Q2 2020 result – 14 July 2020 Henri de Sauvage-Nolting, President/CEO Frans Rydén, CFO Nathalie Redmo, IR
Key messages • Continued negative impact due to COVID-19 • Improved sales during the second half of the quarter • Branded food retail up, P&M and OOH branded sales down • EBIT impact partly mitigated by phasing of supply chain costs • Managing costs to continue investments in A&P • Solid financial position and clear strategic priorities ”Cloetta is well positioned for a gradual recovery.”
Agenda 1. Sales results 2. COVID-19 3. Financials 4. Strategic update 5. Q&A
Q2 2020: Improved sales during second half Total Branded Pick & mix Organic sales growth Organic sales growth Organic sales growth -21.2% -6.3% -58.5% April: -25.4% April: -3.6% April: -70.5% May: -27.6% May: -16.6% May: -60.2% June: -10.1% June: +1.5% June: -41.1% Monthly organic sales growth Monthly organic sales growth Monthly organic sales growth -12.6% organic sales growth YTD
Sales development Sales in the quarter impacted by COVID-19 Branded, % of Q2 '20 sales 3,6% 3,6% 2,4% 1,6% 1,4% 1,4% April: -3,6% 0,6% 0,6% May: -16,6% June: +1,5% -2,5% -6,3% 85% Q1 ’18 Q2 ’18 Q3 ’18 Q4 ’18 Q1 ’19 Q2 ’19 Q3 ’19 Q4 ’19 Q1 ’20 Q2 ’20 Pick & mix, % of Q2 '20 sales 18,1% 6,4% April: -70,5% 0,0% 15% May: -60,2% June: -41,1% -3,3% -8,0% -11,4% -13,5% -15,6% -19,4% -58,5%
Agenda 1. Sales results 2. COVID-19 3. Financials 4. Strategic update 5. Q&A
Thank you to all our employees!
Managing through COVID-19 Consumers Production Employees Cost & cash & customers & suppliers
Consumers & customers Branded packaged products Branded sales by channel* Status of branded • Increased demand in Food, including e-commerce 30% • Shoppers gradually returning as other channels Food 70% starting to open up Other channels • Negative mix from less impulse sales Actions to mitigate Last 3 months market data** ✓ Continued investment in brands -7% PASTILLES & GUMS ✓ Adjusting to new market and consumer realities ✓ Advertising spend adjusted to new media consumption CANDYBAGS +39% * Approximate % based on 2019 full year figures **Nielsen, Kesko, SOK market data last 3 months 2020. Candybags and pastilles; FI, DK, NO, SWE. Gums; FI.
Consumers & customers Pick & mix Channels at Consumer Status of pick & mix Q2 close demand • Most Nordic fixtures opening • Recovery of consumer demand will take time • Unfavorable geographical mix Actions to mitigate ✓ Store trials to convince retailers to open ✓ In-store communication and increased hygiene ✓ Repositioning of Candyking started ✓ Merchandising cost reduced
Consumers Production Employees Cost & cash & customers & suppliers Working under restrictions ✓ Travel ban ✓ IT step-up for virtual workplace ✓ Offices partly opened with meeting restrictions ✓ New office and concept store in Malmö ✓ Reinforced hygiene routines ✓ Strategic agenda kept going
Consumers Production Employees Cost & cash & customers & suppliers Status of supply chain • Factories operational • Absenteeism back to normal • High stock levels of P&M and OOH products • Delay in CAPEX and Perfect Factory Actions to mitigate ✓ Increased hygiene routines and separated shifts ✓ Policy restricting external visitors ✓ Inventory secured on critical components ✓ Measures to reduce inventory levels and avoid obsolescence, such as production closures
Consumers Production Employees Cost & cash & customers & suppliers VIP+ Perfect Factory Cash ✓ Tightened restrictions on spend ✓ Program runs virtual ✓ Loan extension finalized ✓ Acceleration of efficiency initiatives ✓ Production closures during summer ✓ Working capital program ✓ Closure of two warehouses ✓ Increased preventative maintenance ✓ Reduce current inventory levels ✓ Training of factory employees
Agenda 1. Sales results 2. COVID-19 3. Financials 4. Strategic update 5. Q&A
Net Sales Sales in the quarter impacted by COVID-19 Second quarter 6 months -21,9% -12,3% 1 583 -21,2% 3 142 -12,6% -0,7% +0,3% 2 755 1 237 Branded packaged: -6,3% Branded packaged: -4,4% Pick & mix: -58,5% Pick & mix: -33,7% 2019 Organic FX 2020 2019 Organic FX 2020 growth growth
Operating profit, adjusted Impact of lost volumes partly offset by cost savings and phasing of supply chain costs Operating profit, adjusted • Half of lost gross profit 6 months Second quarter mitigated. Gross profit down SEK 119 m, while operating profit, 10,2% 10,4% adjusted, down SEK 51 m. 161 327 • Lower volume key driver of 9,5% 8,9% -32 262 loss, totaling SEK 126 m despite 110 -12 -155 phasing of approximately SEK 35 m -126 122 in supply chain costs to Q3. 87 • Good cost control partly mitigates volume loss, together with positive mix due to lower share of P&M. 2019 Volume Mix/Price FX 2020 2019 Volume Mix/Price FX 2020 /Cost /Cost
SG&A Lower SG&A from good cost control and lower marketing activities Second quarter 6 months 26,5% 28,7% 26,2% 27,1% +65 +76 -355 -746 63 82 -2 -4 2 0 -822 -420 2019 Items FX Cost savings 2020 2019 Items FX Cost savings 2020 affecting affecting comparability comparability
Cash flow Cash flow impacted by lower profit Q2 ‘20 122 • Lower profit drives lower Free cash flow -161 as higher investments in PP&E offset by lower -79 -118 increase in working capital. -389 • Working capital driven by lower payables due to reduced production and sourcing from third -507 Cash flow Changes Investments Free Other Cash Cash flow party contractors, and cost savings. Inventory before in working in PP&E cash flow investing flow from for the variance more than offset by lower receivables. changes capital and activities financing period in working intagible activities capital assets • Cash flow from financing activities driven Q2 ‘19 by reduced debt. Activities last year also 201 reflect payment of dividend. -204 -38 -41 2 -466 -505
Strong financial position 2 361 2 124 115 Cash • Good access to cash with Non-current extension of loan facility 1 259 2 112 Non-current facilities facilities maturing in July 2020 and all facilities now non-current. 750 Commercial papers 249 Commercial papers • Continued compliance with Utilized Unutilized covenant requirements on Net debt/EBITDA. 6 000 4.5 Covenant 4.0 5 000 • Cash pooling operational Net debt/EBITDA 3.5 enabling less cash on hand, less 3.0 4 000 Target debt, and lower interest expense. 2.5 3 000 2.0 1.5 2 000 1.0 Net debt in SEKm 1 000 0.5 0 0.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2017 2018 2019 2020
Agenda 1. Sales results 2. COVID-19 3. Financials 4. Strategic update 5. Q&A
Key business priorities Prioritized activities for achieving organic growth and a 14% operating profit margin, adjusted • Investments in brands to remain the preferred choice 1 • Focus on marketing visible to consumers • Adjusting advertising spend to new media consumption • Next steps in Marketing Competence - Academy • Repositioning of Candyking to a more premium concept 2 • Rebuilding profitability through scale, pricing and efficiency • Contract negotiations • Category supported by global trends • Efficiency initiatives delivering, new cost savings identified 3 • Enhanced management processes to monitor working capital • Gear up CAPEX and Perfect Factory roadmap
Branded growth Fewer and bigger Accelerating strategic initiatives Focus on marketing visible to consumers Share of working media vs. non-working media 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2017 2018 2019 LTM Working media Non-working media
We believe in the Power of True Joy Purpose impact on our new CSR agenda KEY AREAS We improve We provide We care about our footprint choices for you people Our business depends on We create joyful moments We support our employees, the environment. We own through the quality of our our suppliers and farmers, as our responsibility for our products. We aim to meet the well as our communities. impacts; from sourcing to variety of consumer packaging. preferences. Strengthening Q2 HIGHLIGHTS Goal-setting Future-focused Relationships • • Launched PlantPack, a • Strategic goals set to develop Exploring positive impacts step closer to future-proof our offering to meet more across our supply chain with plant-based packaging consumer needs while stronger partnerships between our suppliers and 3 rd party • Our factories achieved upholding sustainability RSPO & UTZ certificates. standards and product quality. organizations.
Repositioning of Candyking Build a brand in order to drive premium pricing Social media and in-store activation Higher quality and premium concept Attractive merchandising and signage Hygiene and tidiness
Drive efficiencies to enable investments Perfect Factory ONE Cloetta VIP + Cash
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