Reported diluted EPS
2014
full-year adjusted EPS forecast range tightened to
Third Quarter Ended |
||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Reported | Adjusted* | |||||||||||||||||||
Third Quarter | % | Third Quarter | % | |||||||||||||||||
(Millions, except per share) | 2014 | 2013 |
change |
2014 | 2013 | change | ||||||||||||||
Net Sales | $ | 3,694.9 | $ | 3,484.0 | 6 | % | $ | 3,694.9 | $ | 3,484.0 | 6 | % | ||||||||
Operating Income | 571.4 | 476.0 | 20 | % | 579.2 | 510.1 | 14 | % | ||||||||||||
Net Income Attributable to |
364.9 | 308.0 | 18 | % | 368.7 | 318.1 | 16 | % | ||||||||||||
Diluted Net Income Per Share | $ | 1.19 | $ | 1.00 | 19 | % | $ | 1.21 | $ | 1.04 | 16 | % | ||||||||
* Operating income is adjusted for special gains and charges; net income and diluted net income per share are adjusted for special gains and charges and discrete tax items. | ||||||||||||||||||||
CEO comment
Commenting on the quarter,
"We are confident in our opportunities, strategies and team. Our formula is straightforward, combining the best people and the best technologies to uniquely solve increasingly complex customer challenges around the world. Global economies and end markets will likely remain challenging, so we will once again work to drive superior growth utilizing our value proposition to win more customers in all of our markets. Our competitive strengths and culture of success in serving fundamental market needs drive our expectations for full-year upper-teens adjusted earnings per share growth this year, and for continued superior shareholder returns in the longer-term."
Quarter overview
Third Quarter Ended |
||||||||||||||||||||
(unaudited) | ||||||||||||||||||||
Reported | % | Adjusted Fixed Currency* | % | |||||||||||||||||
(Millions) | 2014 | 2013 | Change | 2014 | 2013 | Change | ||||||||||||||
Net Sales | $ | 3,694.9 | $ | 3,484.0 | 6 | % | $ | 3,662.4 | $ | 3,447.1 | 6 | % | ||||||||
Operating Income | 571.4 | 476.0 | 20 | % | 574.8 | 503.7 | 14 | % | ||||||||||||
* Operating income is adjusted for special gains and charges | ||||||||||||||||||||
Acquisition adjusted growth rates generally exclude the results of any acquired business for the first twelve months post acquisition and exclude the results of any divested businesses for the twelve months prior to divestiture. Champion is an exception. Due to the rapid pace at which the business has been integrated within our Global Energy segment, including all customer selling activity, discrete financial data specific to the legacy Champion business is no longer available post acquisition. As such, to allow for the most meaningful period-over-period comparison, specific to the Champion transaction, Champion's results for the comparable period of the prior year have been included for purposes of providing acquisition adjusted growth rates.
Third quarter 2014 reported operating income increased 20% to
Third quarter 2014 reported net income attributable to
Segment review
Third quarter 2014 sales for the
Third quarter 2014 sales for the Global Institutional segment, when
measured at fixed currency rates, rose 4% to
Third quarter 2014 sales for the Global Energy segment, when measured at
fixed currency rates, grew 14% to
Other segment sales, when measured at fixed currency rates, increased 7%
to
The Corporate segment includes
The reported income tax rate for the third quarter 2014 was 27.3% and
compared with the reported rate of 24.9% in the third quarter 2013.
Excluding the tax rate impact of special gains and charges and discrete
tax items, the adjusted income tax rate was 27.7% in the third quarter
2014 and compared with 28.4% for the same period last year. The improved
adjusted tax rate was the result of favorable geographic income mix
which more than offset the expired
Business Outlook
2014
Our detailed outlook for the full year 2014 is as follows:
Adjusted Gross Margin, excluding special gains and charges | 46% - 47% | |||||||
SG&A % of Sales | approx. 32% | |||||||
Interest expense, net |
|
|||||||
Adjusted tax rate | 27% - 28% | |||||||
Adjusted EPS, excluding special gains and charges |
|
|||||||
Diluted shares | approx. 306 million | |||||||
We continue to expect special gains and charges for the full year 2014
to be approximately a
2014 - Fourth Quarter
Our detailed outlook for the fourth quarter 2014 is as follows:
Adjusted Gross Margin, excluding special gains and charges | 46% - 47% | |||||||
SG&A % of Sales | 31% - 32% | |||||||
Interest expense, net |
|
|||||||
Adjusted tax rate | approx. 26% | |||||||
Adjusted EPS, excluding special gains and charges |
|
|||||||
Diluted shares | approx. 306 million | |||||||
We expect fourth quarter 2014 special gains and charges, including
restructuring charges and integration costs, to be a net charge of
approximately
Reported fourth quarter 2013 diluted earnings per share of
About
A trusted partner at more than one million customer locations,
Cautionary Statements Regarding Forward-Looking Information
This communication contains certain statements relating to future events and our intentions, beliefs, expectations and predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Words or phrases such as "will likely result," "are expected to," "will continue," "is anticipated," "we believe," "we expect," "estimate," "project," "may," "will," "intend," "plan," "believe," "target," "forecast" (including the negative or variations thereof) or similar terminology used in connection with any discussion of future plans, actions or events generally identify forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding our financial and business performance and prospects, including forecasted 2014 fourth quarter and full-year business results, including sales growth, adjusted gross margin, SG&A ratios to sales, interest expense, adjusted effective tax rate, adjusted earnings per share and diluted shares outstanding; special gains and charges, including restructuring charges and integration costs; and passage of the U.S. R&D Tax Credit during fourth quarter 2014. These statements are based on the current expectations of management of the company. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this communication. In particular, the ultimate results of any restructuring, integration and business improvement actions, including cost synergies, depend on a number of factors, including the development of final plans, the impact of local regulatory requirements regarding employee terminations, the time necessary to develop and implement the restructuring and other business improvement initiatives and the level of success achieved through such actions in improving competitiveness, efficiency and effectiveness. In addition, as it relates to the Nalco and Champion transactions, these risks and uncertainties include problems that may arise in successfully integrating the businesses of the company and Nalco Champion, which may result in the combined business not operating as effectively and efficiently as expected.
Additional risks and uncertainties that may affect operating results and
business performance are set forth under Item 1A of our most recent Form
10-K and our other public filings with the
Non-GAAP Financial Information
This news release and certain of the accompanying tables include financial measures that have not been calculated in accordance with accounting principles generally accepted in the U.S. (GAAP). These non-GAAP financial measures include fixed currency sales, acquisition adjusted fixed currency sales, adjusted gross margins, fixed currency operating income, adjusted operating income, adjusted fixed currency operating income, adjusted tax rate, adjusted net income and adjusted diluted earnings per share.
We provide these measures as additional information regarding our operating results. We use these non-GAAP measures internally to evaluate our performance and in making financial and operational decisions, including with respect to incentive compensation. We believe that our presentation of these measures provides investors with greater transparency with respect to our results of operations and that these measures are useful for period-to-period comparison of results.
We include in special gains and charges items that are unusual in
nature, and significant in amount. In order to better allow investors to
compare underlying business performance period-to-period, we provide
adjusted gross margin, adjusted operating income, adjusted net income
attributable to
The adjusted effective tax rate measure promotes period-to-period comparability of the underlying effective tax rate because the amounts excluded do not necessarily reflect costs associated with historical trends or expected future results.
We evaluate the performance of our international operations based on fixed currency rates of foreign exchange. Fixed currency sales, acquisition adjusted fixed currency sales, fixed currency operating income and adjusted fixed currency operating income measures eliminate the impact of exchange rate fluctuations on our international sales, acquisition adjusted sales, operating income and adjusted operating income, respectively, and promote a better understanding of our sales and operating income trends from underlying business performance. Fixed currency amounts included in this release are based on translation into U.S. dollars at the fixed foreign currency exchange rates established by management at the beginning of 2014.
These non-GAAP financial measures are not in accordance with, or an alternative to, GAAP and may be different from non-GAAP measures used by other companies. Investors should not rely on any single financial measure when evaluating our business. We recommend that investors view these measures in conjunction with the GAAP measures included in this news release. A reconciliation of reported diluted earnings per share to adjusted diluted earnings per share is provided in the table "Supplemental Diluted Earnings per Share Information" included in this news release.
(ECL-E)
|
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CONSOLIDATED STATEMENT OF INCOME | |||||||||||||||||||||||||
THIRD QUARTER & NINE MONTHS ENDED |
|||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||
Third Quarter Ended | Nine Months Ended | ||||||||||||||||||||||||
|
% |
|
% | ||||||||||||||||||||||
(millions, except per share) | 2014 | 2013 | Change | 2014 | 2013 | Change | |||||||||||||||||||
Net sales | $ | 3,694.9 | $ | 3,484.0 | 6 | % | $ | 10,599.7 | $ | 9,693.9 | 9 | % | |||||||||||||
Cost of sales (1) | 1,970.6 | 1,866.1 | 6 | % | 5,699.2 | 5,216.0 | 9 | % | |||||||||||||||||
Selling, general and administrative expenses | 1,145.9 | 1,114.1 | 3 | % | 3,435.5 | 3,236.8 | 6 | % | |||||||||||||||||
Special (gains) and charges (1) | 7.0 | 27.8 | 30.5 | 151.1 | |||||||||||||||||||||
Operating income | 571.4 | 476.0 | 20 | % | 1,434.5 | 1,090.0 | 32 | % | |||||||||||||||||
Interest expense, net (1) | 63.3 | 67.0 | -6 | % | 194.6 | 194.7 | 0 | % | |||||||||||||||||
Income before income taxes | 508.1 | 409.0 | 24 | % | 1,239.9 | 895.3 | 38 | % | |||||||||||||||||
Provision for income taxes | 138.7 | 101.8 | 36 | % | 361.0 | 211.3 | 71 | % | |||||||||||||||||
Net income including noncontrolling interest | 369.4 | 307.2 | 20 | % | 878.9 | 684.0 | 28 | % | |||||||||||||||||
Less: Net income (loss) attributable to noncontrolling interest (1) | 4.5 | (0.8 | ) | 11.6 | 3.3 | ||||||||||||||||||||
Net income attributable to |
$ | 364.9 | $ | 308.0 | 18 | % | $ | 867.3 | $ | 680.7 | 27 | % | |||||||||||||
Earnings attributable to |
|||||||||||||||||||||||||
Basic | $ | 1.22 | $ | 1.02 | 20 | % | $ | 2.89 | $ | 2.27 | 27 | % | |||||||||||||
Diluted | $ | 1.19 | $ | 1.00 | 19 | % | $ | 2.83 | $ | 2.23 | 27 | % | |||||||||||||
Weighted-average common shares outstanding | |||||||||||||||||||||||||
Basic | 300.0 | 301.2 | 0 | % | 300.1 | 299.4 | 0 | % | |||||||||||||||||
Diluted | 305.7 | 307.2 | 0 | % | 306.0 | 305.3 | 0 | % | |||||||||||||||||
(1) Special (gains) and charges in the Consolidated Statement of Income above include the following: | |||||||||||||||||||||||||
(millions) | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||
Cost of sales | |||||||||||||||||||||||||
Restructuring | $ | 0.4 | $ | 1.9 | $ | 7.5 | $ | 5.5 | |||||||||||||||||
Recognition of inventory fair value step-up | 0.4 | 4.4 | 0.4 | 18.0 | |||||||||||||||||||||
Subtotal | 0.8 | 6.3 | 7.9 | 23.5 | |||||||||||||||||||||
Special (gains) and charges | |||||||||||||||||||||||||
Restructuring charges | 6.3 | 11.9 | 34.9 | 75.4 | |||||||||||||||||||||
Champion acquisition and integration costs | 4.1 | 10.7 | 15.8 | 42.5 | |||||||||||||||||||||
Nalco merger and integration costs | 2.0 | 5.3 | 4.8 | 13.5 | |||||||||||||||||||||
|
- | (0.1 | ) | - | 23.3 | ||||||||||||||||||||
Litigation activity, settlements and other gains | (5.4 | ) | - | (25.0 | ) | (3.6 | ) | ||||||||||||||||||
Subtotal | 7.0 | 27.8 | 30.5 | 151.1 | |||||||||||||||||||||
Operating income subtotal | 7.8 | 34.1 | 38.4 | 174.6 | |||||||||||||||||||||
Interest expense, net | |||||||||||||||||||||||||
Acquisition debt costs | - | - | - | 2.5 | |||||||||||||||||||||
Net income attributable to noncontrolling interest | |||||||||||||||||||||||||
|
- | - | - | (0.5 | ) | ||||||||||||||||||||
Total | $ | 7.8 | $ | 34.1 | $ | 38.4 | $ | 176.6 | |||||||||||||||||
Note: | |||||||||||||||||||||||||
Effective in the first quarter of 2014, certain employee-related costs from our recently acquired businesses that were historically presented within cost of sales were revised and reclassified to SG&A. These immaterial revisions were made to conform with management's view of the respective costs within the global organizational model. Results for 2013 have been revised to conform to the current year presentation. The reclassification had no impact on net earnings, financial position or cash flows. | |||||||||||||||||||||||||
|
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REPORTABLE SEGMENT INFORMATION | |||||||||||||||||||||||||||
THIRD QUARTER & NINE MONTHS ENDED |
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(unaudited) | |||||||||||||||||||||||||||
Third Quarter Ended | Nine Months Ended | ||||||||||||||||||||||||||
|
|
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(millions) | 2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||||||||||||||||
Net Sales | |||||||||||||||||||||||||||
|
$ | 1,251.1 | $ | 1,219.5 | 3 | % | $ | 3,602.7 | $ | 3,504.1 | 3 | % | |||||||||||||||
Global Institutional | 1,125.5 | 1,086.9 | 4 | % | 3,195.8 | 3,092.2 | 3 | % | |||||||||||||||||||
Global Energy | 1,089.2 | 957.2 | 14 | % | 3,145.0 | 2,400.3 | 31 | % | |||||||||||||||||||
Other | 196.6 | 183.5 | 7 | % | 560.2 | 528.2 | 6 | % | |||||||||||||||||||
Subtotal at fixed currency rates | 3,662.4 | 3,447.1 | 6 | % | 10,503.7 | 9,524.8 | 10 | % | |||||||||||||||||||
Currency impact | 32.5 | 36.9 | 96.0 | 169.1 | |||||||||||||||||||||||
Consolidated | $ | 3,694.9 | $ | 3,484.0 | 6 | % | $ | 10,599.7 | $ | 9,693.9 | 9 | % | |||||||||||||||
Operating Income | |||||||||||||||||||||||||||
|
$ | 175.2 | $ | 171.9 | 2 | % | $ | 456.7 | $ | 433.0 | 5 | % | |||||||||||||||
Global Institutional | 237.5 | 225.8 | 5 | % | 593.0 | 565.8 | 5 | % | |||||||||||||||||||
Global Energy | 174.1 | 125.1 | 39 | % | 462.5 | 306.2 | 51 | % | |||||||||||||||||||
Other | 33.0 | 28.6 | 15 | % | 84.6 | 78.0 | 8 | % | |||||||||||||||||||
Corporate | (52.8 | ) | (81.8 | ) | (173.6 | ) | (320.0 | ) | |||||||||||||||||||
Subtotal at fixed currency rates | 567.0 | 469.6 | 21 | % | 1,423.2 | 1,063.0 | 34 | % | |||||||||||||||||||
Currency impact | 4.4 | 6.4 | 11.3 | 27.0 | |||||||||||||||||||||||
Consolidated | $ | 571.4 | $ | 476.0 | 20 | % | $ | 1,434.5 | $ | 1,090.0 | 32 | % | |||||||||||||||
Note: | |||||||||||||||||||||||||||
Effective in the first quarter of 2014, |
|||||||||||||||||||||||||||
The Corporate segment includes amortization from the Nalco merger intangible assets and in 2013 certain integration costs for both the Nalco and Champion transactions. The Corporate segment also includes special (gains) and charges reported on the Consolidated Statement of Income. | |||||||||||||||||||||||||||
We evaluate the performance of our international operations based on fixed currency exchange rates, which eliminate the impact of exchange rate fluctuations on our international operations. The difference between the fixed currency exchange rates and the actual currency exchange rates is reported as "currency impact" in the above tables. | |||||||||||||||||||||||||||
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CONSOLIDATED BALANCE SHEET | ||||||||||||||||
(unaudited) | ||||||||||||||||
|
|
|
||||||||||||||
(millions) | 2014 | 2013 | 2013 | |||||||||||||
Assets | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 197.8 | $ | 339.2 | $ | 394.4 | ||||||||||
Accounts receivable, net | 2,694.4 | 2,568.0 | 2,488.9 | |||||||||||||
Inventories | 1,464.4 | 1,321.9 | 1,378.1 | |||||||||||||
Deferred income taxes | 166.1 | 163.0 | 196.6 | |||||||||||||
Other current assets | 349.1 | 306.3 | 338.0 | |||||||||||||
Total current assets | 4,871.8 | 4,698.4 | 4,796.0 | |||||||||||||
Property, plant and equipment, net | 2,978.5 | 2,882.0 | 2,786.1 | |||||||||||||
Goodwill | 6,849.1 | 6,862.9 | 6,812.8 | |||||||||||||
Other intangible assets, net | 4,583.1 | 4,785.3 | 4,851.1 | |||||||||||||
Other assets | 403.3 | 407.9 | 367.6 | |||||||||||||
Total assets | $ | 19,685.8 | $ | 19,636.5 | $ | 19,613.6 | ||||||||||
Liabilities and Equity | ||||||||||||||||
Current liabilities | ||||||||||||||||
Short-term debt | $ | 1,922.8 | $ | 861.0 | $ | 713.2 | ||||||||||
Accounts payable | 1,047.3 | 1,021.9 | 926.6 | |||||||||||||
Compensation and benefits | 547.1 | 571.1 | 506.3 | |||||||||||||
Income taxes | 81.9 | 80.9 | 68.6 | |||||||||||||
Other current liabilities | 855.9 | 953.8 | 985.9 | |||||||||||||
Total current liabilities | 4,455.0 | 3,488.7 | 3,200.6 | |||||||||||||
Long-term debt | 4,874.0 | 6,043.5 | 6,537.3 | |||||||||||||
Postretirement health care and pension benefits | 785.0 | 795.6 | 1,242.4 | |||||||||||||
Other liabilities | 1,805.5 | 1,899.3 | 1,787.4 | |||||||||||||
Total liabilities | 11,919.5 | 12,227.1 | 12,767.7 | |||||||||||||
Equity | ||||||||||||||||
Common stock | 347.2 | 345.1 | 344.6 | |||||||||||||
Additional paid-in capital | 4,832.6 | 4,692.0 | 4,647.2 | |||||||||||||
Retained earnings | 5,318.7 | 4,699.0 | 4,494.7 | |||||||||||||
Accumulated other comprehensive loss | (377.3 | ) | (305.2 | ) | (700.4 | ) | ||||||||||
Treasury stock | (2,423.3 | ) | (2,086.6 | ) | (2,009.7 | ) | ||||||||||
Total |
7,697.9 | 7,344.3 | 6,776.4 | |||||||||||||
Noncontrolling interest | 68.4 | 65.1 | 69.5 | |||||||||||||
Total equity | 7,766.3 | 7,409.4 | 6,845.9 | |||||||||||||
Total liabilities and equity | $ | 19,685.8 | $ | 19,636.5 | $ | 19,613.6 | ||||||||||
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SUPPLEMENTAL DILUTED EARNINGS PER SHARE INFORMATION | ||||||||||||||||||||||||||||
(unaudited) | ||||||||||||||||||||||||||||
The table below provides a reconciliation of diluted earnings per share, as reported, to the non-GAAP measure of adjusted diluted earnings per share. | ||||||||||||||||||||||||||||
First | Second | Six | Third | Nine | Fourth | |||||||||||||||||||||||
Quarter | Quarter | Months | Quarter | Months | Quarter | Year | ||||||||||||||||||||||
Ended | Ended | Ended | Ended | Ended | Ended | Ended | ||||||||||||||||||||||
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2013 | 2013 | 2013 | 2013 | 2013 | 2013 | 2013 | ||||||||||||||||||||||
Diluted earnings per share, as reported (U.S. GAAP) |
$ | 0.53 | $ | 0.69 | $ | 1.23 | $ | 1.00 | $ | 2.23 | $ | 0.93 |
|
|||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||
Special (gains) and charges (1) | 0.12 | 0.21 | 0.33 | 0.07 | 0.40 | 0.11 | 0.51 | |||||||||||||||||||||
Tax expense (benefits) (2) | (0.05 | ) | (0.04 | ) | (0.09 | ) | (0.04 | ) | (0.13 | ) | (0.01 | ) | (0.14 | ) | ||||||||||||||
Adjusted diluted earnings per share (Non-GAAP) |
$ | 0.60 | $ | 0.86 | $ | 1.47 | $ | 1.04 | $ | 2.50 | $ | 1.04 |
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First | Second | Six | Third | Nine | Fourth | |||||||||||||||||||||||
Quarter | Quarter | Months | Quarter | Months | Quarter | Year | ||||||||||||||||||||||
Ended | Ended | Ended | Ended | Ended | Ended | Ended | ||||||||||||||||||||||
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2014 | 2014 | 2014 | 2014 | 2014 | 2014 | 2014 | ||||||||||||||||||||||
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Diluted earnings per share, as reported (U.S. GAAP) |
$ | 0.62 | $ | 1.02 | $ | 1.64 | $ | 1.19 | $ | 2.83 | ||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||||
Special (gains) and charges (3) | 0.09 | (0.02 | ) | 0.07 | 0.02 | 0.09 | ||||||||||||||||||||||
Tax expense (benefits) (4) | 0.03 | 0.03 | 0.06 | (0.01 | ) | 0.05 | ||||||||||||||||||||||
Adjusted diluted earnings per share (Non-GAAP) |
$ | 0.74 | $ | 1.03 | $ | 1.77 | $ | 1.21 | $ | 2.98 | ||||||||||||||||||
Per share amounts do not necessarily sum due to changes in shares outstanding and rounding. | ||||||||||||||||||||||||||||
(1) Special (gains) and charges for 2013 include restructuring
charges of |
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(2) The first quarter 2013 discrete tax net benefit of |
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(3) Special (gains) and charges for 2014 include restructuring
charges of |
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(4) The first quarter 2014 discrete tax net expense of |
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or
Source:
News Provided by Acquire Media
Jeff Webb
Director, Global Communications
Phone: +1-281-632-6794 or by email
MEXICO
Alejandro González d’Hyver de las Deses
Communications Manager, Latin America
Phone: +52 (55) 5001 2935 or by email
BRAZIL
Carolina Simonetti
Communications Manager, Brasil
Phone: +55 11 2134 2649 or by email
Valeria Prado
Communications Director, Latin America
Phone: +1 954 436 2668 or by email
Kate Askew
Director, Corporate Communications
Phone: +41 78 655 3005 or by email
For non-media related inquiries,
call +41 44 877 2000
Naazi Feizi
Communications Director, MEA Region Head
Phone: +971 4 8146961 or by email
For non-media related inquiries,
call +41 44 877 2000
Jacqui Daws
Communications Manager
Phone: +65 9295 1026 or by email
For non-media related inquiries,
call +86 21 6237 1000
Doris Qian
Corporate Communications Manager
Phone: +8621 6183 2465 or by email
For non-media related inquiries,
call +8621 6183 2500