Cloetta AB (publ)

A very warm welcome and thank you for joining Cloetta's Q3 interim report presentation. I'm Laura Lindholm, 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 either have the possibility to dial in and ask questions live or alternatively post your questions through the chat. It's already possible to add questions in the chat. Over to you, Katarina.

Thank you, Laura. Today I'm proud to present another very strong quarter. We executed fully in line with our strategy and we also continue to deliver against all four of our long-term financial targets. Today we also share an important milestone related to our mid-term and long-term profitability target. But first over to the agenda. For new listeners on the call, I will start with a short recap of our strategic framework and our long-term financial targets. After that, I move to our quarterly highlights. This will be followed by our CFO, Frans, who will walk you through the financials. And as always, we wrap up the session with a Q&A. Next, I briefly talk you through our vision, our key strategic priorities and our long-term financial targets. So our vision is to be the winning confectionery company inspiring a more joyful world. This isn't just a statement on a slide. It's what drives us every day. It means doing great work, continue to innovate and creating joy for our consumers. Our vision helps us to keep improving and stay at the forefront of our industry. To help bring our vision to life, we have a strategic framework that guides where we focus and how we drive growth. Our strategy is about making clear choices. We want to focus our time, energy and investment on the areas where we can create the biggest impact. We have five core markets, and that's Sweden, Denmark, Norway, Finland and the Netherlands. Together, these markets account for around 80% of our sales today. Our first priority is to win with our 10 super brands in these core markets. With an expanding strategy, we can reach more consumers, grow faster, and build even stronger market positions. The second priority is to grow beyond core markets. We have identified three markets with particular strong potential. It's the UK, Germany, and North America. I will later in this presentation share an update about our progress in this area. Our third priority is to excel in marketing and innovation. Consumers are constantly changing, so we need to keep listening, stay relevant and offer products that meet their needs. We also look at acquisition opportunities when it fits our strategy and creates value. But it's important to say that M&A is an opportunity, not a prerequisite. Our plans and financial targets do not depend on acquisitions. To deliver on all of this, we need of course the right foundation. That means efficient ways of working and an operating model that is set up to support our strategy and growth ambitions. And finally, none of this happens without great people and a strong culture. They are the heart of everything we do. Our culture shapes how we work together every day and today we have a strong team, strong capabilities and organization filled with energy, passion and joy. In March 2025, we updated our long-term financial targets to match our strategic priorities and our vision. With a clearer plan in place, we raised our long-term organic growth target from 1-2% to 3-4%. Mid-term global inflation is still a concern, mainly because of the uncertain political situation. As a result, we expect the focus on food prices to continue throughout the year. Our long-term adjusted EBIT target is 14%, with the mid-term goal to reach at least 12% by 2027. As you can see from our report, we have now reached the mid-term target more than a year ahead of time. Our EBITDA net debt ratio remains well below our long-term target, also including the effect of the increased dividend paid this year. As I have stated before, if a strong M&A opportunity appears, we may go above our long-term EBITDA over net debt ratio temporarily, but only if it clearly supports our strategy and we declare the leverage plan in place. And finally, our dividend policy. We are targeting a payout above 50% of profit after the tax. The already mentioned higher dividend paid out this year was in line with this target. As promised, I will today give you an update on the second strategic priority to grow Bianco Markets. Those of you that attended our investor day in March last year might remember that this is about two things. It's about creating a winning portfolio and expanding distribution. This is done in three markets. It's North America, Germany, and UK. Markets that all have high confectionary consumption per capita and where we can see attractive opportunity for growth. So far this year, we are progressing very well according to plan and have delivered significant milestones. In North America, we are continuing to see strong demand for Swedish candy, where pick and mix plays an important role. We have therefore done Candy King pilots and opening a New York flagship store. Together, these initiatives are helping us build proof of concept for future expansion of Candy King in the US. One important milestone is that Candy King became the first concept to bring Swedish pick and mix candy into US retail. Another highlight is the successful launch of Olgans Bila in Target. The brand is now listed nationwide, giving us access to consumers across the entire country. In the UK, we have strengthened the business with a new local management team. At the same time, the work to revamp Candy King and expand the shoe width portfolio is continuing. In Germany, we have increased distribution of Red Band portfolio through new retail listings, helping us further strengthen our market presence. Looking ahead, we will have five Candy King pilots running across three different retail chains before the end of the year. Finally, we continue our collaboration with IKEA, which supports our long-term geographical expansion plan. Further updates will be provided as the agreement allows. I now provide an exciting update about the latest news related to our expansion in North America. In September, we shared that our iconic super brand and Sweden's most sold foam candy, Algerns Bilar, is launched in U.S. retail. Four taste varieties were launched exclusively and nationwide in Target stores and on Target.com. The launch has been very successful, and as you can see on the slide, the launch was supported by integrated marketing activation through both paid and earned media, including influencers partnerships, social media, and retail media. The launch generated strong consumer engagement and visibility. The launch campaign reached around 30 million consumers in the US and we have now generated a meaningful share of voice within the Swedish candy in the US. I look forward to sharing more about our geographical expansion in the US also in the upcoming interim report as we will provide further news related to our geographical expansion around year end. In our previous interim report, we shared that we would launch a super brand product novelty in our core markets in the second half of the year. I will now move over to share more about that ongoing launch. Under our superbrand Redband and Malaco, we are now launching Sprinkle Foamy, a multi-sensory product range. Most importantly, the launch demonstrates our accelerated innovation in line with evolving consumer trends and behaviors. It also builds on Clueta's existing portfolio of foam candy as foam confectionery continues to grow in popularity. We also know that consumers increasingly seek engaging and memorable consumption experiences, and that social media amplifies demand for multi-sensory candy, highlighting texture, colors, and sound when it's consumed. Both flavor varieties of sprinkle foamy bring together multiple textures in one bite. The launch activation are still ongoing, but we already know that it has delivered strong launch performance for a novelty product. And now a short quarterly update. In the third quarter, we delivered accelerated volume growth. The 2.3% organic sales growth reflected the positive consumer response of our fair pricing strategy. I'm also pleased that we achieved volume as well as sales growth in both business segments. Looking at our year-to-date performance, we delivered 3.3% organic growth, which is in line with our long-term target. We continue to make progress on all three strategic priorities. We launched Wrinkle Foamies, expanded Ahlgrens Bila in Target in the US, and we are on track to have five Candy King pilots in Germany by the end of the year. We also deliver a strong EBIT margin of 12.7%, supported by volume growth, a good product mix, and strong execution across the business. Most importantly, we reached our midterm profitability target more than a year ahead of plan. And that is, of course, something we are proud of. So with that, let's turn to the financials. I hand it over to Frans, who is already, as always, ready to walk you through our financial performance.

Thank you, Katarina. So I'm also very pleased to help present another very strong quarter for Cloetta. And this is a quarter which reflects in a great way the effect of the new strategy we launched last year. And there's four points that I want to call out. The first one is continued strong volume growth. And as you know, through our broad portfolio and our strong super brands, we have, despite the last couple of years of pretty steep but fair pricing, we've been able to protect our volumes. Then in the first half of this year, we accelerated the volume growth. And now in Q3, we are continuing that strong volume growth. And you'll actually see some of the effects of that in a later chart. That's number one. Number two is the strength of our fair pricing policy. So our strong profitability uplift these years have been underpinned by our fair pricing, where both our consumers and our customers win with us. So now in Q3, these strong volumes are again supported by that pricing policy and where we have reduced our prices commensurate with a dip in the price of commodities like cocoa or cocoa earlier this year. So obviously our prices do not change the same across categories and market as the change depends both on which commodities goes into a product and when the loss changed The third point after the volume growth and the fair pricing is the continued strengthening of our profit margin As Katarina already mentioned, we are very pleased to confirm that we have now reached, more than a year early, our target of at least 12% operating profit margin. That was a full-year target to be reached by 2027, but with the solid margin now also in Q3, bringing year-to-date to well over 12% and rolling 12 months, etc., we are confirming the target as reached. And then the fourth and final point, we have delivered this solid profit margin while at the same time stepping up investments in the marketing of our super brands and in our focused expansion strategy, as we also flagged for earlier this year. So this is not a watered down margin step up. So key takeaway is that continued focus on investing in our brands accompanied by our fair pricing policy means we're able to deliver stable, organic, volume-driven top-line growth at improved margins. Now I'll come back to the profit, but just first the net sales figures. So in the quarter, we delivered volume-driven organic growth of 2.3%, bringing year-to-date to 3.3%. which is well in line with our long-term target. Then the branded package segment grew 1.8% and year-to-date 2.8 and pick and mix grew 3.4% with a year-to-date of 4.3%. So organic volume-driven growth for the quarter and year-to-date across both segments. And while at the same time, we will continue to step up on what we're doing on geographic expansion in both PACT and pick and mix products, and Katarina mentioned several. And that creates future growth potential and is part of the strategy we launched and part of the long-term target to reach a growth of three to 4% on a stable basis. Now, the reported growth was actually slightly higher than the organic growth in the quarter, a total of 2.6% on account of favorable currency movement. But as mentioned in previous earnings releases, we largely sell our products where we make them, and the currency effect is really a translation effect and have limited, let's say, real effect on our financials. Then, moving to the regular page showing the segments over time, I think I pretty much covered this already and what is driving the sales growth and the fair pricing that is softening that a bit. But if I had to call something out, that would be that despite that, and I'm looking at the branded package segment on the top, with the exception for the very strong first half of this year, Q3 at 1.8% is still the highest growth we've had in the last 10 quarters. Now, of course, that fair pricing will also affect the next quarter. And if you read Katarina's comments to the result in the report, we also highlight there that quarter four would also be affected by two recent events, one related to an IT incident at one of our customers in Central Europe, and one related to an IT incident with one of our logistics services providers in the Nordics. Similar but separate incidents and neither having affected our systems. And actually, we haven't had any notable issues in our systems for as long as I'm aware of, at least since I came in 2018. And still, with continued digitalization and also some of these geopolitical uncertainties, The risk can never be eliminated, only mitigated and reduced. But we're committed to continue to strengthen our resilience here and protect our track record in this area. Nonetheless, the two incidents will have a limited and temporary effect on our sales in quarter four, but didn't in quarter three. So let's then go back to Q3 and a bit more on the profit. So in the quarter, operating profit adjusted 12.7%. And that is in line with what we shared in the quarter two reporting, which was number one, that the Q2 result was exceptionally strong and similar should not be expected for the back half of the year. And two, should also not be expected as we would step up on our investments, both for the geographic expansion and to support our super brands with the exciting launch. and this is the result net of investment for that and I can also reconfirm what we said in quarter two and that is that the investments will span across both quarter three and in quarter four so profitability in any quarter can fluctuate a bit up and down but with the strong improvements in margin versus last year also in q3 That is also why we're pleased to confirm having reached the mid-year target of 12%. Then, what is driving this strong operating profit margin? Well, it's quite clear here from the table, it's volume and mix, both for the quarter and year to date. And that's what I opened with as well. So this is partially offset by the investments in our business, but we are driving margin not by hiking prices, but on the contrary we are driving margin by selling products which are well marketed under iconic brands that consumers love. Now on the mix side I can also add that with the strong volume driven growth we are even stronger in our super brands and between categories we're also doing really well in both pastels and gum segments which we have shared before that we've spent a lot of time and effort on We had a novelty Lekkerol Moore launch and we took Minton Zip Mint into new markets, etc. So again, our broad portfolio continues to enable our strong results. Naturally, we have continued also to drive operational efficiencies in supply chain. We have the carryover savings from last year's reorganization, and we've continued the effort by the commercial teams on net revenue management. For example, margin accretive innovation, and all of this contributes. Looking then at the segments over and under, you can see that both segments are delivering strongly. And for the branded package segment, the 14.4%, is nice, but it's still a bit shy of the exceptional first half of the year, but it's an improvement versus last year. And it's a step closer to the 15 plus pre-pandemic margin levels that we used to generate in the branded package segments. Then for pick and mix on the lower half, we do another strong quarter and it's well within our targeted range of seven to 9% of margin in pick and mix. and as you know we've at times tipped over and been above nine percent but then we have also said that the seven to nine percent targeted long-term range in margin is the appropriate range to continue to drive profitable growth in the category as well as the geographic expansion in line with our strategy so we're also pleased to be in line with that range then moving to SG&A Looking then at the sales general and admin costs in the quarter, you do see the investments I've mentioned, both for the geographic expansion and the support of the super brand, including the launches Katarina shared. But you then also have to remember that that is an increased cost net of the carryover savings from the reorganization last year. So it is a significant amount, just as we flagged for in Q2. And year to date, the change last year is obviously primarily driven by the absence of repeating last year's provisions for that restructuring. But if you ignore that, then they also ignore the upside on the currency effect. The main variance driver is again our investments and the fact that we have continued to invest focus time and money behind arguably the broadest portfolio of iconic brands in Northern Europe. Moving then on to the free cash flow. In quarter three, we generated 260 million Swedish kronors in free cash flow on 283 million in operating profits. So we're pleased with that. Now, Q3 last year was actually even stronger, but then that was almost a decade high quarter, had a little bit to do with the facing also of Easter. So if you compare year to date, this year to year to date last year, then the free cash flows are quite similar. And the variance is largely accounted for by the fact that we've invested more in capex this year. And that capex in the quarter, which is 51 million, is the highest we've had the last two years. So we are moving up as communicated earlier. to reach a temporary rise of capex to an average of 4-5% of net sales over the five-year period ending 2030. And that will start to be visible in 2027. That said, the capex that we're spending now in 2026 is part of the total expected capex and is part of the implementation of the plans that we have. And then that takes me to my last slide on financial position. and if we start with the leverage we closed the quarter with a net debt over EBITDA of 0.7 so well below our target for the leverage to be below 1.5 it's reduced by 0.4 versus last year and this is of course driven both by the strong cash flow and the improved earnings 0.7 is pretty close to the lowest ever lowest ever was actually in quarter one this year at 0.6 But then, of course, since then, we've also paid our increased dividend in quarter two and point seven is the lowest we've been for a quarter three. Now, our net debt is also one of the lowest ever at one billion Swedish kronors. And in the end, we have plenty of access to additional unutilized credit facilities and commercial paper, which together with cash on hand total three billion kronors. So I can wrap up and say that for another quarter we have secured resilience in a changing world and we do have the financial strength to act on business opportunities. That said, while we do have strategic financial flexibility, we will not change our selective approach to investing in our business or M&A as described during the investor day last year. And on that note, I conclude that our financial position developing in line with our set targets remains very strong. And I hand back to you, Laura.