Viva Wine Group AB

Good morning everyone and welcome to our Q4 2024 presentation. My name is Emil Salles and together with our CFO Linj Evert I will present today for you. This is the agenda and before we go into the quarterly update and financials, I want to start by giving you a short introduction to Viva Wine Group. Viva Wine Group consists of two major segments, the Nordics and Econ. In the Nordic monopoly market we are the market leader in wine. In Europe we have a profitable econ business across 11 markets. Our operating companies are in the Nordic monopoly markets Sweden, Finland and Norway, while our econ business is based in Germany. Germany is also our main market for econ. Now let's move on to the quarterly update and performance summary. In the quarter we continue to report increased market shares in the Nordics. This is the 13th straight consecutive quarter as a listed company in which we increase our Nordic market share. In fact the actual growth streak is much longer, something we of course are very proud of. In the quarter the net sales for the group increased by .7% with an organic growth of 8.2%. We also report a strong growth in profitability. Adjusted EBITDA increased .6% to reach an .7% margin compared with .3% last year. Finally the board proposes an unchanged dividend of 155 krona per share. Now let's look at the financial performance and I will hand the word over to Lyn who will give you a closer view.

Thank you Emil. We have a positive net sales growth of .7% for the group where we closed the quarter strongly. We have a wine group performed very strong in continued soft markets. Group organic growth was strong as well reaching 8.2%. The Nordic countries are the drivers where all three countries, Sweden, Norway and Finland, performed strongly. All countries in the segment Nordics also increased the position compared to the market. E-com declined slightly in the quarter as the consumer sentiment, especially in Germany, has remained at low levels. Looking at the profitability, we had an improved profitability and as Emil mentioned of .6% and we see a strengthened adjusted EBITDA margin reaching .7% in the quarter. The increase is related to the Nordics and comes from improved sales and stronger gross margins. The small decline in adjusted EBITDA in E-com is mainly related to the sales decrease. Slight decline in other compared to last year due to further professionalizing of the organization and support to our M&A agenda. We have well balanced price adjustments in the Nordics and we have a positive contribution to our gross margins. And as said in previous quarter, our solid sales development proves that consumers have remained loyal to our strong portfolio of owned brands and partner brands. Looking at our net working capital, it is below last year and slightly better in relation to net sales. Our net debt is well within our target and net debt to EBITDA decreased to 1.4. Cash flow for the quarter, we have a very strong operative cash flow both from strong result for the quarter and positive effect from changing working capital. Working capital was high in Q3 due to timing effects which had a positive effect in this quarter instead. During the year, the bank overdraft was used, however, in Q4 fully repaid. In Q4, we acquired shares in subsidiaries from minority owners due to natural reasons such as retirement.

Thank you, Lyn. So now over to the performance by segments. We have, as mentioned, continued our steady growth in the Nordic market shares and once again increased more than the market. We report record high market shares from Q4 in all the Nordic monopoly markets and solidified our number one position. This is despite the overall market performing softer with decreased sales in two of the three monopoly markets. The key success factor for us beating the market is our business model which allows us to quickly adapt to changes in consumer demand and introduce new products that match this consumer demand. For the Nordic markets combined, we have a wine group reported a market share of .2% for Q4, which is an increase of 0.8 percentage points from last year. In Sweden, we reached almost 28% market share in the quarter and beat the market in all wine segments. We continue to have a high pace of innovation and are seeing a positive response from customers to our new product offering. In Finland, we also continue to beat the monopoly market and increased our market share to 22.8%. In June this year, we entered a new channel in Finland, which is wine with alcohol contents of up to 8% in supermarkets and in general outside of the monopoly. The rollout has followed our plan and after seven months, we estimate that we have the same market position in this channel as in the monopoly market. In Norway, we also increased our market share to 7.3%. The increase in market share in Norway is driven by strong organic growth and by the acquisition of target wines. With Q4 completing the calendar year, we'll also take a look at the development of the Nordic market share for the full year. We have, as mentioned, a long history of growth in the Nordics and in the last five years, we have grown our market share from 17% to 22.4%. In 2024, we accelerated our growth pace and increased our market share with .6% points compared with the previous year.

Total net sales for segment Nordics increased with .2% in the quarter and an organic growth of 10.5%. The increase was driven by our new launches, volume increases in general and price increases, supported by our strong Christmas performance. The adjusted EBITDA increased along with the adjusted EBITDA margin in the quarter and ended at 10%. Sweden is the main driver and increased both in sales and gross margins. Continued focus on cost control is another contributing factor. In our finished business, adjusted EBITDA increased compared to previous year, driven by an increase in sales from price increases and sales of 8% wines. Norway had a strong quarter with significant improvement in adjusted EBITDA driven by increase in both volume and price.

In our e-commerce segment, the market continues to be soft. Sales decreased with a negative organic growth of 2.2%. However, considering the market conditions, we consider the sales as relatively stable. We continue to work hard on growth and as mentioned in previous quarters, our focus is on growth in our 11 existing markets. In the quarter, we have successfully tested new channels and approaches for acquiring customers, which we now aim to scale in the coming quarters. These lessons, together with updated brand positioning, are expected to grow the customer base going forward.

The e-commerce segment decreased with an organic growth for the quarter of negative 2.2%. Net sales were down versus previous year due to weaker sales. Consumer sentiment shows very low figures, especially in Germany, which is our main market for e-commerce. A small decline in gross margin was mainly due to negative product mix and year-end adjustments. In the quarter, we have successfully tested new channels and approaches for acquiring customers, which we now aim to scale in the coming quarters. The cost of the quarter was lower than previous year, and the sales were lower.

The e-commerce segment decreased with a negative organic growth of 2.2%. The market conditions were lower than previous year, and the sales were lower than previous year. In the quarter segment, we are not yet reaching our target. When it comes to profitability, we are above prior year, ending the quarter at .7% EBITDA for the group and are on the way to the target range, especially since we in the biggest segment, the Nordics, reached the target range for the first time in a while. Net depth to EBITDA ratio is well below our target of 2.5, while the proposed dividend of 1.55 is slightly above the target of 50 to 70%. To summarize, we are very proud of our Q4 performance, and it was an overall good quarter with strong growth and profitability. Our focus on margins in the Nordics continues to show results. Then, as we have shown today, we have a growing business, and naturally that means that our organization grows. In addition, we continuously work on processes to have the best possible conditions to continue our growth journey, while at the same time adapting to increased regulative environment. Therefore, for 2025, we expect OPEX to be back at the same relative level to sales as in 2023. Then, for 2026 and forward, we will scale on this OPEX level towards the 2024 level, again relative to sales. M&A continues to be a focus area. We see an increased deal flow with much more reasonable expectations on valuations on the sell side. Finally, we closed 2024 on a very good level, but more importantly, we see a very strong potential going forward and have started 2025 with very good confidence and a great momentum. And with that, it's now time for the Q&A session.

The next question comes from Johan Fred from SEB. Please go ahead.

Yeah, hi, good morning, guys. Thanks for taking my questions. You actually answered the first one on OPEX there right just before, Emil, so thank you very much for clarifying the OPEX going forward. But looking at your capex and sort of investment needs going forward, you closed the year with a fairly low amount of money, but you have a very low capex in 2025 or investments in capex. What are your projected needs coming years and are there any sort of upcoming investments that we should be aware of?

In general, we have very, very low capex and we'll continue to have that. Then, of course, if you talk investments, as mentioned, we are active in the M&A area, but that's, of course, a different kind of investment from traditional capex.

So the run rate from 2020 is what we can expect going forward as well in terms of capex.

Correct.

Great, thank you. Those were all my questions for now. Thank you so much for taking the time.

Thank you. The next question comes from Benjamin Wollstedt from ABGSC. Please go ahead.

Good morning, guys. A couple of questions from me as well. First of all, I was wondering about the Finnish market for which the markets dynamics have obviously changed quite a bit recently. Do you see the markets stabilizing from here? And if so, what share of the market has gone to grocery stores, please?

I think the general estimate in the market, and it's still a bit early days, it's less than a year into the whole new situation. But in general, we see five to 10 percent decline on the monopoly sales at ALCO. However, part of that was already in the numbers because of the general financial situation in Finland. So somewhere, let's say between four and eight percent of the market will be most likely be outside of ALCO. But it's early days yet. Then again, if you look at our total sales in Finland, they are increasing despite our sales at ALCO decreasing somewhat. Now much less than the market, obviously. So we see that as a possibility to actually to grow total business with this new segment as well or channel.

Yes, thank you. And sort of following on the same topic, if you have any idea, what is the overall market volume growth in the quarter, please? Like you say in the report that ALCO volumes declined eight percent. But is this fully compensated by grocery stores? I presume not.

That is, of course, a number that we don't have. But if we look at our own numbers, it's more than compensated by the grocery stores. Because there are, I mean, ALCO has a very clear statistics. And then, of course, the supermarkets, there are some statistics, but they're not full.

Yeah, absolutely. And then final one. You note an impact on optics from staffing up to support your growing Nordics business. Could you give us an idea of the timing of this staffing up?

Well, you

commented on the magnitude in terms of

timing. Yeah. Well, it's also to support a growing Nordic business, as you said, but also to professionalize the organization in general. And we have already started this journey. For example, we appointed head of legal and a new deputy CEO and also other person at the group. We have already started with that professionalization. And for the Nordic businesses will be an ongoing journey during the year.

So no real guidance which quarter you will be able to put it in.

Yeah, we have the guidance of the whole year.

Yeah, that's fair enough. Thank you. That's all for me for now.

Thank you. The next question comes from Nicholas Elmhammer from Carlsquare. Please go ahead.

Yes. Hello. Thank you for taking my questions. You have been quite helpful in guiding on the gross margin in 2024. Are you willing to provide us some guidance here for this year?

Yes, we are, of course, very proud of the development of the gross margin during this year that we have had, although no help from the currency. But going forward, we expect if we assume that the EUR-SEQ will stay the same, which are most important currency, we expect the gross margins to stay stable towards looking at Q4. So stable to Q4 going into 2025. And of course, if you look at the currency rates today, there could be strengthening. But that depends on how it evolves during the year, but strong and stable going forward.

Okay, great. And if perhaps we have some kind of expectations for the general market in the Nordics in terms of volumes generally and perhaps price adjustments?

I think in general, if you look at the market, we expect the market to be stable or somewhat down, meaning -2% compared to this in volume. Then if you look in money, turnover, then we expect the markets to grow 2-3%. So we do expect the market to increase, including price increases in general during this year as well. Not saying that we plan any specific price increases, just to be clear.

Great, thank you. That's all for me.

Thank you.

Thank you. All right, I'll take this opportunity to move over to questions. There are no more

questions at this time, so I hand the conference back to the speakers for any written questions.

Thank you, Electronic Voice. So we have a couple of questions that were put up on the message board. So number one, four coming from Alexander. So the first one is on gross margin. Assuming a steady state in EUR-SEC from current levels, can you comment on expectations for gross margins in Q1 as well as 2025?

Yes, and we did answer a bit on that, but I will summarize again that we believe that we have strong gross margin looking at Q4, and we expect them to be strong going forward as well. And this is without support from EUR-SEC.

And then a question regarding price and volume. Going into 2025 with the same product mix as in 2024, how much would price contribute to sales growth in 2025? I will come to the second part of the questions. Yeah,

and we think that both sales, volume and sales, will both contribute to the growth in 2025. Pretty much at the same level.

And then any comment on your expectations on the market volume growth in the Nordics? Please remind us of the long term volume growth in the Nordic markets. Well, we did comment on our expectations of 2025. And again, long term volume growth will be fairly flatish. So we don't expect the market in volume to grow a lot if you look at the total Nordic markets together. Again, we do expect the value to grow.

Yeah, and we expect us to grow.

We definitely always expect us to grow. When it comes to OPEX, OPEX growth was strong in Q4 after several quarters with strong cost control. Can you elaborate on OPEX growth expectations for 2025? I believe we gave you quite clear indication on that as well. Finally, for EECOM expectations for 2025. Well, we do see a slightly brighter picture for EECOM coming into 2025. However, we are in with Germany as our main market and the German consumer sentiment is very important to us. We saw as late as today Mercedes having to cut down their staff. And these things are, of course, trickling down in both generally in the economy and, of course, in the confidence of the consumers. But having said that, we have on our side a new way of acquiring customers that we are now scaling. And as mentioned, we expect the customer base to be increased in the coming months and quarters, which will also mean higher sales, most likely. Then finally, a question from Rauli at Indres. Hi, how do you see the market outlook in the Nordics for 2025? Do you see any growth? Again, we do not foresee any growth in the volume side, while we do expect that there will be a growth in value. And that concludes the questions that I have on the message board. And also today's session. Our next report, our Q1 report, will be published on the 15th of May 2025. Thank you all for today and hope to see you soon.