Gabriel Isskander, Borsveckan
Company Release No. 47/2022 – October 26, 2022
Commercial Declaration Q3 2022
Resilient, Forged Volumes Drive Earnings Growth
Royal Unibrew CEO Lars Jensen said: “It was a challenging quarter with continued strong pressure on our charge base and the update in our customers’ behaviour began to have an effect on our business towards the end of the quarter. The underlying business momentum continues to be strong and I am proud that we are able to achieve a 12% bio-profit expansion during the quarter. This result reflects the strength of our logo portfolio and the resilience of our categories and the favorable evolution of stocks in the market of our key logos.
“The full-year outlook replenishment, which we communicated last week, is due to 3 other demanding situations affecting business towards the end of the quarter and beyond, and the underlying cause remains the inflationary environment. We live in an environment where consumers are employing more retail outlets for their daily purchases, and in market position, we are experiencing a more competitive landscape. Most sensibly, we have noticed occasional stock reduction in our wholesalers in Italy as they try to optimize their money control in dubious times with high inflation and higher interest rates. Despite this, our brands continue to gain market share. We are striving to have the right products, in the right package sizes, at the right prices, in the right position and at the right time for our consumers to mitigate the negative effect it has on our business,” continues Array Lars Jensen.
“Our expansion formula targeting key expansion categories has a proven track record. We have a strong earnings outlook, approximately 9% higher than what we achieved before COVID in 2019. We want to ensure long-term expansion, even in times of maximum uncertainty, we will need to continue to invest in our key brands, with a continued focus on recovering investment from those investments,” says Lars Jensen.
Reflexes:
Monetary highlights of the third quarter of 2022 The volume of the third quarter of 2022 increased by 11% compared to the third quarter of 2021 and amounted to 3. 8 million hectolitres. Organic volume expansion of 2%, with acquisitions as a result. 2 %. In the third quarter, net sales increased by 35% (biological: 12%) to DKK 3296 million. Net income expansion in the first and third quarters of 37% (biological: 14%) compared to the same era in 2021 and amounted to DKK 8,669 million.
Profit before interest and taxes (EBIT) in the third quarter decreased by DKK 106 million compared to 2021 and amounted to DKK 490 million (2021: DKK 596 million). In the first and third quarters, EBIT decreased by DKK 136 million compared to 2021 and amounted to DKK 1210 million (Q1-Q3 2020: DKK 1346 million).
EBIT minimized organically through DKK 119 million in the third quarter. The reduction is basically due to an accumulation in marketing prices and ongoing investments in organizational functions totaling approximately DKK 50 million, higher logistics costs of approximately DKK 30 million, and the mismatch between COGS increases and worthwhile sales increases. The increase in marketing prices planned and started before the beginning of the war in Ukraine, and the increase in logistics prices, which comes from the international division, is difficult to convey to customers. , as we face local competition.
The lag between COGS inflation and sales value increases, combined with a negative combined effect, had a negative effect on gross profit of around DKK 40 million. Northern Europe accounts for a small portion of the negative combined effect, which is basically due across Western Europe, as our comfort drinks portfolio grew faster than our beer portfolio. That said, our super premium beer offering has grown faster than market position (around 10% so far this year, measured through the number of sales), while the stock reduction, which was positioned towards the end of the third quarter, also resulted in a combined negative effect.
Reported EBIT margin decreased by 7. 2 percent to 14. 0 percent in the first and third quarters due to energy and other input costs, a negative impact on acquisitions and a base effect as we expanded costs to sell to protect our absolute earnings consistent with hectolitre.
Free money was DKK 304 million in the third quarter of 2022 compared to DKK 551 million in the third quarter of 2021, while loose money during the first nine months of 2022 was DKK 614 million compared to DKK 1234 million in the first and third quarters of 2021. The progression is negatively affected through an accumulation in current capital, higher capital expenditures and last year’s positive contribution of extended tax payment terms in Finland, which is not repeated in the current year.
Outlook The full-year sales outlook is maintained at the top of the diversity from DKK 10. 7 billion to DKK 11. 7 billion and EBIT of around DKK 1,600, as stated in Company Announcement No. 44/2022 of October 18, 2022.
Reasons and key financial aspects
* Duration of 12 months
** Looking more closely at the monetary figures, it appeared that the expansion of biological EBIT in the third quarter of 2022 was -20% and not -24%, as indicated in the previous announcement (Company Announcement No. 44/2022) of October 18, 2022. .
In the third quarter of 2021, strong earnings momentum was supported by strong volume development, specifically in On-Trade, which is developing at a sustained pace. It recorded strong growth in volume and earnings, despite challenging comparable figures compared to last year.
Our sales and distribution expenses increased 38% through the third quarter of 2021, in part due to mergers and acquisitions, higher foreign freight rates, and a fully reopened On-Trade, adding activity events absolutely back to normal while absolutely locked down in the third quarter of 2021.
Over the past 12 months, we have invested heavily in organizational and capacity development. As we now operate in a more dubious environment, we expect the rate of expansion in constant prices to stabilize.
Gross value of curtains Inflation of inbound expenses has stabilized since the announcement of the effects for the first component of 2022, meaning that the overall accumulation in our expense base until the birth of 2021 is approximately DKK 800 million, part of which is a deficit that is covered through increases in value. Our ambition is to transfer the remainder of the charge increase to our customers. We will revel in the birth of additional charge inflation in early 2023, as we revalue some of our fixed-value agreements with suppliers.
Acquisitions and partnerships On September 15, 2022, we acquired Amsterdam Brewery, founded in Toronto. The acquisition is based on a commercial price of CAD 44 million (approximately DKK 250 million) with no debts. The company has a normalized turnover of approximately CAD 34 million (approximately DKK two hundred million) and a normalized EBITDA of approximately CAD five million (approximately DKK 28 million).
In the first nine months of the year, acquisitions contributed approximately DKK 1450 million in sales and around DKK 80 million in EBIT.
At the moment, in 2022, Royal Unibrew and PepsiCo are expanding their partnership, with Royal Unibrew assuming responsibility for PepsiCo’s beverage portfolio on the Denmark-Germany border from January 1, 2023. The agreement is expected to take into account the strong expansion we have noticed in the sugar-free/low-sugar soft drinks category in the Nordic countries in recent years. The agreement includes production, logistics, sales and marketing operations in this vital business area. On January 1, 2023, Royal Unibrew will also take over sales, distribution and advertising marketing for Lay’s and Doritos in the Nordics, adding Denmark, Sweden, Norway, Finland, as well as Greenland and the Faroe Islands.
As announced in Company Announcement No. 46/2022 of October 24, 2022, Danone and Royal Unibrew agreed not to complete the proposed sale to Royal Unibrew of Aqua d’Or, Danone’s water and beverage business in Denmark, announced on November 16. 2021. The parties decided they would not be able to meet the final conditions, adding approval through the Danish Competition and Consumer Authority (DCCA). Therefore, the parties withdrew notification of the transaction to DCCA.
Net debt Net interest-bearing debt at the end of the third quarter of 2022 amounted to DKK 4364 million, a cumulative amount of DKK 828 million compared to the end of 2021. Based on 12 consecutive months, NIBD/EBITDA 2. 2 times at the end of Q3 2022 (end 2021: 1. 7). The accumulation of net interest-bearing debt is primarily due to percentage buybacks, dividend completions and acquisitions.
Corporate Social Responsibility The integration of Hansa Borg was introduced in the third quarter and, unsurprisingly, we see a minor negative effect on power and water, measured through consumption consistent with the unit produced. The Group’s power is also marginally affected by the transient transfer of herbal fuel to fuel oil at our Faxe site. Therefore, we expect CO2 emissions from scopes 1 and 2 to accumulate over the next consistent period.
Despite the demanding situations of the geopolitical scenario and the demanding situations related to the supply chain, our adventure towards sustainability continues. Our transition to a long-term fossil fuel-free continues unabated with more effective bio- or electrically based projects on our sites. we continue with more renewable energy through our own services or PPAs in combination with certificates.
As planned, our 12 GWh solar panel park in Faxe will be in production condition early next year. The solar panel park will contribute particularly to our goal of being one hundred percent fossil fuel free (scope 1 and 2) by 2025.
Outlook The full-year sales outlook is maintained at the top of the diversity from DKK 10,700 to DKK 11,700 million and EBIT of approximately DKK 1,600 million, as stated in Company Announcement No. 44/2022 of October 18, 2022.
EBIT Outlook for 2022
The outlook is now based on a decreasing expectation of the evolution of overall customer spending outside the home in the winter season, although we expect the On-Trade channel to remain fully open for the rest of the year.
We expect customers and inferior products to gain market share, while premium products will likely be fueled through fewer customers and fewer opportunities.
We expect the stock clearance at our wholesale partners in Italy to have a unique effect on earnings to be included in the current part of 2022.
For more information on this announcement: Investor and Media Relations, Jonas Guldborg Hansen, tel. forty-five 20 10 12 forty-five
Investors and analysts can register for a convention on Thursday, October 27, 2022 at 11:00 CEST at the following link:
https://register. vevent. com/register/BI450ac2f9dd744968bad3266e54026852
The presentation can be followed here:
https://edge. media-server. com/mmc/p/rwsutevr
Economic calendar 20231 March 2023 Annual 27 April 2023 Declaration of activity from 1 January to 30 March 202327 April 2023 Ordinary General Meeting 202322 August 2023 Interim from 1 January to 30 June 20238 November 2023 Declaration of activity from 1 January to 30 September
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Certain vital threat points that would possibly directly affect the Group include, but are not limited to: economic and political uncertainty (including interest rates and exchange rates), monetary and regulatory developments, adjustments in demand for the Group’s products, advent and demand for new products, the evolution of the competitive environment and the industry in which the Group operates, evolving customer preferences, increasing industry consolidation, availability and value of raw fabrics and packaging fabrics, energy loading, issues related to production and distribution, data generation failures, unforeseen breach or termination of contracts, value discounts resulting from market-induced value discounts, Determination of the fair charge in the balance of opening of acquired entities, litigation, pandemic, environmental problems and other unforeseen points.
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