SEB SA

PAR:SK

Earnings Call Transcript 2018-Q1

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Hi, everyone, and welcome to our First Quarter Sales and Financial Data Conference Call. You hopefully have the document in front of you, and so we'll go through the usual agenda that you have on Page 3. On Page 4, I suggest we pause a few seconds and admire this beautiful, beautiful stainless steel companion bowl that we all encourage you to buy. And once you've looked at that, we'll move to Page 5.So on Page 5, our -- the -- our sort of top line dashboard. We delivered another good quarter on top of what was a really exceptional Q1 2017, when, as you might remember, we grew ROPA on a like-for-like basis 34%, and we delivered a 9% [ mup ] which basically is never the case in Q1. So this quarter, we delivered 7.4% like-for-like top line growth. We'll talk about a significant currency impact, negative currency impact leading to a reported sales growth of 2.1%.Operating result from activity, our ROPA was on a reported basis, EUR 123 million, down 6%. And obviously, we'll comment that quite a bit today. On that same page, you have the like-for-like before PPA one-off comparison at EUR 138 million, which is stable versus last year. So let me just take you through a few numbers, so that we're all aligned on what we're looking at. Last year, we published a ROPA of EUR 131 million. That ROPA included EUR 10 million of PPA entries, 7 of them being one-offs, 3 of them being recurring PPA entries. So the -- before PPA 1 of ROPA last year was 131 plus 7, so 138. That's how we do the math. Obviously the 138 we report here, we're talking about in 2018, includes the recurring PPA one-off entries for a similar amount to last year.Right, so hopefully that is clear and we'll be happy to come back to that later on the call. We generated -- we had a strong cash flow generation, driving our net debt down EUR 180 million versus last year's EUR 1,725,000,000 million. A few comments before we get into some sales numbers, if you comment on the ROPA. So as I mentioned, Q1 2017 was a really a high base. In particular, you would remember that we had the strong shipments of 2 PCM, Professional Coffee Machine deals in Canada and Japan that were boosting that quarter. And actually phased out over Q2 and Q3, so we continued to ship those contracts over 3 quarters, but Q1 was a really big one. And obviously, we don't have that this year, so that was expected. We had flagged that difficult comparison for Q1. And the other thing we had last year with the pipeline filled for the new, mostly breakfast range, but not only breakfast, actually the crops range in the U.S., 2 initiatives that had boosted our Q1 numbers last year and obviously are not there this year, so -- and we'll come back and comment further on these on the call. Another element to keep in mind is the way forex plays out this year. We are still -- and we'll come back to that. We are still looking at a relatively modest negative impact from forex on our ROPA for the full year. And in fact, about 2/3 of that full year impact falls into Q1, right? So Q1 carries EUR 15 million of negative FX impact and that's obviously a driver of the reported number.Another element that I would flag that is not mentioned in the earnings release relates to the alignment of WMF accounting methods, if you will, on 1 particular point, paid vacations. The way WMF used to accrue that was once a year, at the end of the year. We do it differently. And we have, therefore, this year in Q1 -- starting in Q1, accrued paid vacations at WMF. That's a negative impact to the Q1 number of EUR 5 million. That's obviously only a calendarization issue. There's no full year impact. But that clearly impacts the Q1 number.And then lastly, I just remind you, as we do every first quarter, whether it's up or down versus prior year, I'd remind you that Q1 is a small quarter for us. If you look at the last 4 years, we delivered anywhere between 14% and 20% of our ROPA in Q1 and therefore, not to be extrapolated to the full year. So that's a lot of, we reckon that's a lot of sort of comments -- context to the ROPA performance, but we thought that was useful to keep in mind. All right. Moving to sales on Page 6 and specifically sales by quarter. Well, basically another very robust top line performance in this Q1 2018 on top of, as you can see on this slide, 11.5% growth last year. And including, as mentioned, the -- including the absence or let's say without the strong PCM deals we had last year and obviously, the crops pipeline fill. So a really strong top line performance, continuing a series of, as you can see, at least 12 mid- to high single-digit quarters in terms of sales growth.Page 7, we look at that -- the buildup of that sales force. So 7.4% organic, a big negative FX impact, EUR 86 million in Q1. As a reminder, 2017 full year was 98. And Q1 last year was actually positive. So we're really seeing this shift in terms of currency evolution impacting sales in quite a major way. And as I mentioned earlier, the impact on ROPA is much more modest. We'll come back to that. So all of that leading to 2.1 reported EUR 1.5 billion in sales.The currency impact in more detail on Page 8. You can see the bulk of it is driven by the US dollar and the Chinese yuan. As I remind you every time, when the Chinese -- the US dollar and the Chinese yuan weaken, this is actually rather good news for us in terms of profitability, given that these are our 2 short currencies. But as you can see, it's pretty much the euro strengthening against all currencies and therefore, while we could have added a lot of currencies on that page, they're all down versus the euro. Most notably maybe fairly, fairly big evolutions, fairly drastic drops in the Turkish lira, the Russian ruble, the real -- the Brazilian real, so all currencies to watch as we go through the year. And I'm sure we'll talk some more about that.On Page 9, our performance by quarter -- by region, sorry. As you can see, all region on the left column, right? 7.4 in total organic growth. All regions positive with the exception of North America, as anticipated, as we had flagged earlier, right? A few comments on the 8.6 -- you see that we split that sales presentation by consumer, including WMF sales, as we had explained before, right? For the first time here including WMF sales in our sort of usual regions, historical regions and then presenting WMF professional as a separate line. As we look at the consumer business, plus 8.6% on a constant-currency basis, that would be 9% ex LP. So LPs have a modest impact on the business this quarter. I mention that because they do have an impact on some regions, so I'll mention that as we go through them. And the other comment on the 8.6% is you would split it between 9.7% on the ex WMF business and then a decline of 2.5% on the WMF consumer business. We'll come back to that, but that 8.6% is built up that way. Now by region, EMEA was very solid at 6.3%. Within EMEA, Western Europe at 2.2%. That's where both LPs and WMF actually play a bigger role. Ex LPs we're at 3%, ex LPs and WMF we're at 4%. So Western Europe, a sort of ongoing historical business was solid at 4%. And this is where the bulk of the WMF business is and that impacted that region and a little bit down. Other countries performed wonderfully at 18.5%. North America, minus 11%. Obviously driven by a big drop in North America minus 19.8%. Isabelle will come back in some detail on that. And I'm sure you might have -- you will have some questions, so I won't comment further at this point. South America, South America plus 4.3%. It was positive in both Brazil and Colombia, slightly positive in Brazil, solid in Colombia. Asia, plus 19%. Another exceptional quarter at -- in China at Supor, plus 24% and then other Asian countries 2.5%. That's the other region actually where LPs play a bit of a role, ex LPs would be at 4% in the region with basically all markets positive. WMF professional at minus 3.8%. I think I'll comment on that on the next page, so minus 3.8% for WMF professional. Let's move to Page 10. So there you go, professional 3.8%, negative; consumer, as I mentioned 2.5%; and total WMF at 3.2%. On the consumer side, first. Germany, the main market right? The first market was actually flat. Even though it remains a difficult market for the same reasons we've highlighted before, in particular a difficult distribution environment. Outside Germany, we were, therefore, slightly negative. And what we have there is, we're really still, I'd say, in the last stages of the transition of the WMF business to the SEB subsidiaries. That takes a bit of time. It's actually heavy work in terms of integrating that business. It's a lot of people, legal, systems, in some cases listings, work that needs to take place. And therefore, we should see an acceleration of that business mostly in -- starting in S2. That's what we're anticipating now. Right. And the business largely integrated, yes. Outside DACH, the business has been taken over by these subsidiaries.On the professional side as announced, right? We're down due to not having big contracts to ship in Q1, whereas we had last year. Last year, it was to Canada and Japan. The good news is actually twofold. First on the base business, i.e. if you exclude the tough comparison, if you exclude those deals we had last year, business grew 10%. So we had very solid professional, and I mean, professional coffee. Professional coffee grew 10%, driven by Germany, China, the U.S., Scandinavia. I mean, in a lot of the markets, we had very solid coffee growth, Central Europe as well.The second good news is we actually will have another strong year in terms of big contracts. WMF recently signed 2 large contracts in the U.S. and in China, which will start to ship in Q2. These contracts are of a similar magnitude as those we shipped last year and therefore, the prospects for PCM's growth in 2018 are just excellent. All right. And 1 just -- just 1 last slide for me. Sales by region. You can see in Q1, a fairly unusual split in fact with China. The green part of the circle, a big 33%, that's obviously specific to Q1 and Chinese New Year and an exceptional quarter delivered by Supor on a full year basis that will get back closer -- that should get back closer to 20% and everybody else will benefit.And in terms of mature versus emerging markets, you can see that our consumer business is slightly tilted towards emerging markets in Q1. Again, with a big China that will probably on a full year basis reverse. And the professional business is heavily driven by Germany, the U.S., Japan, so heavily mature markets for what happens to be a perfect 50-50 in Q1 between mature and emerging markets. And with that I'll hand over to Isabelle.

[Isabelle Posth]

Yes, good evening. We're going to go through the different continents and regions. Starting as usual with Europe, where the market has been slowing down after several quarters and more -- I would say almost 2 years of very brisk growth. So market has been softening and has contracted across the countries and according to the countries in Europe. As a matter of fact, if we take -- if we start with France. The market has been slightly up, slightly positive, driven mainly by vacuum cleaners, electrical cooking and especially multicookers, food preparation and home comfort. Home comfort was mainly driven by the fact that retailers have implemented preseason sales as they were short in inventories last year and as such, they wanted to be more cautious this year.On the negative side, beverage preparation was down, mainly [ due to ] coffeemakers and kettles. Linen care was also declining as well as personal care. Regarding the cookware market, it's been declining on high comps because, as you remember, last year was, again, a good year after 2016, which was down. So we have some kind of a roller coasting effect on the cookware market, but this beginning of the year is slightly down.Regarding now our performance. You remember that we had a very good Q4. And on this basis and after this stronger end of the year, the growth of close to 3% in Q1 is a good performance. And ex LP, this growth would be above 4%, as mentioned in the press release. It was largely driven by a strong catch-up in cookware after a negative year in 2017, difficult. And regarding SDA sale, electrical products sales, the trend was okay, and was very good in vacuum cleaners with our new AIR FORCE 360, which is doing well, as well as the Clean & Steam model. It was also very good in food preparation and Cuisine Companion is getting momentum again, and blenders are doing fine as well as Dolce Gusto. And also France as mentioned before, the preseason stocking by retailers has been a good momentum, has constituted a good momentum for us.We've been lagging in linen care, and especially in irons and steam generators as, of course, the garment steamer segment is doing much better. So that's for France. Let's switch now to Germany. Germany being now our second market as we had mentioned a few months ago, when we started to speak about WMF. So Germany being our second market. Growing around 3% like-for-like. But this is integrating. This is taking into account the performance of WMF, which is dampening slightly our group SEB standalone performance. Excluding WMF, which is kind of flattish, we would have been close to 6% growth in Germany.Again, in Germany, market softened significantly. It was very dynamic. So we are packing on very high comps, but the market has been softening. And we've been, again, outperforming the market in small electrical appliances as well as in cookware. So the growth was driven by full automatic expresso coffee machines, by vacuum cleaners, by electrical cooking with OptiGrill still driving growth. And globally, we've been outperforming the market in all these categories, and so gaining market share.Regarding the rest of Europe. In Spain, dynamic is still satisfying, but it was penalized by the non-repeat of the B2B deal last year in beauty care. So the core business is kind of flattish plus. But the WMF consumer business in Spain is doing well and growing kind of mid-single digit in the first quarter. So globally, a good performance in Spain if we take into account the fact that we have very high comps in this area.In Italy, good dynamics of the group in a declining market, and that was mainly linked to linen care, to food prep, electrical cooking, and of course, vacuum cleaning, where we've been doing fine. In the U.K., Q1 sales were slightly up in a market which is difficult to follow because we have some quarters up, some quarters down. But all in all, we've been doing quite well and we've been quite resilient in a declining market.Let's now go to the other EMEA countries, starting with Central Europe. With Central Europe, the dynamic has been very strong over the past year and we continue to have a strong demand and a very dynamic SDA market. This is particularly true -- it's true for all countries, but it's particularly true in Poland, which is a big country for us. And where the sharp and the strong momentum that we have in this country is fueled by full automatic coffee machines, by the launch of the vacuum cleaner category in Q4, which is gaining momentum and expanding in the distribution with also a good impetus in food preparation with strong drivers like hand blenders and kitchen machines and Cuisine Companion, which is also developing further, and also linen care and electrical cooking, which is bolstered by grill, and OptiGrill being really the category captain.Market share in Central Europe, and it's true also for Poland, has been up. And we continue to really strengthen our position on these markets. Now regarding Russia. We finished last year with a softened growth. We have in Q1, again, a strong acceleration of this growth, in a market which is growing nicely, which is also very competitive with lots of players, very aggressive in terms of prices. So it's a very competitive market in which we are doing very well and we continue to gain market share. So our growth in Russia was broad-based. It was both in SDA and cookware. In cookware, all the different categories have contributed to growth. And in SDA, growth was also growth-based with multicookers, with grills, with OptiGrill, ovens, full automatic coffee machines, linen care, vacuum cleaners and also, the new meat mincers. You probably remember that this category was difficult for us a few quarters ago. We've now totally revamped the product offering, and we are gaining momentum again in this very iconic business in Russia.Last in this area but not least is Turkey, where the general climate is not very easy in Turkey right now. The ongoing depreciation of the Turkish lira doesn't help and is leading to inflation, which is around 10% in Turkey. And of course, means that consumer confidence is a bit at stake. Nevertheless, the SDA market continues to grow quite well, double-digit. It's slowing down in units, but in value it's growing double digit. In the context of very serious competition, that group set is doing very fine. We continue to have a very strong momentum in this area, which is not easy, again, I repeat. But all categories have been contributing to growth. All distribution channels, including our group retail in Turkey. So the momentum for us is good in a market which is clearly difficult. NAFTA. NAFTA, well, that's another story. As mentioned -- as Vincent mentioned before, this area is difficult for us. And in addition to that, we are passing on high comps in 2017. You remember that we had this launch of the cross range in kitchen electrics, in mass retail and online last year and this selling, of course, boosted our sales in Q1.So clearly difficult comps. But the general business is difficult and is also impacted by the structural difficulties of the U.S. retail. You know that consumption patterns have been changing drastically over the past month and quarters with lower store traffic and a major shift from -- major purchasing shift from brick-and-mortar to alternative circuits. And this clearly is not helping. The market is rather well-oriented because well, the U.S. economy is rather on a positive trend and consumer confidence is good. So market is rather well-oriented, but as a whole, we have been suffering in the first quarter on our key categories, which are cookware and linen care. Even if we're doing well in garment steamers, this does not offset the decline that we have in ironing. So a difficult stance for the time being in North America -- in the United States. In Canada, the situation is clearly resembling more and more, as far as the distribution is concerned, to the United States. You all know about Sears bankruptcy, so the retail environment is tough. Sears has now closed down all their stores. So it means that, of course, we're missing a certain number of sales and it doesn't help. But a certain number of other retailers are at stake. And it is clearly a difficult time for the distribution environment and industry in Canada also.In addition to that, we've passed a certain number of price increases in order to offset the Canadian dollar depreciation and this adds another issue to our sales there. Now Mexico is the market which is growing in NAFTA. Double-digit growth. A good momentum for us in a market which is good, which is well-oriented, a hefty core business, which is based on 3 strong pillars: cookware, linen care and more and more blenders. The mix is improving, and our SDA sales has been increasing solidly, driven by all categories that I just mentioned, linen care, electrical cooking, but also fans. We're launching a new range of -- well, we're launching fans, as a matter of fact, which are made in Colombia. And the sellout is very encouraging, as the hot season has not really started, but nevertheless, the sellout starts to be very good.Core business and cookware business has been -- have slightly up also, but clearly growth is driven by SDA. Now, Latin America. South America, starting with, well, continued depreciation that Vincent has already spoken about it of the different currencies that are key for us in this area. But overall, the general trend for our business is rather better. In Brazil, the economic environment remains mixed with the different -- all the news that we can have in a contracted situation. But we are returning to growth in small electrical appliances. And this is mainly due to the fact that we have now a better competitive environment for us as the [ Etuchea ] site has been ramping up in small electrical appliances and this has helped us significantly. So very strong momentum notably in fans, because the season has started. Even if the market is down, we are doing very well in France because we have new models that have been launched. A robust recovery also in food preparation, namely in blenders and kitchen machines. And a very strong expansion in the ironing segment, where we have been gaining momentum. Of course, some areas are not as good, and especially cookware, which continues to be a very tough business for us in Brazil. In Colombia, the growth is driven by the big category, which is fans. But we have also a good momentum in food preparation, and namely in blenders, that have been helping us a lot in Q1. Argentina, again, a good dynamic in the first quarter, which has been the case for the whole year 2017.China. Well, China, again, we have been cautious over the quarters telling you, we don't know if this 20 -- more than 20% organic growth can be sustainable. Well, again, 24% like-for-like growth in a market which is much softer than our growth as a matter of fact, which is positive. And this very strong organic growth by Supor based on high comps is driven by many, many products. As well in cookware, where almost all families are up with a special mention for thermal mugs and utensils, which are growing more than 50%. And in small electrical appliances, the big families are continuing to bring a very strong momentum. And namely kettles, namely electrical pressure cookers, high-speed blenders, which are just flying, well, growth is flying, not the blenders. And really, we have a very, very good momentum. And again, a little word on LKA, large kitchen appliances. These extractor hoods and gas stoves, which continue to do very well as mentioned already in February. So a very strong product dynamic. Expansion in new categories, including HPC, where we continue to develop in vacuum cleaners and in garment steamers. A little bit softer -- well, a little bit -- it's clearly softer in air purifiers, because air is better in China for the time being, and so we sell less where the market is down, because air purifier are selling less than before. So that's our takeaway for China. In other Asian countries, well, first a word about currency volatility in the region. As you can see, reported and like-for-like growth made a big difference. But revenue on the contrary to what we had before, where we had heterogeneous situation across countries, their revenue is up in almost all countries. Growth is a bit more moderate in Japan. It's softer in small electrical appliances. You know that we are present mainly in kettles and ironing, but it's getting softer, it's getting softer in this area. But clearly nurtured by cookware and especially pressure cookers, where we have a good start with [ kids community ].In South Korea, the market is really buoyant, it's really buoyant. And we continue on a very good dynamic. And our best sellers are clearly vacuum cleaners with strong momentum on the versatile vacuum cleaners, grills with OptiGrill, but not only. Other grills are also driving growth. And food preparation with the introduction and successful introduction of high-speed blenders, mainly.Australia is doing fine, it's doing fine, and continues to develop. And we have in addition to that a very solid momentum in Southeast Asia with very strong double-digit growth in Thailand and in Malaysia. And a brisk development in Vietnam, which is based on Supor cookware and rice cookers, the fans of AsiaVina, under the brand AsiaVina, and also a new launch of a [ Tifor ] range for kitchen electrics in Vietnam. So this helps clearly a very strong momentum in this area.

[Vincent Leonard, CFO & Senior Executive VP of Finance]

All right. Thank you, Isabelle, and as far as our outlook is concerned. So we remind you, as I did earlier, that Q1 is not representative of the full year. And we clearly delivered a good Q1. Our guidance, we're refining our guidance for the year with organic sales growth that should exceed 5%. ROPA growth at current forex, right? So on a reported basis, but at current forex and before PPA one-off as far as the 2017 base is concerned, growing by more than 5%. And we are well on our -- on track to deliver the deleveraging we target at the end of the year of a debt to -- a net debt-to-adjusted-EBITDA ratio below 2 at the end of 2018. So that's our updated guidance. And with that, we'll be happy to take your questions. So, please go ahead.

[Operator]

[Operator Instructions] Our first question is of the line of Nicolas Langlet at Exane.

[Nicolas Langlet, Research Analyst]

I've got 3 question. The first one on the price mix in Q1. Can you tell us if there was any impact on sales on ORfA in Q1. And given the recent move we had in [ a shakes up in Ruma Italiane ], are you still looking at very limited price mix for this year? Or do you feel you might have to [ passive it ] more to offset the recent movement? Second question. On the [ Ruma Italiana ], we had some volatility on prices recently. Are you still looking at minus EUR 50 million impact for the full year? Or do you think it might be maybe a bit higher than that? And lastly, on Supor, the company of the share buyback plan months ago. Can you explain us what's the rationale behind this share buyback program? And notably, what do you plan to do with the shares bought back? Are you agreeing to consult them and make them increase your stake in Supor or do you plan to use them for [ a suffing ] ?

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Thank you, Nicolas. Price mix, I don't think we said that we expected limited price mix this year. I think we said we expected limited pricing. We still intend, as we always do, as the teams always do, to work hard on continuing to improving the mix of our sales, whether across families or within families. Regarding pricing, and yes, it is in the context as you mentioned of a somewhat worsening raw material environment. I think it is still our intention to limit price increases as much as possible. But we had said that in some cases, we won't have a choice. So that's clearly the case. And if you look at, I think, Isabelle mentioned Russia already, I think you mentioned Turkey. Basically if you look at the severely weakening emerging market currencies, you're going to see us take pricing and we're going to try to limit that, but we do that and we're committing to doing that. And we've done a lot of that in 2013, '14. We will be doing what's necessary to protect our margins. As usual, there's this kind of lag between -- it takes a little bit of time for all that to take hold, but when necessary and clearly in some cases this year it will be necessary, we will take pricing. On the other hand, in some markets in Europe, where given the weakening of the renminbi and the dollar, we're going to have to remain very competitive in our pricing and promotion. So I think, all in all, you probably are going to see some limited impact from pricing. I hope that answer your question, Nicolas.

[Nicolas Langlet, Research Analyst]

Yes, it does.

[Vincent Leonard, CFO & Senior Executive VP of Finance]

On raw materials, yes, it is a worsening environment. You've seen, in particular, what happened to aluminum. What I'd say is, yes, it's going to slightly, obviously, put pressure on that 50 -- around EUR 50 million estimate that we had mentioned in February. What you need to know though is, we do carry significant hedges, in particular on aluminum. We do have inventories that were bought at better prices. So this is not -- basically this is as far as we can see today, a very manageable impact for the year, so -- and the other thing is, frankly, it's pretty volatile. So you've seen aluminum go up 30%, come down 10% in one day. So it's still hard to predict where this will settle. The U.S. sanctions are themselves a little bit in flux. So let's see, but so far -- and that's a comment around -- overall, on raw materials, not only aluminum. We don't see an impact that is -- I mean, we see a very manageable impact basically.Supor share buyback, well, Supor has been delivering very strong results over the years. And it's just one of the ways we can return cash to their shareholders. So that's what we are potentially doing there, right? As you've seen, this authorization is constrained by certain price levels. I think today, it's [ far was ] above that price. And then the shares yes, would likely be canceled, as they are already bought back, that's how it works there, yes.

[Nicolas Langlet, Research Analyst]

Okay, okay. And just one clarification on the one-off PPA, because I recall that last year the one-off PPA impact was minus 10 in Q1, minus 7 in Q2. But you mentioned in the press release, it was actually minus 7 in Q1. So it means, Q2 was actually minus 10, right?

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Yes, that's right. 17 for the whole year and it was all in S1, yes.

[Operator]

We are now over to Steve Levy at Natixis.

[Steve Levy, Analyst]

Three questions, if I may. The first one is on the French days. Are you going to participate and what can we expect from the 3 days it's mainly on, from your view? Second question is have you been impacted by weather condition in Q1 and do you...

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Steve, can you speak up a little bit? We are struggling to hear you.

[Steve Levy, Analyst]

Is better like that? So about -- my first question is about the French days and what your thought about that? Second question is about the weather condition in Q1. Do you expect a delay for some orders or the recovery in Q2? The third question is about the World Cup in Russia. Do you have any marketing plan dedicated to this sport event? And do you expect any pickup in sales due to this event? And just because I missed the number, can you give me your organic growth in Western Europe excluding LPs? I missed the numbers.

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Western Europe growth excluding LPs was 3%. So 3%, Steve. Your second question was -- was it about the strike in France or ...?

[Steve Levy, Analyst]

No, the weather condition. Have you been impacted by weather condition in France? Or in Western Europe basically, or that could put some delay in some orders or deliveries, something like that.

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Okay, and I think the first one is...

[Isabelle Posth]

French days. It's been good. Yes.

[Steve Levy, Analyst]

As of April and beginning of May.

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Your question is about French days, right?

[Steve Levy, Analyst]

Yes, the French days. It starts on...

[Vincent Leonard, CFO & Senior Executive VP of Finance]

In France, next Friday.

[Steve Levy, Analyst]

Exactly.

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Okay, okay, sorry. Look, we expect Q2 to be of a good quality. So overall, we won't be -- it won't be a big negative for us in the quarter, let's say -- let's just say that. I hope I'm answering your question, Steve.

[Steve Levy, Analyst]

Yes.

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Delays in orders, no. No, I don't think we -- I'm actually -- we've actually not heard of weather issues of any type. So no. No such thing in our numbers and therefore, no recovery in Q2. And World Cup in Russia, yes, we are expecting to fully leverage that.

[Isabelle Posth]

The attenders? The attenders?

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Yes, exactly, right, with convivial type appliances.

[Isabelle Posth]

But some drink, also, coffee.

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Right. I don't have an impact to tell you on that, but that's obviously something that the team has prepared.

[Steve Levy, Analyst]

And do we need -- can we expect more marketing event or marketing spending [ French quarter ] or this quarter particularly, rather than the other quarter?

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Yes, I think you can expect a lot of in-store animations, in-store presence, in-store activity around the event.

[Isabelle Posth]

And as a matter of fact, in Russia, we have kept on growing our investments in growth drivers. Not as much in the past, as in the past, but we are strongly activating our business there in-store and online.

[Operator]

We are now over the line of Christophe Chaput at Oddo.

[Christophe Chaput, Analyst]

A few questions for me. The first one is on the currency impact for the full year. Regarding the annual results, in fact, you say that it was -- it will be minus EUR 10 million for 2018, and so it will be slightly above minus EUR 20 million. Which currency led you to adjust your estimate? Is it Brazil, Brazilian real, ruble, or other currency? Can you give us some figure about that? The second one is on the home [ etaiole ], so minus 50 for the full year, how much of that is booked under Q1, if you get this kind of figure? And 2 other small questions. First on North America, I'm not sure to understand your comment. I mean, for the balance of the year, for the next 9 months on a like-for-like basis, are you going to be, let's say, only flat or slightly negative regarding the retail, which is in a bad shape? And the last one is on the coffee contracts for 2018, I mean the brand new. Is it going to be fully delivered in 2018? And globally, how much does it represent? I mean, is it EUR 50 million to EUR 40 million? Can we have more figure about that, please?

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Thank you, Christophe. On currencies, yes, so it's worsened a bit, but really, as we look at it, it's still in the same neighborhood, right? It's easy for FX impact to go up or down EUR 10 million given our exposures. What's worsened since we last talked are the currencies we mentioned earlier, right? The ruble, the Turkish lira, the real have all worsened quite a bit and that's mostly what's driving the slight increase in our full year estimate. Raw material, well basically, if you take the 50, all things equal, it should be spread across the year more or less equally, right, based on sales, so it's a little less than that because, as we said, we have inventories and hedges that protect us and what will happen is that the impacts we're talking about will materialize mostly towards the end of the year. So that should be the phasing. Coffee, I'll answer coffee first. Yes, it will be fully delivered. Those 2 deals should be fully delivered in this year. Actually, no, 1 of them will actually have a slight, yes -- going to slightly into 2019. And I said, they're of similar magnitude as the previous one. So I think actually we mentioned last year that half of our growth was driven by those deals, right, so you can make those calculations. They are significant, as big as we've had last year. And therefore, it provides us a base. The tough comparison we had flagged earlier, driven by not having those deals in 2018, we can pretty much take that out now and consider that will deliver our kind of organic growth on top of last year, if you see what I mean, right? But that deal impact should be pretty much offset by those new deals.

[Isabelle Posth]

And delivery should start from Q2 on.

[Vincent Leonard, CFO & Senior Executive VP of Finance]

That's right, starting in Q2 and indeed going into Q1 next year. And North America, the question was about full year?

[Isabelle Posth]

Full year.

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Yes, on the -- I mean, we expect, Steve, to be -- we hope -- we're very prudent, as you can hear, but we expect to be positive in the balance of the year. And I wouldn't venture into estimating what the full year will be at this stage.

[Operator]

[Operator Instructions] We will now go to the line of Alessandro Cecchini of Equita.

[Alessandro Cecchini, Analyst]

I have some questions. The first one is about your ROPA trend in the first quarter. I would like to understand if it was affected by higher investments in growth drivers adjusted to imagine a bridge for the first quarter? My second question is about, so we spoke during the call about price hikes for full year. You said that, I would like to double check, if I understood correctly, that you are expecting some -- I mean, promotion in Europe in order to be competitive. I would like to understand if I understood well this point? Then my third question is about Russia. I would like to understand what is the trend that you experienced after the very harsh depreciation in ruble over April, just to understand the current trading? And finally, if you could give us the PPA underlining for the full year?

[Vincent Leonard, CFO & Senior Executive VP of Finance]

All right, Alessandro. So on the ROPA trend in Q1, no, we're not increasing growth driving investments in Q1, we're actually increasing them in absolute terms, not as a percentage of sales. And I think we've mentioned before that probably that's the trend that we'll see for the year, the sort of stabilization of our growth driving investments as a percentage of sales. We don't provide a bridge for ROPA in Q1, that's why I -- that's partly why I mentioned quite a few elements to put that Q1 ROPA in context. So hopefully that helps you read that ROPA number. I would just say that, that ROPA number is not a source of concern to us, right? We're very comfortable that the year is going to unfold in a good manner. Pricing, the promotions I was referring to simply reflect the fact that it is very competitive environment, that negotiations were tough. And that our customers are leveraging the fact that the dollar and yuan have weakened, to ask us to be very competitive. So that's what it is. On Russia, balance of year is expected to ...

[Isabelle Posth]

Yes, it's expected to be good. Of course, we have this new challenge with the weakening -- the new weakening -- the fresh weakening of the ruble, which puts a little bit of cautious spin. But at the same time, the dynamic is -- the dynamic of the market, even if it's softened, is still good. And we have been outperforming the market and we'll continue to do so. So by extending distribution, by a very strong quarter dynamic, by entering in new categories. Like for instance, we're launching vacuum cleaners with a good success. So we continue to be rather confident. We continue to be confident regarding Russia, and we will implement price increases, as we have done in the past in order to offset the weakening of the ruble.

[Vincent Leonard, CFO & Senior Executive VP of Finance]

That's right. And as we report at constant currency growth, that includes price increases. So clearly we're in that mode in Russia. As we speak, I mean, it's happening now. On -- full year PPA was the question, right? So full year PPA will be EUR 9 million, right? The recurring PPAs just like last year will be EUR 9 million and they're included in our ROPA. So we don't and we won't mention that, but it's in the ROPA.

[Alessandro Cecchini, Analyst]

Okay. And just a very brief follow-up on the raw material side that you said about your hedges. Your inventories, of course, this will vanish in 2019. Just a flavor that it's a big positive contribution that you are experiencing from these hedges, or, of course, it helps but not in a big manner? Just wanted to understand the fact that probably if things remain in this way, we could have some [ ebbings ] in 2019? Just a flavor.

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Alessandro, we try to -- I mean, we tend to hedge not systematically, but we tend to be hedged on certain currencies, on certain raw materials. We tend to be hedged almost permanently, so everything gets sort of smoothed out and delayed, if you will. And the idea is not to avoid the impact. We get the impact obviously, but to give us time, to buy time to adjust where necessary our pricing or some cases our cost structure. So you don't have to expect a big sort of step. We are coming out of hedges and all of a sudden we are exposed; that's not how we pilot it. We hedge pretty much continuously over different horizons that can vary a little bit, but we pretty much hedge continuously. So no, I would say no major step.

[Operator]

As there are no further questions in the queue today, could we pass it back to you for any closing comments at this stage?

[Vincent Leonard, CFO & Senior Executive VP of Finance]

I think we give it another few seconds.

[Operator]

[Operator Instructions]

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Okay, okay. So then, I guess, we don't have more questions. So we just want to thank everyone. We are glad to deliver these kind of numbers. I hope our guidance -- refined guidance helps a little bit. And we thank you all very much. And we'll see you at the shareholders' meeting on May 16. Thank you very much. Bye-bye.

[Isabelle Posth]

If you have additional questions overnight, Raphael and I will be available tomorrow morning to answer your questions -- not during the night, tomorrow morning.

[Vincent Leonard, CFO & Senior Executive VP of Finance]

Always on call. All right. Thank you. Bye-bye.

[Isabelle Posth]

Thank you. Bye-bye.