Earnings call transcript: Viva Wine Group sees strong Q4 2024 growth

Viva Wine Group AB reported a robust performance for the fourth quarter of 2024, with group net sales rising by 8.7% and adjusted EBITA growing significantly by 49.6%, resulting in an 8.7% margin. The company maintained a stable net debt to EBITDA ratio of 1.4. According to InvestingPro data, the company operates with a moderate level of debt and maintains healthy liquidity, with a current ratio of 1.23. Following the earnings announcement, Viva Wine’s stock price increased by 3.04%, closing at 40.7, reflecting positive investor sentiment.

Key Takeaways

• Group net sales increased by 8.7%, driven by organic growth and successful product launches.
• Adjusted EBITA margin improved to 8.7% from 6.3% in the previous year.
• Stock price rose by 3.04% following the earnings announcement.
• The company maintained a stable net debt to EBITDA ratio of 1.4.
• Proposed dividend remains unchanged at SEK 155 per share.

Company Performance

Viva Wine Group demonstrated strong financial performance in Q4 2024, with notable increases in both sales and profitability. The company’s strategic focus on innovation and market expansion in the Nordic region has contributed to its sustained growth. Viva Wine has successfully increased its market share for 13 consecutive quarters, with significant gains in Sweden, Finland, and Norway.

Financial Highlights

• Revenue: Increased by 8.7% YoY.
• Adjusted EBITA: Grew by 49.6%, reaching an 8.7% margin.
• Net Debt to EBITDA: Decreased to 1.4.
• Proposed Dividend: SEK 155 per share (unchanged).

Market Reaction

Following the earnings release, Viva Wine’s stock price saw a positive movement, increasing by 3.04% to 40.7. This rise reflects investor confidence in the company’s strategic direction and financial health, which InvestingPro rates as FAIR with an overall score of 2.4. The stock remains well within its 52-week range, indicating stable market performance. Based on InvestingPro’s Fair Value analysis, the stock currently appears to be trading near its fair value. Subscribers to InvestingPro can access detailed valuation metrics and 12 additional expert insights about Viva Wine Group.

Outlook & Guidance

Looking ahead, Viva Wine Group expects stable gross margins in 2025, with Nordic market volumes likely remaining flat. The company anticipates slight improvements in the e-commerce segment and plans to continue focusing on mergers and acquisitions to enhance growth. The Finnish market presents new opportunities with changes in alcohol sales channels. With a P/E ratio of 30.91 and positive analyst forecasts, InvestingPro data suggests the company will remain profitable this year. Get access to comprehensive valuation metrics and expert analysis with InvestingPro’s detailed Research Report, available for over 1,400 stocks including Viva Wine Group.

Executive Commentary

CEO Emil Salas expressed optimism about the company’s future, stating, "We closed 2024 on a very good level, but more importantly, we see a very strong potential going forward." He also emphasized the expected market growth, saying, "We expect the markets to grow 2% to 3%."

Risks and Challenges

• Market Saturation: The Nordic wine market may face saturation, impacting volume growth.
• E-commerce Volatility: The soft e-commerce market in Germany poses challenges.
• Regulatory Changes: Shifts in alcohol sales regulations could affect business operations.
• Economic Conditions: Broader economic pressures could impact consumer spending.
• Competitive Pressure: Maintaining market share amidst increasing competition.

Q&A

During the earnings call, analysts inquired about Viva Wine’s low CapEx strategy and the expected impact of Finnish market channel changes. The company clarified its focus on maintaining operational efficiency and adapting to evolving market conditions.

Full transcript - Viva Wine Group AB (VIVA) Q4 2024:

Conference Operator: Presentation for q four twenty twenty four. For the first part of the conference call, the participants will be in listen only mode. During the questions and answer session, participants are able to ask questions by dialing key 5 on their telephone keypad. Now I will hand the conference over to CEO Emil Salnes and CFO, Lynn Geffert. Please go ahead.

Emil Salas, CEO, Viva Wine Group: Good morning, everyone, and welcome to our Q4 twenty twenty four presentation. My name is Emil Salas and together with our CFO, Lin Gewirt, 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 thirteenth 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 8.7% with an organic growth of 8.2%. We also report a strong growth in profitability. Adjusted EBITA increased 49.6% to reach an 8.7% margin compared with 6.3% last year.

Finally, the Board proposes an unchanged dividend of SEK 155 per share. Now let’s look at the financial performance and I will hand the word over to Lynn, who will give you a closer view.

Lynn Gewirt, CFO, Viva Wine Group: Thank you, Emil. We have a positive net sales growth of 8.7% for the group, where we closed the quarter strongly. Viva Weingroup 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 comm declined slightly in the quarter as the consumer sentiment, especially in German, but Germany has remained at low levels. Looking at the profitability, we had an improved profitability, and as Emil mentioned, of 49.6. And we see a strengthened adjusted EBITDA margin reaching 8.7% 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 ecom 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 and 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 relations 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.

Emil Salas, CEO, Viva Wine Group: Thank you, Lynn. 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 for 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, Viva Wine Group reported a market share of 22.2 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, 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 (NYSE:TGT) 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 1.6 percentage points compared with previous year.

Lynn Gewirt, CFO, Viva Wine Group: Total (EPA:TTEF) net sales for segment Nordics increased with 11.2% 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 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 Finnish 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.

Emil Salas, CEO, Viva Wine Group: In our ecom 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.

Lynn Gewirt, CFO, Viva Wine Group: The ecom 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 ecom. A small decline in gross margin was mainly due to negative product mix and year end adjustments. Costs are within good control and at good levels versus prior year.

Adjusted EBITDA margin was lower than prior year, driven primarily by the lower sales.

Emil Salas, CEO, Viva Wine Group: So, before our final remarks, I would like to also, as usual, to comment on our financial targets. When it comes to our growth target, we are once again reaching and beating the organic growth level for The Nordics and are well above targeted 4%. In our e commerce segment, we are not yet reaching our target. When it comes to profitability, we are above prior year, ending the quarter at 8.7% 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 debt to EBITDA ratio is well below our target of 2.5, percent, 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 regulatory 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 and 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 and a session.

Conference Operator: If you wish to ask a question, please dial 5 on your telephone keypad The next question comes from Johan Fred from SEB. Please go ahead.

Johan Fred, Analyst, SEB: Yes. 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 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?

Emil Salas, CEO, Viva Wine Group: 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 and A area, but that’s of course a different kind of investment from traditional CapEx.

Johan Fred, Analyst, SEB: So the run rate from 2024 is what we can expect going forward as well in terms of CapEx? Correct. Great. Thank you. Those were all of my questions for now.

Thank you so much for taking the time.

Emil Salas, CEO, Viva Wine Group: Thank you. Thank you.

Conference Operator: The next question comes from Benjamin Walstad from ABGSC. Please go ahead.

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

Emil Salas, CEO, Viva Wine Group: 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 5% to 10% decline on the monopoly sales at ALKU. However, part of that was already in the numbers because of the general financial situation in Finland. So, somewhere, let’s say between 48% 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.

Benjamin Walstad, Analyst, ABGSC: 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 8%, but is this fully compensated by grocery stores? I’ve received not.

Emil Salas, CEO, Viva Wine Group: 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 I mean, Alco has a very clear statistics and then of course the supermarkets there are some statistics, but they are not full.

Benjamin Walstad, Analyst, ABGSC: Yeah, absolutely. And then final one, you note an impact on OpEx on 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.

Lynn Gewirt, CFO, Viva Wine Group: Yes. 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 professional station.

And for the Nordic businesses, it will be an ongoing journey during the year.

Emil Salas, CEO, Viva Wine Group: So no real guidance which quarter you will be able to put it in. Yeah.

Lynn Gewirt, CFO, Viva Wine Group: Yeah. We have the guidance of the whole year.

Benjamin Walstad, Analyst, ABGSC: Yeah. That’s, that’s fair enough. Thank you. That’s all for me for now.

Emil Salas, CEO, Viva Wine Group: Thank you.

Conference Operator: The next question comes from Nikolas Elmhammer from Carl Square. Please go ahead.

Nikolas Elmhammer, Analyst, Carl Square: Yes. Hello and thank you for taking my questions. I mean, 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?

Lynn Gewirt, CFO, Viva Wine Group: 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 you we assume that the Eurosek will stay the same, which our most important currency, we expect the gross margins to stay stable, towards if looking at q four. 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.

Nikolas Elmhammer, Analyst, Carl Square: Okay, great. And if perhaps do you have some kind of expectations for the general market in The Nordics in terms of volumes generally and perhaps price adjustments?

Emil Salas, CEO, Viva Wine Group: I think in general, if you look at the market, we expect the market to be stable or somewhat down, meaning 1%, two % compared to this in volume. Then if you look in currency or in money turnover, sorry, then we expect the markets to grow 2% to 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.

Nikolas Elmhammer, Analyst, Carl Square: Okay. Great. Thank you. That’s all for me.

Emil Salas, CEO, Viva Wine Group: Thank you. Alright. I’ll take this opportunity to move over to questions. We have

Conference Operator: more questions at this time. So I hand the conference back to the speakers for any written questions.

Emil Salas, CEO, Viva Wine Group: 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 Euroseek from current levels, can you comment on expectations for gross margins in Q1 as well as 2025?

Lynn Gewirt, CFO, Viva Wine Group: Yes. And we did answer a bit on this, 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 the Eurosek.

Emil Salas, CEO, Viva Wine Group: 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.

Lynn Gewirt, CFO, Viva Wine Group: Yeah, and we think that both sales volume and sales will both contribute to the growth in 2025 pretty much at the same level.

Emil Salas, CEO, Viva Wine Group: 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 flattish. 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.

Lynn Gewirt, CFO, Viva Wine Group: Yeah, and we expect us to grow.

Emil Salas, CEO, Viva Wine Group: 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 e comm expectations for 2025, well, we do see a slightly brighter picture for e comm 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 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 05/15/2025. Thank you all for today and hope to see you soon.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.