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 Vestergaard, and we would like to welcome you to this webcast, where we will cover the release of our third quarter result, and afterwards, take your question. Now, please turn to slide number three. In Q3, we had a great quarter with good momentum in the business and the best EBIT ever result. In Q3, we picked up the volumes that were lost in June due to bad weather. We delivered 8% organic volume growth in the quarter, driven by continued strong rebound in our international markets and solid performance in Western Europe, and in particular Italy, where we continued to gain market share. The capacity constraints we had last year has been solved as the acquired companies have added sufficient capacity to support our global supply. We increased our market shares in many markets and our multi-beverage model with focus on growth categories is giving good momentum. In our multi-beverage businesses in Northern Europe, soft drinks have continued the strong progress seen in the first half of 2024, especially driven by Denmark and the Baltic countries. In Italy and international, where our beer positions are more niche, we continue to outperform in the markets. Our sales in to the international segment has been higher than sales out, as we have rebuilt stock in several markets. Our sales out flight attitude in international is high single digit. As the stock has been rebuilt, you will see a higher calibration between sales in and sales out going forward. Organic EBIT growth in the third quarter of 25% was driven by strong commercial execution, top-line growth, as well as efficiency improvements. In general, integrations of acquired companies are progressing according to plan, and this is now starting to be reflected in the business results. On 1 October, we took over the sales and distribution of Pepco's beverage portfolio in Belgium and Luxembourg, The carve-out of the business from Pepsi has required significant IT integration work and is still requiring some work before we are in normal operations. On 17th of October, we signed an agreement to acquire Penorikaa's portfolio of local Nordic brands within spirits, liquor and local wine in Finland. The most well-known brand is Mintu, a leading liquor brand in Finland, which is also exported to Nordic countries. The transaction is expected to be finalized during the first half of 2025. In Q3, we reach an agreement to sell our shareholding in the Polish brewery companies Perva and Farel. Farel owns shares in Perva, so that's how it hangs together, for the total proceeds of 207 million Danish kroner. The amount is recognized as financial income in the profit and loss statement, and the amount is tax-free. based on the results delivered year to date and our expectation for the remainder of the year, we take the bottom of our interval slightly up on the full year EBIT growth guidance. Now please turn to slide number four. On this chart, we try to illustrate some case stories in our growth categories. As you know, the European beverage market is not really growing. Therefore, it's important to identify and play in the categories that grow. The headlines show our growth categories, and below we have some important examples on how we play in them. In low-nose sugar, our group growth has more than doubled since 2019. The success is driven by strong execution, but also the combination of strong own brands together with Pepsi's strong portfolio of sugar-free soft drinks. The growth is both organic and via acquisitions. As a specific example, we have the Faxi Condi brand in Denmark that has grown 65% since 2019, and the growth is almost entirely coming from the sugar-free version. But more importantly, it is not taking volume from the sugar version, so the growth is on top and supporting the call. A part of this journey is the launch of the orange version, where we decided to put the full focus on no sugar, despite the orange market being more skewed towards sugar versions in general. In premium, we have grown the Italian business volume by 40% since 2019, the year before COVID and the stocking, destocking that we went through. This has been done without compromising our premium positioning and the price level continues to be at a high level. A part of the growth is led by the increase in field force, a part of the by launch of cans and finally, very, very strong marketing work. In no low alcohol, our volume has grown slightly as the market growth in the category is also low in the Nordics. We still expect this category to grow, however, at lower levels than our previous thinking. The quality of our offering is very strong and provides excellent opportunities to have great tasting beverages, even when you do not want to have alcohol. In energy, we have several strong examples and have selected the cult case in the Baltics, the cult brand that has grown from not even being in the market in the Baltics to 9% market share. in four years and continue with strong momentum. Their success is based on strong concepts from other markets of the group combined with strong execution by our organization in the Baltics. This is a good case of creating organic growth via category entry on the back of group experience with a local twist. In the Netherlands, the volume of SOCI vitamin water has grown by around 60% in just two years. We also see a strong performance in Finland and the Baltics in this category, a category we believe will grow quite a lot going forward. Lastly, we want to highlight our performance within our Gravn's and Hansa brands in cider-slash-RTD in Norway. We take the lead in expanding the category and have grown 38% in four years despite strong competition and many players in the market. The broader cider-RTD space is one of the few categories that grow in volume in Norway and we believe that that will continue. Now, a note on entering new categories. It's not super easy to enter new categories if you do not have experience in working in the country. It took us about three years to learn to do soft drink in Italy, which was on the back of a beer business. It is different gameplay that you see in the categories. And this is something that we are very thoughtful around when we enter into categories in a country where we do not have the experience. Summing up, in order to grow our business by volume, we must play a strong role in growth categories with a mix of own brands and partnership brands. Now, please turn to slide number five. If we look at the year-to-date developments in our individual business segments, Northern Europe saw the lowest organic growth in both volume and revenue, as demand was impacted by poor weather in June and weak development in the on-trade segment. Also, consumers are buying more on promotions in the off-trade channel. Year-to-date, we increased to 8.3 million hectolitres, which is equivalent to 2% organic growth, while organic revenue increased by 3% organically. In Western Europe and internationally, we saw overall strong developments and solid execution with no capacity constraints. In Western Europe, year-to-date volumes increased 7% organically, while organic revenue increased by 16%, predominantly due to strong performance in Italy. Our beer, carbonated soft drink, and energy business continue to expand, and we continue to win market share in all the three categories we are present in, which is very, very strong. In international, the strong growth continued in the third quarter and year-to-date. Volumes were up 37% to 1.1 million hectoliters, whereas net revenue increased by 32% organically. The negative price mix was due to product and country mix, And as mentioned earlier, our current volume sales outgrowth is high single digits. And now I'll let Lars take over, so please take it from here.

Thank you, Lars, and good morning to everyone. I will walk you through the main highlights of our financial result in Q3 and the first three quarters of 2004. As Lars alluded to earlier, we saw strong performance across the organization and we gained market share in Q3. Our total volume increased by 34% in Q3 and by 31% year-to-date, primarily driven by additional volume from the Netherlands and San Giorgio in Italy. Acquisitions contributed by nearly 0.9 million hectolitres in the quarter and by approximately 2.5 million hectolitres in the first three quarters of the year. The organic volume growth in the quarter was 8% and 5% year-to-date for the group. The price mix was overall neutral in the quarter, meaning that the organic revenue growth in the quarter was also 8% compared to 7% year to date. Net revenue was also positively impacted by M&A and grew 22% in Q3 and 21% year to date. EBIT grew more than net revenue by 33% and amounted to 675 million in Q3, which is our best quarterly EBIT result ever. The EBIT margin increased by 130 basis points to 16.5%. in Q3, and if we adjust for M&A, the EBIT margin expanded organically by 230 basis points in Q3. The margin expansion is a result of efficiency improvements as well as having solved the capacity constraints we experienced last year, as Lars also mentioned. So it's good to see that the efforts across the group is showing results also in the margins. We had a slightly positive weather impact in Q3, where the organic EBIT growth was 25%, which to a large extent offset the negative weather impact in June. It means that the weather impact has been close to neutral if you look at our year-to-date numbers, where organic growth rates was 19%. Net financial expenses were positively impacted by 207 million Danish kroner from the sale of our shareholdings in Poland. Adjusting for this impact, net financial expenses increased 9 million to 62 million in Q3 as a result of higher debt and interest rates. Tax payments increased to 144 million kroner in Q3 and to 290 million kroner year-to-date. This corresponds to a tax rate of around 18% in the quarter, which is positively impacted by the tax-free sale of shares in Poland. The underlying tax rate was 24% in Q3 and 22% year-to-date. We expect to land the full year around 21%. Earnings per share increased by 83% in Q3 and by 43% year-to-date to 24.5 kroner per share. This is impacted by the disposal of the shares in Poland, and excluding this, our earnings per share would have been 20.4 kroner. If you turn to slide number 7, please. On this side, we show the impact of acquisitions on revenue and EBIT. On the left-hand side, we show the revenue bridge. Net revenue increased by 747 million kroner, or 22% in total. Acquisitions amounted to 469 million kroner. or 14% of revenue, and the remaining 278 million kroner, equivalent to 8%, comes from organic growth. On the right-hand side, we show the EBIT bridge acquisitions contributed by 41 million kroner to EBIT in Q3, equivalent to 8%, while organic growth in EBIT amounted to 127 million, which is equivalent to 25%. On top of the acquired net revenue and EBIT, we also acquired access to extra capacity on a group level in connection with both acquisitions, which has contributed to organic growth as well. The two new production sites have delivered volume to the group and have freed up capacity in Northern Europe, which has supported the global supply chain, and the effects can mainly be seen in the international segment. Adjusting for M&A, the EBIT market expanded by 230 basis points in Q3. Please turn to slide number eight. Free cash flow amounted to more than 1 billion kroner in the first three quarters of the year. This is an increase of 37% versus last year. The cash flow was positively impacted by the sale of the shareholdings in Poland and positive developments in operating results. On the other hand, cash flow was adversely impacted by an increase in net working capital as a result of higher activity, and in particular by an increase in receivables and inventories since the end of last year. In total, cash flow from operating activities was 233 million higher than in the first three quarters of 2024. CapEx increased by around 107 million compared to last year, resulting in a free cash flow of 1 billion and 32 million Danish, which is 277 million higher than last year. One of the key focuses for 2025 has been to re-establish our financial flexibility, which we have now achieved, primarily driven by strong operating profit and cash management. Our net interest-bearing debt to EBITDA ratio improved to 2.1 at the end of Q3 and is now well below our financial target of maximum 2.5 times EBITDA. As announced in Q2, the Board of Directors decided to pay out an extraordinary dividend of 14.5 kroner per share, which happened in the beginning of October. So that cannot be seen in the balance sheet in this reporting. Please turn to slide number 9 and the outlook for 2024, which has been narrowed. We still expect net revenue to be at least 15 billion kroner, including contribution from acquisitions of around 1.5 billion kroner, which is equivalent to an expected organic growth of around 4.5%. We now expect an organic EBIT growth rate of 15 to 19%, meaning that the reported EBIT is expected to be in the range of 1.965 to 2.024 billion Danish kroner. Belgium and Luxembourg are not expected to contribute to earnings in Q3 due to integration cost. Acquisitions will contribute to EBIT by around 85 million in the full year. Net financial expense are now expected to be around 90 million Danish due to the proceeds from the sale of the shares in Poland, whereas expectations for the tax rate is unchanged. CapEx is now expected to be in the range of 850 to 950 million Danish. After some years with high volatility and many moving parts such as inflation, COVID, stocking and destocking in Italy, 2024 is expected to be a normal year. Although the weather was poor in June, it has been fairly neutral if you look at the full year impact. Overall, macroeconomic uncertainty has remained high and therefore the underlying volume growth has been modest with cautious consumer spending. And we see the effects to a higher extent in on-trade in Norway and Finland than in the rest of the business. And with that, I'll give you the word back, Lars.

Thank you, Lars. And now please turn to slide number 10. Just go through the key items on our agenda right now. We see a successful integration of the acquired companies unfolding. We are well underway across the acquisitions and look forward to welcoming our colleagues in Finland during the first half of next year. As consumers continue to be cautious, we continue to put efficiencies high on our agenda. As we have shown on the page with our growth framework, we have been successful in bringing focus on the right categories. When we meet with our global leadership team, we share best practices and discuss changes in the markets to ensure that we react to changes in the beverage categories with the aim of growing faster than the market and win in the segments that are growing. The market environment is based on some cautiousness on the consumer front, which is impacting on trade in Finland and Norway. Across all countries, we continue to experience that consumers are buying more on promotions, and we continue on the basis of that to monitor closely and make the necessary changes to ensure solid in-market performance and profitability. And lastly, we continue our focus on ESG and are on track to deliver on our main KPIs in the coming periods. Please turn to slide number 11. And to summarize, our financial performance has been strong across the group with the best quarterly EBIT ever and higher organic growth than peers. A very strong free cash flow allowed us to bring down debt and solidify our financial position. Being in the right categories with the right offerings have made us much more robust and enabled us to gain market share in many markets. As long as consumers are focused on price, we will remain focused on cost and on driving efficiencies out of the business. However, we will also continue to enhance our product portfolio with high-quality brands, as we have done both this year and in the past years. And with that, we are ready to take your questions. So, operator, please start from here.