Good day and welcome to the Mondelez International First Quarter 2019 Conference Call. Today's call is scheduled to last about one hour, including remarks by Mondelez management and the question-and-answer session. [Operator Instructions] I would now like to turn the call over to Mr. Shep Dunlap, Vice President, Investor Relations of Mondelez. Please go ahead, sir.

Good afternoon, and thanks for joining us. With me today are Dirk Van de Put, our Chairman and CEO; and Luca Zaramella, our CFO. Earlier today, we sent out our press release and presentation slides which are available on our website, mondelezinternational.com/investors. During this call, we'll make forward-looking statements about the Company's performance. These statements are based on how we see things today. Actual results may differ materially due to risks and uncertainties. Please refer to the cautionary statements and risk factors contained in our 10-K and 10-Q filings for more details on our forward-looking statements. Some of today's prepared remarks include non-GAAP financial measures. Today, we will be referencing our non-GAAP financial measures unless otherwise noted. You can find the GAAP to non-GAAP reconciliations within our earnings release and at the back of the slide presentation. In today's call, Dirk will give you an overview of our results as well as progress update against our strategic priorities. Then Luca will take you through the financials and our outlook. We will close with Q&A. With that, I'll now turn the call over to Dirk.

Thank you, Shep, and good afternoon, everybody. Six months after the launch of our new strategy, I'm encouraged by our performance and the progress that we're making. Our new strategy leverages our unique differentiators. We are a global leader in snacking. We are not in general food. We have an expansive global presence with nearly 75% of our sales outside of North America. We have large and powerful global brands and well-known local brands that resonate with consumers. And we've built a culture of cost discipline, which provides a strong platform to leverage future growth. And our teams are rallying behind are clear and focused strategy to accelerate growth and create value for our shareholders. Our new strategic plan built on these fundamental advantages and it's focused on executing on these three strategies to create a more consumer-centric organization. The first strategy is about accelerating our topline growth, the second, about driving operational excellence, and the third, about creating a winning consumer focused culture. The combination of these three leaves us well positioned to create sustainable long-term shareholder value. I am pleased with our latest financial results, which demonstrate clear progress against these strategies. These results reinforce my confidence in what we can achieve with a consumer-centric mindset and with our people in power to act with speed and agility. We started 2019 with a strong quarter. In the first three months, we delivered against our key financial metrics. Our topline growth accelerated to 3.7% with a good balance of volume mix and pricing. Our emerging markets grew at 8% and we continue to build on our momentum created with our strong execution. India, China, Southeast Asia, Russia, Mexico and Africa all performed really well and Brazil returned back to growth. Our developed markets showed sustained growth at approximately 1%,…

Thank you, Dirk, and good afternoon. It was a strong first quarter and start to the year, as we built on the progress we saw in the later part of 2018. In quarter one; we delivered strong organic net revenue growth, solid increase in gross profit dollars, double-digit earnings increase and positive free cash flow. We also returned more than $1 billion to our shareholders. Growth was broad-based as we posted positive results across each region and business unit, driven by another quarter of balanced volume and pricing. It is important to note that the vast majority of Easter shipments happened in Q1, generally eliminating phasing impact between Q1 and Q2. Adjusted gross profit dollars on a constant currency basis grew more than revenue in Q1, similar to Q4, and we continue to make critical investments to our business, in order to support our long-term strategic initiatives, across brands, go-to-market and innovation, consistently with our plans for the full-year. Organic net revenue increased 3.7% for the first quarter. This increase was driven by solid execution across our business and continued momentum in emerging markets, where we posted growth of 8% with a good balance of volume and pricing. Excluding Argentina, emerging markets grew 6.5%. We delivered strong results across the Board, in India, China, Southeast Asia, Russia, Mexico and Africa. In addition, Brazil returned to growth this past quarter. We also delivered solid performance in developed markets, supported by growth in Europe and continued steady improvement in the North American business. On a regional basis, Europe once again demonstrated another quarter of solid execution as it delivered revenue growth of 2.7% lapping the strongest quarter last year. This growth was volume driven and broad-based with solid increases across chocolate, biscuits and candy. Russia grew double-digits, while Germany and the UK…

[Operator Instructions] And your first question comes from the line of Andrew Lazar with Barclays.

Good afternoon, everybody.

Hi, Andrew.

Hi, Andrew.

Hi. Maybe we'll just pick up on the organic growth piece. Obviously as you mentioned, it's just the first quarter, but I guess with the strong start to the year on the organic topline, maybe why is 2% to 3% still the right number for the full-year and particularly as pricing seems to be coming through nicely. And as part of that were there any things that maybe were on discrete benefits that you can help quantify to organic growth in the first quarter, whether that's – you had mentioned a bit of a benefit, I think from Easter and perhaps anything related to like a Brexit inventory build and things of that nature?

Yes. So I'll start by saying that we are clearly very pleased with the way Q1 played out, and it builds a little bit on the momentum we saw in the second half of 2018. I think it is also important to taking a look at the results to realize that those were really good quality results. I think the teams around the world did a great job and I'll let Dirk talk maybe a little bit later, but this clearly adds to the conviction of the long-term potential of Mondelez and the merits of the strategy we put together and we presented to you. We were very clear that in 2019, we really want to solidify the progress we saw toward the end of last year. And we believe we really need to see these growth rates above guidance for at least another quarter before we revise our outlook. I want to remind you that this is an investment year and some of the investments we're making are for the benefit of the medium to long-term as well. So it will take a little bit of time for those investments to positively affect our revenue. And we clearly remain optimistic about our outlook, but as we've said many times, we want to be also thoughtful given some of the uncertainties that might post risk throughout the year, clearly Brexit is one of those. We also have some share losses and we need to address those in the remainder of the year. To your specific question, at the time of guidance last quarter, we said that there would be a 50 basis points positive impact due to Easter in the second quarter because of timing. Realities after that guidance we sat down with the trade specifically in the UK and we decided that ahead of the potential Brexit exit that line, which was March 29, it was better for either one to put the Easter stock in the trade itself which we did. So in terms of year-over-year, Easter happens to be neutral in terms of shipment on the quarter. So there is no timing effect. And so I think it is in relative terms, a clean quarter. Again, we're very pleased with the way we see the markets performing. But as I said, it is still early in the year to call up the guidance at this point.

That's really helpful. Thank you for that color. And then just very quickly, Dirk, the better overall volume result even light of the pricing is notable. So I guess where are we in the process of the shifting mindset for more of a cost focus to a growth focus. And I guess how responsible is the new compensation scheme that rewards the volume growth component specifically? Thank you.

Thanks, Andrew. Yes, one of the key elements of our strategy was to create volume growth, which we haven't had for quite a while for a number of reasons. I think you are only growing as a company, if you're volume is going up, i.e. that you're selling more product to more consumers, but also because it gives us overheads leverage. We have installed capacity and to use that every extra ton we put through the plants comes at relatively speaking, lower cost than the previous one. So we try to help our teams to think differently about this. First of all, there was the incentive plan, which we did a number of changes and not in the least, we started to reward our teams for volume growth. There's also a better balance between topline and bottom line growth in our incentives. We also push down incentives in the sense that before most people would be rewarded our region was performing, we now have people being rewarded at the business unit level. So it is more of a direct impact. Before we used to have 60% of their results based on financial results, we've moved that up to 80%. So there is a more direct relation there and we also made sure that our long-term incentives are very performance based. So for sure that has played a role, a big role, I would say in these results. The other one that is really helping in the sense is the fact that we are focusing more and more on dollar gross profit growth, and that makes you think a little bit different on how you generate that versus a percentage of gross profit. And so that means that volume also through that sort of thinking is being stimulated. So overall, yes, we are at close to 2%, 1.7% volume growth in the quarter. That's pretty good and we want to keep it like that because we can clearly see the benefit.

Thanks everyone.

Thank you.

Thank you, Andrew.

And your next question comes from Chris Growe with Stifel.

Hi. Good afternoon.

Hi.

Hi.

Hi. I had a question for you, if I could start on pricing that was obviously quite strong in Latin America and you discussed the benefit from Argentina in the quarter. Just curious, does that continue across the year so that the continued kind of boost to your price realization for the overall company?

Yes. Look, we are very pleased with pricing and the balance we see with volume mix. As I described pricing last year, we clearly focused on a couple of parts of the world, one was our developing markets, which Argentina is a component. I think there is a little bit higher pricing this quarter, than we saw on average last year. But the simple reality is Argentina in Q1 is lapping last year, a relatively benign inflation and ForEx. So the devaluation ramped up in the second part of the year. We moved to higher rates of inflation in the second part of the year in Q2 as well. But the second one about Argentina is we are striking a better balance between pricing and volume, so the volume component is better than we have seen last year. So all in all, I think Argentina will continue growing at the rate that is not going to be necessarily the Q1 rate. But excluding Argentina again, when I look at developing markets that grew 8.5% in the quarter, give or take, excluding Argentina, we are looking at a 6.5%, which is clearly building on the great momentum of last year, and the good news is that that growth rate is comprised both of volume for the vast majority and pricing. So we are very pleased. The other one is North America, where last year we had positive pricing. As I said last year, we used pretty much all the pricing levers promo, price pack architecture and line pricing. We announced toward the end of last year, a price increase in the U.S. We are pleased with the way it is going into the market. And again, when we look at biscuits, which is the biggest category we have in the U.S., and we look at consumption, nice numbers in terms of category growth between volume and pricing and importantly with share gains. So we will continue to see pricing for the remainder of the year. I think Argentina and the impact associated with it will come down in the quarters to come.

Okay. Thank you for that. I had just one other quick follow-up, basically as you put in place – a more of a focus on the local brands over the power brands, I just wanted to understand, and it sounds like Luca you had said maybe the level of investment this quarter was what you expected in relation to that strategy. Is that something that's taking effect right away? Is there a pipeline of new products that has to be developed? Is there a more marketing to be done there? Just wanted to understand how that manifest itself in this situation as you kind of transition your focus as well for some of the local brands?

Yes. I'll take that one. Yes. So the first element there is that we are increasing our investments about $150 million this year that largely goes to A&C. And if I would split that between local and global brands that is more going to local brands than to global brands. We are also investing in route-to-market, India, Russia, China, South Central Europe. If we see there, there is more sales people, more trucks on the road, and we're also investing in R&D. The R&D investment is probably taking a little bit more time, but increasing our A&C investment in our brands and giving a little push on our local brands that is really having an immediate effect, and also the route-to-market of course immediate effect. But we do still believe that the big benefit of that extra investment still has to show up, so we want to see an acceleration in the return we get on it. And overall, I would also like to say that we don't see this as a one-off year where we do this. Our overall thinking is that as we invest more this year, we will get higher topline growth, which will lead to a solid gross profit growth and then we more or less flow half of that to the bottom line and reinvest half of that into our A&C and so on. So we see this continuing getting ourselves into a virtuous circle. And that would mean that every year we increase our investment.

Great. Thank you very much.

Okay. Thank you, Chris.

Your next question is from Bryan Spillane with Bank of America.

Hi. Good afternoon, everyone.

Hi, Bryan.

I had a couple of questions related to the balance sheet, I guess. The first one, Luca it looks like total debt in the quarter was up sequentially by about $1 billion, and yet even interest expense came in more favorably. So I guess one question related to that is just, is there anything timing related that drove the debt higher in the quarter and then just I guess the disconnect between interest expense coming down, but debt going up?

Look, I'll start by talking about the interest cost. I think on the interest cost Q1 at $80 million, it came quite frankly a little bit more favorable than we thought. The reality is we are still benefiting particularly year-over-year from additional net investment hedges that had a positive impact. We are quite pleased with the rates we have in terms of all the interest costs. I would just want to remind you that we have $4.5 billion of euro denominated debt that is partly coming due in the second part of the year. That debt is at zero cost, actually negative cost for part of it, and we will renew that with a longer tenure, we will incur in additional interest cost. So yes, maybe the interest cost guidance of $450 million is a little bit on the conservative side. But I think again, we have to see how the year plays out. I think there has been a little bit of fluctuations around the interest rate. On the debt, it is true the debt went up. I don't think it went up, I'm looking at net debt, so including cash that we have some additional cash compared to the end of the year. And the reason being that there is particularly in Q1 some seasonality due to Easter falling later, receivables went up a bit. So we have a little bit more liquidity in the system. But the top of that went up pretty much because we renewed some debt. We have as you know, still relatively low cash flow compared to the yearly projection, so $200 million in Q1 versus the $2.8 billion that we are going to generate in the year. And then we took the opportunity to buyback shares as I said at $44 million. So between share and dividends, we paid a little bit north of $1 billion. So debt went up a bit. I think in terms of leverage, we are in the ballpark of the number we had at the end of last year. So I think it is pretty much timing.

And so I guess, as we're thinking about the timing and relative as we're thinking about net debt for the full-year, absent something that we don't know about like an acquisition or someone along those lines. You're not expecting net debt to really increase for the year?

Maybe it will increase a bit again in line with EBITDA, I would say, so but I wouldn't expect leverage to go up again. We are committed to the credit ratings we have. We just got reaffirmed as one of the agencies reiterated the rating. So we feel good where we are. I think you should project the same situation as of the end of last year.

Okay. Just one more related one. There has been some stories about the potential for Mondelez being interested in Arnott's and obviously I'm not passing a comment specifically about that, but just a deal that size seems large relative to what you described in M&A. So maybe either Dirk or Luca, if you could just remind us how you're thinking about M&A, both in terms of strategy, but more just size? How you're thinking about what types of size of deals you'd be looking at?

Yes. As we have stated, our preference is for bolt-on acquisitions, looking at the different white spaces that we have around the world. As you go around that you look at biscuits, chocolates, or gum and candy markets, we still have areas where we are not present or not big enough and that will be our preference to sort of filling our geographical landscape. We have the same in existing markets where in certain channels or there are certain areas in our categories like health and wellness premium, digital businesses that we would be interested in. But overall, we do not expect those to be big deals. In the case of Arnott's, it's Australia, it's biscuits, it's quite sizable business. It fits in that white space thinking. It's obviously a process that's still ongoing. It's probably a little bit higher than what we would originally start when we thought about acquisitions. But at the same time, we have very clear expectations in the term of returns and in term of leverage, and we want to stay very disciplined buyers. So as long as it fits into the framework that we've set into our strategic plan, we will do so. But if it falls out of that we will not make a deal.

All right. Thanks, everybody.

Thank you, Bryan.

And your next question is from Steve Strycula with UBS.

Hi. Good afternoon.

Hi.

Hi, Steve.

So two-part question. First for Luca. Just to on an apples-to-apples basis for first quarter, I know you have Argentina, Brexit, and Easter to Andew Lazar's question, would you say if we kind of take those three pieces into consideration, the underlying organic sales number was close to about a 3 percentage point number?

Again, the way I commented on Brexit it was, we decided to put it Easter into the system ahead of a potential exit or even hard Brexit. So in terms of shipments, I wouldn't attribute to Brexit any impact year-over-year. It just happened that Easter this year fell in Q2, and we decided to put selling into the system in Q1. So, Q1 2018 versus 2019 no material changes. I think as I said, Argentina is a little bit higher. We gave you the number between developing markets with or without Argentina. The relevance of Argentina in the quarter is a little bit higher than last year. We expect that to turn down. So I would say, look in shipment terms, I think it is really a clean quarter now. I think you saw the categories, particularly around chocolate, where we have some challenges, part of it is due to timing. We need to work on the shares. And as I said, if you're trying to see if there are opportunities in terms of topline for the year, I would say, great start to the year. We are very pleased. As I said, I would like to see the second quarter above guidance for us to be able to call guidance out for the year.

Okay. And then a follow-up for Dirk. Dirk you recently did an interview with a German newspaper and admittedly my German isn't so fresh. So I was hoping you might help bridge a few comments or add some transparency as to what you meant when you were describing some of the opportunity set for a big global brands relative to home-grown brand, and then to wrap up, your comment on the monetization potential for the coffee assets in that paper. Thank you so much.

Yes. Well, the two comments were not that new. I think the first one as it related to brands was that I have – and I think the rest of the management team in the company's shares that believes that the days of the big global brands that cover all areas and under which you can do everything and that will lead to significant growth, that's not necessarily what the future looks like. We can see the phenomenon very clearly with the insurgent brands in the U.S., which is translating in sales a little bit around the world. So the comment was related to my opinion that we need to keep on growing our global brands. And as we explained, we are very happy to have our two biggest brands growing almost both of them double-digit is quite good. But at the same time, we believe local brands more and more will have a significant role to play. They are closer to the local consumers. They feel more connected to it and so the comment was meant to say, we believe our strategy is the right one. On the coffee assets, the comment there was that they asked me, what was the future of our coffee assets in the business? I said that for the time being, we’re very happy. We've got different investments. We're seeing good growth. We are happy what the management teams are doing there and they still have some good potential. On the longer-term, the comment was that obviously we divested or partially divested our coffee business. We are not running it anymore. And over time, we will exit those assets. We don't know when, but clearly it's something that is in the plan. Those were the two comments.

Okay, thanks. I'll pass the line.

Okay.

And your next question is from Ken Goldman with JPMorgan.

Hi. Thank you.

Hi.

Hi Ken.

In North America, there was a fairly significant gap between your takeaway as reported by Nielsen in the quarter and your actual North American sales. I know you addressed this a little bit, but I'm just hoping for a little bit more color in your view what the biggest reasons were for maybe the reported numbers coming in a little bit more below takeaway then what some of us expected?

Yes, yes. And I don't know, which takeaway numbers that you are looking at, but you probably are comparing our biscuit takeaway numbers to our overall net revenue numbers...

No, I mean including everything. It's still a little bit lower.

Yes. It's still a bit lower. I would say our takeaway overall would be around 2% and then the net revenue is 0.5%. Clearly biscuits are doing very well for us. We have a good category growth. We're increasing our market share, and we clearly see that in the consumption. We do have as much smaller part of our business is related to gum and candy, and in the first quarter we saw a slowdown in those two categories, particularly in candy, we think that's only driven by Easter falling later into the year this year. We think that's going to come back in gum as been always a little bit under performing. So that's clearly a challenge as I bridge. They are not growing at the level that the rest of the consumption is growing. Particularly hard hit was halls in the quarter, because of the cold-season not being very good and also that we have some more pressure from vicks competitive activity. The other factor that you need to take into account is that the retailers still are lowering their stock levels and that shows up in our net revenue, but doesn't show up in the consumption numbers. So that's clearly something that plays a role for us. So those are largely the biggest factors, there is potentially also a little bit of non-measured channels that don't show up in the consumption numbers that you see, which we're not growing through the same rate. So that also causes that difference between the two. Those would be the big reasons, but we were able to perfectly make that bridge between our net revenue that we're seeing in consumption.

Okay. Thank you very much for that. That's helpful. My follow-up will be quick. In terms of the destocking you've seen which certainly isn't limited to Mondelez. Any idea when we can expect a little bit of a slowdown there? I mean, there can't be destocking forever, and yet it seems to be happening for longer than what maybe some companies were anticipating?

Yes. So first of all, some of the rollouts were not the whole country at the same time. So that certainly plays a role. Then also the systems are now – so the rollouts were spread over more than one year. The second effect that you have there is, it's an automatic system, and as that automatic system sees for instance our gum sales go down that will lead to lower stock levels de-referencing some of our SKUs, and so that sort of has an extra effect in the year, as our sales will start to go up. That will probably lead to a slight increase of our stock levels in the trade over time. So we do believe that this difference between our net revenue and the consumption we see will disappear in the coming months or quarters. And that it will be more reasoned out.

So, just to follow-up and make sure and I apologize for having the call little bit. But just to make sure I understand, if your takeaway numbers in Nielsen are disappointing in a certain category, the customers will automatically order less, I didn't – I knew that was something in there, but just want to make sure that that's what you're sort of suggesting?

They don't order unless they will – yes, in a way they do, but they will lower their stock level, because if the sales go down, they need to have less stock. So you see an effect from that to...

What Dirk was saying, yes, is that in gums specifically, we see a little bit of trade reassessing their stock position and as consumption goes down in our SKUs. They adjust stock down. So it was just refining to gum for that comment, I assume.

Yes.

Thank you.

And your next question is from Jason English with Goldman Sachs.

Hey, good evening, folks. Thank you for the question.

Hi.

Hi Jason.

I've got two questions. First a quick one, is your business going to be affected by the price controls implemented in Argentina? And if so what are the implications there?

I think you know the answer to that question is, at this point, no. I think as the new relatively new President came into play, actually all price controls were removed. I think the exchange rate environment is in terms of ability to move money out of the country and to remit money at growth, as being better than in the past. So the simple answer is, no. We don't have price controlled categories at this point in time, but we don't know clearly what lies ahead.

Got it. Thank you. And then my second question. I totally appreciate and respect your focus on gross profit dollar growth. But I'm still trying to make sure that I understand my margin bridges. And I was a bit surprised that we didn't see a bit more margin strength this quarter, given the sequential acceleration of pricing, given there is still pretty easy comp that you're cycling against here in the first quarter. Can you walk us through some of the puts and takes that you're seeing there, whether in terms of inflation and productivity and maybe some mixed drags between gum weak or you pushing into local brands or investing et cetera?

Yes. Look, I think it is clear that we are trying to move the mindset from gross margin percentages to gross profit dollars or from that matter from high percentages to high dollars. I think the gross profit line was in line with expectations and grew 4.5%, which is ahead of revenue we added 30 basis points of gross margin. As I dissect the business on the gross margin line, quite frankly, we are very pleased with what we're seeing in three regions out of four. There is Latin America that is facing some pressure and last year we did over strategies for ForEx that were absolutely exceptional, and we are lapping quite positive ForEx rates in Latin America in Q1. But with the exclusion of Latin America quite frankly, I see strength across all the other three regions and volume leverage is coming into play. Pricing, net of cost is positive and clearly we deliver productivity. Below the line or below gross profit we invested in A&C, route-to-market in R&D as we've said. But and we also deliver cost savings in the operator line, so underlying savings both in gross profit and overheads is quite good in line with expectations. We happened to lap a little bit of one-time as last year for some VAT related benefits that we got into the P&L. And as I said in my remarks, we are also – we have made accruals in Q1, in relation to some legal matters and again indirect taxes. So the year-over-year impact is round about $40 million. So when I exclude these items, I think the P&L that we deliver in Q1 was great. On Latin America, I wouldn't be at this point overly concerned. We achieved what we have in plan and as Brazil specifically speaks out for the remainder of the year, we should be benefiting from better leverage as well there. So you might be a little bit below what you had in mind, but it is in line with what we had internally and importantly I see three regions on solid ground.

Very good. Thank you. And congrats on the strong start.

Thank you, Jason. Operator Your next question comes from Dara Mohsenian with Morgan Stanley.

Hey, guys.

Hi.

I wanted to get a bit more detail on the pricing environment in Latin America, and in some of the key markets ex-Argentina, because it was a big sequential improvement in trend. So did Brazil and Mexico see some sequential improvement in Q1 versus Q4, and maybe just detail the competitive environment you're seeing there particularly in Brazil. And then from a volume standpoint, we're still seeing declines in Latin America versus very healthy growth you're seeing in other emerging markets around the world and a lot of progress we've see in some of the other regions. So just curious on if we should get more of a balance between volume and pricing going forward in Latin America, and your ability to accelerate volume growth there like we've seen in some of the other regions? Thanks.

Yes. Maybe I'll start with the volume part of the question and Dirk can give you a little bit of flavor around both Brazil and Mexico and what we're seeing. Yes, look, Latin America as historically shown negative volume. I think if you look at the volume mix this quarter it happens to be a little bit better than what you have seen in the last few years. Remember that we used the full array of pricing tools to pricing the marketplace. So one component of volume is downsizing and there is an impact, specifically in Brazil around that. But all-in-all, I think you should expect also for the remainder of the year a little bit of volume pressure. Having said that, I think there should be sequential improvement. In Argentina, as I said in one of the previous questions, volume came in better than last year. We are striking a much better balance between volume and pricing. And I think this move to gross profit dollars and the opportunity we have to optimize reliable consistent and repeatable volume growth. I think it is quintessential to them all. So I think all-in-all, we are also pleased with the volume dynamics we are seeing overall in Latin America and hopefully we see an improvement in the remainder of the year. On the Brazil, Mexico, Dirk if you want to...?

Yes. So, one observation on Latin America was that all our business units grew at the same time. In fact, all our business units around the world had growth. So that made the quarter quite appealing to it. To talk a little bit more about Brazil. We feel that Brazil is on an uptick. It's improving. It's not totally stable yet. There's certainly a number of macro uncertainties that are still there. But overall, we saw the business return back to growth, which we felt good about. As we look at categories, the chocolate category was in slight decline, but that of course includes the impact of the late Easter. And in terms of our Q1 revenue, our chocolate grew high single-digits. One of the successes there was the launch of a product called Bis Xtra, under our Bis brand and there was a new type of wafers, covers with chocolate that's doing very well there. As it relates to the gum category, we saw high single-digit revenue growth. This was driven also, sorry, the category was growing and our revenue was growing, largely driven by Trident and Trident launched a new campaign called Chew2Relax and that had a significant impact. And then also powdered beverages is very important for us, and where we also see the category getting back to growth, which was not the case last year. There we lost a little bit of share. In the past year and we are starting to recover, but we still have some recovery to do. So overall in Brazil, I would say surprising situation because that was the origin of your question is relatively healthy. It's not as big as it is in Argentina and largely in line with our expectations. By the way, the overall effect look of Argentina on our result, I think compared to last year's growth was 0.2. So there is an effect, but it's not that dramatic I would say, as you might expect. And then maybe to talk about Mexico, a little bit. Mexico, we see a very good situation. We are growing mid single-digits and pricing is relatively mitigated there. Also so, I would say if you look at Latin America where the pricing is higher than it has been in the past years is largely in Argentina, the rest looks largely in line with expectations.

Great, thanks. It's very helpful.

Okay. Thank you.

And your next question is from the line of Alexia Howard with Bernstein.

Good evening, everyone.

Hi, Alexia.

Hi, Alexia.

Hi there. So two quick ones. First of all, on the A&C spend. How much was it up this quarter and how much are you expecting it to be up to the full-year either in percentage terms or dollar terms? Is it going to accelerate from here or was there a big burst this quarter, and then it slows down? And then my second question, just coming back to the beginning of the Q&A, you mentioned that one of the reasons that you didn't want to raise guidance for the full-year. It's early and there are clearly some risks on the horizon and Brexit is one of them. Is that the main one or there are other uncertainties out there that you're keeping an eye on? Thank you and I'll pass it on.

Yes. Thank you for the question, Alexia. So on A&C, it was up in Q1. We're not going to start giving you details by A&C spending, but as particularly we look at working you can see which is dollars we spend behind initiatives online or Television, etc. That was up quite a bit year-over-year. I expect that increase to continue for the remainder of the year. And actually the overall A&C spending is going to sequentially increase in the quarters to come. Nothing that wasn't expected, it is baked into the guidance. To your second question, yes, Brexit is clearly unknown at this point in time and it is the biggest risk that that we know of. But as I learned many times in my life, I mean sometimes the unexpected comes as well. And so there are a few elections around the world. I don't know the outcomes of those yet, but there might be some uncertainties. Again, as I look at the categories, they are displaying solid growth in many places. We are fairly pleased with developing market. Having said that, given it is just one quarter. We decided to keep guidance the same.

Perfect. Thank you very much. I'll pass it on.

Thank you, Alexia.

And your last question is from the line of David Driscoll with Citi.

Great. Thank you and good evening.

Hi, David.

Hi, David.

I've got a couple of questions here that I wanted to ask. Just going back on Bryan's question about the debt, can you just go over how much of that euro debt has a negative interest rate? What is that negative interest rate? And when do you actually refi it? I'm still struggling with the $80 million interest expense in the quarter and how we get to this $450 million? And then you made the comment, well maybe that's a little bit conservative? Can you help me figure out how conservative?

Look, just let's get the number straight on the debt. The net debt that we had at the end of last year was round about $17.3 billion. Okay. And it was the total leverage of 3.3x on EBITDA. At the end of Q1, net debt inclusive of cash, which I said increased around the world because of seasonality, specifically around Easter. It was $17.8 billion with the leverage round about 3.4x. So those are the numbers. On the interest rate and the cost $80 million is clearly a number that if you multiply by four doesn't get you the guidance we gave on interest rate. Having said that, there is an impact on net investments hedges, and particularly year-over-year that impact is going to subside. And then it was not uncommon particularly on short tenure debt to be able to borrow money in Europe at the negative interest cost. I'm not going to give you the details of what that these, but it is negative, so we are getting paid for that. And as we renew that debt at current rates, we are going to incur a cost and not last, we are going to increase tenure of the debt we are going issue for – in the second part of the year. So that is causing a little bit of – I mean such cost headwind that we have projected this year. As I said, I believe we are going to be a little bit better than the $450 million, but I think again, it is still early in the year given some uncertainties. Remember we have multiple interest cost components in the year. We have short-term borrowings that we do around the world. There is the net investment hedges. There is CP, commercial paper. The free cash flow came in better in Q1 than last year. So there is upside most likely. I think it is early for me to quantify it. I wouldn't expect to – a massive number here though in terms of upside.

That's very helpful. On the phasing of the investments this year and I think it's around $150 million. Did the first quarter, more or less get its proportional share, did 25% of that $150 million go into Q1, then I'm really just trying to get a sense here for the pacing of these investments. Previously, I think you guys had said that you did expect it would be rather even throughout the year, but now that we've got one quarter in the book, so then you could update us on that one. And then Dirk, I had one final one. You were about to bite on this one earlier in the questions. But I'd like you just to talk about that for key growth in the United States, the 6.5 points of volume growth that we're seeing in the Nielsen data and just the sustainability of that kind of take away and what's driving in. It's pretty special obviously it's in cookies and not in the other portions of the U.S. business. But I'm still just curious as to what's driving it in the sustainability of that cookie growth? Thank you.

Okay. Well, as it relates to the investments, it is evenly spread if anything, the first quarter was probably a bit lower than its fair share. So, it is not that we have an extraordinary spending in this quarter and now with tempers down, I would say we are expecting as Luca said the sequential increase of the spending as we go through the quarters. As it relates to what we are seeing, yes, obviously that's not captured in our consumption numbers that you see. But you're referring to a report that I think came out recently. We do see quite some substantial increase of consumption. I would say there in biscuits in North America, that I think that's sort of a particular situation, we have Easter was in – is in those numbers. So that's going to have an effect. We also just ran a very successful promotion on Oreo, The Games of Thrones edition, which is a one-off. So I'm expecting as those big effects sort of passes that consumption will go back to the normal 3%-ish that we're seeing. But yes, we clearly have seen in April, a big boost in consumption and we are quite happy about that.

Congratulations and thank you, guys.

Thank you.

Thank you.

And I'll now turn the call back over to Dirk.

Okay. Thank you. So as I said at the outset, I feel good about our performance in this first quarter and the progress we are making as the strategic plan. We are encouraged by this strong start, and we believe we are well positioned to deliver on our financial commitments and keep on funding our future growth. We want to continue to invest for the long-term to support our brands, our sales, on innovation and our quality. And we think we are entering into that virtuous circle that we're talking about to build this sustainable momentum and keep on creating value for our shareholders for many years to come. So thank you for the time. Thank you for your interest in the Company. And talk to you in about a quarter.

Thank you.

This does conclude today's conference call. Thank you for your participation. You may now disconnect.