Anora Group Oyj (ANORA) Earnings Call Transcript & Summary

So a warm welcome to our briefing on our exciting news today about the acquisition of Globus Wine, the Danish Wine Company. I am Tua Stenius-Ornhjelm from Anora's Investor Relations. Our CEO, Pekka Tennila; and CFO, Sigmund Toth, will soon discuss the transaction, after which we open up for your questions. You can send in your questions already during the presentation through the team's chat. A recording of this call and the presentation material will be available on our website soon after this. Without further ado, we are ready to start. So Pekka, please go ahead.

Thank you, Tua, and good afternoon, everybody. Thank you for joining this call. Maybe Tua, we can move on to next slide and start the presentation. So as said, this is a big day to us. We have made our first acquisition and we have acquired a market-leading Danish wine company in Globus Wine. And obviously, this fills the missing piece in our Nordic market leadership position, which is the Danish market. Globus Wine is a very successful company founded in 2006 with consistent growth and with consistent above the market growth in the last years with their own wine brands. Globus Wine owns the top selling wine brands in Danish retail, and then offers filling services to third parties. Globus Wine net sales in last year were DKK 550 million and adjusted EBITDA at DKK 66 million. The purchase price was EUR 80 million and that equals to an enterprise value of EUR 90 million and closing is expected to happen in the beginning of July. Moving on. The Danish wine market is super interesting. It's -- the per capita consumption is very high on the European scale, right there with Sweden and higher than, for example, in the U.K. or Germany and well above the consumption -- the capital consumption of Finland and the Baltics. Obviously, being a bit smaller country, the absolute volumes are a bit behind that of Germany and U.K., but still very -- still quite high. I mean if you compare -- combine Norway and Finland, you'll get the Danish total consumption. So quite a significant market with growth expectations at 1% to 3%. And as I said, Globus Wine has, over the past years, performed above the market growth. Moving on. So a bit about the Globus Wine business. They source wine in bulk, mainly from U.S. and Italy to be filled in bag-in-boxes or bottles in their production facility at Køge, which is right next to Copenhagen. And as products are sold under own brands, which has been growing fast or then third-party brands. They have very strong in-house brand-building capabilities. And obviously, the best proof of that is the consistent market share gains across all wine types. They sell in retail in Denmark as then obviously, the co-packing for wine houses. They have very efficient production, very good capabilities in wine sourcing as well. The production facility is a new one. It's built in 2018. It's actually the largest bag-in-box filling capacity in Northern Europe. And currently, the total volume exceeds 50 million liters, and that is from last year. And it's also the leading producer of sustainable wines. In terms of key figures, I guess I didn't mention the number of employees, it's 139, own brands make 63% of total sales. They have 5 production lines, bottling capacity of 100,000 bottles per day, bag-in-box capacity at 90,000 units per day. And then warehouse capacity at 14 million liters. Moving on. So this is what I said about the missing piece in our Nordic market leadership strategy. We are #2 in spirits in Denmark. And with this acquisition, we've become #1 in Denmark, wine where we were basically nonexistent. Obviously, the own wine business is super interesting. It is a big part. It's probably almost half of total Nordic monopoly business and it's super interesting for us for many reasons. But definitely, one is the profitability of that segment. And with this acquisition, we believe we are more competitive in that segment. It's often quite price competitive and with a very efficient supply chain that Globus Wine has. I think we're going to be very competitive there. What's growing the fastest in wine, is sustainable wines. It's a lot about packaging, also other items are important, but probably what the monopolies talk about right now, the most is packaging. And obviously, Globus Wine is very strong in that. So we believe that with this acquisition, it helps us to strengthen our own wine business in more countries than just Denmark. And then -- is it already -- Sigmund, the next? Or what's the -- yes, Sigmund, go ahead.

Thank you very much, Pekka. So I think most of these things were mentioned already. But as Pekka said, the purchase price is around EUR 80 million. It will be paid in cash, and we will be financing this acquisition with debt. The agreement was signed today and with no regulatory approvals needed, we are proceeding quickly with the closing. So that's expected to happen in the beginning of July. And as a result of that, Anora will consolidate Globus Wine to Anora Group as of the third quarter of this year. An important point here, our guidance remains unchanged at EUR 75 million to EUR 85 million in comparable EBITDA for this year. Obviously, the consolidated figures from Globus Wine will contribute positively to our -- ultimately to our results, but the guidance itself remains unchanged. And I think with that, actually, that was the presentation, wasn't it? So I think we are now ready for the -- Pekka, I don't know if you want to do a brief summary before we go to the Q&A?

Yeah. Go ahead.

Let's do questions, and then I can summarize after that.

Great. And we have a question in the chat and it's from Joni Sandvall from Nordea. So the question is, what level of synergies are you expecting from the acquisition? And when should we expect this to happen? And following that, does Globus Wine own its production facility?

The synergies. So the valuation and the purchase price is based on stand-alone valuation. We feel there are positive top line synergies. Like I mentioned Globus Wine significantly strengthens our own wine capabilities across the Nordics and Baltics and Travel Retail, for sure. And with our capabilities, for example, in wine regions where Globus is not that strong yet, like France and Spain, we can help them out and help them grow. They also -- I mean, we can also help them with more pricey wines in order to push them up the pricing ladder in Denmark. So I believe they will help us grow in own wine, in sustainable wine, which is the fastest-growing segment right now, and we can help them to grow in Denmark. In terms of cost synergies, that's something we will come back to. We know for a fact there -- the production is very, very efficient. Their sourcing is probably very, very capable as well, and we believe that there are synergies there, but that's something that we need to do a deep wine -- once, deep dive once we have the full numbers visible for us, which we -- as we were competitors, we were a bit -- we didn't have the full disclosures of all the numbers. So that's something we'll come back to. So the -- yes, on production facility, yes, it's owned by Globus Wine.

Okay. Then we have another -- 2 other questions from Joni. First one is about COVID-19. So how -- do you want to comment how that affect or impacted Globus Wine or the Danish market, maybe in general, if you compare it to, for example, Finland or Norway?

Yes. So the impact of COVID, it was a positive for Danish wine market, obviously, especially the German border market is quite sizable. What we know right now, we estimate that, that impact to be 3% to 5% for the total market. But on the other hand, Globus Wine is operating in German border as well. So it's a bit of a give-and-take there. So I would say, to my understanding, it was a positive effect on COVID but it wasn't nearly as sizable as it was for all monopoly markets. I mean we experienced 10% to 20%. And obviously, Norway was 45%. So it's more single digits in Denmark.

Good. And then about -- do you want to comment on the sales channels and country mix, I guess this is now going forward or maybe for Globus Wine actually?

Yes, the absolute maturity comes from Denmark that the border trade is a good sales channel as well. Baltics is small, and then there are other countries, I think Poland. But I would say right now, Denmark is by far the most significant. In terms of channels, it's all retail. So Globus Wine does not sell to on-trade currently. And if the country mix, I'm not sure what you mean with country mix, but if we talk about the origin of products, then that's mainly from U.S. and from Italy.

Yes. Good. So if you -- Joni did not get an answer, then we can come back to that later on as well. Then we have a few questions from Maria Wikstrom, SEB. The first one is, is there any material difference in Danish alcohol market compared to other Nordic countries?

Yes, quite a lot different, actually. It's what we call an open market so there's no monopolies. Wine is sold through retail and on trade. The second big difference is probably the excise online. So it's significantly lower, mainly driven by the German being a neighbor and a big German border trade. So -- and maybe the third big difference would be that Denmark is quite a big alcohol market overall. Consumption of both spirits, wine and beer is relatively high on the European scale.

Okay. Then the question is -- the next one is about the seller. So who was the seller? And do you have any comments on the motivation to sell at this point of time?

Sigmund, do you want to take it?

Yes. I can take that. So that the seller is Credo Partners, I guess, mainly Norway-based private equity company. I think -- I mean I think in the end, there are the ones who have to comment on their motivation to sell, but I think it's kind of the nature of the business of a private equity company to take -- to acquire companies and then own them for a while, develop them together with the management and then sell it on to an owner who can take it to the next phase in its development. And I think that here, Credo together with the management and the employees of Globus Wine have taken -- have done a really fantastic job. It's very impressive to see the journey of this company over the last few years. And then there comes a time in the investment cycle of private equity company, in the life cycle of a company such as Globus Wine where maybe then it makes sense for all parties involved to sell it to a strong industrial owner such as Anora. So I think that's the main reason if I have to speculate on their motivation. And also just let me -- I have a small additional answer to Joni's question on the production facilities. There is a long-term lease on that. And actually, if you see in our release, you will see a small footnote on IFRS 16 correction. So if you compare the publicly available financials of Globus according to Danish GAAP to the figures that we released on IFRS 16, the difference is coming from there that there is a long-term lease on the buildings in the facility. So I just wanted to mention that.

Thank you, Sigmund, for that. And then there is a question about wine producers or maybe also referring to wine partner. So are there any wine producers you are not serving today in other Nordic countries? Do you think you could lure them to other markets as well?

So let me just try to make sure I understand the question correctly. So if this is ...

Pekka, It's Maria. It's my question. So what I basically wanted is, I mean talk a little bit more about the -- like the sales synergies that if there are producers in, I guess, in Italy, or the U.S. that you are currently not -- you are not partnered with in the other Nordic markets that you think you could -- I mean, with this acquisition, you could basically get a better foothold with those producers. And then try to convince them to come to your clients in Finland, Sweden, Norway.

Yes, absolutely. Absolutely. I think there's -- there will be a lot of good opportunities for finding synergies. So one -- the obvious one is that our wine business in Denmark was very, very small. And now we have a strong base to build on. And obviously, Globus Wine, for example, they don't have partner wines at all. That's obviously something that could be interesting for some of our existing partners. Obviously, global wine sources a lot of wine from different companies. And I think our current partnership or having those new partnerships certainly could open up new opportunities. So you're quite right. I think there's a lot of opportunities to explore. And yes, I do believe that we can lure them to other markets as well. I think, obviously, that is the strength of Anora business model being a leader in all markets, we can offer with the same contract we can offer for markets if that's interesting. So -- and I think that is a good offering to a lot of wine companies.

I definitely hope that you are successful because I would love to see more U.S.-based wines in Finland. So please do so.

Thank you. We keep that in mind.

Thanks, Maria. Okay. So then we -- [Operator Instructions]. So we next take Joni's question about seasonality. So does the Globus Wine seasonality follow that of an own wine business. Do Sigmund want to comment on the seasonality?

I have to be so honest that I don't think I have a very, very firm grasp yet of the specifics of the seasonality of Globus Wine business. I think it does follow -- the market in Denmark does follow the same cycles, right, as a market in the Nordics. So with, I guess, more rosy and white in summer and then for the festive seasons in -- around Christmas that there is more consumption and also Easter the opening of the summer cottage in Denmark is a big event as we know from our spirits business. And then another aspect of it that is more, I would say, more specific to the open market is, of course, the possibility of doing promotions, right, trade promotions. So again, this is something that we are quite familiar with from our spirits business. So in some sense, in the monopoly markets, outside of the seasonal peaks that are driven more by, I would say, festive events. You can also have a seasonal, let's call it, seasonal peaks and troughs that are driven by promotional activity, right? So in some years, you have more promotions in this or that retail banner at a given time and the next year, you may have the same amount of promotions but coming in a slightly different month. So I guess you could say that there is a -- there is maybe a bit more variability in general, coming from an open market where you have more tools in your toolbox, both as a supplier and obviously, as a retailer.

Okay. And then the question from Paul at Taiga, I think that's also for you, Sigmund about the enterprise value and how much of the enterprise value for the acquisition is leasing debt?

Let me just check the number. I think I'll have to come back on that. I don't recall the exact amount that it's not -- it's not a huge amount. I think it's in the order of magnitude of DKK 100 million, if the memory serves me right, so something around EUR 10 million around that amount. It's not that long a lease commitments or the IFRS effective, it is somewhat smaller than if the lease for longer.

Okay. We can come back to Paul on that still to confirm the number. Okay. I think this is at the moment all the questions we have in the chat. So please Pekka go ahead to summarize.

All right. This is a big day, important day for us. You know about the wine market first. It is a growth market in -- and from our point of view, the Danish wine was really the missed piece in our Nordic market leadership position and own wine brands is an important part and a very interesting part of our business. For many reasons, like as said, and not the least for the profitability of it. Own wines are often built on sustainability, and that's the fastest-growing segment in the Nordics. That's what all consumer -- our customers, especially want end consumers more and more. And like I said earlier, own wine is often quite price competitive. So what the Globus Wine, what it has is create sustainable brands, high-quality very efficient supply chain. So it is a great answer to our short and to our long-term needs to grow the own wine. And further, we believe that with our knowledge of certain wine regions, high priced wine, we can help Globus Wine to strengthen their market leadership in Denmark. With that, I guess, I thank you for joining, and thank you for all the questions. I think we have one more question Tua from Maria.

Okay. Great. Good. So -- okay. So could I ask about the cost of the new debt? That's for you, Sigmund too to comment on that.

For sure you can ask whether I'm going to answer that's a different question. No, I don't think I want to go into the details of that other than to say that I think Anora is and remains, I think, a very stable company that I think has seen as a quite good credit risk by various banks. So the cost of the new debt was, I think, competitive. And we will come back with, I guess, more details when that becomes relevant.

Okay. Great. Thank you to the speakers and to everyone online for joining our event today. As I mentioned earlier, there will be a recording and the presentation material on our website still later today. And feel free to reach out if you have any follow-up questions. But we wish you all a really relaxing and sunny summer. Thank you.

Thank you. Bye-bye.