Cloetta AB (publ)

A very warm welcome to sunny Stockholm, and thank you for joining Cloetta's Q1 interim report presentation. I'm Anna Lidholm, the Director of Communications and Investor Relations. Our CEO Katarina and CFO Frans will first go through our results, after which we will move to the Q&A, where you, as per usual, either have the possibility to dial in and ask your question live, or alternatively post your question through the chat. The chat is already now open for questions.

Over to you, Katarina. Thank you, Laura. I'm pleased to present the quarter with exceptionally strong profitability improvement driven by our broad portfolio. But first over to the agenda. Today, it looks as following. I will start with Clueta in a brief, followed by our new strategic priorities and updated long-term financial target that we also shared at our investor day at the end of March. And then I will move over to our Q1 highlights. After that, our CFO Frans will take you through our Q1 financials. And as always, we wrap up with a Q&A. It's a pleasure to share the incredible journey of Clueta. Today, Clueta is Northern Europe's leading confectionery company and has been creating joy through our iconic brands for over 160 years. And our plan is, of course, to continue to do that for at least another 160 years. Founded in 1862, Clueta has grown from a small confectionery business Two, first a Nordic and now a North European powerhouse in the industry. Our success is built on a foundation of a deep commitment to spreading joy. We believe in the power of true joy and this belief drives everything we do. We have what we call 10 super brands. They are our most scalable brands and they account for more than 50% of our total sales. We have operation in 11 countries and have around 2,600 colleagues in Klueta. In 2024, our net sales reached 8.6 billion Swedish crowns and with an operating profit margin of 10.6%. Klueta is committed to sustainability and we have joined the science-based targets initiative and our ambition is to reduce our carbon footprint by 46% by 2030. This spring we launched Cloetta's vision and it is to be the winning confectionery company inspiring a more joyful world. This vision is a commitment to excellence, innovation and the joy we bring to our consumers every day. We believe in the power of true joy and this vision reflects our dedication to this purpose. We have also started to take concrete steps to enable this vision. At the end of April, we also shared a plan to create a more efficient operating structure through changes in our commercial and group level function. And I will talk more about that later on. Clueta continues to play in two business segments. It's the branded packed products, which is our products packed in branded bags. The second segment is pick and mix, a confectionery experience where shoppers choose from a wide variety of candies and create their own individual mix. As individualization is a consumer trend, the whole pick and mix category is currently growing a bit faster than a confectionery market in general. One of our key strengths is our broad portfolio within all confectionery categories. We are the only major company present in all categories, which means we are active in candy, chocolate, pastel, gum and pick and mix. Having a broad portfolio gives us flexibility to adapt to different situations and trends. So, for example, with the current high chocolate prices is, of course, beneficial to be in other categories as well. Our core markets are five markets. There are Sweden, Finland, Netherlands, Denmark and Norway. In all our core markets, our brands have been loved by generations, and we also have market-leading positions. 81% of our turnover comes from our core markets, and 90% of our sales come from outside our core markets. Cloetta is among the top three players in our Nordic markets. Interesting fact is that the three top players actually differ per country. So in Sweden is Cloetta, Fazzo and Mondelez. And in Finland, it's Cloetta, Fazzo and Orkla. In Denmark, it's Cloetta, Haribo and Toms. While in Norway, it's Cloetta, Mondelez and Orkla. But as you hear, Cloetta is actually the only company that stands on the podium in all markets. We also have the market leading position in Sweden, Finland, Norway, Denmark and the Netherlands. And unlike the other players, we are strong in many categories. In candy, which is also our largest category, we are number one or two in all core markets. In chocolate, we are very strong in Countline chocolates and in Sweden we are number two and in Finland number three. In pastilles, we are the leader in Sweden, Finland, and Denmark. And we are in gum in Finland and Netherlands, and there we are number one and two. And we have a clear leading position, as you can see, in pick and mix in the Nordics. And that, in a nutshell, is Clueta. Now I'll proceed to give you a brief update, overview of our new strategic priorities and financial targets. For more detailed information, please view the recording of our investor day that is available on our website. Sorry. So after I was appointed CEO, I approached the assignment through four steps. First, setting the vision, then the strategy, thirdly, to review the structure, and finally, to execute the plans. In June, when I started, I started talking and listening to as many internal and external stakeholders as possible. This was the start to create the vision. In the end of March, we launched the updated strategies. And to support the implementation of our new strategies, we have now also reviewed our organizational structure. Our aim is to establish a framework to ensure Clueta becomes a more focused and efficient company with improved speed and agility. This restructuring will result in a leaner organization with up to 100 fewer positions in Europe. Additionally, this change will support our journey towards profitable growth as it will yield savings of 60 to 70 million Swedish crowns. To make our plans clearer and easier to understand, we have created a strategic framework. We start, of course, with our vision that we want to be the winning confectionery company, inspiring to a more joyful world. Then it comes to our strategic focus areas. And it is actually very much about focus. We need to make choices to create scale. Our first strategic priority is to increase focus on our 10 super brands in our core markets. This approach will help us seize new opportunity and achieve scale. Our second strategic priority is to grow beyond our core markets. We have identified three markets with nice potential, which are United Kingdom, Germany and North America, where we will have greater focus going forward to ensure stronger growth. Our third strategic priority is to excel in marketing and innovation. As we operate in an evolving market, we continuously need to be active and responsive to market development. The last year, we have focused on organic growth. We have not done any significant M&A in the last seven years. We are now open to explore M&As that fit our strategic goals and make good business sense. If we do M&A, we will accelerate for strategy. There is no M&A included in the plan to reach our long-term financial targets. To deliver on strategic priorities, we need, of course, some enablers. One is an operating model, including the organizational structure that is straightforward and efficient. And, of course, what is a company without our people and culture? A black book. This is the fundamental of our company, and our aim is to continue to build strong and efficient team players. Linked to our strategic priorities and vision, we have updated our financial long-term targets. With the great plans we have, we are stepping up our long-term organic growth target and move from 1% to 2% to 3% to 4%. Our long-term adjusted EBIT target will remain at 14%, but we are committed to reach at least 12% by 2027. Historically, our net debt target has been around 2.5. Considering our consistent achievement of this target in recent years, we have now set a new net debt target, and that is below 1.5. However, should a compelling acquisition opportunity arise, we may temporarily exceed this, provided there is a clear path to the leverage. And then last but not least, our dividend policy has moved from a payout within a range of 40 to 60 percent to minimally 50 percent of the profit after taxes. So a summary of Clueta today and what we also presented at the Investor Day. We are the Northern Europe's leading confectionery company with a vision to be the winning confectionery company, inspiring a more joyful world. We act on a non-cyclical market with stable consumer demand, outgrowing underlying fast-moving consumer goods. We have market leading position in our core market, and we have iconic brand across diverse categories. With a strong and diversified customer base, where we have steady sales in traditional retailers and double-digit growth in incremental channels, we are ensuring a broad market reach and resilience. We are on top of the changing consumer and market dynamics. In these rather turbulent times in the financial market, we offer investors a resilient stock in a non-cyclical market. And now back to the quarterly update. As previously mentioned, we had a quarter with exceptionally strong profitability improvement driven by our broad portfolio, and I'd like to highlight some key takeaways. So thanks to our broad portfolio, we had another quarter of better profit, and this was achieved despite high continued raw material costs. The profit improved, even though Easter was later and affected sales in this quarter. Q1 was down due to phasing of Easter, but we expect clear profit growth in the first half of the year and the second half of the year to be close to our new long-term target of 3% to 4% sales growth. Adjusted profit is 11%, and that is up 1.8% from last year. And we are reaching another successive all-time low net debt over EBITDA, well below our new long-term target of 1.5. And now it's time for the financial, and I hand over to Frans who will talk you through the Q1.

Thank you, Katarina. So for the quarter, we delivered our seventh consecutive quarter with sales above two billion, although for the first time in four years, a quarter without organic sales growth. And the last time this happened was in Q1 2021, when the sales met largely pre-pandemic quarter one 2020. So the organic sales are down 1.1%, and there are a couple of contributing factors which I'll break down for you when we look at the sales by segment. But the one single key takeaway is that sales are lower than last year due to the later celebration of Easter this year. Those sales came back in quarter two, and we expect continued organic growth for the full first half of this year, as Katarina mentioned. Now, beyond organic growth, the quarter was also affected by the sale of the Nutisol brand in early June last year, as well as a strengthened Swedish Krona. So the two billion in sales overall is actually despite those drivers. So moving then to the sales by segment and in the top half here, the branded packaged sales. So sales were down 3.4%, and it is the first time, as you can see on this slide, where we have a negative number. So let me spend a bit of extra time on this. So the decline is driven by primarily two things. In part by the easter facing, although not to the same extent that it affected pick and mix. And secondly, in line with our strategy, and as also shared in the investor day end of March, we have continued to optimize our product portfolio by taking out lower margin SKUs, including discontinuing certain contract manufacturing. Now, towards the end of the quarter, there were also, to maybe a lesser extent, two other things that affected this. And firstly, which is also in line with our strategy, is that we held firm on our fair pricing. And as a result, saw some lower sales with an important customer towards the end of the quarter. But, and that has also been the case in the past, that situation has since been resolved. And finally... With all the food price inflation across retail the last couple of years, it is affecting consumption. And we mentioned here earlier, I think Katarina mentioned, especially in chocolate. And that also did affect our sales, especially towards the end of the quarter. But then for pick and mix, pick and mix grew a healthy 4.6%. And that is despite the Easter phasing. And you can actually, if you look here, you can see the Easter effect on the slide. In 2024, Easter was fully in quarter one. And as a result, you see that quarter two was quite soft. And now in 2025, Easter is back in quarter two. And then just to be clear, in 2026, Easter will be in the very beginning of April. So most of our sales for Easter next year will come again in quarter one. So this is really just something that's shifting back and forth. Overall, though, for the first half of the year, eliminating the effect of defacing, we therefore expect continued profitable organic growth. And on the note of the profit, let's look at this exceptionally strong step up versus last year in the quarter. So we're very pleased with 11% operating profit adjusted. Now, I should say on a reported basis, excluding the adjustment for comparability, the profit was much, much stronger. Over 17% operating profit margin adjusted. and over 40% gross margin when you look at the numbers. Now, this is due to the accounting effect of the decision to not proceed with Greenfield project. That discontinuation resulted in, and we mentioned this in our press release in February, it resulted in a one-time non-cash net gain on account of released provisions and reversed impairments. partially offset by some impaired capitalized projects and other borrowing costs, but net 125 million gain recognized in items affecting comparability and 9 million recognized as a cost in the net financial items. So at the back of this presentation, we have, and we've done this before as well, added a table that bridges the reported and adjusted results to make it super clear. Nonetheless, on an adjusted basis, Our 11% operating profit was a clear improvement versus last year's 9.2%, so up 180 bps. Now, 11% places us just above last year's full year average, which was 10.6%. So the improvement is also versus a softer Q1 last year. So you couldn't really assume now that we made a permanent step up of 1% to 2% EBITDA margin, just because we shared a new strategy at the end of March. I mean, that would have been quite fantastic, but of course, it will take a little bit longer time than that to implement it. Now, so the lower EBIT margin last year, as you may recall, was largely on account of the rising COCO input cost and the inevitable lag that we can get in our pricing. Now, the comeback here is then thanks to our continued work with our total portfolio, including the mix, and we do have had the ability to take cocoa pricing, given our strong brands, and leverage the breadth with respect to categories and across markets. Now, in the quarter, profitability was further helped, of course, by the effect of having continued to optimize the portfolio as part of our net revenue management efforts. but also lower promotional spend on account of the later Easter, in the sense that a lot of those activities moves now into Q2, together with the sales. And we'd respect that some promotional activities was on hold end of Q1, pending the pricing negotiation that I mentioned that affected the sales at the end of the quarter, but which have now been resolved. So importantly, the step up in profitability is not due to any reduction in the investments in our brands. On the contrary, that continued investment enabled our comeback and continued pricing. Let's look at the two segments separately. So on the top, the branded package profit is is driven by all the factors mentioned on net revenue management contributing to that. Now, that said, the branded package segment profit is, of course, up versus last year, but it's not back to where it once was. And we will continue this work. We presented that also during the investor day, how we will drive this. And actually, in the quarter, the expansion of the Mynton brand, the pastels across the Nordic, is one example of that effort. And actually, from a volumes point of view, our pastels volumes grew in the quarter, and both pastels and gum together outperformed the other categories with respect to volume. Now, on the bottom half, pick and mix continued strongly here. Now, with the phasing of trade spent to quarter two coming on top of the continued journey to strengthen the profitability, that, of course, gave a bit of an extra boost, getting us to almost double-digit margins in the quarter. But importantly, I think this shows why we during the investor day also raised the margin target from Picket Mix from the prior 5% to 7% to a new 7% to 9%. Now, the SG&A, that is up versus last year. And that is in part due to that we actually held back on a lot of discretionary spend in Q1 last year to support the bottom line. The total spend of 484 million is coincidentally exactly in line with the average spend the last eight quarters. But then, of course, that also includes items affecting comparability. Nonetheless, Q1 last year was low. And at the time, I spoke about using all the levers to our disposal. So that's what we did. Now we have another year of general salary inflation for our employees and both in services. That, together with the investment in our core brands, drives the increase. Now, we also said in Q4 that this was an area where we would now also further increase our focus. And, of course, last week we announced changes to our organizational structure to better align to the new strategy. and also with the result of creating a more effective organization. And that will, of course, help with the cost within a fairly short time. Coming down to our cash flow, we are again reporting a very strong quarter. We delivered 199 million of free cash flow, which is just about double of what we did in Q1 2024. The main driver for this improvement is that we've been able to hold working capital fairly stable, even a little bit favorable, whereas last year working capital increased with a much more significant surge in inflation we had then. On the capex side, 32 million is on the lower side of our normal spend due to a number of factors, but this is also in line with what we presented during the investor day, where we've held back on some activity, pending our setting the new strategy, but where this figure will rise over the next five years to secure the growth and the profit. Now, on the very left-hand side of the graph, if you wonder, with the increased operating profit adjusted, and the one-time gain in net items affecting comparability, why is cash flow before changes in working capital higher last year? And the answer is because, first of all, the one-time gain, as I mentioned, was non-cash in nature, so it doesn't affect this. And also last year, we benefited from a favorable timing on income tax payments. So the underlying result this year is truly better. And of course, the favorable timing on the income tax payments. The taxes have been paid, because as we all know, there's only two things certainly in life, and paying taxes is one of them. Which brings me to my final slide, where we have again close to quarter with a net debt over EBITDA well below our target, which is, as Katarina mentioned, to now be below 1.5. And we've done so with a new best ever of 1.1. This leverage benefited both from the higher EBITDA, but also from lower net debt, which is also at an all-time low of 1.3 billion Swedish kronor. Finally, as we close the quarter, we have plenty of access to additional unused credit facilities, commercial papers and cash on hand, including about 1.6 billion in credit facilities related to the greenfield. Now, since then, actually it was on April 14, we completed the cancellation of those greenfield facilities. And if I reduce the quarter end, unutilized access to cash with that amount, we still close the quarter with a very healthy access to another 2.7 billion Swedish kronors, as shown in the table on the right. So again, I conclude that our financial position continues to be very strong. And with that, back to Katarina.