Royal Unibrew A S

Good morning, everyone. My name is Lars Jensen and I'm the CEO of Roy Unibrew. And with me today is our CFO, Lars Vestergaard. I would like to welcome you to this webcast covering our trading statement for the first quarter of 2025. And after the presentation, we'll be open on the line for your questions. First, we will walk you through the business highlights of the quarter, our financial performance and our outlook for the rest of the year. Now, please turn to slide number three. We are pleased to report that our volume and net revenue for the first quarter were in par with Q1 2024, despite a full week of strike in Finland and the later timing of Easter, which shifted sales into the second quarter. Our Western Europe and international segments continue to perform strongly, maintaining the positive trends and momentum we saw in 2024. On the financial side, we delivered an EBIT growth of 4% and an earnings per share increase of 25%, with an EBIT margin expansion of 0.2 percentage points. Given this good start to the year, we are reiterating our financial outlook for the full year of 2025. That said, the macroeconomic environment has become more uncertain since we published our annual report just two months ago. Geopolitical tensions, evolving trade policies and changes in consumer sentiments are adding a new layer of complexity. But we are well prepared due to our focus on cost and efficiencies. While Unibrew has limited direct exposure to the U.S. in terms of imports and exports, we continue to monitor this closely and remain focused on maintaining flexibility and operational resilience. Now, please turn to slide number four. Let's now take a closer look at the performance across our geographical business segments. If we start with Northern Europe, volume were down by 8%, which is mainly due to the later Easter and the sector-wide strike in Finland. Net revenue declined by 6%, to 2 billion and 41 million, and overall consumer sentiment remained quite soft, and particularly in the on-trade channel, which you have heard us talking about for at least one and a half years. A clear assessment is that we are gaining slightly market share in northern European segment as a whole, and that is measured on sales out. So not our sales in, but measured on sales out in Q1. And if we look at March and April together to neutralize the Easter shifts between the quarters and shipping difference in Finland from the strike, we are right where we should be. with growth on both top line and gross margin. In percentage, we grow more on gross margin than we do on revenue, which is due to the efficiency agenda and our price mix management. If we dive a bit more into the performance in some of the countries, the strike in Finland meant that production and logistics operation at our brewery were stopped during the last week of March. The sectorial strike was pre-announced, but still had a significant impact both on sales and production in Q1. We see that sales has recovered in April, but there has been an extra cost related to the production stop in Q1. which is always the case when we have strikes that last as long as a full week. The consumer sentiment in Finland remains quite challenged, impacting both on and off trade. On the positive side, we took over the local portfolio of alcohol brands from Panorika, which is mainly the Minto brand at the beginning of March. It is still very early days, but I would say so far the integration is going as planned. and really well done, both by the receiving organization and the Finnish organization. Results in Denmark were impacted by Easter timing and somewhat lower consumer sentiment. We continue to perform well on market shares in Denmark, which in the first quarter is driven by a soft drink with both Pepsi and Faxe Condi. It's driven by beer with Royal and energy drinks with Faxe Condi Booster. In Norway, the activity levels were as expected. We finalized the SAP integration in the first quarter and we are now operating as planned. As you may have noticed, we announced the closure of the Borg brewery in Sarfsborg by the end of 2025. This is not expected to impact the P&L for 2025 and is a part of the optimization of our production setup in Norway that was initiated with the closure of Kristiansand a couple of years ago. In Western Europe, volumes grew by 15%, driven by the new activities in Bilux and continued strong growth in Italy and France. Net revenue increased by 14% to 828 million. The Netherlands was flat compared to last year as the timing of Easter also in the Netherlands had a negative impact. In the Netherlands, we start to see the positive effects of our commercial agenda that was set after the summer last year on the back of the excise increase, which came in on the 1st of January 2024. The field sales force organization we have built in OffTrade is lifting sales and the quality of in-store execution. We have also acquired GIK, a brand that was born as a hard seltzer, but by now is also in more traditional ready-to-drink variants. This is our first entry into the alcohol categories in the Netherlands. The integration of Belux is progressing as planned and sales the same, also in accordance with our expectations. In Italy, we see a shift towards branded business. So we have less private label and we have more cheddar strong ale and faxe. And the Le Monsola range is also performing very well in an otherwise flat market. France is continuously delivering an overall share gain in a total soft drink market as we are well positioned in growth categories with both Rowena and Crazy Tiger. And we are within that focusing on managing the SKU assortment towards a higher net revenue on a per liter basis, which supports the profitability enhancement in Western Europe. Finally, in our international segment, we saw the strong trends from 2024 continue into 2025. International delivered a 10% volume growth and a 9% revenue growth, with Africa continuing to outperform in the segment with a very strong growth. Overall, our sales outgrowth continues to be high single digit, and sales out is a number which is counted from our customers and out into the market, so our partners in the individual markets and out into the market. And now I will hand over to Lars, who will get into the details around the financial numbers.

Thank you, Lars, and good morning to all of you. Please turn to slide number five. I will walk you through the financial highlights for the quarter. First, as a reminder, Q1 is seasonally a small quarter for us, usually contributing around 10% of our full year earnings, and Easter moving into Q2 this year makes growth rates slightly difficult to interpret. We are in line with our internal plans. if we look at gross profit it increased by 42 million to one point one billion two hundred and eighty forty sorry 84 million in q1 2025 driven by better margin management country mix and efficiency improvements the gross profit margin increased by 1.2 percentage points to 40 percentage EBIT came out at 219 million, corresponding to a growth of 4%, and the EBIT margin expanded by 0.2 percentage points to 6.8. As we said when we released the annual report, operational efficiency is higher on our agenda for this year, and we continue to optimize and manage our cost base tightly. This said, we continue to invest in sales and marketing to support our future growth. Net financial expenses for Q1 declined to 55 million due to lower net interest-bearing debt and lower interest rates. Tax expenses were 37 million with an effective tax rate at the expected level of around 22%. As expected, Q1 was cash flow negative. This is normal in our industry as we build inventory for the peak season in the next quarters. Free cash flow was minus 543 million compared to minus 480 million last year. The higher outflow reflects both higher investments and higher inventory levels ahead of the Easter sales, which, as you know, falls into Q2 this year. Overall, a good and disciplined start to the year in line with our expectations. I will also mention that yesterday we had our ordinary AGM and it was decided to pay out a dividend of 15 kroner per share. This means a cash outflow of around 750 million in Q2. Please turn to slide number six. The financial outlook for 2025, as stated in the annual report for 2024, is reiterated. We expect net revenue growth in the range of 5-7%, including the contributions from the new activities in Benelux and the Mintu transaction in Finland. EBIT growth is expected in the range of 7-13%, meaning that the reported EBIT is expected to be in the range of 2.1-2.225 million. I would like to emphasize that our financial guidance is based on absolute EBIT in Danish kroner, which means that any impact from currency in translation is included in the guidance, and we do not have a separate special items line in our report. Net financial expenses are anticipated to be around 250 million, excluding currency-related losses or gains. The effective tax rate is expected to be around 22%. CapEx for 2025 is projected to be around 7% of net revenue. Please note that in our definition of CapEx includes repayment on leasing facility, which represents around 1% of net revenue. Our main assumption includes stable demand in our markets and no major channel mix changes. As already mentioned, the level of uncertainty around macroeconomic developments is higher than only a couple of months ago, and we monitor activity levels closely across our markets, and the focus on efficiency remains very high on the agenda so we can adjust when necessary. And with that, I'll turn the word back to you, Lars.

Thank you, Lars. And now please turn to slide number seven. To summarize, 2025 has started as expected, despite facing some short-term headwinds from the sectorial strike in Finland and the later Easter timing. We continue to see positive developments in our EBIT margin, underpinned by operational improvements, and we maintain committed to invest in our strong brands, the strong brand portfolio that we have, and in the growth categories in particular. We reiterate our full-year outlook for 2025, despite an increasing uncertain macroeconomic environment. Our financial performance across the group has been strong, and we are well positioned to deliver on our ambitious target for the year. We are now ready to answer your questions. Operator, please go ahead.

Thank you. Participants who wish to ask a question now, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 11 again. There will be a short pause as participants register for questions. We will now take our first question from the line of Richard Withegund from Kepler Shriver. Please go ahead, Richard.

Yeah, good morning, all. Thanks for the questions. Let me ask three questions, please. First of all, on the Nordics, could you comment perhaps a little bit on the competitive activity in the soft drinks segment? I have the impression it's getting a little bit more competitive. You're still gaining market share, you say, so maybe some background on that. Second question is on the Netherlands. Lars, you mentioned a better commercial execution. What are the two, three main initiatives that carry out to improve the performance in the Netherlands? And then the last question is about maybe the gross margin performance in 2025. Obviously, it's a pretty decent start to the year with 120 basis points, gross margin improvement. You probably are relatively certain about the pricing, about the cost of goods sold. trends. So what do you expect in terms of cross-margin improvement this year? Thanks.

Yeah, if I take the two first ones, I think overall when we look at the Nordics, we are not really detecting a lot of change. The market is, from a volume point of view, when you correct for the Easter in the first quarter, it is, I would say, as expected from a total volume point of view. We continuously see that no low-sugar territory is gaining share, and this is what we are benefiting from. So when you look at our portfolio, which is also embedded in the growth category framework that we have. This is where we have a stronger position from a portfolio point of view than competition. And there's also been a lot of questions the last few weeks in terms of do we see any effects of a reduction of Pepsi sales on the back of consumers, in particular in Denmark, reacting, you know, being anti-American in some of their purchases. We still gain share for Pepsi. Then you can discuss, could we have gained more? But our conclusion is that this is actually not something that we see fully visible today. I think what is important in the Nordics, given our wide portfolio, that is that we, on one hand side, make sure that we cater for individualism, that we... That's a high focus on single-serve, smaller containers, where you would see the... I would say the... From a wealth point of view, from an income point of view, from middle class and upwards, they are not changing their consumption patterns significantly. And then you see the income group that is below that. Those are the ones that are harvesting or finding more, looking for more opportunities in buying cheaper products. So on one hand side, you need to cater for, call it the wealthy part of, more wealthy part of the society. But on one hand side, you cannot forget about some of our core consumers. And that's a discussion around more affordability. So you do see a... a two step approach in terms of how to manage. And that also leads to in some of the countries that you see deeper promotions or you see a higher intensity of promotion and thereby an average pricing on a per liter basis that has been not been trending upwards. And that is also why that we focus for, I would say, one and a half year by now or so, is keeping such a high focus on harvesting efficiencies so that we do not lose profitability as we are trying to massage our assortment towards catering for both of these. And I would say the market share picture This is very consistent. So no, no, no, no change in any trends that we have detected when it comes to the Netherlands. We see, I would say, I would highlight three things that I think in particular is helping us. And I think what we are super happy about is that we have a Dutch business, which from a revenue point of view is at the same level as last year, but that is actually negatively impacted by an Easter phasing. So the underlying is our assessment right now is that underlying we are growing now the business in the Netherlands, which is something that we haven't seen in that business for many, many, many years. So that's a very positive thing for us by now. The three things that I would highlight here is that the field of sales organization and off trade is now working. We have proof of concept in terms of. delivering value added to the stores, but it also converts into a better sales and quality of sales for ourselves. And we are looking forward to ramp that up over the coming years. It's still a fairly small organization compared to the big markets in the Nordics. Point number two I would raise here is that we are well-positioned when it comes to growth categories. So we have acquired a business with a very high focus on healthier proposition, less sugar, and those are also the categories that are driving the business in the Netherlands. So being positioned in right categories is super important. And that is working well for us. And then I think the third one I would call out is focus. So the... The conversation that we have had with the Dutch team and the way that they have built the plans on 25 is to do less is more. So focus on a few things that matters instead of focus on, you know, multiple things where the individual initiatives doesn't move the needle. And this is, I would say, it's a common thing for us in Royal Unibrew, that is to try to emphasize on all of these three. At the end of the day, have a very strong field force, have strong brands in the hands, and then ultimately make sure that you do not get defocused on things that doesn't really move the needle. So it's the Royal Unibrew model, I would say, that we start to see working in the Netherlands.

If we turn to the gross margin questions, there are two elements that I would like to call out. One is, of course, that the growth framework we have is driving our portfolio towards products with better margins. And we are trying to push the higher margin products more. So there's a mixed component in the margin development. And then, of course, there is a substantial effect from efficiencies where... We are trying to kick complexity out of our production footprint, and that is giving us some savings. So those are the two things that improves our gross margin in the first quarter.

Thank you. Thank you.

We will now take our next question from the line of Soren Samso from SED. Please go ahead, Soren.

Thorin, your line is open.

Please ask your question.

Sorry, I just figured it out. Sorry, I'm from SAP here. So, first I have a question on Finland and if you can try to give an impact of the Easter impact and the strike in Finland in Q1 and if you expect to regain that fully in Q2, you could say. Then talk about the partnership agreement in Belgium-Luxembourg. How's that ramping up? in Q1. And also, how is the market share on Pepsi developing in the Netherlands? Those are my questions.

Yeah. So when it comes to Finland, as I said in the comments in the beginning, that goes for the whole of Nordics, but it also goes for Finland. So when we look at the numbers here, two invoicing days before we close, when you put March and April together, which we always do because of this Easter thing. We are exactly where we want to be, and we are delivering growth in the territory, more on the profitability side than on the top line side because of what Lars also talked about, our relentless focus on efficiencies. So that's the situation when we look at Finland. And I would say that it is a clear view that when you look at the share of profit pool in Finland, and we are in particular strong in above mainstream in Finland, we have no indication that we have had any loss of profitability share of the market. Belux is ramping up. It's a bit of a turnaround, and the team has embraced that, and I'll tell you, the customers have embraced our attitude towards Belux. how to win in the market. But this is a project with a longer time horizon, I would say. The deals with the retailers have been closed, you know, kind of like a month or one and a half months ago or so, and then that is what we are implementing. And then I would emphasize that one of the things that is also working well in Belux is that we are – executing the snacks business as well. So we do all the selling on the beverage side of things, and then we are executing the snacks for PepsiCo, and that piece is also working well. So that's where we are on Belux right now. Pepsi shares in the Netherlands – is flat-ish, I would say, at this moment of time. But the quality of sales is better. And remember, in the Dutch market, you have a lot of these buy one, get one for free, which the retailers... find us as the most effective promotion tool. But it also it obviously comes at a far lower profitability. So one of the things to work on and we have been working on in the Dutch market is to strike the right balance between promotions, the depth of promotions, the number of promotions, the price points on shelf, which we obviously not to decide, but the retailers decide. But to get all of that mixed together to drive profitable growth, you can drive an awful lot of growth if you just do these one plus one. but it doesn't really help anybody at the end of the day. So the trick here is to find the exact model to do so, and we are getting closer, I would say, to a model that is enhancing both.

Okay, so it seems like you're focusing more on profitability, which is good. But then in Norway, if you can come a little bit on your volume development, I know Q1 again is a small quarter, but still it would be nice to know how it's tracking. And also the same for profitability. What is happening there and what should we expect for the rest of the year?

Norway is also, when we look at our own plan, and remember that we have this SAP implementation that moves a bit of volume because you push volume in before that you have a cutover date and you need to catch it up and so on from a stability point of view when the system is up and running. So when you compare the plan that we have made and where we are with the Norwegian business, we are on plan. When you look at the market in Norway, it is still, as we have also called out Finland, as this is a much larger market for us and with a much higher share in on-trade. But the on-trade business in Norway is, as we have talked about it the last quarters, is under pressure. The Norwegian kroner is not helping the average Norwegian consumer. And we have seen a slightly further devaluation of the Norwegian kroner over the last month. So when we look at our performance in market, it is as expected. When you look at our shares, they are as expected. We are gaining a lot of momentum in the broader RCD hard sales categories. And beer is flattish in a slightly declining beer market. And wine in the monopoly is, I would say, closely on par with last year if you take the Easter effect out of that. And then again, you know, it gets a lot of pluses and minuses on it. And when it comes to the journey towards being on a 10% return on invested capital in Norway, we are on track. And obviously, the closure of Sapsbo is going to help us on that journey.

Okay, thank you. Thank you.

As a reminder, to ask a question, please press star 11 on your telephone keypad. We will now take our next question from the line of Thomas Lynn Peterson from Nordea. Please go ahead, Thomas.

Hi, everyone. Good morning. A few questions also from my side. So Lars and Lars, could you please comment a little bit on the current trading you're writing here that you're seeing increasing macroeconomic uncertainty. And I guess that's specifically related here to April. So are you seeing anything in terms of consumer sentiment change in April? That would be the first question. Then the second question is about the positive price mix in Northern Europe. I think I recorded 2.5% price mix. How much of this is price? How much is mix? And sort of how can we extrapolate this development to the rest of the year? And then also a question regarding your capacity. I think you are expanding particularly in Italy. So any comment on that would also be helpful. Thanks.

Yeah, consumer sentiment, if we start with that one, I think if you look at everything that is published in all our major countries, it points in one direction, and that is that consumers are more concerned. They still have a lot of money to spend, but they don't spend them because of this uncertainty to the same extent. When we look at beverage in general, it is a very, very resilient category. So if you look at the totality of the categories where we work, beer, soft drink, energy drinks, waters, whatever, you put it all together, the amount of liters that is being sold, it's the same. So there's two things that we are continuously working on, irrespective of the consumer sentiment. And that is to be in the categories that grow. That is just probably the most fundamental thing that you need to work on. And then the other one is what I talked about, about this mix between having focus on affordability and So this is about container sizes at the right prices, the right promotion pressure, the right promotion intensity, so that you make sure that you cater for the consumers that are very focused on that without diluting your overall profitability. Now, that is a very difficult exercise. So without having the efficiency agenda at the same time, It wouldn't work. But with the efficiency agenda at the same time, we believe that we can retain the profitability over time. So those are the two things that we are generally working on when it comes to consumer sentiment. But people are generally going less out. They're spending less money when they go out. But it's our job to massage that and make sure that we deliver on the profitability, which is what we expect to do for 2025. And now I've tried to talk about March and April together because that is the way that we look at it, because it is really difficult to separate the cold and the hot water here. But if you look at our April, it is a very, very strong month compared to last year. So, yes, it is closing the gap and a bit more to that. So we are delivering growth when you're looking at the two months in combination. Price mix, I think you need to be a bit careful on that, also in particular because you have the Easter effect and you also have the strike effect in Finland. So generally we have a higher net revenue per hectare in the Finnish business than we have in the Baltics, as an example, and so on and so forth. So I would say... Don't extrapolate from a relatively small quarter. I think you need to rely on the guidance that we have given in February in terms of how we see the components of driving our profitability and top line for 2025.

And in terms of capacity, a number of the CAPEX projects we have done in the last couple of years is starting to come online. So some of the investments we are doing in Italy is starting to help capacity in Italy. We have canning lines coming in place in both Italy, Holland, a PET line in Denmark. So Capacity for 2025 looks to be adequate so that we will not lose any sales this year due to capacity. So all good on the capacity front.

Great, thank you.

Thank you. We will now take our next question from the line of Philip Spain from JP Morgan. Please ask your question, Philip.

Good morning. Thanks very much for taking my questions. I had two, please. The first one was just on, I appreciate some of the one-offs in the first quarter, particularly in Northern Europe around the strike and Easter timing, but I suppose what gives you the confidence in being able to reaccelerate through the rest of the nine months of the year to be able to deliver on that top-line guy? What's kind of giving you that strong conviction? And then my second question is just on maybe trying to break down headline pricing versus the promo. So in terms of your negotiations so far this year, how did they go? Did you see any disruptions from retailers in terms of the level of pricing you're able to get through? And do you expect promo to be higher year on year, given some of the comments you made earlier around that? Thanks very much.

Yeah, I think the conviction on, call it conviction or what, but if you look at a growth attitude, if you look at the Nielsen numbers, IRA data, whoever is the source of information on our sales out progression in all of our major markets, and when we then look at our own data and that we can see that reflected in our own data, then it supports that we have a good underlying momentum in our business that can deliver on the outlook guidance that we have given. There's a few, I would say, categories. There's a few brands where we are excelling. And obviously, when we have things that work well, we are trying to fuel that even more. We have highlighted a few in the comments we gave early on. Crazy Tiger, Lorena, is doing well in France. Cheddars in Italy, Limon Soda in Italy. We see our Faxe Condi brand together with Pepsi in Denmark is doing an excellent job and so on, so forth, you know. So... uh we we as our as our beer share of our total business is relatively small we have an exposure in our assortment that is much more towards the categories that the consumers are actually asking for right now so less calories less sugar, there's more moderation, so less alcohol. And we are well positioned just from a portfolio point of view. We are fairly well positioned for that piece. So that is what gives us the conviction. And I would say it's a very broad question that you ask about price promo and so on and so forth, because every market is different. Every customers different and customers are different as they have different priorities. Sometimes you have customers that wants to cater more for sharp prices. At other times, they want to cater more for the shopping experience. So what we generally do is that we listen well to the strategies that the customers have, wherever they are and how big or how small they are. And then we are trying to cater for, I would say, a total offer with our portfolio so that the customer can achieve what they want to achieve. And within that, obviously, trying to maximize our earnings opportunities as well. So that's about striking a balance on a win-win basis. I don't foresee that promo levels will go up on an overall basis. They are already fairly high on an off-trade basis. In some categories, we see that promo shares are already in the 85% level. So it's very, very difficult to get that up and we don't want to get it up necessarily so this is more about discussion if you want to go high low and what is low is that a discount of 20 25 30 or like in holland one plus one uh so how was all of that put together that is where the art sits in in when when it comes to the retail side of our business and this is where we historically And I think also now prove that we can deliver on a consistent journey that delivers. both value for us, but also value for our retailers. We have a strong heritage in doing this in the old Roy Unibrew markets. We managed to take that attitude in Norway already last year. And that is what we are bringing into the negotiations in the newer markets. So in the Netherlands, Holland and Belgium, that is the attitude that we take in. We are here to win together. And we have proposals on how to do so.

Thanks very much.

Thank you. We will now take our next question from the line of Aaron Adamski from Goldman Sachs. Please ask your question, Aaron.

Hi, thank you. Good morning, Lars and Flemming. Thanks for taking my question. I have two. The first question is on the Q1 performance. I think some of your peers reported they're relatively more resilient volume performance in the Nordics. And I guess they also had an impact from Easter and some headwind from the strike. So I just wanted to ask, are you seeing any market shallows in any of the key geographies in Northern Europe across the key categories? And if you could run us through the performance of those key categories in those markets, that would be great. The second question I had is on the planned factory closure in Norway. Can you please give us a sense of how much savings are you expecting that will bring for the local business next year? And then connected to the efficiencies on Netherlands, have you already begun to benefit from the investments you have been making in the packaging architecture? Or is this going to be impacting 2026 to a greater extent? Thanks.

Yes. On Q1 in the Nordics, no, we do not detect any share losses overall. There is always changes within categories due to promotional pattern and different kind of focuses sometimes. We plan to lose share in a category because the profitability might not be as attractive as in another category. So what so what we are looking at is, is it following our thoughts around how the year will turn out? And it is progressing as planned. So we are gaining share in the categories that are growing. That is our absolute clear view on this. You need to this is a small quarter. You also need to be aware of sales in, sales out. There's also... There might be differences, and we could have earned more money if we would have pushed some sales end of March, and then the numbers would have looked different. But does it change the flight attitude of the business? No, it doesn't. And you often have to pay if you do these kind of things. So that's not how Royal Unibail works. So that is also why that we are talking here about what is the sales out trend, because that's the real thing. Sales in is not the real thing. Sales out is the real thing. And that's where we have a solid momentum and has a continuation of our momentum going out of 24. That's the same that we see into 25. And we have been confirmed on that also in the April numbers. We haven't gotten all of the numbers in April in terms of sales out data. But on our main customers, we get access to our own shares in the category. And we can see that we are progressing as scheduled. So we have no, I would say, red flags that we need to highlight or that we need to do something about on the short term.

If we turn to Norway, then good question. Of course, when we acquired the Norwegian essence, there was an opportunity to structurally improve the footprint in Norway. And this is what we are executing on. And there will be benefits in the coming years. As you know, we have a long-term guidance of 6% to 8% organic EBIT growth. And of course, the acquisitions we have will contribute to this when we start to deliver on the efficiency agenda on that. We're not going to comment on a specific number in Norway. And of course, it doesn't come on the day when you close sites or anything like that. So you need to ramp up in other sites. But it is... clearly contributing to our journey in Norway. In terms of the efficiency agenda in the Netherlands, you cannot see that in the numbers yet because the CAPEX programs are starting to deliver products in Q2. So they will start to come into the numbers soon. in the remainder of the year, but more so in next year where they will be fully up to speed and we have changed all the sourcings to the new capacities we have. So nothing in the numbers yet, but it will start to come into the numbers in the coming quarters and years. Thank you.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone keypad. Next is a follow-up question from the line of Richard Wizzigan from Kepler Shriver. Please go ahead, Richard.

Yeah, thanks for the follow-up. Because I want to get back to the capacity expansion in, I guess, in the Netherlands and Italy, but also in Denmark. A two-sided question here. First of all, How does it change your commercial strategy? What are the additional opportunities that you have from having more capacity in the Netherlands, Italy and in Denmark? And then the second part of this question is, should we expect more production reallocation, hence a more efficient production footprint for Royal Unibrew in the next two to three years?

I think you should definitely expect that with the enhanced capacities that we can harvest efficiencies, no matter if it's running less weekend shifts, if it's logistic savings as we have invested closer to where the consumers are, et cetera, et cetera. It gives us... capabilities so we can add a new type of packaging to the market. We have, with the PET line in Denmark as an example, it is in carton boxes, the PET that we are delivering, which is, I haven't seen that before in any of the European markets that you deliver. Most will shrink wrap it with plastic. It is super well received by both the customers, but in particular by the consumers. They really, really like it. this packaging. So it's not the primary pack, but the secondary pack, which is brand new. In Holland, we get new capabilities from a canning point of view. They could only do the stoppy can in the past, and now we have a suite of things that we can add to the market as we are developing Getting them into the line, so to speak, it has just been up and running for about a week or so. So, of course, it's going to take a bit of time. We are launching the mini cans, the 150 cans in Italy as an example. It's a proposition that we as a company have not launched before. And I think you have almost only seen from... from the red guys in the soft drink space in the market. And then in that respect, we bring something new into the category with lemon soda and orange soda in these containers. So yes, it is a part of, I would say, building a capability for the commercial plans for the future. That should help us in delivering a consistent bottom line growth of 6% to 8%. And it will help us on being more efficient in the way that we are operating. And then I would say the final thing is that remember that The countries that you mentioned here are all countries that support the international business. So this is not just about the local market, but it's also about supporting international, which is on a very strong growth trajectory, and making sure that we can deliver what they need.

Is that okay, Richard, or...? Yeah, that's very clear, Lars.

Thank you. Thank you.

Thank you. Our next question comes from the line of Andre Thomas from Danske Bank. Please go ahead, Andre.

Thank you so much for taking my question. Thanks for choosing me. Just a follow-up question on the reported performance in Northern Europe compared to peers, because it seems that Carlsberg said their volumes were flat in Nordics yesterday, and and all these volumes declined 5% to 6%. So why is your volumes declining so much more? That's my first question. The second is regarding gross margins, where your gross margins improved 120 bits, as you said, but they actually declined 160 bits in Q1-24, so it's not even back to 2023 Q1 levels. So should they continue to improve rest of the year when the base is more tough? That's my question.

Thank you for the questions. On the volume side, I think it would be a bit of a repeat of what I've said already before. We do not know how our competitors are... stocking up or stocking down. When you look at the Nordic markets, some markets and customers are with central warehousing systems. Some of our competitors, in particular, I would say in in Finland, as an example, are more skewed towards off-trade, where off-trade is more central warehousing, where our setup on route to market is a direct link to the customer, So the wholesalers, as an example, have not been subject to the strike. So if you're stronger on the wholesale side of things, then it's a different delivery pattern that you have compared to us, where we have our own route to market set up in direct contact with the customers. So this is also why that in our judgment that we are much more focused on looking at the sales outnumbers. So what is actually being sold, what is actually being consumed, and when we look at those numbers, we are not losing in the marketplace. And then there might be swaps between a month or a week or whatever, but if the long-term trend and when we put March and April together – is clearly indicating that we still have a trajectory of strong market share development. We are super comfortable. So I think I don't know how they do it, the ones that you talk about here, but now you know how we do it.

In terms of the gross profit question, I think you and I know better than anybody else that if you look a few years back, there has been high inflation. There's been high price increases. You've had acquisitions and so on. And I think when we. So our numbers, if you go back two or three years, are impacted by a lot of different factors. And I think what we said at the end of last year was that 24 is a normal year where you have very little impact from COGS or price increases or other stuff. So it is true that if you go back a few years, then probably we had a different gross profit margin. But I would say... We are, the guidance we have done this year of quite decent organic growth rates, we are following those plans and the gross profit margin in the first quarter is supporting that agenda and it's a good improvement on last year which was... a normal base where we should not adjust for high cost or late price increases or things like that. So it's a little bit difficult in Royal Unibrew to go back a few years and look at trends because we have been in years that have been pretty volatile and done a lot of acquisitions and had inflation.

Just to be sure, so is Q124 a normal base because it declined 160 pips in Q124?

I cannot remember what happened in Q1 the year before, which must be in... But I think if you look at the whole season of 24, then there has not been any particular quarters that have been impacted by any one-offs. And there was a lot of price increases coming through in the year prior and... inventory revaluations, I think it was at 23, that impacted Q1. So I would say it's easiest in our business to look at 24 because all those effects are out of 24. De-stocking in Italy, and remember that Italy is a very high margin market for us. So 23 was, as I remember it, very heavily impacted by de-stocking in Italy. which is negative for our group margins.

Okay, thank you.

Thank you. We will now take our next follow-up question from the line of Soren Samso from SEB. Please go ahead, Soren.

Yes, hi again. I just had a couple of more questions. First of all, in Italy, I can understand that you are taking out some volumes on private label and replacing them with own brands. Maybe elaborate a little bit on what brands we're talking about and then how, I mean, it may cost you on the volume short term, but I'm sure this is going to improve your cross-market in Italy. Maybe talk a little bit about how we should expect that to develop over the year and going forward. And then my second question is on the admin expenses, they are up some 25 million in Q1, so around 12%. Just maybe bridge that, what's the increase due to?

Thank you. When we look at Italy, yes, it's correct that when we look at it from an overall point of view, including the private label business, the volume is more flattish. So we are selling more cheddars in particular, but fax is also doing well. But cheddars is, of course, the magnitude of our business. When we look at... Now, off-trade, remember, that's only about 35% of our total business, and it is a very, very small quarter for us in Italy. But when we look at the beer market as a whole, it is slightly declining, so kind of like minus 1%. And again, they also have a little bit of Easter, so let's say that the market is fairly flat. And in that market, we are growing double digits. So we have a good momentum on our beer business with our own brands. And we rather want to allocate production time for our own portfolio that comes with a totally different margin. So this is management of resource and return on investments that we are doing in Italy. And then, yes, that would then come with a higher average net revenue per hectare liter and an average higher profitability on a per hectare liter. and likely also a margin expansion at the end of the day. So that is what we do in Italy, and that is totally in accordance with the plan that was built when we acquired the business.

On the admin expenses, it is primarily related to Belux. And then, of course, we also have some extra cost in Finland related to the integration of the business. spirits brands that we are acquiring so that's where to look for the increase in admin okay thank you and i expect we will see something similar for the rest of the year then I think if you look at admin expenses for the full year, it's included in the guidance. So we will see a little bit higher admin expenses. But, of course, we're also looking at driving efficiencies out of admin. So it's all included in the full year guidance, and we don't guide on individual lines in the P&L.

Admin is like international, obviously, you know. You need to look at the – not on the shipping data. You need to look at this in a longer period of time from a trajectory point of view. And admin cost is a bit of the same. Look at it in a 12-month flying height. And then Belux is adding a layer to this. So that's the thing. There's nothing structurally changing in admin cost.

Understood. Thank you. As a last reminder, please press star 11 for questions.

All right, I'm showing no further questions. I'll now turn the conference back to the speakers in the room for their closing comments.

Thank you very much, everybody, for your participation. As I would usually say here at the end, enjoy the day and you know where we are if you need us. Thank you very much and enjoy the day.