Earnings call transcript: Royal Unibrew misses Q4 2024 earnings expectations

Royal Unibrew (CSE:RBREW) A/S reported its fourth-quarter 2024 earnings, revealing results that fell short of analyst expectations. The company posted an earnings per share (EPS) of 4.6, missing the forecasted 5.98. Revenue also came in below expectations, with 3.57 billion USD compared to the anticipated 3.7 billion USD. InvestingPro data shows that 2 analysts have recently revised their earnings expectations downward for the upcoming period. Despite these misses, the stock saw a modest increase of 1.08% in the open market, reflecting some investor optimism or potential confidence in the company’s strategic direction.

Key Takeaways

• Royal Unibrew’s EPS missed expectations, coming in at 4.6 compared to a forecast of 5.98.
• Revenue was slightly lower than anticipated, at 3.57 billion USD versus 3.7 billion USD.
• The stock rose by 1.08% following the earnings release.
• The company reported significant organic growth in several product categories.
• Strategic investments and operational efficiencies were highlighted as future growth drivers.

Company Performance

Royal Unibrew demonstrated solid growth across several business segments despite the earnings miss. The full-year 2024 revenue reached 15 billion DKK, with organic volume growth of 5% and an EBIT margin increase to 13.1%. According to InvestingPro analysis, the company maintains a strong financial health score of 3.01 (rated as "GREAT"), with particularly robust profitability metrics. The company also reported a reduction in net interest-bearing debt to 5.7 billion DKK and proposed a dividend of 15 DKK per share, reflecting a 51% payout ratio.

Financial Highlights

• Revenue: 3.57 billion USD, slightly below the forecast of 3.7 billion USD.
• Earnings per share: 4.6, missing the forecast of 5.98.
• EBIT margin: Increased to 13.1%.
• Free cash flow: Increased to 1.4 billion DKK.

Earnings vs. Forecast

Royal Unibrew’s actual EPS of 4.6 was below the expected 5.98, marking a significant miss. This represents a negative surprise of approximately 23%. Revenue also fell short by about 3.5%, with actual figures at 3.57 billion USD compared to a forecast of 3.7 billion USD. This miss contrasts with previous quarters where the company had met or exceeded expectations.

Market Reaction

Despite the earnings miss, Royal Unibrew’s stock price rose by 1.08%, closing at 560 DKK. This movement suggests that investors may be focusing on the company’s strategic initiatives and growth potential rather than the short-term earnings shortfall. InvestingPro technical indicators suggest the stock is currently in overbought territory, though it has delivered an impressive 21.53% return over the past year. The stock trades at a P/E ratio of 18.87, which appears attractive relative to its near-term earnings growth potential. Get access to 8 more exclusive ProTips and comprehensive valuation metrics with InvestingPro.

Outlook & Guidance

For 2025, Royal Unibrew has set a revenue growth guidance of 5-7% and an EBIT growth guidance of 7-13%. The company expects EBIT to range between 2.1 billion and 2.225 billion DKK. Long-term, Royal Unibrew aims for an annual EBIT growth target of 6-8% starting in 2026, with continued investments in non-alcoholic beverage categories and capacity expansion. Based on InvestingPro’s Fair Value analysis, the stock currently shows potential for appreciation. Unlock detailed valuation models and comprehensive financial analysis with InvestingPro’s exclusive research reports, available for over 1,400 stocks.

Executive Commentary

CEO Lars Jensen emphasized the company’s focus on current market trends, stating, "We need to live the categories of today and not the categories of yesterday." He also highlighted the strategic adjustments, saying, "Our strategy remains the same, but from 2025, we have fine-tuned our growth categories."

Risks and Challenges

• Market Saturation: The European beverage market faces limited volume growth.
• Economic Pressures: Inflation and varying market conditions across regions could impact profitability.
• Integration Challenges: Ongoing integration of acquisitions in Norway, Netherlands, and Italy may pose operational challenges.
• Competitive Landscape: Increasing competition in the non-alcoholic and energy drink segments.

Q&A

During the earnings call, analysts raised concerns about the slowdown in the no-low alcohol category and sought clarification on integration plans for the Benelux and Minto portfolios. Questions also focused on the international segment’s performance and the company’s channel mix and pricing strategies.

Full transcript - Royal Unibrew A/S (RBREW) Q4 2024:

Lars Jensen, CEO, Royal Unibrue: Good morning, everybody. My name is Lars Jenson, and I’m the CEO of Royal Unibrue. And with me today, I have our CFO, Lars Westergaard, and would like to welcome you to this webcast where we will cover the release of our fourth quarter and annual results for 2024. And afterwards, we will take your questions. Now please turn to Slide number three.

We will walk you through the business highlights of ’twenty four and our growth drivers as well as our financial performance and outlook for ’twenty five. Now please turn to Slide number four. We will start by looking at the most important highlights from the annual report. Over the past four years, we have almost doubled in size. We have expanded our multi beverage platform in Northern Europe and we have now full coverage of all countries in the Nordics and the Baltic countries.

Also, we now have significant footprint in Western Europe and with multi niche possessions in Italy, France, Benelux. So effectively, we have step changed the business and unlocked additional growth opportunities through our multi beverage and multi niche strategies in an industry where growth is otherwise limited. We delivered a revenue above DKK 15,000,000,000 and a total EBIT growth of 20% in 2024. We have made considerable investments in capacity and capabilities and we have made several acquisitions underpiling our strategy. Integrations of acquired businesses are on track and in the coming year, we will focus more on harvesting scale benefits and reducing complexity to increase our operational efficiency.

In 2024, we have revised our sustainability goals to ensure they remain relevant in relation to our material impacts, risk and opportunities and support our sustainability aspiration. We continue to make good progress within sustainability. And with the approval of ScienceBase target, we have in fact increased our ambitions on ESG and in particular around the CO2 reduction. Elsewhere short of the strong free cash flow generated in ’twenty four and our solidified financial positions, we are now relaunching a share buyback program of up to DKK250 million, and the program will run up and until mid August this year. Finally, we have published our new guidance for ’twenty five, where we expect revenue growth to be 5% to 7% and EBIT to grow 7% to 13%.

These are ambitious targets and a testament to the strength of the company. As 2025 is above our objective of 6% to 8%, we should count the 6% to 8% growth as from ’twenty six percent and beyond. We believe we are well positioned with a substantial part of our business in categories with growth potential and with investments both commercially and in CapEx that will facilitate strong performance in both top and bottom line in the coming years. Now please turn to Slide number five. If you look at the development in our individual business segments, Northern Europe is by far our biggest segment, accounting for more than two thirds of net revenue and EBIT.

We performed well in a difficult market and consolidated the strong performance from 2023. We achieved 23% growth in volume and revenue respectively. And more importantly, we were able to protect our margins through efficiency improvements, which offset promotional pressure and adverse channel mix. In Northern Europe, we have a nearly 50%, fifty % split between alcoholic and non alcoholic beverages. In Denmark, we had a volume record year and we are gaining market share in most of the categories, notably in carbonated soft drink led by Foxicondi and Pepsi Max, but also strong performance in Energy Drinks.

In Western Europe and International, we saw strong developments and solid execution with no capacity constraints, both delivered record results on both top line and bottom line. In Western Europe, volumes increased by 122% in total and by 7% organically, while organic revenue increased by 14% and by 91% in total. This is predominantly due to strong performance in Italy and France, led by our strong brands, Cheetahs and Limon Sohla in Italy and Arena and Crazy Tiger in France. Non Elk beverages account for roughly two thirds of our revenue in Western Europe. In international, we saw a strong rebound in volume, revenue and profitability with organic growth above 20% in both volume and revenue, while EBIT margin improved by 8.1 percentage points to 14.5%.

Our performance was positively impacted by eased supply chain constraints on group level and improved pricing in general. Like in Northern Europe, the split between alcoholic and non alcoholic beverages is close to fiftyfifty with a slight overweight to alcoholic beverages in the international segment. We saw especially strong demand from Africa, the dark countries plus Albania as well as from our mall beverages business in Americas and Caribbean. Now please turn to Slide number six. Even though the European beverage market is not really growing by volume, we are focusing on and are playing in categories that are growing.

Let me just highlight a few examples to this. In Enhanced Beverages, we saw organic growth of 14%. This development reflects a general trend towards healthier products with higher quality and better functionality. As an example, we have seen the volume of Soshi vitamin water in The Netherlands growing strongly and the launch of Faxi Condi Pro taking almost 30% of the sports drink market in Denmark. In No Low Sugar, organic growth was 11% in 2024 and overall, we have more than doubled in size in this category since 2019.

Success is driven by strong execution and combination of strong owned brands like Foxy County Zero Calories and strong performance with Pepsi Max, and we do a lot of innovation in this category. In the premium category, organic growth was 9% in 2024. As an example, we have grown our malt business and the Cheater Strong Ale in Italy significantly. This is supported by strong in market execution and marketing campaigns. In no low alco, our volume has only grown slightly as the market growth in this category is also low in The Nordics, where the demand is the highest for this category.

We still expect the category to grow, however, at a slower pace than what we than what was our previous thinking. On the back of our analysis of further trends, we have slightly updated our growth category framework. Now please turn to Slide number seven to illustrate the update. Our strategy remains the same, but from 2025, we have fine tuned our growth categories and now we have taken the six categories down to four. Energy Enhance is now one big category as these two categories are getting closer together or closer to each other in terms of content of the liquids.

For now, we do see a strong enough we do not see a strong enough growth in no low ALCO to qualify for the framework. These products remains an important part of our portfolio, but with lower expected growth rates from now on. Hence, it doesn’t qualify to get over investment, so to speak. To summarize, we intend to play an important role in our defined growth categories through a mix of own brands and partner brands. We will drive a fair amount of resources towards these categories in the form of sales, marketing, innovation, manpower based on an assessment on where we get the highest return on the invested capital.

And now I would like to hand over to Lars, who will go through the details with the financial numbers.

Lars Westergaard, CFO, Royal Unibrue: Thank you, Lars, and good morning to all of you. Please turn to Slide number eight. I’ll walk you through the main highlights of our financial results in Q3 and the full year of ’twenty four. On this slide, we show the key financial highlights for 2024. We delivered 5% organic volume growth while organic net revenue grew slightly more as a result of positive price mix.

We also highlight our absolute growth of 23% in volume and 16% in revenue, which include the effect of previous year’s acquisitions. Organic EBIT growth was 15% with efficiency being a strong contributor to the EBIT growth. As a result, the EBIT margin increased to 13.1. Percent. This includes a dilution of 60 basis points from acquisitions as the acquired companies operate with a lower margin than the group average.

Free cash flow increased to DKK1.4 billion, leading to a reduction of our financial gearing to DKK2.2, which is below our long term target of a maximum of 2.5. This is the reason why we are now relaunching share buybacks. Please turn to Slide number nine. The strong momentum seen in previous quarters continued into the fourth quarter, however, with differences between markets. In Northern Europe, we still see a challenged consumer sentiment.

While our multi beverage platform provides a certain level of stability, it also limits our ability to grow simply because we already have a strong position in the market. In Western Europe and International, we are still a relatively small player, which allows us to grow even in a soft market. Overall, we saw solid organic growth in both volume and revenue in the fourth quarter of 54% respectively, while EBIT growth was two percent compared to a strong Q4 in 2023 with a positive impact from a one off income of DKK 30,000,000 from a sale of a building in Norway. Additionally, we increased our marketing spend and invested DKK 40,000,000 more in marketing in the fourth quarter and incurred cost of SEK10 million related to the start up of Belgium in connection with the takeover of the PepsiCo (NASDAQ:PEP) beverage and snacks portfolio in Belgium and Luxembourg. All in all, this explains a delta of SEK80 million at an EBIT level compared to the same quarter last year.

Adjusted for one off income in Q3 twenty twenty three, organic EBIT growth was 9% in Q4 of ’twenty four. But with a higher level of marketing investments, so the performance is stronger than the headline numbers indicate. If we look at the full year numbers, we delivered significant growth in volumes, net revenue and earnings because of both organic and acquisitive growth. Revenue reached DKK 15,000,000,000 as guided and organic EBIT growth was 15% in line with the low end of the guided interval, impacted by the performance in Q4 as described. Net financial expenses for the full year of 2024 was positively impacted by DKK201 million of tax regains from the sale of the Polish shareholdings.

Adjusted for this, net financial expenses were at the level of $300,000,000 for the full year of 2024, reflecting higher debts and interest rates. Tax came out higher than what we guided at Q3 due to some tax losses in Sweden that we have for prudence reasons decided not to capitalize and permanent differences. Net profit and earnings per share increased by around 34%. Adjusted earnings per share excluding the one off gain on the sale of the shares in Poland increased by 15%. Please turn to Slide number 10.

On this slide, we show the impact of M and A on revenue and EBIT. Net revenue increased by 16% in total of which acquisitions accounted for 10%. In the middle, we show the EBIT bridge. Acquisitions contributed with DKK84 million to EBIT in 2024, equivalent to 5%, while organic growth in EBIT amounted to DKK246 million, equivalent to 15%. On top of the acquired net revenue and EBIT, we have also acquired access to extra capacity on a group level in connection with both acquisitions, which have contributed to the organic growth as well.

The two new production sites in Netherlands and Italy have delivered volume to the group and have freed up capacity in Northern Europe, which has supported the global supply chain and mainly the international markets. The EBIT margin expanded by 40 basis points to 13.1. Acquisitions have delivered the margin impact by 60 basis points. Adjusting for this, the EBIT margin expanded by 100 basis points in 2024. Please turn to Slide number 11.

Free cash flow amounted to DKK1.4 billion in 2024. This was an increase of 25% versus last year. The cash flow was partially impacted by positive development in the operating results and a decrease in working capital of DKK216 million. As a percent of net revenue, net working capital was unchanged at 6%. In total, cash flow from operating activities was DKK412 million higher in 2024 compared to last year or the previous year.

Cash from investing activities and lease payments came to DKK $956,000,000 and included the gain from the sale of shares in Poland. This resulted in a free cash flow of DKK 1,435,000.000. 1 of the key focus areas in 2024 has been to reestablish our financial flexibility, which we have now achieved, primarily driven by the strong operating result and cash management. Net interest bearing debt decreased to $5,700,000,000 at the end of twenty twenty four from $6,400,000,000 the year before. Consequently, our net interest bearing debts to EBITDA improved to 2.2 at the end of twenty twenty four and is now well below our financial target of a maximum of 2.5 times EBITDA.

And as announced yesterday, we have launched a new share buyback program of DKK250 million. On this slide, we have also included OIC, which increased to 12% including goodwill. Please turn to Slide number 12. Our priorities for capital allocation remains unchanged. Our first priority remains to maintain our financial flexibility and to have a financial gearing measured at a net debt to EBITDA below 2.5%.

Secondly, we prioritize investments in organic growth with high return on invested capital. We are still interested in value accretive acquisitions in the form of bolt ons, brand platforms or asset acquisitions. We remain committed to paying out 40% to 60% dividend and the Board of Directors have proposed a dividend of DKK 15 per share to be distributed for twenty twenty four, equivalent to a payout ratio of 51%. Lastly, we have now launched a share program of DKK $250,000,000. I will now hand over the word to Lars who will dive into the sustainability growth and value creation framework.

Lars Jensen, CEO, Royal Unibrue: Thank you, Lars. And now please turn to Slide number 13. In 2024, we have revised our sustainability goals to ensure they remain relevant in relation to our material impacts, risk and opportunities and support our sustainability aspiration. We have added goals for water, which is our most important raw material, and we are targeting regenerative agricultural practices for 50% of our major ingredients, barley, sugar and hops by 02/1930. We have also raised the bar for packaging material and are now targeting 100% circularity for packaging materials by 02/1930.

’90 ’5 percent of our packaging materials were either recycled, recyclable or reusable in ’twenty four. We have also raised our ambitions with respect to marketing spend on products with a sustainability position to 60% as we have opted for more demanding goals on consumer engagement and sustainability, transitioning from being a perception driven preferred supplier to implementing concrete sustainability plans and actions. All in all and due to the science based target approval, we have increased our ambitions. Now please turn to Slide number 14. If we take a closer look at how we intend to grow and create value, you must probably see that you have probably seen this model before.

We remain committed to delivering profitable earnings growth and we drive the business to maximize long term returns on invested capital and earnings per share. Organic EBIT growth is our most important short term value driver in that formula. In ’twenty five, we believe that most of our earnings growth will come from value growth and operating efficiency in Northern Europe, while in Western Europe, while in Western Europe, volume growth will be the main contributor to grow the profitability. International is assumed to be a mix of both volume and value, but likely more volume than value. Finally, share buybacks will also increase earnings per share in 2025, and we believe from our flexible strategy that we can adopt through the market conditions whatever they may be.

Two years doesn’t look the same and as there is very different parameters between what is happening in the markets. And I will now hand the word back to Lars, who will dive into the outlook and financial targets.

Lars Westergaard, CFO, Royal Unibrue: So for if you turn to Slide 15 please. For 2025, we expect net revenue growth of 5% to 7% including contribution from structural changes in Benelux sorry Belgium and Luxembourg and Finland, which is assumed to be around 2.5% up to 5% to 7%. We expect EBIT growth of 7% to 13%, meaning that the reported EBIT is expected to be in the range of DKK2.1 billion to DKK2.225 million including contribution from structural changes, which is expected to be marginal. Net finance expenses are expected to be around DKK250 million and we expect that the effective tax rate will be around 22%. CapEx is expected to be at the level of 7% of net revenue, reflecting our investments in both capacity and capability.

The financial outlook assumes a stable demand in our markets and that we can outgrow the underlying market. We expect the market trends we saw in 2025 to continue. This means that growth in on trade will be modest and off trade consumers will remain highly focused on promotions. This will vary between countries and we are ready to adapt and pursue growth opportunities. We expect that both our EBIT margin and OIC will increase as we grow and continue to optimize operational efficiency.

Please turn to Slide 16. Our long term targets remain unchanged. So you have most likely seen this slide before. We still target an annual EBIT growth rate of 6% to 8%. And as you have just seen, our 2025% target is above this.

So you should see 6% to 8% growth as a target for ’twenty six and onwards. We expect that we will be able to increase the EBIT margin in the coming years and pursue operational leverage and achieve full synergies from the acquisition. The proposed dividend for 2024 and our share buyback program are both fully in line with our targets. And with that, I will turn the word back to you, Lars.

Lars Jensen, CEO, Royal Unibrue: Thank you, Lars. Now please turn to slide number 17. Let me just go through the key items on our agenda right now. We have announced ambitious financial targets for ’twenty five, and we will continue to drive efficiency improvements across all operations to deliver on the targets and drive further margin expansion. We have come to a long way with integrations.

Most recently, we have gone live with our SAP platform in Norway. The main integration focus for 2025 is on Bilox and Finland, so the acquisition from Panorvikar, where we look forward to welcoming our new colleagues only a few days from now in Finland. We continue to invest in our growth markets and categories. That we have illustrated on the page previously with our growth framework. We have been successful in bringing focus on the right product categories and this will continue into ’twenty five.

At the start of any year, we highlight and mention macro and geopolitical uncertainty. This is certainly also true for 2025 and we will monitor the development closely and react to the changes to ensure solid in market performance and profitability across our markets. Last but not least, sustainability is an integrated part of how we operate and invest in our business, and this will also continue to be high on the agenda in 2025. Now please turn to Slide number 18. To summarize, our financial performance has been strong across the group with the best financial result ever for the group.

A strong free cash flow allows us to bring down debt and solidify our financial position, and we have now started a new share buyback as of today. Being in the right categories with the right offering has made us much more robust and enabled us to gain market shares across most of the markets where we operate. And when customers remain focused and while customers remain focused on price, we will remain focused on cost and drive efficiencies out of the business. However, we will also continue to enhance our product portfolio and high quality innovation as we have done both this year and in many prior years. We have set ambitious targets for 2025, reflecting that our investments over recent years have placed us in a strong position and we believe that we are well positioned to deliver strong performance in the years to come.

And with that, we are ready to take your questions. So, operator, please take it from here.

Conference Operator: Thank you. And now we’re going to take our first question. And it comes from the line of Andre Pistacchi from Bank of America. Your line is open. Please ask your question.

Andre Pistacchi, Analyst, Bank of America: Yes. Good morning. Latt Lars and Lars. I have three, if I may, please. The first one is on no low alco, which is at category level, it’s growth has slowed a bit as you were saying.

And I think you said that you’ve de emphasized it a little in terms of your resource allocation priorities. So does this mean that you see the slowdown here as more structural rather than related to the sort of weaker current environment? And if so, why do you think it has slowed structurally? Is it just because it’s large analysis of the scale? Or is there anything else there?

Second question please is an update on Belgium on Belux, which has been in your perimeter now for a few months. So could you give a bit more color on what you’re doing to integrate the business here and the commercial priorities for the Belgian part of the business in about twelve months? And the third question, please, is just a clarification on the EBIT guidance and the M and A contribution there. You’re saying that the structure changes contribute about 2.5%, I think, to your sales growth, but negligible impact on EBIT. Now I understand the Belgium part.

There’s a lot of reinvestment there. But I thought the Mintu brands would be probably higher margin, also considering that you would be just plugging these brands into your existing platform with

Lars Jensen, CEO, Royal Unibrue: still see beer in structural decline in Europe. It varies between countries, but between zero and minus 2%. And it doesn’t there might be fluctuations between months and quarters, but the long term trend is that beer is a bit challenged. We still see no low sugar going significantly up. Just as an example, if you look at the Pepsi Max product in the old Royal Unifruit market, so that’s excluding Biloxi and Netherlands.

But the old markets, we are growing that franchise by 6% on a volume basis. So that’s still even though the carbonated soft drink is not really growing, it’s something that is with the conversion into no sugar is really strong. And when we put the no low ALCO into that kind of metric, we need to look at all the categories next to each other. Then the growth rate of this category is not high enough to qualify for the same ambitions as an example on the no low sugar or on energy drinks or on enhanced beverages. It doesn’t qualify for that.

So we will still try to continue to do what we do, but as it is small already in the portfolio, it’s not going to move the needle in absolute terms of our Uniflu. That’s the view that we have right now. We still have a generally association in low ALCO than we do in mainstream beer. And obviously, we want to protect that, but not with an overinvestment, so to speak. On the Belux, we have taken over a business that in, I would say, in constant decline on a volume basis for quite some time and where PepsiCo also during ’twenty four had some challenges with delistings or partial delistings in some countries.

So the flight attitude of the business is the first priority for us to turn around in the billox business. It’s a very strong team that we have taken over. We have supplemented the team with some new hires in some areas that has been covered more by Central in the PepsiCo system, but where we rather want to move it to local. So the first month, two, three, fourth month here have been on getting the business to function, so to speak, and get the re or the hirings in place to fulfill all the positions and to build a plan that we are discussing with the customers as we speak on how to create more value in the market. So when it comes to the details of that, I would refrain from giving all the details as we are still in discussion with the customers.

But you can assume that most of the thoughts that we have or the thinking that we have around bringing value into these two markets is some of the same parameters as we have been working on for many, many years in the Nordic countries and are also putting into the gameplay in The Netherlands. But I must really praise the organization. It’s really a strong group of people that we have taken over. So, we are pretty happy about that. And then, I will leave the number question on Minto to Lars.

Lars Westergaard, CFO, Royal Unibrue: Yes. So, in terms of the guidance, then we have included, what you would say, organic and inorganic in the guidance for the year, because at a total company level, the impact from acquisitions is pretty low. And if you look at the we have given pretty precise guidance on how we expect it to impact net revenue for the year. And it’s clear that as Lars just mentioned that the PepsiCo business, we are building a business for the long term and we need to make certain that that is, what you say, getting the right flight attitude. So don’t expect too much from Belgium.

If you look at the Minto portfolio, you are absolutely right that that is a very strong brand. But remember, we haven’t taken over the organization yet.

Philip Spain, Analyst, JPMorgan: So, we

Lars Westergaard, CFO, Royal Unibrue: need to make sure that we integrate the company and we are expecting some one off costs related to the integration of that business. But even so, it’s a relatively small acquisition and that is also why it was not announced as a stock exchange announcement, but as a press release in Finland. So, I think that’s how you should think about it.

Andre Pistacchi, Analyst, Bank of America: Got it. That’s clear. Thank you.

Conference Operator: Thank you. Now, we’re going to take our next question. And the question comes from the line of Thomas Lindt Petersen from Nordea. Your line is open. Please ask your question.

Thomas Lindt Petersen, Analyst, Nordea: Hi Lars and Lars, hi everyone. Two questions from my side please. The first one is regarding the integrations in Fermoda and Norway. You’re saying here that synergies from acquisitions they will be materialized in over the coming years or in 2025. I guess back in June or May at the CMD you raised the ROIC target of 2% to 10% on both these acquisitions.

And I believe it was by 2026 at least Primona was supposed to deliver that. Can you please give us an update on these integrations? Are you at a 10% work here with these companies? Also given that you are stating now that the long term EBIT growth of 6% to 8% is in effect from next year from 2026? So that would be my first question.

And then the second question is regarding Western Europe volume growth 8% very, very strong. Can you maybe split that up into how much is Italy? How much is Ramona, France, Pepsi, Belgium? Any help there would be nice. Thank you.

Lars Jensen, CEO, Royal Unibrue: So when it comes to the integration and what we showed at the Capital Markets Day on the return on invested capital, we are on target. So what we put in, in 2024 as the bridge to move towards a 10% return on invested capital has been fulfilled. So we are on plan. Are we on 10 now? No, we are not.

And that was not the plan either. That was not what we showed at the Capital Markets Day, but we are following the plan that we showed in back in May. When we look at Western Europe, I would say that and that’s also what we write in the yearly book here, and that is that the performance in Italy and France has been super strong in 2024, whereas the Dutch business has been hold back by the excise increase that came in on the January 1 and have taken volume away from brand owners. And of course, we are also subject to that exercise that the government took into gameplay. Italy, to give you maybe a few numbers on that, so the Limon Solar franchise in Italy is growing by about 10% on a volume basis.

So that is a really strong development and gaining share in the market. By the way, Lemon Soda is growing more than 40% internationally. So it’s not only in Italy that this is a strong part of our portfolio. And Cheetos has for the first time ever reached €100,000,000 of revenue in a year. So and it’s most of it is driven by on trade.

And remember that on trade is a channel where consumers are asking for specific brands. So the health of our Italian businesses is really, really strong. And when we turn into France, France overall as a business grew 9% in revenue last year and Crazy Tiger had a very strong year growing 14%, so more than the lemonade business. But really strong performance, I would call out, both in Italy and France. And then I would say a solid turnaround here in The Netherlands.

And yes, we are still in negotiations in all of these countries in terms of what will happen in ’twenty five. But I think we get a very positive response on our approach to creating value in all of these markets with the customers.

Thomas Lindt Petersen, Analyst, Nordea: And maybe just a small follow-up on the ROIC here of these acquisitions. So is it still the target of 10% ROIC in by 26% or?

Lars Jensen, CEO, Royal Unibrue: The time line hasn’t changed.

Lars Westergaard, CFO, Royal Unibrue: No. Okay. Thank you.

Conference Operator: Thank you. Now we’re going to take our next question. Just a moment. And the question comes from the line of Richard Witagun from Kepler Cheuvreux.

Richard Witagun, Analyst, Kepler Cheuvreux: I have three questions, please. First of all, you mentioned focusing a lot more on efficiency in 2025 and then reducing complexity. Can you perhaps give some examples and in which markets you have the biggest opportunities to reduce complexity? Second question is on Denmark. What benefits did you realize in the supply chain in 2024 as some of the production was moved to other countries?

And how will you be able to realize more benefits in Denmark in 2025? And then the last question on Italy. I mean, the business is gaining market share and you will have additional capacity available, I think, in Sao Giorgio in 2025. So can you discuss maybe which commercial initiatives you plan to keep growing the business? Thanks.

Lars Westergaard, CFO, Royal Unibrue: Yes. So if we start with efficiency, then clearly it’s mainly in Northern Europe that this is very high on the agenda because we see a market where consumers are holding a little bit back in terms of how much they spend in on trade and they are chasing bargains. So some of the examples we have is number of SKUs, we have number of innovations, we have number of product upgrades. So, we are really running through everything with a tooth comb just to make certain that we take out efficiency and makes it easier for the supply chain to deliver on what the markets are requesting. So, it’s all about making certain that we have lower complexity in the Nordic markets where, what you say, the channel mix is not good currently, which it hasn’t been for quite a while due to the consumer sentiment.

So that’s where we have the key focus on efficiency. If you look at the supply chain in Denmark, the main benefits of releasing the capacity in the Danish supply chain, you can see in the numbers for international, where we have been holding back the sales in the past years. So I would say a lot of the efficiency that we actually get in Denmark doesn’t sit in the Danish sorry, in the Nordic segment, it

Lars Jensen, CEO, Royal Unibrue: sits in international. And on Italy or capacities in general, I think Italy, the acquisition of San Giorgio has been, I would say, a stellar example of how to create value on assets where the previous owners have not been able to create the same amount of of value. Italy is growing, and we are expanding the capacity in San Giorgio. We still have quite some private label adoption in San Giorgio. And obviously, as the branded business growing, the threshold for qualifying to continue to deliver large scale private label, of course, changes similarly.

I think when we look at our capacity math, assuming that we continue to grow volume and that the conversion into more single serve will require more capacity, we would need to add a new line somewhere in the grid every six, seven months or so, of course, depending on where it happens, how fast it happens and so on. And that also means that we will still utilize the network that we have now created with, I would say, 10 sizable production units that can help each other. We will still use that as the first step because it’s cheaper than to do the CapEx. And then as the capacity gets up to a utilization rate, which is closer to the 85%, which is the threshold where you start to become inefficient, then we would move into using CapEx to cover off for what is needed. Or if we can find assets like San Giotto, that can help us in building out the grid and thereby avoids larger CapEx,

Andre Pistacchi, Analyst, Bank of America: but get, I would say,

Lars Jensen, CEO, Royal Unibrue: the capacity faster and often at a lower entry cost. Is that okay, Richard?

Richard Witagun, Analyst, Kepler Cheuvreux: Yes, that’s very clear. Thanks guys. Thanks a lot.

Conference Operator: Thank you. Now we’re going to take our next question. And the next question comes from the line of Andre Thromman from Danske Bank (CSE:DANSKE). Your line is open. Please ask the question.

Andre Thromman, Analyst, Danske Bank: Yes. Thanks for taking my questions. I just have two. First is just coming back to this EBIT effect from Benelux and Panoprikard in 2025. I just wanted to be sure, is it less than 2.5% in 2025?

That’s the first question. The second question is in terms of Norway. And I think you have said a few times that the profitability is normalized in the Norwegian market compared to when you acquired it. Just to be sure, what does normalized mean? Is it compared to history or compared to the normalized numbers you gave when you acquired?

And is it also the case that profitability is normalized in the fourth quarter? That’s my questions.

Lars Jensen, CEO, Royal Unibrue: When it comes to Norway, so what we have said is that the ambition for 2024 was to get back on the profitability that we acquired. And that is what we have achieved. So and then we can start growing into 2025 from there. On the 2.5%, that is the net revenue that is expected to come out of nine months of BILUX, not Benelux, but BILUX and ten months of Minto portfolio, so the portfolio from Penobrikar, out of the total guidance of five to 7.5 sorry, to seven. And that means that you the organic growth will be sitting in the range of the 2.5 to 4.5.

That’s how you should consider it.

Andre Thromman, Analyst, Danske Bank: Yes. So I get the top line effect. It’s just to be sure, is the EBIT effect less than 2.5%?

Lars Jensen, CEO, Royal Unibrue: But it’s back to what Lars answered just before that we are taking over a business where the revenue of the business as you will when you do the math on the 2.5%, you would see that the revenue of the business is not very big and where we need to get an integration done very, very fast. We are taking over as we did with Limansoda back in the days. It’s a carve out, so it’s a production unit with brands and we get one brand manager and then that needs to be put into our organization and there is obviously always one off cost that you need to deduct to get it up and running. And I think the track record that we have from the FINIS organization in terms of onboarding these type of assets is super, super strong. And thereby, we would I would say, we would buy the bullet on the cost that we need to take, whatever that may be.

And as Lars also said that we haven’t taken over the business yet, so we cannot give you all of the details. We need to talk to the employees first in terms of how we are going to do this, but it is a strong brand with Mintzl that we are buying and we expect that that will be very ROIC generative, but not in ’twenty five. That is a ’twenty six discussion.

Andre Thromman, Analyst, Danske Bank: Okay. So then the effect is less than 2.5% I

Andre Pistacchi, Analyst, Bank of America: need to I’m

Lars Jensen, CEO, Royal Unibrue: not commenting, Andre, on your 2.5%. I’m not commenting on it.

Lars Westergaard, CFO, Royal Unibrue: Okay.

Lars Jensen, CEO, Royal Unibrue: It’s a number that you pick out of the blue.

Lars Westergaard, CFO, Royal Unibrue: Okay. Thank you.

Conference Operator: Thank you, Andre. Now we’re going to take our next question. And the next question comes from the line of Philip Spain from JPMorgan.

Philip Spain, Analyst, JPMorgan: My first one is just thinking about the price mix development in 2025 and how I suppose you’re thinking about, firstly, in terms of channel mix to develop versus what we saw in 2024, do you expect that to get any better or worse? And similarly, if the promotions as well, what you’re seeing in the market, whether you expect that to get any better or worse? And then I suppose just to round out the discussion, what you can do in terms of pricing that’s planned as well as package mix that could help to offset some of those mix headwinds? So that was my first question. And then my second question was just on the you’ve spoken before about you seeing better growth prospects for the non alcoholic beverages overall, not just non alcoholic.

We’re talking about soft drinks as well. I guess given as well that you talked about seeing slower growth in non alcoholic beer specifically as well. Is there any change in kind of consumer behavior that you’re seeing? Is that gap between nonalcohol bevs growth widening at all? Just interested to see what you’ve kind of seen with consumer behavior recently as well.

Thank you.

Andre Pistacchi, Analyst, Bank of America: Yes.

Lars Jensen, CEO, Royal Unibrue: On the channel mix side, we do not really expect a lot of changes, to be honest. We still think that consumer sentiment, in particular in the Nordic countries, is going to be lower than what we saw two or three years ago, but it’s not something where we expect dramatic changes compared to what we have seen in ’twenty four. The same when it comes to the way that we are playing our price pack promo strategies. We always bring something new to the market every year, but no major changes. I would say, we will continue relentlessly to work on that agenda to try to create a right pack for the right occasion at the right place because that can drive sales and it can also drive the net revenue on a per liter basis upwards.

When it comes to pricing, I would not be commenting on that specifically. And many markets are not, I would say, settled yet because it’s a part of a a wider discussion around the input and the output together with our customers. But the view that we have is that we are back to the same way of looking at value generation as before the inflation started to kick in. And if you look at what happened during that period of time, you would generally see that pricing real pricing would be more like 0% to 1.5% -ish and not as we saw during the high inflation period where price increases were more between 46% and even several times for the year. So we are back to this our view is we are back to the same gameplay as before COVID.

On your last question around the categories, we generally and I think you can also see that from our growth category framework. You would see that we see more opportunities in nonalcoholic beverages organically than we see it in alcoholic beverages. And that is even taken into consideration that generally we have lower shares in alcohol beverages than we do have in non alcohol beverages. We have seen, I would say, the healthy living is something that every year is moving consumers towards less calories and less algo. And we do not really think that that’s when we stop.

We have seen that innovation can drive a lot of consumption towards brands, but also towards different and new categories. And we see that as a big opportunity for us as a beverage player playing in so many categories. And as we mentioned on the call, we have never played in sports drinks in the Danish market or it’s more than ten years ago that we last did it. We entered with a Faxaconti Pro and then we get through a 30% share in the category and basically, I would say, wipe out one of the competitors in the market because of the good work that we do both from a marketing point of view and the execution by our sales force. So the category movement here is where you need to find the growth.

If I gave you some of the numbers on France as an example, there’s only basically two companies in Paris that grow, and one is Red Bull and the other one is Osh. The rest is basically losing business in 2024. And the reason why we are growing is because we are sitting in two categories that grow. Lemonades is growing slightly as a category and then energy drinks is growing as a category. If we would have been in all other categories, we would probably also have been up for a decline in volume, even though that we had the Olympics in France, then that was the case.

So this is I think the difference between us, at least the way that we look at it, the difference between us and most other beverage companies that is that we are really, really focused on trying to find the growth pockets irrespective of our heritage of being either a brewer or soft drink company or water company. We need to live the categories of today and not the categories of yesterday.

Philip Spain, Analyst, JPMorgan: That’s really helpful color. Thank you. Maybe I just had one other question, if I may, please. Just on the international development in Q4, if you could give some color on the difference between the shipment volumes and the sellouts? And if we expect any reversal of that trend in Q1 that we should be thinking about for shipment phasing?

Thank you.

Lars Westergaard, CFO, Royal Unibrue: Yes. So I think we’ve said this for many years. The shipment part is very lumpy in the international segment. So if you look at one quarter in isolation, you can get some fairly odd numbers that does not really reflect the performance of the business. So look at the international in 2024 at the full year and you will see that it’s actually performing very well.

Nothing have changed in the fourth quarter where you saw revenue being okay, but volume being significantly done. If you look at the other three quarters, it was was the opposite. So, I would just encourage you to look at the FEMBA and ESSNA because it is a more volatile business. So, as you look at the full year and it’s performing very well and when you look at at shipment, I’m sorry, at how much is being consumed of our product, we see good high single digit growth rates across the portfolio. So, the international portfolio is in good shape and don’t read anything into the volume revenue development in the fourth quarter because it is driven by shipments and not by underlying consumption.

Philip Spain, Analyst, JPMorgan: That’s very helpful. Thank you.

Conference Operator: Thank And now we’re going to take our next question. And the question comes from the line of Soren Samso from SEB.

Thomas Lindt Petersen, Analyst, Nordea: Just a follow-up question on international. Just to sort of if you can give an indication of what’s the normalized growth rate there in the international business for 25%. I mean, it’s probably going to be somewhat lower than 24%, but also higher than the guidance 5% to 7%. But just to give us an indication for the model. And then also elaborate on the margin progression here because you reached a margin of around 14.5% EBIT margin 24%, but you’re still some way from the 2020 level of about 20%.

So do we expect a further progression in the margin in 2025? And what sort of increase should we look for?

Lars Jensen, CEO, Royal Unibrue: Yes. So when we look at the sales growth, as Lars also talked about just a minute ago, and that is that we are high single digit sales outgrowth. And that is the rate of sales from our distributors, our importers, the ones that we work together with in the international markets and what they sell out into the market. And you need to do the spreadsheet on what you then believe for 25, but that’s the current flight attitude of the business. And it’s as we have said early on, it’s driven by a strong development in Africa.

It’s the soft drink part of our business. So the lemonade export, it’s the lemon soda proposition that is growing well. And then we have the malt business that has had, I would say, a phenomenal year in ’twenty four. So those are the main growth drivers. When it comes to the margin, depends on where it should come from, right?

Because as also Lars said earlier on, it’s the same supply chain as we use for the Danish market, the border trade. And the synergies that we are creating in that part of the business will also help international in earning more money because then COGS will be lower. If there’s volume changes between these two segments, then it either hurt or help depending on the allocation because there’s an allocation of indirect production costs between the units. So when we are running more efficient, it will also help the international business. And then there’s a I would say there is a piece which is about the logistic cost.

So we do expect logistic cost to come a bit down in 2025, but it is not down to the level of before the transportation companies, they really started to increase prices. So there’s still a little bit of a backlog on that one. But I would say, overall, I would expect our margins to go slightly up in international, but not to the level of 2025%.

Thomas Lindt Petersen, Analyst, Nordea: Understood. And then just the other question I had was on the CapEx level, which increases in 25% from ’26 Maybe you already said it, but maybe just repeat what exactly do you expect this extra CapEx to be useful? Thank you.

Lars Westergaard, CFO, Royal Unibrue: Yes. So as when we acquired the Italian brewery and Pomona, we also announced at that point in time that they were needing investments. So, we are spending money on these to get them up to group standards and make certain that they have in particular and in Holland to ensure that they have packaging capabilities, so we can have a relevant offering to the market. So, that’s one piece of it. Then we have been constrained in terms of capacity in other places.

So, we are making a PT line in Denmark and in Italy, we have made a can line. So, it is very much to secure that we have capacity and capabilities to grow across the network. And then the final big thing we are doing is, we are making a big warehouse expansion in Denmark. Right now, we have lots of external storage. We use external storage which creates a lot of complexity and inefficiency in our setup.

And that leads to roughly 7% of net revenue in CapEx in ’twenty five. We will also have elevated CapEx in ’twenty six and then we expect that we are like we have a capacity that is more in line with what we need and then the CapEx level will start to move towards the depreciation to sales level that we have. So two years of higher CapEx, but that will also give good returns. So it both helps the bottom line and of course it’s a cost.

Thomas Lindt Petersen, Analyst, Nordea: Okay. Thanks. That’s Clay.

Conference Operator: Thank you. So dear speakers are not further questions at this time. I would now like to hand the conference over to your speaker, Lars Jenssen, for any closing remarks.

Lars Jensen, CEO, Royal Unibrue: Thank you very much. Thanks, everybody, for participating. You know where we are, if you need us for any further questions. And please enjoy your day.

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