BIC (Ticker: BIC) has presented its fourth quarter and full year 2023 financial results, revealing a strong year with a 9.2% increase in net sales at constant currencies, reaching €2.3B. The company's strategic initiatives under its Horizon plan have driven growth and product innovation, with notable launches such as the EZ Reach lighter. BIC's commitment to operational excellence and sustainability has been reflected in gross profit improvement and a focus on reducing its carbon footprint. An 11% increase in the ordinary dividend has been proposed by the Board, alongside an exceptional dividend and a share buyback program. The company's outlook for 2024 includes a sales growth target of 5-7%, slight EBIT margin improvements, and a free cash flow target exceeding €220M.
Key Takeaways
- BIC's net sales hit €2.3B in 2023, a 9.2% increase at constant currencies.
- Adjusted EBIT reached €333M, with a margin of 14.7%.
- The company announced a proposed 11% increase in the ordinary dividend and exceptional dividends.
- Strategic plans for 2024 focus on market share expansion, Revenue Growth Management, and AI deployment.
- New product launches include the EasyRinse razor and EZ Reach lighter.
- Despite increased competition, BIC is gaining market share in the U.S. lighter market.
Company Outlook
- Aiming for 5-7% net sales growth in 2024.
- Anticipating slight improvements in EBIT margin.
- Targeting free cash flow above €220M.
- Focus on expanding market share and driving distribution gains, particularly in the Middle East and Africa.
- Commitment to innovation with new product launches planned across divisions.
Bearish Highlights
- Negative mix impact from developing markets expected.
- Gross margin projected to remain flat in 2024.
- Inflationary pressures anticipated to continue in 2024.
- Asian competitors returning to the U.S. market, impacting volumes.
Bullish Highlights
- Strong eCommerce performance and geographic expansion.
- Gross profit improvement of 240 basis points.
- Notable growth across all divisions, including Human Expression and Flame for Life.
- 91% renewable electricity usage showcasing commitment to sustainability.
Misses
- Fourth quarter net sales in 2023 slightly down by 0.1%.
- A one-year delay in reaching the 2026 ambition due to customization demands and longer lead times.
Q&A Highlights
- The company is on track to achieve a 10% innovation vitality rate in 2023 and 2024.
- Minimal raw material impact on margins in 2023, with inflation expected in 2024.
- The Stationery division saw margin improvements due to price increases.
- BIC Blade Tech expects double-digit growth in 2024.
- M&A opportunities are being explored with a focus on shareholder value.
- Brand support for 2024 will be consistent with 2023 levels.
BIC's financial results and strategic plans for 2024 demonstrate a strong focus on innovation, market expansion, and sustainability. The company's resilience in the face of competition and inflationary pressures, along with its commitment to shareholder value and operational excellence, positions it for continued growth in the coming year.
Full transcript - None (BICEY) Q4 2023:
Operator: Hello, and welcome to the BIC's fourth quarter and full year 2023 results. My name is Laura, and I will be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions] Today we have in call, Gonzalve Bich, Chief Executive Officer; and Chad Spooner, Chief Financial Officer. I will now hand you over to your host, Kimberly Stewart, Head of Investor Relations, to begin today's conference. Thank you.
Kimberly Stewart: Good morning, everyone. This is Kimberly Stewart, Head of Investor Relations. Thank you for joining us for BIC's fourth quarter and full year 2023 results conference call. With me today are Gonzalve Bich, CEO, and Chad Spooner, our CFO. This call is being recorded and will be available on our Investor Relations website along with today's presentation and press release. During this call, we may make statements about our ambitions and future performance. These forward-looking statements which reflect our current views are based on reasonable assumptions at the time of publishing our results. They are, by nature, subject to risk and contingencies, liable to translate into a difference between actual data and the forecasts made or inferred by these statements. A description of the risks borne by BIC appears in the Risk Management section of the 2022 Universal Registration Document filed with the French Financial Markets Authority, AMF, on March 30, 2023. We also invite you to refer to our glossary in our press release and presentation for the alternative performance measurements. With that, I hand you over to Gonzalve. Gonzalve?
Gonzalve Bich: Thank you, Kimberly. Good morning to you all, and thank you for joining us today. Chad and I will go over BIC's 2023 financial and operational performance, along with the important initiatives and exciting launches we have in store for 2024.At our investor update presentation back in September, we showcased our plans to deliver robust top-line growth and we outlined key proof points around efficiency and sustainability, fueling our belief in being able to fund profitable growth and generate sustainable shareholder returns. As we close out the third year of solid execution against our Horizon strategic plan, we are underpinning growth opportunities that continue to deliver our midterm guidance in 2025. The underlying demand for everyday essential products continues to be strong globally. We continue to reinvest in our business, with 65% of our CapEx commitments this year used to support the growth of BIC's core divisions, Flame for Life, Human Expression, and Blade Excellence. Notably, we made investments to ensure the successful global rollout of our EZ Reach lighter, a standout product innovation that is igniting passion for the BIC brand, with a new generation of consumers. BIC is more diversified than ever. Within our growing Skin Creative and Digital Expression divisions, we made several commercial and operational adjustments throughout 2023 to further distance ourselves from peers and expand into brand-new markets. We will discuss more on this shortly. Turning to M&A. Although we worked hard to uncover new opportunities, we chose not to complete any strategic acquisitions in 2023. As stewards of shareholder capital, we did not feel the valuations were right. We're disciplined in our approach to building the business for the long-term and will not deploy capital to execute growth for growth sake. We remain focused on our pipeline of potential opportunities as we seek to deploy capital in 2024.In 2023, we grew net sales across all divisions on a constant currency basis, supported by disciplined execution, innovation and successful new launches and extensions. We boosted our marketing capabilities with impactful campaigns that drove growth across multiple sales channels and geographies. All this was possible due to the efforts made by the global community of our 15,000 BIC team members who might thank for their contribution towards our shared success. After 2 years of test and learn and strong capability building, 2023 was about execution. Revenue Growth Management initiative continued to underpin our commercial excellence. Understanding our consumers' evolving needs enabled us to maximize how we deliver the right product in the right pack at the right place. Since the creation of our RGM program in 2019, our net sales per SKU have grown an impressive 83%, while at the same time, we reduced our total SKU count by 34%.These factors are helping us to reduce our inventory level, which we did by €19 million in 2023 as we continue to improve our working capital by streamlining our portfolio. Alongside our expanding retail channels, our eCommerce performance was robust for both sell in and sell out in 2023. We successfully outpaced our key markets in value in the U.K., France, Germany and the U.S. Our net sales grew [13%] in the US. One of the best-selling products online was our Xtra Smooth Mechanical Pencil, which grew 46% year-on-year in sales on Amazon (NASDAQ:AMZN). With unpredictable inflationary pressures persisting, consumers are increasingly looking online for value and quality, which plays into BIC's strength of being nimble and finding pockets of opportunity. Geographic expansion remains a significant contributor to BIC's group sales. We continue to diversify geographically across our segments by maximizing existing infrastructure to tap into high growth markets, such as Eastern Europe and the Middle East and Africa, all of which saw double-digit sales growth in 2023.More specifically, in the Middle East and Africa, net sales have grown an impressive 30% since the launch of Horizon. We have developed the right multi-brand management capabilities and channel optimization. Our teams have done tremendous work focusing on increased distribution and executing strongly during the Back-to-School season. Brazil delivered impressive double-digit net sales growth for the third consecutive year, fueled by solid commercial execution, robust volume performance in all categories and distribution gains. This was well reflected in our market positioning. In Blade Excellence, for example, we solidified our #2 position, outpacing the disposable market in both volume and value for yet another year. 2023 was also a strong year for product innovation. Our EZ Reach lighter in our Flame for Life division achieved a milestone of €100 million of cumulative net sales since launching in the third quarter of 2020.In the U.S., it captured 5.8% of value market share. In Europe, EZ Reach makes up an impressive 10.7% of the value market share in the pocket lighter segment across hypermarkets and supermarkets, less than 1 year since its launch. In our Blade Excellence division, I'm proud that our latest shaver innovations, EasyRinse and Soleil Escape have outpaced the disposable market and gained a combined total of 1.8 points of value market share in 2023.Overall, we ended the year with 9.5% of net sales coming from products introduced over the past 3 years, indicating how our consumer-centric mindset and data-led approach actively deliver top-line growth. It's important to remember that in an inflationary environment, one of BIC's core strengths is offering true value-for-money products for consumers. The results speak for themselves. Several core and added-value products have delivered positive net sales growth. For instance, from 2019 to 2023, sales of the iconic J26 Maxi lighter grew by 24% and our core Utility lighters range grew by 27%.In Blade Excellence, over the same period, we grew volumes by 60% for the 5 blade segment, in line with our ambition to grow in added-value segments through further innovations. One of our best performing products was the added-value Flex (NASDAQ:FLEX) 5 shaver which achieved an impressive 50% net sales growth. Finally, our focus on operational excellence contributed to a gross profit improvement of 240 basis points over 2022. Chad will go into more detail shortly. The key points that I'd like to take note of are our efforts that spanned across manufacturing and operational parts of the business during 2023. Facing a number of important headwinds to achieve the overall improvements, we found wins in procurement over €25 million. For example, we brought in-house a number of external co-packers, while also leveraging our internal network to drive the lowest landed cost to the market. We combined our quality and core technical functions to drive synergies between the 2, leveraging our consistent product reliability and our inherent engineering capabilities. We also worked during the year in partnership with key suppliers to improve our product impacts, both in cost and sustainability. This included some network optimization, as well as our continuous work in eco-design.As Chad and I outlined at our investor update last September, we're also working on value engineering of our products, for example, redesigning parts or sub-assemblies to reduce mass without sacrificing quality or usability for the consumer and the added improvements in our environmental impact. We ended the year with €3 million more improvements than those communicated in September, so approximately €10 million improvement. Another example is in our Blade Excellence division where our procurement efforts resulted in lower raw material costs versus the prior year. We also benefited from favorable price mix related to added-value products, such as the EasyRinse shaver. These added €2 million in gross profit. Turning to Slide 5. In line with our ESG journey, we continue to make progress on our goals during 2023 and we took steps to reduce our overall carbon footprint. Very close to my heart is BIC's contribution to promoting a lifelong love for learning and providing educators and students with the tools they need to succeed. We've put a lot of thought into the creation and execution of programs that support the first stages of handwriting development, especially in highly underserved communities throughout Europe and Africa. Initiatives undertaken by BIC have provided nearly 200 million children with improved learning conditions worldwide over the past 5 years. We remain on track to meet the goal we set in 2018 as we aim to support 250 million children by 2025. This is just one of several recent ESG achievements. You will find additional information when we publish our universal registration documents at the end of March. In line with BIC's capital allocation policy, the Board of Directors will propose a €2.85 per share ordinary dividend at the next Annual General Meeting. This is an increase of 11% compared to 2022. In addition to the ordinary dividend, we will continue our share buyback program of up to €40 million throughout 2024.Considering BIC's 2023 solid performance and strong balance sheet, our Board of Directors has recommended an exceptional dividend of €1.42 per share in addition to the €2.85 ordinary dividend per share. I'm proud to recognize the performance of our talented and committed teams by paying in 2024 a special premium allocated to team members who are now part of our long-term incentive plans. It is important to me to honor the contributions of such a dedicated workforce across 5 continents, especially in our factories who are proudly responsible for delivering our portfolio of products that bring simplicity and joy to everyday life. We remain in an excellent position to fulfill our strategic goals, maximize free cash flow and deliver long-term profitable growth to all of our stakeholders. I hope this gives you a better understanding of the strategic levers we pulled in 2023 to deliver solid results. With that, I hand it over to Chad to walk us through our financials before I return to talk about our plans for 2024.
Chad Spooner: Thanks, Gonzalve. Let's begin with an overview of our consolidated results for the full year 2023 key financial figures on Slide 9. Net sales for the full year were €2.3 billion, up 9.2% at constant currencies. As mentioned by Gonzalve, our solid results were driven by our team's strong commercial execution, distribution gains as well as the success of both core products and innovative added-value products, confirming our strong value-for-money positioning. Our adjusted EBIT was €333 million, which resulted in a margin of 14.7%. This was due to a gross profit increase, partially offset by increased OpEx and brand support investments, which are continuing to deliver strong results as part of our Horizon plan. I'll go into more details on the drivers in another slide. Adjusted earnings per share were €5.70, an increase of 11.3% versus last year. Our free cash flow for the full year was very strong at €249 million. At the end of December of 2023, our net cash position was €385 million. We've completed €116 million in share buyback, of which €100 million announced in February that were dedicated to the cancellation of shares and the balance was used for our long-term incentive program to our employees. Turning to Slide 10. You'll see a snapshot of our divisions, starting with our performance in Human Expression. Net sales were €846 million, up 10.2% at constant currencies. Growth was driven by the success of both core products such as the iconic 4 Color Pen in the Mechanical Pencil, as well as added-value products like our gel pens. This performance reflects our strong value proposition and how we're well positioned to provide consumers with high-quality products for great value. In this context, we are able to capture market share notably across Europe and the U.S., driving growth ahead of the market trends. In developing markets, top-line performance was robust with double-digit net sales growth in Brazil and the Middle East and Africa as a result of continued distribution gains. The Human Expression adjusted EBIT margin increased to 7.2% compared to 3% in 2022. The biggest contributor to this increase were pricing, mix and lower raw material costs. On the center of the slide, we have our Flame for Life division's performance with net sales of €852 million, up 3.3% at constant currencies. This was driven by distribution gains and solid commercial execution in Europe, Latin America and the Middle East and Africa. Across these regions, BIC's net sales for added-value lighters, including decorated and utility lighters and BIC EZ Reach grew high single-digits versus prior year. Overall, volumes and net sales in this division were impacted negatively by our U.S. lighter business from an unfavorable comparable basis in Q1 of 2023 and competitive imports from Asia returning to the market. The Flame for Life adjusted EBIT margin was 34.1% compared to 35% in 2022. The main contributor was favorable pricing, which was more than offset by higher raw material costs and brand support investments with the launch of the BIC EZ Reach advertising campaign in Europe. Lastly, in our Blade Excellence division, net sales were €537 million, up 17.8% at constant currencies. Performance was strong in both sell in and sell out. Our 3 to 5 Blade and Hybrid shavers drove growth ahead of the market in all key regions. Net sales for this added-value product segment grew by almost 20% from strong performance across Europe, Latin America and the Middle East and Africa. In Brazil, for example, we continue to strengthen our portfolio by manufacturing an increasing number of our products locally, which brings us closer to our consumers. We solidified our number 2 market position, gaining in both volume and value share as a result of strong commercial execution through key marketing campaigns on products in the Soleil range and the 3 Blade segment. The Blade Excellence adjusted EBIT margin was 12.7% compared to 13.4% in 2022. This slight decrease year-on-year was mostly due to electricity cost inflation and brand support investments, mostly related to the launch of BIC EasyRinse and a major advertising campaign in the U.S. to support this launch. This was partially offset by favorable price and mix. Turning to Slide 11. Let's now review our consolidated financial results, starting with the fourth quarter of 2023 net sales evolution. On an as-reported basis, net sales for the fourth quarter of 2023 totaled €526 million, down 0.1% versus last year. On a comparative basis, our net sales were up 2.4%. Currency fluctuations had a negative impact of minus 4.5 points, which was mainly due to the decrease of the U.S. dollar, the Turkish lira and Nigerian naira against the euro. Argentina contributed plus 2 points. Turning to Slide 12. Let's now review the full year 2023 net sales evolution. On an as-reported basis, net sales for 2023 totaled €2.3 billion, up 1.3% versus last year. On a comparative basis, our net sales were up 3.5%. Currency fluctuations had a negative impact of minus 3.1 points, which was mainly due to the decrease of the U.S. dollar, the Turkish lira and the Nigerian naira against the euro. The perimeter impact adjustments includes the acquisitions Tattly and AMI, as well as 1 month of Inkbox. Argentina contributed plus 0.7 points. Let us now take a closer look at our adjusted EBIT margin change versus the prior year for the fourth quarter of 2023 on Slide 13. Q4 2023 adjusted EBIT margin was 13.8%, an increase of 5.6 points versus Q4 last year. Fourth quarter gross profit margin increased by 5.4 points. This was driven by strong price and mix, lower raw material cost, manufacturing efficiencies and favorable euro-U.S. dollar hedging. This was partially offset by unfavorable fixed cost absorption and unfavorable ForEx, mainly the U.S. dollar to Mexican peso and Argentinian peso as well as the euro versus the Turkish [Audio Gap]. Brand support was flat versus the fourth quarter last year. OpEx and other expenses decreased by 0.2 points. Now turning to Slide 14. You see that 2023 adjusted EBIT margin was 14.7%, which was 0.7 points higher than 2022. The 2023 gross profit margin increased by 2.4 points, favorably impacted by price and mix, manufacturing efficiencies and euro-U.S. dollar hedging. This was partially offset by higher raw material costs in lighters and electricity costs in shaver, unfavorable fixed cost absorption and ForEx. Brand support was 0.5 points higher, driven by media campaigns for EasyRinse in North America and the EZ Reach launch in Europe. OpEx and other expenses increased by 1.2 points. On Slide 15, we have the key P&L elements summarized. Adjusted EBIT for 2023 was €333 million compared to €312 million last year. 2023 income before tax was €313 million, which was a 27.6% tax rate that is compared to €277 million in 2022. Net income group share was €227 million compared to €199 million for 2022. Our adjusted EPS group share was €5.70 compared to €5.12 last year. Moving on to Slide 16. We see the main elements of working capital. We continue to drive inventory efficiencies as the level of inventories decreased by €19 million compared to December of 2022, and we improved our DIO by 3 days since the end of December of 2022.Faster cash collection improved our accounts receivable in days, our DSO, which decreased by 4 days. In 2023, we invested €105 million. The greatest focus was on our growth CapEx, which represented 65% of total CapEx as we continue to invest in our business to deliver our long-term growth ambitions. We invested 30% of our CapEx in Blade Excellence mainly related to the growth CapEx for new products, such as the EasyRinse shaver. In Flame for Life, we invested 22% of our CapEx in new machines and molds, notably for key products like the EZ Reach lighter. On Slide 18, we have our net cash evolution from December 2022 to December 2023. You will see that our operating cash flow was €469 million. We had negative working capital and others of €116 million. Net cash was also impacted by investments in CapEx of €105 million. This resulted in positive free cash flow of €249 million, notably driven by strong operating cash flow, coupled with improved working capital control. During 2023, we bought back €100 million in shares for our share buyback program and €16 million of shares for our long-term incentive plans. Our net cash position at the end of December of 2023 was €385 million. This concludes the review of our fourth quarter and full year 2023 consolidated results. With that, I'd like to hand it back over to Gonzalve.
Gonzalve Bich: Thank you, Chad. Having launched our long-term strategic plan in 2020, we focused on building new capabilities, and in 2023, we ensured solid execution efforts. Equally, it is important to recognize that we didn't always get things right. We take lessons from aspects of the plan that work, we pivot and move forward. In 2024, we expect our unwavering commitment to commercial excellence to be the key contributor to expanding our market share across key regions, supported by further distribution gains offline and online. Our focus on Revenue Growth Management will also continue to delever. In 2024, in partnership with Eversight, we're deploying an AI-powered technology globally that allows us to test and identify top-performing consumer promotions in real time and redirect our investments to drive a higher ROI. This is boosting our continued efforts on portfolio complexity management, price pack architecture and promotional effectiveness. I'm also excited by our growing omnichannel capabilities, push into social commerce and compelling new go-to-market strategies that will continue to drive growth in 2024. I'll be giving you more detail about several new initiatives shortly. Throughout 2024, we will strengthen our core products through innovation. We'll continue to boost our 2024 innovation pipeline, which includes the EasyRinse razor and the EZ Reach lighter, with focused brand support investment and improved execution. For instance, approximately 30% of the total brand support in our Flame for Life division will be dedicated to the further global rollout of EZ Reach, including introducing our iconic Snoop and Martha advertising campaign throughout Europe and Asia and commitments to enhance in-store execution. We will accelerate growth in Skin Creative and Digital Expression. Our Skin Creative business will continue to ramp up as we build our leading body art temporary tattoo business for self-expression. More on that in a few minutes. We will continue to scale up our B2B business, BIC Blade Tech, which offers the potential for double-digit net sales growth and accretive margin to the total Blade Excellence division in 2024.After 2 years of starting, developing and operating this new business, as well as continuous dialogue with existing and new customers about their current and future product needs and launches, we see a 1-year delay in achieving our original ambitions. We're taking steps to adapt further to our customers' needs with more tailored solutions. Lastly, 2024 will be another year of market expansion as we unlock new sources of growth through our go-to-market excellence. Our teams will be focused on driving distribution gains across the board. For example, in the Middle East and Africa, we will expand distribution for both our stationary and lighter businesses to secure long-term growth. This will be achieved through a more efficient route to market with dedicated teams on the ground instead of going through distributors in certain markets, like we did in the past. True innovation remains at the forefront of our product development efforts. I'm excited about the recent launch of BIC EZ Load, BIC's first reloadable utility lighter. Long-lasting and eco-friendly, BIC EZ Load can be reloaded up to 10 times with a BIC Maxi pocket lighter for up to 15,000 lights. Its body is made of nearly 50% recycled plastic. This innovation is a perfect example of our strategy to be a part of more flame occasions and respond to consumer demand for long-lasting, more sustainable, lighter products. Our iconic 4 Color Pen range will offer more ranges to meet consumers' needs in various regions, including innovations in barrel design, which people of all ages, especially kids, love to collect. We will launch an ultra-low viscosity ink that delivers a smooth and gel-like writing experience that lasts longer and is 40% smoother than a ballpoint pen. The launch will kick off in North America in time for the 2024 Back-to-School campaigns. Continuing with Human Expression, we're restaging our BIC Kids offering through new product positioning, portfolio optimization and a new packaging identity that will drive global brand growth. Innovative products like tattoo markers and stamps with ease to apply and remove and toddlers felt pens developed with ergonomic insights that address the needs of children as they begin creative activities. We will also build on the momentum achieved in 2023 from the launch of the EasyRinse shaver. This is our Blade Excellence category's most researched and tested razor with 21 patents. It has a strong value for money proposition with long-lasting blades and environmental benefits. For example, our womens' refillable razor is made with 34% recycled plastic and 58% recycled rubber, a first in the category. In 2024, we will expand distribution in the U.S. and launch the EasyRinse shaver in Canada and Asia Pacific before extending it to Europe and Latin America in 2025. Hand-in-hand with launching innovative products and product extensions, we will drive core growth across categories through marketing excellence with the launch of several marketing campaigns in 2024, including a BIC Kids global campaign called Go Make WOW, in Europe, Mexico, the Middle East and Africa during the 2024 Back-to-School season. The campaign comes to life with an immersive new social gaming experience that is now live on Roblox, called DrawPlanet, Go Make WOW, the champion's imagination, self-expression and creativity. Of the approximately 70 million daily active users on Roblox, BIC Kids' target audience of 9 to 12-year-olds represents one of the largest user bases of any age group on the platform. We are also taking our winning 4 Color formula in France and deploying it across the world with our "A Pen for Every Side of You" campaign. We launched this last year in Europe. It's currently live in Brazil and will be going live in Asia Pacific and North America. By the end of 2024, our campaign will have run in 5 continents and 10 languages. In the U.S., ahead of the important Back-to-School season, we've partnered with the Singer Charlie Puth, to bring excitement and relevance to the Gen Z consumers and have several other exciting partnerships in the pipeline. Building on BIC's more than 70 years of renowned engineering and manufacturing excellence, proudly manufacturing over 90% of our products in our own factories, we can harness BIC's know-how and efficiencies. We have tremendous potential for creating synergies to deliver growth and margin development. We're doing just that with our Skin Creative business and with Inkbox specifically. Our engineers working cross-functionally have designed new manufacturing that will increase capacity by 5 times at ISO footprint. We will also increase the quality and speed of production while reducing labor and waste. We will stay at the forefront of technology and process while taking further strides to improve our footprint by bringing in-house production. This is just one example of how we're expanding our expertise for value creation. We're also building a fit-for-the-future supply chain that goes beyond quality manufacturing at low cost, and we're using it to create a competitive advantage. These include our value engineering program, rethinking our route to market and the supply chain's regionalization with a factory to customer to shelf approach. Let me give you one example. In 2023, we announced the split of our single-source global production of just one product family and are in the process of moving the manufacturing to existing locations in the Americas and Europe. This will improve our product landed cost and gross profit. This delivered €3.7 million in cost savings and significantly reduces lead time to market by over 50%.This initiative brings production closer to the end consumer, increases capacity, lowers inventory, but also lowers freight costs and improves our CO2 footprint. In 2023, we recorded the lowest absolute carbon emission over the last decade. As part of the efforts to reduce our CO2 footprint, I'm proud to say that 91% of the electricity BIC purchased in 2023 came from renewable sources, up from 76% in 2022. The points we've covered today will all contribute to BIC's long-term profitable growth as we navigate challenging macroeconomic headwinds. Like all global companies, we lack clarity regarding consumer resilience against geopolitical and economic uncertainty. I firmly believe that BIC's value-for-money products while bringing simplicity and joy to everyday life enable us to be well positioned during these times. As I said before, my number one belief as to how we will achieve our net sales growth target is through our continued progress on delivering innovation and revenue growth management actions across the group. These all drive our ability to improve volume, price and mix. Further supporting my confidence to ensure profitable growth is our capacity to increase distribution, which is attainable by our relentless focus on commercial execution, both online and offline. We will deliver our margin and free cash flow objectives through operational excellence with further manufacturing and procurement efficiencies, focusing on what we can control. We continuously review our manufacturing network, and we're working on numerous opportunities for continuous process improvements across our factories. In 2024, we've already identified in excess of €12 million of cost savings in manufacturing and procurement efficiencies compared to last year. At the same time, we will continue to invest in brand support and research and development to foster long-term profitable growth. With all this in mind, full year 2024 net sales are expected to grow between 5% and 7% at constant currency. We expect to see a slight improvement in our 2024 adjusted EBIT margin as we continue to drive EBIT expansion to deliver long-term profitable growth, in line with our 2025 targets. Free cash flow is expected to be above €220 million in 2024.Before we conclude, I'd like to leave you with the 3 imperatives that I feel reflect BIC's performance in 2023 and that will also set the stage for continued success in 2024: momentum; confidence; and disciplined execution. As long as we continue to harness our unique manufacturing footprint and embrace the new capabilities built under Horizon plan, we remain in an excellent position to fulfill our strategic ambitions and deliver long-term profitable growth to all our stakeholders. With that, Chad and I will answer your questions.
Operator: [Operator Instructions] We'll now take our first question from Kate Rusanova with UBS.
Kate Rusanova: First of all, I wanted to ask regarding your outlook for gross margin this year. You've mentioned a number of moving parts, and it appears that there were more negative in the list. So how should we read this? Do you expect further expansion? And what is the key uncertainty going into the year? And then, it would be great if you could provide some more color on the guidance for slight operating margin improvement? You essentially have 80 bps of EBIT margin expansion towards your midterm target. Does your guidance mean that it will be predominantly driven by 2025? And lastly, it would be great if you could provide us with the most recent development of Asian players in the U.S. lighter market? Does it continue to be a meaningful headwind into the start of the year?
Chad Spooner: Thanks for your questions, Kate. Let me go through 1 and 2. I'm going to kind of combine them and I think that will answer them both. I'll start with the gross margin piece. A lot of people think that we are in a deflationary environment, and we are not, right? Some people call it disinflation. So we still have inflation, just less than what we've seen historically. So to your point, we do have some headwinds against us, but we also have some tailwinds that are helping support us, right? So input cost inflation will still be there to some extent. You see that in raw materials and utilities and labor cost. As we continue to reduce our inventory and run our factories, we will actually get volume -- and we can talk about that later. I'm sure some will ask about our growth in volume. But we're going to do that while producing less inventory so we can reduce our total inventory value. So we're going to get unfavorable fixed cost absorption there. And then also, when we talk about our growth in volume, one of the things that we'll talk to you about is it's coming from developing markets. So that's going to have a negative mix impact from a margin perspective. So those are some of the headwinds that we talk about. But from the favorable side, we still will have some favorable pricing and our manufacturing efficiencies will continue to benefit us, right? So that's going to stabilize and keep our gross margin relatively flat for 2024.When we look at the operating margin and when you flow that down to our EBIT, we talked about slight improvement, 14.7%. When I spoke to everyone back on September 11, I said we've got a journey of 150 basis points over 3 years. I said, will it be a straight line? No. I said, will that line be the trajectory of where we're going? Yes, it will. So I said some years might be a little bit above, some years might be getting closer to the line. And the way that you should think about 2024 is us getting closer to that line of that trajectory between 14% and 15.5%, and that's where we land closer to in 2024.So what you will see is with that, I'll call flattish gross margin, we're actually going to have operating leverage from our OpEx, which will drive that slight improvement. And in regards to the Asian players in the lighter market, we talked about this last year. They really -- we knew they were coming back. The question wasn't if, but it was when. And they came back somewhere in the middle of Q2 of last year. So we're seeing that impact. I'll say the impact has stabilized from a volume standpoint, but we're still going to see that hit in Q1 and maybe the beginnings of Q2.So from a comparable basis in Q1, we will have that negative comp from last year where we didn't have the Asian competitors in the market. So it's something that I want to preface already because the question will come in -- what will come in is how do you see that from a phasing perspective. So you'll see some -- the temper -- the phasing in Q1 will be lighter than what you've historically seen. And then, the growth in Q2 will be more reminiscent of what the other quarters will be like. So like I told you last year, let's think of the years in halves instead of quarters, so we can take out some of the seasonality of the different elements. The first half we'll have growth in line, the lower side of the consensus and then, the higher side will be in the second half of the year. So hopefully, that's answered your margin. That's answered EBIT, Asian players and given some view on phasing for the year and what we should expect in terms of the margins being -- they'll be lighter in the first quarter as you have less North American lighter because of that negative comp getting stronger throughout the year.
Gonzalve Bich: The only thing I'd add, Chad, to somebody who might ask the question is, well, how is your market share doing in pocket lighter in the U.S.? We're still gaining share even with those bringbacks of Asian imports. So from a brand distribution and brand strength perspective, we're still delivering on our key metrics. But everything else you said I support fully.
Operator: We'll now move on to our next question from Christophe Chaput with ODDO Securities. [indiscernible] you're mute.
Christophe Chaput: I've got 3 quick questions. I am not on mute.
Gonzalve Bich: No, no, we hear you.
Chad Spooner: We hear you.
Christophe Chaput: Okay. Sorry for that. I've got 3 questions, please. The first one is coming back to the operating margin or the gross margin in 2024. Is there a phasing effect between H1 and H2 in terms of developments? Because you mentioned some phasing effect, but I thought it was only for the lighter division. So I'm asking for the full hope. The second one is just, I would like to come back on Argentina currency, because honestly, I'm not so familiar with the way to quantify the impact. On Page 33 of your slideshow, you see the Argentina pesos as an average rate of -- in 2023 of ARS 321, and actually, it is traded at ARS 100, ARS 900, sorry. So are you going to see further impact in 2024 if we consider the ARS 900 level? Because -- I mean, sometimes I thought that it should be the rate at the year-end that should be taken in account. So just to have a little bit of visibility in certain extent on that topic? And the last one is, the level of profitability of Inkbox should be the equilibrium in 2024, if I remember well, versus a decent loss, let's say, in '22. Would you say that in 2023, you do half of the growth to offset the loss, or is it lower than that?
Chad Spooner: Thanks, Christophe. I'm going to answer your first question about gross margin. I think it's more relevant at the EBIT level, right, because that's what we see that turns into cash flow. The EBIT, as I was trying to imply before with Kate's question, first half of the year, it will be a lighter EBIT margin than the second half of the year given the mix impact on the lighter piece in the first quarter. So you will see, I'll call it a lighter margin rate in the first half and a stronger margin in the second half is what you should expect from an EBIT level. From Argentina, you think about the currency at the beginning of 2023, it was trading at roughly ARS 180, right? At the end of the year, it was mid-800s. And so what happens is -- when we look at our results, what happens is every single quarter, you look at those average rates. So that's why it's not the actual spot rate at the end of the year, and that's the average rate for the year when you look at 2023.But when you look at 2024, and you can pull any of the data you want from any of the currency forecasters and that's not our expertise, so we have companies that we obviously look to. And all of them show that currency continued to devalue significantly more, which is one of the reasons why we've taken it out of our guidance on constant currency, so everyone can see, I'll call it the rest of the business ex-Argentina. Now we're doing that for 2024. That doesn't mean we're going to do that for 2025 and going forward. Let's see where the currency develops and what happens. But from what we're seeing right now, they'll have considerable change in the currency rate throughout the year. So we've decided to pull that out. And then as we talk about profitability for Inkbox, 2023 we continue to get towards our goal, which is breakeven by the end of 2024. That's still what we're targeting right now. And I'll say we've gotten better in 2023 and 2024. The trajectory will be obviously improved. So we'll get to breakeven by the end of the year.
Operator: [Operator Instructions] We'll now take our next question from Christian Devismes with CIC.
Christian Devismes: Just a quick question from me. It is on our top-line growth guidance. So it's between 5% and 7% at constant exchange rate and excluding Argentina. This is quite high compared to 2023, where the same TPI was 3.7%, if I'm right. So could you explain the driver of this increase in speed in which month, in which region, thanks to innovation? So could you elaborate a bit on this speed increase?
Chad Spooner: Thanks for the question. Yes. So the growth that we're going to see in 2024 -- when we had 2023, it was probably different regional mix what we had anticipated at the beginning of the year. And the reason that we didn't hit the -- where we wanted to, at 5%, excluding Argentina, was because of North America, which we've talked about. Going forward in 2024, we're going to see growth in developing markets, right? And so we're actually going to have volume growth, as I talked about, on other things, but you're going to see that outsized growth coming from more developing markets versus our traditional developed markets that you'd see. So that's where that growth is coming from.
Gonzalve Bich: Let me take a step back and tell you how I think about 2024 and which would be the fourth consecutive year of 5% to 7%, so Horizon trajectory growth for the company. Chad, you mentioned it earlier, volumes will come into play, both in stationary, Human Expression and Blade Excellence, very important. You also mentioned the mix between developed and developing markets. Let's call them different parts of the world because that's always a bit -- so there is some demographic dividend thrown into there. There's also some growth and penetration into new segments. But I want to take 2 steps back as well to talk, one, about eCommerce, which has been a journey for us these last 5 years and today represents roughly 13% of our sales and grew in 2023 by about 13%. That's really important for a consumer products company because that says we are showing up with consumers in all channels of distribution. We admittedly, and I've said this -- so this is in the scoop, we were on -- we were behind the curve 5 years ago. And today, we've caught up. We've built the capability. We've built the teams. We've built the relationships both with the customers that are pure players, but also with the divisions of the customers that are brick-and-mortar at the same time. And we're introducing social commerce and other new forms of distribution for the company, which is great both for sales, but also for showing up as a brand with consumers where they expect and want to see us. So very important to me. The second piece of it is innovation. We -- when we set out on our transformation journey, may feel like a long time ago, we said we wanted to improve -- increase the number of patents by 20% sequentially every year, and we achieved that run rate. Well, today, you're seeing the fruits of all that labor. And we wanted to get to 10%, what we call innovation vitality rate, which is simply put the percentage of your new products in your total sales, stuff launched in the last 3 years. And so today we're almost at 10% in 2023. And I want that to continue into 2024. And I'm, of course, excited and confident by the second year of our important shaver launches in the U.S., notably EasyRinse and Soleil Escape. I'm also excited by the continued global rollout of EZ Reach and continued growth in the U.S. and it will be the second year for the European market. But I'm super excited by the launch of EZ Load. So EZ Load, as we launched it now 1 month ago -- a little bit over 1 month ago in the U.S. market, it's our first reloadable utility lighter which you can reload about 10 times. And 10 times translates into 15,000 lights. So from a not only innovation, for the consumer perspective is really interesting, but also from a sustainability perspective, really interesting. So it's -- the proof of the pudding is in the eating, and here it is for us. Those are some of the things that I'm really excited, are driving our outlook for 2025 -- '24 sorry, Chad -- '24.
Operator: And we will now take our last question from Marie-Line Fort with Societe Generale (OTC:SCGLY).
Marie-Line Fort: Could you come back on the raw materials impact on your 2023 margin? I remember that raw material tailwind represented €62 million in 2022. How 2023 compared to these figures? Second question is about your operating drivers for Stationery division because you reported a nice jump in operating margin. Could you elaborate a little bit more about the moving parts? Inkbox you comment slightly, but probably [Cello] as well? Another question is about Blade Tech contribution to your sales in 2023. Could we have an idea in terms of impact? And also, are you confident that Blade Tech could reach 20% of the blade turnover division in the near term? Just what's your objective? And also, could you elaborate about the last contract that you have recently signed? And last question is about M&A. You're paying an extra dividend for 2023. Does it mean that you don't project any significant M&A transaction for 2024? And I've got a -- last question is about the brand support engagement. Could we have an idea of the phasing for 2023, an idea for the increase for 2023 and how it will be paid over the year, just for our projection -- quarterly projection?
Chad Spooner: Thanks, Marie-Line. I'll start with the raw material impact on 2023. As we spoke at the first half of the year, we had a bit of impact from the rollover of inventories we spoke about 6 months ago. The second half of the year was more favorable. So on a net total year basis, it was relatively muted, right? It was a small increase. We still had some, but it was very small, like single-digits. It was not a big impact for the full year. But 2024, we are continuing to see inflation for material costs in metals and in some of our plastics. So that's why we do have an actual inflation for cost in 2024.
Marie-Line Fort: Do you mean that you reported minus €62 million in 2022 compared to 2021 and you supported still an inflation compared to €62 million in 2023? Is it correct?
Chad Spooner: 2023 had inflation, and yes, that's correct. On a net basis on the total year, there still is inflation, yes -- Raw material, yes. First half of the year, yes, we had quite a bit. So yes, we did. And then in 2024, we will have an increase, again, because we have low single-digits. We have material cost inflations on metals and on some of the plastics we use. So we'll continue same material cost inflation, but obviously, not to the levels anywhere we saw in 2022. And then as we talk about the operating drivers for Stationery in the full year, obviously, the biggest impact was probably price across the board. But to your point, both Inkbox and Cello performed better on their journey towards breakeven in 2024. So I'll say, less of a negative impact, also had a growth for the margin story for Stationary for the full year.
Gonzalve Bich: Yes. So I'll cover BIC Blade Tech. So BIC Blade Tech, we're still on that trajectory, as I said in my introductory remarks, although we see a 1-year delay versus our original ambition, which was '25, now we're talking '26. And really, that's attributable to 2 things. The first of which is the outstanding performance of the rest of the Blade Excellence division, maybe a little bit as what we thought originally. And so it makes that percentage a little bit harder to catch, but still extremely excited by the business. The second is when we started this business and started to operate this business and discuss with our potential customers and existing customers how they wanted product development to look like, we're getting more customization flowing through the system than we might have originally anticipated. That customization translates into more machine build time, which is pushing out some of the lead times that we've got. But all in all, I'm still both confident that we'll reach the ambition, but also very excited because, let's not forget, it's accretive to the total category and company margin. And this year in 2024, we'll be double-digit growth. So as I said, we signed up 3 new customers. I can't really go into a ton of detail because those customers all have confidentiality clauses with us. But what I can tell you is, geographically they were well spread out in the U.S., Europe and then rest of the world and allow us to be working in different segments. So I'm really excited by what -- how this business is shaping. Let's not forget, this is only the -- we're starting our third year of BIC Blade Tech operation, but really excited. To your --
Marie-Line Fort: Do you mean that you reported flat sales for BIC Blade Tech this year? Is it -- because I remember that in 2022, BIC Blade Tech accounted for €14 million on your sales?
Gonzalve Bich: Yes, we have the slight increase this year, a little bit less than I would have liked, more than could have been the downside, but on that trajectory to where we want to go. It's all about getting -- well, the new customers we sign, then you have to build the machines and then you start shipping, and that's where you recognize the revenue. So we're still on that trajectory. Okay? All right. So for M&A, let me first set the backdrop of BIC, right? So we're a growth company with a history of paying strong dividends. And a few years ago we said after the sale of the Clichy headquarters that we would, over time, return that to shareholders if we didn't deploy it in a big M&A. And as I said in my prepared remarks, that was kind of -- my disappointment of 2023 was not finding that opportunity at the right valuation in the right segment that fit that. We did the work. We did the reps, but we didn't deploy capital. And I stand on that. I think that it was the right choice from a steward of shareholder capital perspective. But we're still in the market out there talking to opportunities, investigating things. So we still want to deploy capital in an accretive way, but we won't be chasing growth just for growth sake. And then to your brand support question, no, you should think about our brand support for 2024 about the same as 2023 and the phasing roughly the same as well because it's about launch platform. So no major changes this year.
Operator: Thank you. This concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.
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