Royal Unibrew A S

Good morning, everybody. My name is Lars Jensen, and I'm the CEO of Roy Unibrew. With me today, I have our CFO, Lars Westergaard, and we would like to welcome you to this webcast where we will cover the release of our half-year results and afterwards take your questions. Now, please turn to slide number three. We have had a strong start to the year with good momentum in the business and strong growth up until and including May. The weather in June had a negative impact on our performance in Q2. Despite the poor weather in June, we realized 1% organic volume growth in the quarter, driven by continued strong rebound in international and normalized Italian market and solid commercial performance in Northern Europe. Strong product mix and price increases across geographies, growth and organic net revenue growth of 4% in the quarter. The price mix of 3% was positively impacted by strong product mix in Western Europe and negatively impacted by channel mix in Northern Europe and the country mix in international. Organic EBIT growth in the second quarter was driven by strong commercial execution, innovations and efficiency improvements. We increased market shares in our key categories and especially in our most important brands. Soft drinks have continued the strong progress in the first half of 2024, especially driven by Denmark and the Baltic countries. Beer growth has been high due to the normalization of sales in the international segment, and the energy drinks segment continues its above-average growth, with the performance in H1 being driven by growth in all markets. After we have completed the majority of the carve-out from Heineken in the Netherlands, the focus is on commercial execution and on the final aspects of the carve-out of Heineken. Norway is performing well and the IT integration is on track. We are currently in the process of taking over the sales and distribution of PepsiCo's beverage portfolio in Belgium and Luxembourg markets. The agreement also includes a field service agreement on snacks for the markets, and the entire agreement is expected to commence on October 1st this year after heavy IT integration work separating the beverages and the snacks businesses. So on the back of a strong first five months of the year, a week June, and in combination with the development we have seen in the beginning of Q3, as well as one quarter in Benelux, we increase our outlook for net revenue to be above 15 billion Danish kroner, while we specify our organic able growth guidance to be in the upper half of the previous 9% to 19% range. Benelux is not expected to add any profit this year due to the integration cost. Finally, the board has decided that we pay out extraordinary dividend of 14.5 Danish kroner per share in the beginning of Q4. Now please turn to slide number four. In the first half of the year, we achieved a 9% reduction in absolute carbon emission despite the acquisitions of Ramona in Holland and San Giorgio in Italy. This equals a 29% organic CO2 emission reduction, and the significant reduction is partly due to the transition from oil to natural gas. at certain facilities, but it's also a result of our Latse brewery in Finland now operating on 100% renewable energy. The installation of an additional heat recovery system here in Faxe in Denmark has also led to a decrease in natural gas consumption, which for the site will result in a 30% reduction in energy usage when fully implemented. Measured in gigawatt hours per hectolitre, our energy efficiency improved by 7% in the first half of 2024. We expect further improvements from the heat recovery system in Lithuania and other efficiency projects that will be implemented later this year. During the second quarter, we have also had our long-term net zero targets for 2024 approved by the science-based target initiative. And our KPIs, roadmaps and activities are aligned with the latest climate science and the Paris Agreement's goals to limit global warming by 1.5 degrees above the pre-industrial temperature levels. We have initiated the replacement of trucks in our own fleet with electrical vehicles and we are also testing concepts with our providers to convert to more sustainable vehicles. The no-low sugar and alcohol segment of our portfolio continues to develop very positively. We have launched new products in the first half within no-low, such as the Lemon Soda Twist in Italy, Faxe Condi Boost, the Pink Dragon, and Frosty Blue Energy in Denmark, as well as Amangali Energy Water with natural caffeine in Latvia. And then I'm also very proud that in the alcohol-free segment, our Royal Pilsner 0.0 was named the best non-alcoholic beer in Denmark in 2024 in competition and amongst 42 beers from 21 different breweries in Denmark. Finally, on this slide, I'm also happy to say that when it comes to gender diversity, both at the board level and the international management level, we are improving and we are on the right path to achieve our goal of at least 40% of the underrepresented gender at both levels by 2025. And now I will hand over to Lars, who will give a more detailed view on the financials.

Thank you, Lars, and good morning to all of you. If we turn to slide number five, I will take you through the financial results of Q2 and the first half of 2024. Our total volumes increased by 23% in the second quarter and by 27% in the first half, primarily driven by additional volumes from Holland and San Giorgio in Italy. They contributed by nearly 0.9 million hectolitres in the quarter and by approximately 1.9 million hectolitres in the first half of the year. The organic volume growth was 1% for the group. Net revenue was also impacted by M&A and grew 16% in Q2 and 20% in the first half. EBIT grew faster than revenue and EBIT grew 22% and reached 866 million in the first half. The EBITDA margin expanded by 30 basis points to 16.2 and the EBIT margin increased by 10 basis points to 11.7. Adjusting for the dilutive effects from M&A, the EBIT margin expanded organically by 1%. Net financial expenses increased significantly by 52% to 163 million in the first half as a result of higher net interest-bearing debt. As I will come back to, the development in financial expenses is better than expected when we initially guided for 2024, as results and cash flow have been better than what was initially expected when we started the year. We will therefore now expect a full year net financial expense of a maximum of 300 million compared to around 350 million previously. Tax payments increased by 30% in quarter two and thereby by 24% in the first half to 145 million. This corresponds to a tax rate of around 20.5% in line with our full year expectations of 21%. Earnings per share increased by 14% in the first half to 11.2 per share. Please turn to slide number six. In Northern Europe, the volume development was flat at 5.4 million hectolitres, whereas net revenue increased organically by 2% to 5 billion. In line with all competitors reporting, the numbers are impacted by weather in June. In Denmark, we have continued our strong commercial execution and we have grown our value shares in nearly all categories. In Finland, net revenue increased as an increase in sales of ready-to-drink more than offset declining beer sales. while net revenue from CSD and water remained stable in the first half. Net revenue in the Baltic countries increased in the second quarter, fueled by strong performance within our strategic growth area framework, and in Norway net revenue increased due to solid volume growth and favorable mix. In Western Europe, volumes increased by more than 200% to 2.4 million hectolitres due to acquisitions and strong performance in Italy. The organic growth was 6% in the first half. Strong product mix resulted in an organic net revenue growth of 18%. In Italy, the macroeconomic environment remains stable. Our beer and carbonated soft drinks business have continued to expand throughout the second quarter, and we continue to win market shares in all the three categories we are operating in. In international, the strong growth continued in the second quarter and volumes were up 35% in the first half to 0.7 million hexaliters, whereas net revenue increased by 29% to more than 700 million Danish. Negative price mix was due to a product and country mix. The African business was normalized and we are witnessing robust growth across most markets. Despite a general downturn in the Canadian beer market, our business in Canada is successfully expanding its market shares. And in the Americas, our malt beverage business is growing as we now have the capacity to produce and freight rates have improved. But also due to a great effort by our team in the Americas. If you turn to slide number seven, Here you can see the impact of M&A. On the left hand side you can see the 16% revenue growth in the quarter. Of that, 12% comes from M&A and the remaining 4% comes from organic growth. Making the same numbers on EBIT, then around 5 percentage points of the 22% is from M&A, whereas the remaining 17% is organic. On top of both the net revenue and EBIT, one could add the effects of the capacities that we have achieved from both acquisitions. If we look at how they are supporting the group, the two new production sites have delivered 177,000 hectolitres to the group. So great to get the relief on our capacity constraints. If we look at where they have supported us, it is primarily giving us relief in Northern Europe on beer and international, and freeing up capacity in CSD in Denmark. Adjusting for M&A, the EBIT margin expanded by 190 basis points to 16.8 in the second quarter. If we turn to slide number eight, Free cash flow increased by 17 million in the first half compared to last year. Higher net profit was partly offset by higher taxes and net financials as well as higher capex. Cash flow from operating activities was 122 million higher than in the first half of 2023. Capex increased by 37% compared to last year corresponding to 113 million Danish. The result of all this is a free cash flow of 560 million, which is 15 million higher than last year. A key focus for us has been to re-establish our financial flexibility, and we have achieved this mainly by stronger operating profit than planned and stronger delivery on our cash flow generation. Our net interest-bearing debt to EBITDA was at 2.4 at the end of the quarter, which is in line with our financial targets of being below 2.5. As our financial strengths have improved, the Board of Directors have decided to pay out an extraordinary dividend of 14.5 per share on October 1st in accordance with the mandate given to the AGM back in April this year. Please turn to slide number 9. Here we have the outlook for 2024, which we have updated. On the back of the takeover of Belgium and Luxembourg, we increased our net revenue guidance to a minimum of 15 billion, based on flat organic volume development and a positive price mix, leading to low to mid single digit organic net revenue growth. After a solid performance up until mid-August, we have decided to narrow our organic EBIT growth guidance to 14-19%, which is the upper half of the previously guided range of 9-19%. This means that the reported EBIT is expected to be in the range of 1.95 to 2.025 billion Danish kroner. Belgium and Luxembourg is not expected to contribute with any earnings in the fourth quarter as we have quite a number of integration costs going on. Acquisitions are expected to contribute inorganically to EBIT by a minimum of 80 million in 2024. As said earlier, the net financial expenses are now expected to be at maximum 300 million Danish, excluding currency-related losses or gains, whereas expectations for the tax rate and capex remains the same. After some years with the many moving parts such as inflation, COVID, stocking and destocking, we are heading for a fairly normal year. Although the weather was poor in June, if you take the weather in totality, it is a fairly neutral year. And at the full year, we do not expect big impacts from weather as we had both good and bad months in the summertime. When we made the guidance for the full year, we highlighted that the macroeconomic uncertainty remained high and therefore the underlying volume growth would be modest. This seems to be the scenario that is materializing and consumer spending in on-trade is not strong as particular interest cost is having an impact on the discretionary income for our consumers. Off-trade is doing well, so nothing new compared to what we have said earlier on in the year. And with that, I would like to give the word back to you, Lars. Thank you, Lars.

And please turn to slide number 10. I'll take you through what is top of our agenda at the moment. The integration in Norway, which is mainly and almost only the ERP system, the Netherlands, where almost all carve-out is done, hence the focus moves more towards finishing the CAPEX programs, and then the commercial agenda. San Giorgio in Italy is now fully integrated, while for the supply chain organization in Italy, the remaining part is the capacity investments, which is ongoing, some ESG initiatives, and general improvements on site. New to the agenda in the integration is Belgium and Luxembourg, as Lars talked about, which we have been working on for some months and now with the goal live, which is planned and will be executed on the 1st of October. The integrations are going according to the plan and we are seeing the first financial and commercial results of the efforts. As mentioned at earlier occasions, efficiency improvements are very high on our agenda. We have implemented a more stringent and structured process around discovering, prioritizing, executing and monitoring the efficiency-improving projects, and this will remain high on the agenda in the coming quarters and years. We will continue to invest behind our growth categories and our strong and important brands to drive further market share growth. Through innovations and strong commercial execution, we believe we can grow faster than the market in value terms. It is also a top priority to deliver on a long-term organic EBIT growth target of an average of 6-8% per year, while improving our EBIT margin at the same time. This year, we are clearly above that target, and now we are working hard to secure the maximum momentum going into 2025 and beyond. We'll continue to monitor possible changes to consumer behaviors and macroeconomic uncertainty remains. It is important that we react quickly to potential changes should they occur, and they will occur. Finally, our ambitions in the ESG area have not decreased, so we will continue to pursue and execute on our ambitious targets within this area. And with that, we are ready to take your questions. So, operator, will you please take it from here?