Carlsberg As Shs A

Thank you very much, and good morning, everybody, and welcome to Carlsberg's Q3 2024 conference call. As said, my name is Jakob Ove Andersen. I'm the Carlsberg Group's CEO, and I have with me our CFO, Ulrika Fern, and Vice President, Investor Relations, Peter Kontrup. Before we go in, let me begin by summarizing the key headlines for the quarter. We delivered volume and revenue growth in the majority of our markets, while the development in three large volume markets impact the total group volumes. We maintain our full-year earnings guidance. The BRITVIC acquisition is progressing, and we still expect to close the transaction in Q1 2025. And we have further strengthened our relationship with PepsiCo with the addition of Kazakhstan and Kyrgyzstan to our portfolio of CSD markets. I'll provide the key group headlines for the quarter, and Ulrike will take you through the regions and the full-year outlook. But let's zoom in on Q3, so let's turn to slide number three. We delivered organic revenue growth of 1.3% for the quarter and 3% year-to-date. The positive quarterly revenue growth was the result of revenue per hectolitre growth of 2% and a slight volume decline of 0.2%. We delivered volume growth in the majority of our markets, with particularly strong growth in the CE&I region. However, this growth was offset by the three large volume markets, China, France, and the UK. Year-to-date, our volumes grew by 0.8%, which is a solid achievement given the consumer environment and weather impact in Europe and some Asian markets, including China this year. The revenue per hectare growth was mainly driven by price increases across markets and a positive product mix driven by the growth of beyond beer, alcohol-free brews, premium beer across many European markets, and European soft drinks. the impact of channel mix was insignificant. Reported revenue grew by 0.9% to 20.5 billion Danish kroners. So despite currency headwinds, we're pleased to see that we are delivering positive top-line growth, both organically and in reported terms, even in a tough quarter. Let's turn to slide number four, and let's have an update on our growth portfolio categories. Our total premium beer portfolio grew by 3% year-to-date. Despite growth in the majority of our markets, premium volumes was flat for the quarter due to lower volumes in China, France, and the UK. Excluding these markets, our premium volumes increased by double-digit percentages. While we cannot be satisfied with the total group development, the fact that most markets are transforming their portfolio by continuing to succeed in driving growth for our premium brands is very positive. We're particularly pleased with the continued positive momentum for our key international brands. If we look at some of them, Carlsberg delivered 11% total volume growth and almost 20% growth in the markets where it's premium positioned. Tuborg grew by 2% despite the softness in its largest market, which is China. The growth of Tuborg was mainly driven by India and the export and license business. We also saw good growth rates for the local premium brands, such as Wind, Flowers, Snow, Moon Premium Beer in China, Fruinloin in Norway, and Kaiser in Greece. The growth of alcohol-free brews continued, this time at 6%, with broad-based growth across Western Europe and CENI. Beyond Beer grew by 10%, with growth achieved in all three regions. Garage and the Beyond Beer version of Wind, Flowers, Snow, Moon were the main contributors. Soft drinks volumes grew by 4%, supported by good growth for Pepsi in our current Pepsi markets, which are Norway, Sweden, Switzerland, Laos, and Cambodia. We also deliver good growth for the Coca-Cola businesses in Denmark and Finland, and for our own soft drinks brands. As we said at the beginning of the year, when we launched Accelerate Sale, we are increasing our marketing investments this year to support the long-term growth of our key priorities, both in terms of markets and in terms of brands. Slide five, please, and an update on the exciting actions that we've taken in the soft drinks category. That enables us to leverage our already strong beer business and route to market. Firstly, on the Britwick acquisition. As you may have seen, the Britwick shareholders approved the recommended offer on the 27th of August, and more recently, the UK CMA announced the deadline for the phase one decision on 18th of December. Following that, there will be the process of the court's sanctioning of the scheme of arrangement and consequently we still expect the deal to close in Q1. In September, we announced the expansion of our strategic partnership with PepsiCo with a new agreement. Under that, Carlsberg will become the PepsiCo partner in Kazakhstan and Kyrgyzstan from 1 January 2026. We have a strong beer business in Kazakhstan with more than 2.5 million hectolitres and a 38% market share. Adding the Pepsi portfolio to our beer business will more than double our business in Kazakhstan giving us significant benefits in sales and distribution. The increased volumes will require a new bottling facility, which is going to be an investment of around 100 million euros. The new investment is expected to deliver a double-digit return on invested capital from year one and will be accretive to Group ROIC by year three. The last point today on our partnership with PepsiCo is that we recently extended our bottling agreements in Norway and Sweden securing our long-term cooperation with PepsiCo also. With this, I will hand over to Ulrika, who's going to take you through the regions and the outlook.

Very good. Thank you, Jakob, and good morning, everyone. And please now go to slide six, and Western Europe, where we delivered good numbers in most markets, including the Nordics, Poland, and Germany, but the overall volume and revenue delivery was impacted by challenging conditions in France and the UK. Consequently, organic volume and revenue growth was flat. The flat revenue per hectolitre was impacted by last year's comparables due to the inclusion of excise duties in the UK when we took over the Cronenberg 1664 licensee arrangement. Excluding this, revenue per hectolitre improved by approximately 2%, mainly driven by pricing. And this impact, by the way, will impact comparable numbers in Q4 and Q1 as well. Reported revenue grew by 1%, positively impacted by the appreciation of the Polish, British and Swedish currencies. So let's zoom in on a few markets. We were very pleased with the growth that we saw in the Nordics. Volumes were up by 6% and revenue by 8%. And we saw good growth for the core mainstream portfolio and more importantly also for premium, alcohol-free brews and soft drinks across the markets. And the positive mix supported the higher revenue per hectolitre as did the price increases taken earlier in the year. It has been a tough year for our French business. Following several years of growth led by the premium segment, the beer market in France is impacted by the weak consumer environment, and again in Q3, bad weather. In addition to the impact from the market development, our volumes have suffered due to our price increases, which seem to be at the high end compared with the market. especially the Cronenberg red and white brand was impacted by this. Our performance in the UK was impacted by the soft market exacerbated by the supply chain disruption that impacted our Northampton brewery, which we flagged in Q2 and which is also now behind us. The supply chain issue also impacted our commercial activities, and even though we were able to source from other Carlsberg breweries, we lost market share as we couldn't fulfill demand in the quarter. And we are now fully back, and the start of Q4 has been promising. As you know, we will lose San Miguel from 1st of January. We are therefore encouraged by the growth that we saw for Brooklyn, Peretti, Blanc, and the premium segment, although we do recognize that it will take time to recover the lost San Miguel volume. Carlsberg Pilsner delivered another quarter of good growth. Our Polish business delivered good performance with low single-digit volume growth in a flat market. The growth was driven by international brands such as Carlsberg, 1664 Blanc, Sarmusby, and Garage, and local brands such as Ocosim. So please go to slide seven, and Asia. And here, volumes were under pressure in the quarter due to the difficult trading environment, particularly in China, and specifically for Q3 also in Laos. Organic revenue declined by 3.3%, reflecting a volume development of minus 5.2%, partly offset by an increase in revenue per hectolitre of 2%. The positive development in revenue per hectolitre was supported by price increases, particularly in Laos due to the high inflation, and a positive country mix. And the reported revenue development of minus 4.2% was impacted by the depreciation of the Laotian and Vietnamese currencies. Looking at China, we continue to gain market share in a quarter and year to date. However, the consumer environment in China is very tough at the moment, and we were not able to compensate for the market decline. Although better than the market, our volume development in Q3 was minus 6% in a market that was down by an estimated 7%. And year to date, our volumes in China were flat, while the market was down by an estimated 5%. As we said in our half one announcement, we remain cautious about the Chinese market for the second half of the year, and that view remains intact. In Vietnam, the beer market continued to stabilize in the quarter. Despite the market conditions during the past year to year and a half, we continue to execute our growth and expansion strategy. And our volumes were up by low single digit for the quarter and year-to-date. And we continued to improve our market share. For the year, we saw very good growth for our international premium portfolio, which placed Vietnamese strategy. Our business in Laos has remarkable resilience through this time, despite multiple price increases. However, in recent months, we have seen a slowdown in the market due to severe rainfalls and flooding in all parts of the country in August and September, and a challenged consumer in the high inflationary environment. In Q3, these factors impacted our business and our volumes declined by mid-single digits, while revenue per hectolitre was up by more than 20%. And we did, however, see an improvement towards the end of the quarter. In Cambodia, we saw stabilising volumes as we delivered good beer volume growth and as we're beginning to cycle last year's decline of our energy front. Slide eight in our CE&I region, where we saw very good performance more or less across the board. Organic revenue grew by 9.8% as a result of 4% increase in revenue per hectolitre and volume growth of 5.2%. The volume growth was supported by good weather during the summer, while the improvement in revenue per hectolitre was supported by price increases and a very positive product mix, thanks to 20% plus growth of the premium portfolio. Reported revenue growth was 6.9%. So a few comments on the largest businesses in the region. India was a significant contributor to the strong results with low teams volume growth in a quarter and the year to date. which translated into an improvement in market share. The Carlsberg brand, which is positioned in the premium segment in India, delivered an impressive growth of more than 40%. The Ukrainian market remains volatile. Our business delivered a very strong set of numbers with mid-teens volume growth driven by almost all brands across categories, including premium, alcohol-free brews, and beyond beer. And in our export and license division, the low single-digit volume growth was particularly driven by Tuboy and Carlsberg. And finally, in the region, we still expect to close the buyout of our minorities in India and Nepal in Q4. Please go to slide nine and the earnings outlook for the year. The statement on this slide may be a bit boring, which is probably a good thing in a tough year for consumer goods companies. but we keep all element of our outlook unchanged. In August, we adjusted upwards and narrowed our full year earnings expectations to just two percentage points to an organic growth in operating profits between 4% and 6%. Based on the Q3 performance, where we saw good momentum in most markets, but a challenging development in a few large volume markets, we maintain the full year outlook. We still expect that flat COGS per hectolitre a high single-digit increase in marketing investment, and we continue our rigorous and well-embedded focus on costs. And based on yesterday's spot rate, we assume currency impact on operating profit of minus 300 million Danish kroner in line with previous assumptions. All other assumptions are also unchanged. Net financial expenses, excluding FX, are expected at minus 1.2 billion Danish kroner Remember here that we had an impact of FX in half one of 100 million. And the tax rate is unchanged at 21%, and the CAPEX outlook is also unchanged at 5 billion. And with that, back to you, Jacob.

Thank you, Ulrike. And for the final slide here, just before opening up the Q&A, let me just summarize a couple of key points. We deliver volume and revenue growth in the majority of our markets. while the development in three large volume markets impacted total group volumes. Great to see that we're delivering both organic and reported revenue growth at group level. We maintain our full year earnings guidance, as Ulrik has just said, the one that we lifted in August. The BritaVic acquisition is progressing and we still expect to close the transaction in Q1 2025. And we further strengthened our relationship with PepsiCo with the addition of Kazakhstan and Kyrgyzstan to our portfolio of soft drinks markets. As always, for the Q&A, we will limit the number of questions to two per person to ensure that as many as possible get a chance to get through. After your questions, you are welcome to join the queue again. And with that, let's take some questions.