource allocation where it matters. And the structural cost is something that we go after. So it is a combination of creating the right resources too. And then again if we have added-value products because of our research, because of argument, then also the margin should allow you to fuel what you need to do and that's also the pricing then. So it's a combination; it's not just one year, one-off some additional resources we put in. That's linked with my first answer that this is an intention that I don't see abating in the next years. It is our intention to drive our nutrition, health and wellness agenda proactively with added science and knowledge and added-value products.

And can I just have a quick follow-up?

The next question from the call is Jean-Philippe Bertschy of Vontobel. Please go ahead Jean-Philippe. Jean-Philippe Bertschy: The first one would be on your organic growth outlook for the current year. Why are you so cautious when we consider that last year you had the impact from Yinlu, Maggi noodles, the one-offs of Nestle skin health, U.S. frozen was still weak in H1 and you had as well negative impact of the price increase on the confectionery business? That would be the first one. And the second one, you are talking about strong brands, Paul, but I guess you have some weaker brands as well and why are you not being more aggressive in reshaping your portfolio. Thinking once again of U.S. confectionery, for instance, where you are a distant number four. Thanks.

Well, I like to hear you say we're cautious because sometimes I hear that we're not cautious and too ambitious and not linked with reality. But, look, we do see what matters is actually this RIG and that can bite us too, but we do see softer pricing and it is all linked with whole years of [indiscernible]. And looking at softer pricing, that's why we say, well, pretty much looking at the environment out there growth is going to still see subdued in certain areas. Although we grow everywhere, but it's going to be slower than we were a few years ago used to. This brings us to saying well we're going to see it more or less in line with last year and I think that's wise to do. And then you say the strong brands we have, soft brands. I do again continuous portfolio management. We're not going to jump on the scene and say we're going to get rid of 200, 300, 500, 600 brands. We do have this permanent looking after brands and we're not getting rid of brands. We have done quite a lot of major things like Davigel and a few others. It's quite substantial if you add it all up over time and we're going to continue doing that. What we're going to do too is in resource allocation, certain brands that are really not delivering or are there where we have an extreme strong SKU management. And again last year we have been driving out SKUs. And a few years ago we had over 100,000 SKUs and we're getting to 70,000 SKUs. That's a lot. That with [indiscernible] on top, so that is actually doubling the counting. And that is linked with brands. So we have been phasing out certain brands and then we're also stopping resourcing certain brands that we don't believe in for the future that are still okay, but we don't resource them anymore. So you see we focus on the brands that, more and more focus on the brands that matter. You may remember a few years ago we said resource allocation, that was one of the priorities. How are we really going to look at having resources where it matters? That is return on resources is a concept that we have built into the minds but also into structures. Portfolio management is all about resource allocation. How much R&D are we going to put in a certain category or in a certain category in a market or in a certain brand? How much PFME we're going to put behind it? How much talent? Where do we put the best talent we have? That is all embedded in our mindset and our tools to do the portfolio management. So your question is totally, totally valid. Soft or low-performing brands with no real promise we disengage and see if we keep them because we still enjoy them to a certain extent or we phase them out and that is what we're doing on a continuous basis.

Now let's take a question from the room. Ralph please?

Thank you. Ralph Atkins from the Financial Times. Two questions, firstly the organic growth you've reported this year for 2015 of 4.2% slowed down from the previous year. You're expecting similar growth this year but compared to the yardstick we've used before of 5% to 6%, it's obviously a slowdown. Now at your 150th anniversary are we now entering a period of slower growth for Nestle going forward? And my second question is on the business environment in Switzerland. A number of referendums this weekend, two of particular interest for you, one on financial speculation on agricultural products and another one, the enforcement initiative on foreign criminals which could affect international companies. Both could affect international companies such as yourself. Do you see a deterioration in Swiss business trading conditions? Thank you.

Well, first of all the growth slowed down and how does it compare to this medium to long term ambition of 5% to 6% and now 150 years are we closing a book of 5% to 6% and going then to 3%. No, because also in 150 years past we had good and not good environments to live in. We're a very pragmatic realistic Company. And if you see the last years and we still have this 5% to 6% as a medium to long term thing that we could have a little sideline there. But we have a sense of reality. In the last years it is a softer growth environment in general and there is low pricing and pricing's part of it. So what we aim at is to be on the higher end of our industry, to be leading our contemporaries, to have the initiative of these categories ending in new dimensions and innovation, that we're the top of mind among consumers in where we want to be. So that is what matters and I think again what we project for in 2016, as we said, is going to be more or less the same turbulences and uncertainty as last year, with opportunities too like last year. So we see it pretty much in line there which is basically an expression of realism. 150 years in front of us. What we do though is building a platform for profitable growth of this 150 years and actually that is of extreme importance. We were investing heavily also last year in something that we didn't enjoy last year. But we can do that because we did it before or somebody else before us did it before and that is how this medium and long term view of Nestle is so strong and so embedded in our culture, to not let the short term dimension condition our minds for the long term. And we look -- we have intensity in the day by day. Our goal is with the long- and medium term and long term perspective. The business environment in Switzerland, I must say, well, a year ago we were sitting here and we had just the Swiss franc that was again moving on backwards and that was also uncertainty and is that going to affect us. You mentioned and if you see, it has affected us in quite a few things of our P&L on the aesthetics. We just think, if I would say the last five years, again last year was 7.4% Forex impact. The last five years has an impact of 30%. The last 10 years the Swiss franc strength has an impact of 50% on our sales. We would have something like CHF135 billion if we would have consolidated with -- that's aesthetics at the end of the day. That has an impact to a certain level because of some structures and mixes because Swiss franc is part of our cost base here. And then again I do believe, I fundamentally believe and I leave it to the Swiss people and their wisdom to understand that success of Switzerland is based on its openness and its link with this permanent understanding of what the state of the country is and I fundamentally believe that's going to be the case again.

Let's take the next question from the call. Adam Spielman at Citi Bank. Adam, go ahead please.

I have two please. The first one is a simple one and it's on your last point, Mr. Bulcke. Can you tell us will the cost savings in 2016 be greater than they were in 2015 and is there any way you can quantify that? And the second question is perhaps a more technical one more to do with accounting. When I look at trading operating profit and trading operating margin, there's a significant miss with what I was expecting. But when I look at adjusted operating profit which is what you use for adjusted EPS, it was more or less in line. And so the question is, can you tell us, can you explain in simple terms how we get from trading operating profit to -- and what the adjustments were in it that in some sense depressed trading operating profit?

In simple terms -- will this cost saving be more in 2016 than 2015? The organization is geared towards that. There's always upsides and there's always cost saving potential. The Nestle Continuous Excellence is a model that permanently drives cost out or waste out of the system. A social structure like a company is like thermodynamics, entropy. There's always new cost saving potential. And we have been communicating in the past these figures of over CHF1 billion. Well, it is over CHF1 billion a year. We're looking at 3%, 4% of our cost base to be driven out permanently. What do we do with these savings? Well, we have a little bit of a rule. First of all, some of that should help us to drive margin expansion. That is logical; we want to enjoy at the end of the day part of that. But it is also linked to be more competitive in the market which is to compete versus competition. And it is also to do what we said before, support behind the brands and R&D platform. And, as I say, we need more of that for the future because I do believe in the differentiation power of these investments. To be successful in the future we're looking for more of it. So that's where we're. We're building the structure for that. So you see we have quite a few initiatives going in that direction and getting more intense on it. Francois-Xavier Roger: Adam, for your question, I will try to answer it in a simple way. I think that trading operating profit, especially at constant exchange rate is a good reflection of the underlying performance of our business and the bottom line. After that we have a certain number of exceptional items which are adjusted down to underlying EPS. And I will mention a few of them and especially their behavior in 2016. We have litigation costs and we had less of them in 2015 than in the past. We have restructuring cost and we had less of them in 2015 as well. We had impairment for goodwill. All of these are obviously non-trading items and relatively exceptional items. We had less impairment for goodwill because we did an impairment for the business in the U.S. which was quite significant in 2015. And we had less losses as well on disposal of businesses. We had a few in 2015 but we had more in 2016. So that's what makes the difference between trading operating profit and EPS. And these are adjustments. Obviously we will be more than happy to discuss with you and the IR department can provide you with all the details you need on that question.

The next question is from Jon Cox at Kepler. Please go ahead, Jon.

A very good job on the free cash flow and operating cash flow and you're saying that further improvements to come on working capital. So as a result we could assume probably CHF10 billion plus free cash flow for 2016. But looking at your net debt, you're clearly now below 1 times net debt to EBITDA. You said you don't need to go below 1 times because you don't necessarily want to get back to your AAA credit rating. So my question is I was surprised that there wasn't a buyback announcement today. I wonder if you could just comment on that. And a follow-up to that question, should we expect more M&A from Nestle going forward? Maybe parts of your business slowing down and you think, well, maybe you should go out and buy faster-growing businesses to help you. Thank you.

Thank you for saying we did a good job. It's good to hear. We're proud of this free cash flow because at the end of the day what matters is cash, working capital, a consistent good job there. Is there more to come? Well, we're still focusing on the elements that drive this, like SKU management, simplifying your organization, focusing on fewer but bigger. That all helps and it is something that glues an organization together on focus too, working capital, that's true. But maybe you can discuss a little bit or give a bit more light on that too. So it is a permanent objective I think that has still potential. I wouldn't like to back off there. On M&A, let me ?- and then I give to you. But cash, we have this, to simplify, we have priorities. And the first thing is resources behind our future success. That is built, again, in our growth platforms, R&D, brand support, innovation/renovation, to talent structures that are relevant. That's where we invest first. Then capital investment definitely, although with strong discipline. Second is to honor our shareholders and that is dividend. And you have seen again we're earning in a basket of different monies, not all in Swiss francs and we're paying Swiss franc dividend so that's quite noble. But dividend is very important to us. That is actually rewarding in the best way our shareholders. And then M&A is always part of it and we say bolt-on. So we're always scouting and seeing. You have seen also during the last year we had M&A activity that is relevant to our strategy. So we have that always foreseen bolt-on acquisitions. And then share buybacks is something that it is amazing. Of course you all get used to this. This is not a normal part of our landscape. This is exceptional and I don't believe this is now the case in the sense of, but I leave it to you to go more in it. Francois-Xavier Roger: I can just add one thing is that over the last 10 years Nestle returned to shareholders CHF105 billion which shows our real commitment to our shareholder remuneration and the fact that we value it. 58% of it went through dividends and 42% through share buyback. So we will not hesitate to do share buyback whenever relevant, but we stick as well to our rating of AA so we need to strike permanently the right balance between providing an attractive return to our shareholders and maintaining a strong balance sheet which we manage to do. And, Jon, I just want to add one comment as well. Indeed I think that a lot of work has been done over the last couple of years in terms of cash flow generation and more specifically on working capital. It was, I think it's very, very good progress that has been made, reducing the working capital as a percentage of sales by half over the last three years. We can do more essentially with inventory and payables and the entire organization is really committed to it. So we'll -? you'll certainly see more progress on that front.

And the next question is from the call, Celine Pannuti of JPMorgan. Celine, go ahead please.

My first question is to come back on margin, two parts. First, you mentioned the Maggi hit and I think there was as well a hit from others. How much is it fair to expect that that will continue to impact H1? And my second part of that question is that, Paul, I think you said, I quote, a relentless and consistent focus on cost. How much visibility can that give us in order to look at 2016 margin? You mentioned margin up on constant currency, but as I look at 2015 they were down. What kind of comfortable -- comfort can we get about margin improvement in real money in 2016? And then my second question is on pricing. You are more bearish it seems on overall the pricing weakening and clearly there is less inflation in the system, but can you maybe give us some areas of weakness that you foresee for 2016? Thank you.

Well, margin, I can tell you it is true that the Maggi case and also Beneful, these are material things so we don't use them too much as ?- plus it's also part of doing business in a Company that has a presence worldwide and it's open to these things and it's part of our reality. Now that was a coincidence of quite two big ones and some other small ones, but for 2016 I don't expect any of that, but still we have to see. We're not going to get into the details there saying what and how, but it has been material for us last year, so your comparative basis is only going to work as from the second half of this year definitely on growth. This relentless and how much it's going to be for this year. We say an increase in margin and that's a continuous increase in margin. You have seen -- if you see the history of Nestle, I see that going. I don't like for an organization always to be disrupted. We could also show off for a year and then correct the year after. We like this continuous building up this margin. I do believe that this has to be combined with also higher investment for the future again. So I feel it's going to be pretty much in line with what we have shown in constant currencies over the last years. Pricing subdued. Well, that is basically linked with the fact that what we see in our pipeline and our raw material base and our hypothesis that we don't see that coming up as a need first of pricing because of that. That can change and it can change very fast. Secondly, you see, especially in certain parts of the world like Europe, Western Europe, pricing is not like part of the discussion. And we see our customers and we're in permanent contact with them and price and price increases is not part of the discussion we have with them. So we have to be aware of that, hence a very, very strong focus on costs and really going for the brands that matter.

The next question from the call is from Alain Oberhuber of MainFirst. Alain, go ahead please.

I have two questions, the first question is regarding working capital. You showed us the reduction nicely. What does Nestle think where this reduction working capital to sales could go without really harming the business on organic growth? The second question is regarding ice cream. You announced this JV with J&J in Europe. Could you give us an update where we currently stand? And in general I have a question on this ice cream business in Europe of Nestle. Given that you have really nice brands, why was Nestle not able to get a decent margin in ice cream Europe?

Working capital, how far can you drive that without harming the business? Maybe you answer that because I truly believe and we have been in discussion sometimes on this, some other companies have negative working capital and now, watch out, we don't do certain practices like aggressive factoring now because it costs you more than what it costs us to have it and it is always there pressuring your margin. But anyhow I leave that to you. Mind you, still we have ambitions in working capital. How far do you want to drive it? Francois-Xavier Roger: Working capital, everything we do is extremely healthy which means that it will not hit the business and its growth at all. So, as I said, over the last couple of years the main improvement has been with inventory management and payables. There is little to do in receivables, especially so that it is more and more regulated anyway meantime, so we have less freeway there. In inventory it is really about decreasing the number of SKUs. By the way, over the last three to four years we divided the number of SKUs we had by almost half which gives you an example. Did it hurt our growth? Not at all, because usually you are taking off the tail of our SKUs to start with. And payables, we reached a certain number of agreements with some of our suppliers which are usually win-win situations because we're trading off a certain number of benefits as well for them and we take some benefits out of it. But at no time at all we have entered into any specific transaction that would have hurt our growth in order to improve our working capital and cash. This is not the objective at all. It's not one or the other. We're targeting both growth and working capital and cash improvement.

On ice cream and our joint venture we're building up, first of all, this is still something in the process. I feel there's also approvals to get. We're in permanent discussions with them to do the set-up and I think that's going to be later in the year we're really going to know that we're there. But I must say there is affinity, there is affinity in purpose, affinity in proposal and affinity in seeing the strategic dimension forward. And that is actually the motivation why we did it. It's all about winning in the marketplace. And we have some brands and, mind you, we have been increasing the margin in our ice cream business also in Europe substantially. So this is not a bad business that we're getting rid of. What we do is a business that we enjoy more and more, that we really see with the complementarity of the two capabilities, brands and [indiscernible] and out-of-home, together with in-home and together with the capabilities of production and industrialization of the others. That combination is a powerful one and that is the reason why we're in together. So it is not because of soft brands or not enjoying the business. I must say ice cream for us has gone, especially on margin, very well in the last years. But I would say I would leave it there. We're working diligently. It is a complex thing because there are many markets involved and these businesses are embedded in our structure so we have to work on this. And that is what we're doing.

We'll take a question from the room here. So over here please, thanks.

This is Ling Chin [ph] from [indiscernible] Agency from China. Since you've talked about the ecommerce, I'd like to know about the strategic cooperation between Nestle and Alibaba. Thank you.

So I will give that to Wan Ling who knows quite a bit about that. So Wan Ling, I give you the floor.

A lot of exciting things happening on the ecomms space, as you know, in China. And in fact the shift has been major from bricks and mortar into the ecommerce space. The alliance we have between Alibaba and Nestle is just -- it covers a few points which is a partnership in terms of cross-border, selling of products coming from outside of China, obviously partnership in terms of their program which is the Taobao rural, going into a lot of the smaller villages and also leveraging a lot of the data that Alibaba has to help us in terms of targeting advertising and product development. So those are kind of like the highlights.

The next question is from the call, James Edwardes Jones, RBC. James, go ahead please.

You acknowledge in the short term at least that the market is difficult. Rather than I think your phrase was a relentless focus on costs which implies to me at least more of the same, do you need to adopt a significantly more austerity orientated approach towards cost management? And my second question is a developing theme for several of your competitors is enhancing promotional efficiency. To what extent is this an opportunity for Nestle?

I didn't understand your first question. Relentless cost management?

Yes, clearly the market is tough out there. You've moved away from the 5% guidance in the short term. Do you actually need to ramp up your cost management rather than -- relentless to me implies you're going to carry on doing more of the same. Should you actually be looking at a significant increase in your cost control or cost reduction activities?

Alright, so more disruptive.

Yes.

I can tell you, relentless is not more of the same, same little pace and hiding behind that continuous and saying don't bother us. I can tell you and we should maybe be more explicit and talk more about that. But the fact that we go continuous, Nestle Continuous Excellence for example and we have mentioned it before, is something that involves almost everybody in this organization. But this is not just a mindset and let's talk about that and then it's done. It's something like -- I'm not far from the reality here in saying there are 30,000 projects last year alone linked to Nestle Continuous Excellence. And that goes from a few thousand Swiss francs on a line somewhere to major projects where we have been driving out, for example, reports in our Company. We have been driving out thousands of reports in our Company. Our structural costs. We understand the Swiss franc is heavy so we have been very cautious and actually have reduced our Swiss franc footprint in our structural costs globally in the Company. These are the things that we go about. And I mention it, what's happening out there. And I know that you referred to quite a few other initiatives there and all that. Well, that creates with us I would say a more acute and a sharper view on cost and less tolerance. So I would say and far from actually being a project that goes only after costs, but Nestle Business Excellence, that brings in capability together, the back-line/front-line, is actually to give more support, not effectiveness, into the front-line and yet at a leveled up and scaled up cost. So you're totally right and structural cost is very high on my agenda and definitely very high on the agenda of Francois also and together with me we're going to go after that more intensively. We see what's happening out there and you rest assured we're totally aware and acting and reacting on that. So it's a good point and it helps me to drive that through the organization too. Promotional efficiency is a very important point. It's resource, again return on resources, this whole mantra of return on resources, hence, for example, backing off promotional dimensions on certain brands that we don't see the payback for and focusing on really what matters. There's a fundamental. And still we're working also in bringing more tools. There's a mindset return on time. My time, I want to invest where it matters, where I feel I can make a difference. That is linked with what we're looking for. The same thing goes for everything. And that mindset is definitely there in promotions too. We have, for example, also the social media. And social media, we're working with these big partners there to really drive and implement and test tools to test the efficiency of communication. And I must say I saw these worldwide renowned partners we're working with and we're working with the best. I'm saying that we're quite a little bit in front of quite a few others in really looking into return on our efforts in social media, for example. And the same we're going to do in ecommerce. What is the effort? What are the margins coming off? But it's a good point and we can -- sometimes Nestle is continuous, we go our way, we do it our way, with the Nestle way and sometimes we don't use these international words that are in, but mind you, it's all part of what we mean by continuous. It is a lot of intensity.

So we have time for another couple of questions. Warren Ackerman of Societe Generale. Warren, go ahead please?

It's Warren Ackerman here at Societe Generale. Two questions also. The first one is around coffee. There's been even more consolidation this year in coffee with Keurig Green Mountain being acquired and this new challenger are getting quite close to Nestle overall in global leadership. Nestle is still the leader but the gap's closing quite rapidly. And I'm looking at that and also looking at the fact that powdered and liquid beverage margin is down 180 basis points. So can you talk about the outlook for the coffee market and why margins were down so much in the year and what role hedging played in that reduction? And the second one is for Francois. It's around return on investor capital. Your ROIC was I think 10.8% in 2014. Where did ROIC come out in 2015? You've said that it's a priority. I'm interested on where we're at on your Atlas tool and your agenda of accelerating, protecting and fixing the portfolio and where do you see the biggest upside in ROIC, Because that level of 11% is still well below best-in-class peers. Thank you.

Coffee, we're on high alert in that sense because we see what's happening out there and actually at the end of the day we like good competition and it looks like we're going to have good competition there. They're closing in on our leadership, yes, but they're not hanging on our wheel and we don't want to let them get in our wheel. We know and the cyclists, they know, when the cars start getting into the wheel, they're hanging in. So we're going to maintain different standard. That's why I also mentioned it. And we're uniquely positioned because, if you see, we're a Company that leads this very interesting market that is growing. It is growing because, well, we're inventing and reinventing the category. Apparently we have to continue doing that. But it's growing also because there is that intensity. Now we do believe that having to do that with these two strong brands. There's not a major -- we don't have that complexity. We have two strong brands, Nescafe and Nescafe has driven permanently and reinventing its reality permanently. You saw Dolce Gusto again but also in the powder and RTD, there's so much happening. And out-of-home, we have a whole new set of machines there too etcetera. So Dolce Gusto is being rolled out. I mentioned that we're in 18 markets. There's still 120 markets to go and still growing fast in Western Europe. It's double digit, quite nicely double-digit growth in Western Europe where it started almost 10 years ago, still going up. And so that's the first thing. And then Nespresso again and Nespresso is continuing growing. There's also intensity there. Creates more animation. I think Nespresso competition, I feel Nespresso is a class apart. And that's the positioning that we're aiming at. That's where we want to position it because of the quality in the cup. We're engaging in North America with a special Nespresso offering that adapts 100% to what class-apart in the United States means and that's fantastic. And then we have that scale, we have the brands, we have the R&D, we have the pipelines and we have the competition there really motivating us to do the right things. So that's where we're. Margin down, yes, but very, very substantial margin still. And there again, Nespresso, Swiss franc has an impact. And we have extremely efficient factories. We actually integrated a new one. We have a roll-out to do in the United States so we put resources behind that for the future. And that has a certain cost, but it's a good investment and that's where we're. Return on invested capital for you. Francois-Xavier Roger: One additional comment on the margin down on coffee before talking about margins, let's not forget that our organic growth in coffee increased by 5.4% and the RIG increased by 3.1% which we believe is good and we gain market share there. Hedging, hedging played against us in 2015, especially in coffee. Hedging is not an exact science. We take a position that we freeze for a certain number of months. We're gaining some years and losing some other years. We gained in 2014 and we lost a little bit against market prices in 2015. Finally, I want to say as well on the margin on coffee, we're in an investment position clearly with Nescafe Dolce Gusto which is growing very fast which is, as you know, already a billionaire brand and will be a billionaire brand in EMENA alone in 2016. So we're clearly in an investment position there and we see the result in terms of growth. Talking about return on invested capital, as you know, this is a clear area of focus for us. It is true that we're at a rather, let's say, low level and we have ambition to grow. The good news to start with is that we started to gain a little bit of traction in 2015. We improved our ROIC by 10 basis points to 10.9%. It's not a long way but it's probably the beginning or the start. We're clearly acting very much on it and on all the items of return on invested capital. Starting with the operational ones, starting with EBITDA, we keep on increasing our margin year on year. We can do more and we will try to do more there but this is the first lever. The second one is on working capital. You saw the progress we made which is quite impressive and once again we can do better. CapEx is another dimension. You saw the way that we went with a significant decrease over the last three years from around 6% to 4.5% and we believe that we can sustain at that level while supporting our growth. Finally, on the operating side I think that we will see some improvement and we have been doing a good job. The second part of the return on invested capital is about goodwill. There we could probably -- I'm not saying we could have done a better job but this is what is putting some pressure on our return on invested capital. On that front we need a little bit more time because this is more a medium- to long term indicator, but I'm pleased to see that we see some development on the positive side. We will need certainly to be very cautious whenever making acquisitions to pay the right price. Just one last word on Atlas, I think that this tool is a fantastic tool. We identified three years ago a certain number of businesses that needed to be fixed. A lot has been done already because out of what has been identified three and a half years ago we have fixed already about 80%. This is a dynamic process and we have new areas have appeared and so forth. But you saw what we did with ice cream which is one way to drive the issue. You saw what we did with frozen food which is about reinvestment. You saw what we did with Davigel which is about disposal. So we can bring different answers to different types of issues. The tool is constantly used, not only at HQ level. It is a very operational tool which is used at operating level which makes it a very powerful tool.

Now we have the final question from the conference call. Jeremy Fialko of Redburn. Jeremy, go ahead?

Jeremy Fialko at Redburn here, just going through all of these moving parts in the margin, it sounds as though you should have probably more favorable commodity costs next year given some of your comments on timing and hedgings having worked against you in 2015. Clearly your advertising and promotion was up very heavily as a percentage of sales in 2015. You had these one-off issues in terms of the other businesses and also the Maggi noodle effect. Offsetting that you've got pricing perhaps a little bit softer than in 2015. But when I put all of these things together, it sounds to me as though you should have a year of clearly, let's say, above average margin expansion in 2016. So is there something I'm missing out on or is that something that you would expect? Thanks. Francois-Xavier Roger: It's with cautious -- with caution. Indeed in commodities we might have a marginal tailwind in 2016 over 2015. That being said, let's be careful; the year is not over, to start with and we have a couple of commodities which are starting to increase again like milk for example and you know that this is a significant component for us. Second, let's not forget one thing in that the main component of the increase of our margin by 170 basis points in 2015 is coming from pricing which accounts for about 100 basis points. On pricing once again we take a cautious view on pricing in 2016. You know that we benefited from about 2% -- in our organic growth 2% came from pricing. In Q4 it was only 1%. So we clearly see a trend with less pricing, even at the end of the year. One-offs, I agree with you, so we should -- we don't have any one-offs this year. We had some last year although we still suffer from some headwinds from India noodles, probably for the first six months of 2016. So let's be careful there. That being said, we have clearly indicated in our guidance that we expect to improve our operating margin again this year as we have been doing over the last 10 years, but commodity might help but pricing will probably on the lower side.

Let me add something to this in the sense that we can have that mechanical rational explanation of margin and all the ingredients. There's something fundamental here. The softer growth, pricing is not there. We do have a basket of raw materials that moves differently than the oil price I would say, so there are dimensions like milk coming back to some extent. And I hope some of these raw material prices are coming back because we need a sustainable supply of agricultural materials and the farmers, they don't -- they have to have their income. But the competitive intensity in a lower environment is extremely intense. So we're not going to disengage from competing. So that's one. Second, it is also somewhere Nestle is in acceleration mode towards nutrition, health and wellness and we're engaging. We're building platforms. We mentioned that there is health science, skin health and we're going to put resources behind them. But there is also specifics in our food and beverage business. We spoke about coffee earlier. We're going to engage. Confectionery. There's so many things there that I feel -- it's a fascinating time to live in. In spite of all the uncertainties and turbulence there's so much opportunity we want to embrace. Ecommerce and how we engage there. There's some upfront investment that we're doing there too. So I think that's why we have to face these things out and manage them and balance that thin line, but our commitment is continuous margin increase in constant currency. And that is what we promise to the market. That is what we try and are looking for on a continuous basis. With that -- and also, although that's not the reason why the margin is not going to increase as you would like to, but we have 150 years of celebration and we're going to do that this year too. With that, I think we're coming to -- we had our last question. Thank you very much for following us there on the other side of the webcast and thank you all for being here and sharing this moment with us. And I'm looking forward to an exciting 2016 again, a year of celebration, 150 years of a passion for nutrition. Thank you very much.

Thank you very much, Paul. As usual we're happy to take any follow-up questions via email or Twitter or any other means. I'm sure you know the addresses. Thank you very much.