Carlsberg As Shs A

Welcome to the Carlsberg A.S. H1 2025 Financial Statement Conference Call. I'm Moritz, the call's call operator. I would like to remind you that all participants will be in a listen-only mode and the conference is being recorded. The presentation will be followed by a question and answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to your host today, CEO Jacob Arab-Anderson and CFO Ulrike Fern. Please go ahead.

Thank you so much, Operator, and good morning, everyone, and welcome to Carlsberg's half-year 2025 conference call. As said, my name is Jacob Arab-Anderson, and I have with me our CFO Ulrike Fern and our Vice President of Investor Relations, Peter Kontrup. Before we get into the meat of it, let me begin by summarizing the key headlines for this call. We delivered strong top-line and profit growth, mainly due to the consolidation of BRITVIC, of course. We delivered solid organic performance in a challenging environment with good market share development in all three regions and returning to volume growth in Q2 in both Western Europe X, San Miguel, and in CE&I. The integration of BRITVIC is on track and we're excited about the performance of the business in the key UK and Ireland markets. And thanks to the solid performance in the first half and our strong performance management, we today also narrow our full year guidance for organic operating profit growth towards the upper end of the previous guidance range. I'm going to go through the key headlines for the group, the BRITVIC integration and the regions. And then Ulrike will take over and provide more details on the financials and the full year outlook. So please turn to slide number three. So the half-year numbers were, of course, significantly impacted by the BRITVIC acquisition that was completed on the 16th of January. Consequently, we delivered very strong top and bottom line growth for the first six months. Total reported volumes were up by 16%. Reported revenue grew by 18.2% and reported operating profit by 15.1%. The organic development was impacted by the loss of San Miguel in the UK from the 1st of January and a difficult trading environment across our regions. Therefore, we are very satisfied that adjusting for San Miguel, total volumes in Q2 delivered slight growth and revenue grew by 2.4% in Q2, driven by both Western Europe and CNI. And I think that's a key point, 2.4% revenue growth in Q2 when adjusting for San Miguel. For the half year, volumes declined organically by minus 0.4%, whilst revenue grew by 1.3%, adjusting for the impact of San Miguel. Thanks to the strategic and financial strength of the business, we continued our long-term investments in key strategic priorities, including our growth categories, our brands, and a number of our capability programs. Despite these investments, organic operating profit grew by 2.3%, And the underlying growth, excluding the impact of San Miguel, was a couple of percentage points higher. Now please turn to slide four and then update on our growth categories and our international brands. So we were very pleased to see good growth for premium beer, alcohol-free brews, and also soft drinks in Western Europe. Excluding San Miguel, we saw good growth for the premium beer portfolio, which was up by 5% in the half year and in Q2. All three regions delivered positive growth rates. with particularly good results in Western Europe. The growth was also driven by both international brands and local premium brands. If I had to call out a few local brands, Valaisans in Switzerland, Windflower Snow Moon in China, and Perinsko in Bulgaria did particularly well. Alcohol-free brews grew by 7% thanks to very good growth in Western Europe of 12%. As with premium, we saw good growth for both the alcohol-free versions of the international brands and for local alcohol-free brews, such as Falcon in Sweden, Moncom in Norway, and Fix in Greece. Soft drinks now account for around 30% of total group volumes, and with about 75% being in Western Europe. When we look at the organic figures, soft drink volumes in Western Europe were up organically by mid-single digits for the half year and high single digits in Q2. This underscores our excitement about the category in Europe and our excitement about the British acquisition. In C&I, growth accelerated in Q2, delivering high single growth as well. I'll get back to British results on the next slide. But before that, let's look at beyond beer volumes that declined by 1%, and that was because of growth for brands such as Garage in several markets and Windflower Snow Moon in China was offset by lower summer speed volumes. Looking at our international brands, premium Carlsberg volumes grew by 16%, while total volumes were up by 5%. The brand grew in the majority of its premium markets with significant growth seen in China and India for Carlsberg. In the large UK market, where Carlsberg is a mainstream brand, we saw mid-single-digit growth, but this was offset by lower volumes in mainstream markets of Denmark and Malaysia. Tupac volumes grew by 2%. We saw growth in premium markets such as China, Poland, and Bulgaria, and double-digit growth in India, where most of Tupac volumes play in the mainstream segment. Volumes in Denmark and certain export markets declined, dampening total brand growth. 1664 Blanc saw flat volumes in the half year. The brand delivered mid-single-digit growth in Western Europe and C&I, driven by markets such as Ukraine, the UK, Switzerland, Sweden, and Serbia, while volumes declined in Asia. Our international beyond-beer brand, Garage, has delivered strong performance in recent years. In H1, the brand continued the positive trajectory seeing 15% growth. The brand is mostly sold in C&I and in Poland, and the strong growth was in particular thanks to good growth in this market and in Kazakhstan. So let's turn to slide five and an update on Bridrick, which has now been part of the Carlsberg Group for seven months. A lot has been accomplished in those seven months. The integration of this business is going very well, and it's progressing in line with our plans. I'm truly impressed by the passion, the energy shown by everyone in the combined organization. The synergy realization is also on track and is delivering as planned. We've dismantled the POC structure, we've removed duplicate functions resulting in additional people changes. We're integrating procurement and we've carried out the first combined tenders with satisfactory results. Our UK business is now a large, dynamic, multi-beverage powerhouse, the only one in the country addressing more than half of the drinking locations in the UK market. Our H1 results speak to that. British volumes in the UK grew by 1% as they were impacted by top comps in Q1, supported by better summer weather volumes grew by 3% in Q2, and were the highest ever in the company. Pepsi Max delivered strong market share growth. Also, brands in the fruit carbonated soft drink segments such as Tango and 7-Up outperformed the market, as did brands such as Jimmy's, Plenish, London Essence, and Aqualibra. The Britwick business in Ireland is a standalone business, as we do not operate our own beer business in this market. Following a soft start, we saw good improvement in the last part of Q1 and into Q2. For the first half, volumes in Ireland grew by 2%, despite a very high level of promotional activity in the market. The portfolio optimization actions in France and Brazil, which we started in Q1, has impacted volumes in these two markets quite significantly. Consequently, total BRITVIC volume growth in H1 was negative minus 3%. The operating profit in the first half amounted to £95 million. As we are confirming the full-year earnings expectations from BRITVIC, including the synergy delivery of 10% to 15%, we expect results in the second half to be stronger than in the first half. At the Capital Markets Day in October, where I hope to see many of you, we're going to be providing more color on the Carlsberg-Britwig company in the UK. Now, let's turn to slide six in Western Europe, where numbers are, of course, greatly impacted by both Britwig and San Miguel in the UK. Reported total volumes grew by 44.6%, excluding the impact of San Miguel, total organic volumes grew by 2.4%, with beer volumes being up 0.7% in the first half, and 1.8% in Q2, where we also, of course, benefited from easy comps in June last year. Other beverages grew by 5.6%, with good growth in almost all markets. Revenue for Hexaliter improved by 1%, supported by a positive mix in price increases, and organic revenue growth adjusted for San Miguel came in at 2.6%, while reported revenue growth was 34.9%. Reported operating profit growth was 27.3%, And the organic growth adjusted for San Miguel was slightly up thanks to the volume and revenue per hectolitre growth and efficiency improvements, partly offset by higher logistics costs and also IT investments as we are renovating our ERP landscape. Let me give you some additional market comments. If we start with the U.K., we delivered a very strong underlying half-year. I've already talked about the good results for the Brickwick U.K. business but we also saw impressive numbers for the beer business in the market that declined by an estimated 2%. We've seen very good performance of key brands such as Peretti, for which volumes more than doubled, Kronenbauer 1664 in Brooklyn, for which brands' volume growth was in the low teens, but we also saw mid-single-digit growth for Carlsberg. Consequently, we saw a solid improvement in our market share in the U.K. in both on-trade and the off-trade. In the Nordics, total volumes grew by a low single digit, driven by good growth of soft drinks, premium beer, and alcohol-free brews. The positive product mix and price increases led to a positive revenue per hectolitre development. In France, we saw a strong rebound in Q2 after a soft start to the year. Volumes for the half year were therefore up by a low single digit, driven by good growth for premium and alcohol-free brews, and for brands such as Kronenbrunner 1664, Tuborg, and Tutel Twistz. while the mainstream Kronenberg red and white declined. Our market share strengthened, and we regained part of the last year's market share loss. Thanks to the positive product mix, revenue behavior later improved. In Poland, our volumes increased by a low single digit, and we improved our market share in a soft market. We saw good development for all growth categories, including premium, alcohol-free brews, and beyond beer. Please go to slide number seven in Asia, where our first half results were impacted by the overall soft consumer sentiment. Total volume was declined by 2.8%, with slightly lower decline for beer, which was down by 1.7%. Revenue per hectolitre increased organically by 1%, and consequently, organic revenue development was minus 1.9%. The positive revenue per hectolitre development in Asia was supported by brand mix and price increases. The depreciation of the Laotian and Chinese currencies led to a reported revenue development of minus 4.1%. Operating profit grew organically by 7.3%, supported by lower cost of sales, which was mainly driven by supply chain efficiencies. Adverse currency movements meant that reported operating profit came in at 5.2% growth. Operating margin improved by 230 basis points to 26%. And then there are some market comments in Asia. In China, our volumes were up by 1% with growth for our premium portfolio, particularly for the Tuborg, Carlsberg, and Windflower Snow Moon brands, which more than offset lower mainstream volumes in our western strongholds due to the soft economic environment. We saw good growth in the big cities. Our market share was flat. The Chinese on-trade channel continues to be under pressure, seeing a decline in store count and low footfall, which has continued into Q3. And last, the market remains impacted by the weak macroeconomy. We were not immune to the difficult market conditions and our volumes declined by mid-single digits. Revenue per hectolitre increased by high single digits due to our price increases in the inflationary environment. In Vietnam, our business suffered from a continued weak beer market in the central part of the country and intensified competitive actions as well as a range of initiatives that we are taking to reorganize our distribution network and our outlet universe. We're doing this to strengthen our business and create a resilient and high-quality route to market. The overall market is growing, driven by north and south, while central region declined, which also impacted our local mainstream Huda volumes negatively, while we saw good growth for Carlsberg and Tuporg in the premium segment. Then let's go to slide 8 and the Central and Eastern Europe and India, or CE&I as we call it. Numbers in this region are this year also impacted by M&A due to the inclusion of BRITVIC's Brazilian business and also the consolidation of the business in Nepal after getting full control in November last year. Reported volume growth was therefore 9.5%. Organic volume growth was flat as double-digit growth in India was offset by lower volumes in Ukraine and the Baltics due to bad weather, and overall weak consumer sentiment across the region. We improved our oil, or we held market share in the majority of the markets throughout this region. Revenue per hectolitre grew by 3% thanks to price increases and a positive product mix. Consequently, organic revenue growth was 3.1%, while reported growth amounted to 11.4%. We've already started preparing our business in Kazakhstan for the takeover of the Pepsi franchise from January. In addition, costs in the first half were impacted by flooding at the Italian brewery in April. Consequently, organic operating profit declined by 3.6%. Reported operating profit development was minus 1.8% as the positive acquisition impact was more than offset by currencies, mainly in Ukraine, Kazakhstan, and India. Zooming in on the markets, we delivered another set of strong results in India. The double-digit volume growth was achieved despite the early arrival of the monsoon with its heavy rains. We saw particularly strong growth for Carlsberg Elephant and Tuborg Green, and our market share strengthened. We launched 1664 Blanc in the super premium segment in December last year, and the initial results are satisfactory. Ukraine was severely impacted by bad weather this year on the back of tough comps, and the intensification of the war across the country, and our volumes were down by mid-single digit. Nevertheless, our premium portfolio did well, led by particularly strong growth of 1664 Blanc and Carlsberg. Our business in Kazakhstan recovered strongly in Q2, leading to flat volumes for the half year. The second quarter growth was supported by market share gains and market recovery after the Ramadan and improved purchasing power. As I just mentioned, we're preparing for the takeover of the Pepsi franchise from 1st of January. We've started the hiring of more Salesforce people and supply chain staff. We've invested in coolers, and we've initiated the construction of a new bottling facility, which is expected to be operational in the second half of 2026. This means that we will be using co-packers until then, and as a result, we do not expect a material profit contribution from the Pepsi business in Kazakhstan in the initial year of 2026. Volumes in our export and license business returned to growth in Q2, led by a solid growth of the Carlsberg brand in license markets. And with that, over to you, Ulrike.

Thank you, Jakob, and good morning, everyone. And please go to slide 9 for more details on the P&L. Here, reported revenue was, of course, positively impacted by the inclusion of Britsvik, which meant that it grew by 18.2%. The organic development was minus 0.3%, but as Jacob has already explained, this figure was impacted by the loss of San Miguel in the UK, without which organic growth was positive by 1.3%. Revenue per hectolitre was up by 1%, with improvement in all regions as a result of positive category mix and price increases. And the currency impact of revenue of minus 1.1% was mainly related to the Chinese, Laotian, and Ukrainian currencies. Cost of sales per hectolitre was flat organically, and we were able to offset the normal inflation in the cost base and the under-absorption of fixed costs coming from the lower volumes through continued efficiency improvements. And this is part of our Funding Our Journey programme, which specifically addresses cost of sales and logistics. Gross profit per hectolitre increased organically by 3%, resulting in a solid organic improvement in gross margin. The reported gross margin was impacted by the inclusion of Britvic, where the shape of the P&L is different from Carlsberg due to the large soft drink bottling volumes. Gross margin therefore declined by 10 basis points to 46.0%. We increased investment in sales and marketing by low single digits organically, And the organic marketing investment to revenue ratio grew as planned, but also as expected, the reported ratio was impacted by the inclusion of Britvig, and therefore declined by 20 basis points to 8.5%. And combined with higher logistics costs, total operating expenses were up organically by 2.4%. Income from associates was up 97 million Danish kroner, and this was mainly due to the improved profitability in Myanmar and property gains in Karlsberg-Been. Reported operating profit grew by 15.1%, mainly due to the BRITVIC acquisition and the consolidation of the business in Nepal that is performing well. The organic growth was 2.3%, impacted by the loss of San Miguel, and the organic operating margin improved by 40 basis points. The reported operating margin was impacted by the lower margin at BRITVIC and therefore contracted by 40 basis points to 15.8%. Looking at the items below operating profits, special items amounted to minus 541 million Danish kroner, and this was mainly due to the integration costs and M&A-related costs. And net financials, excluding foreign exchange gains and losses, amounted to minus 1.1 billion Danish kroner. And this was, of course, significantly higher than last year due to the BRITVIC acquisition. And we refinanced the acquisition in February through a successful bond placement. The effective tax rate was 23%, and this is in line with our expectations. And the higher tax rate than in previous years is due to BRITVIC. And there are two reasons for this. Firstly, the tax rate in BRITVIC is higher than in Carlsberg. And secondly, there is a deferred tax deductibility on the acquisition-related interest expense. Non-controlling interest declined mainly due to the acquisition of the remaining 40% of Carlsberg Marstons in July last year. And due to special items, net profit for the group ended up at 3.6 billion Danish kroner, a decline of 4.7%. Adjusted net profit, however, improved by 3.9% to 4 billion Danish kroner. Adjusted earnings per share was 30.4 Danish kroner, which was an increase of 4.7%. So then slide 10, please. Pre-operating cash flow amounted to 2.7 billion Danish kroner, and this was a decline year on year of 944 million, and mainly due to the integration and restructuring costs, a negative trade working capital impact, and higher net interest payments, all related to Britsvik, and also higher capex. The change in total working capital was minus 1.476 billion Danish kroner. Zooming in on trade working capital, the 12 months average trade working capital to revenue was strong at minus 17.8%. And it was below last year's level of minus 20.4%. And as just mentioned, due to the inclusion of BRITVIC. Excluding BRITVIC, the trade working capital to revenue was at the same level as in 2024. So we maintain our strong discipline on cash. CapEx amounted to 2.5 billion Danish kroner, which was 15.4% higher than in half one, 2024. And CapEx included capacity expansion projects in India and Vietnam, and also investments in preparation of us taking over the Pepsi business in Kazakhstan from next year. Financial leverage increased significantly following the financing of the Britfic acquisition. Net interest-bearing debt to EBITDA on a pro forma basis, so that is including 12 months of BRICVIC EBITDA, was 3.46 times and in line with plan. In addition, net interest-bearing debt was impacted by the dividends paid to shareholder and non-controlling interests of 3.9 billion Danish kroner. Return on invested capital was 11.5%, and this was a decline of 270 basis points, which was mostly driven by the BRICVIC acquisitions. But please go to slide 11 and the earnings outlook for the year, which we are narrowing towards the upper end of the previous expectation. In half one, we delivered solid in-market performance in a challenging trading environment and solid operating profit growth despite the impact of the loss of San Miguel. We don't expect any significant change in the consumer environment for the reminder of the year, but let's provide some additional color on what we've seen so far in Q3 and what we assume for half two. In Western Europe, we have tough comps due to the good Q3 last year. However, the quarter has started well, benefiting from good weather in most markets, except in Poland. And although we have easy comps in China in half two, uncertainty has increased due to the continued softness in the on-trade channel. And in C&I, we expect solid in-market performance. Ukraine remains uncertain due to the war. And in India, we can expect continued strong volume growth in half two, albeit Q3 started a bit soft due to the worse than normal monsoon. As you know, having strict cost control is a vital part of our performance management, and whilst maintaining our focus on driving supply chain efficiencies and improving gross margin, we're also implementing additional cost initiatives to ensure that we have the financial flexibility to continue to do the right investments for the long-term strength of the business. And that includes investment in key brands and commercial initiatives and capabilities, such as digital and value management. And on the back of all of this, and as we now have good visibility into the important summer months, we are updating our earnings guidance range for 2025 and now expect organic growth in operating profit of 3% to 5% compared to our previous guidance of 1% to 5%. For Britsvik, we are pleased with the performance in half one and the beginning of Q3, especially in the UK and Ireland, and we see good progress of the integration of the business, and as planned, we are increasing commercial investments to support future growth. We maintain the expectations for full year's operating profit from Britsvik of around £250 million. And based on yesterday's spot rates, we assume a currency impact on operating profit of minus 200 million Danish kroner, unchanged compared to our previous assumption. We are lowering our expectation of financial expense excluding foreign exchange to around 2.4 billion. This compares to our previous expectation of 2.5 billion, and the 100 million decline is due to higher than expected financial income. Our assumption for capex has also come down a bit, and we now expect capex of around 7 billion Danish kroner compared to 7 to 8 billion previously. and assumptions for tax are unchanged at 23%. So with that, back to you, Jakob.