Anora Group Oyj (ANORA) Earnings Call Transcript & Summary

Okay. It's 11:00 o'clock. So good morning, and a warm welcome to the presentation of an Anora's Q3 results. I'm Milena Haeggstrom, Head of Investor Relations here at Anora. And today we also have our CEO, Jacek Pastuszka; and our CFO, Sigmund Toth on the line. We will start shortly with the presentations. [ Jacob ] will go through the business update, followed by Sigmund's review on the financials. And after the presentations, we start with the Q&A. We look forward to many questions from you, and you can start sending them through the chat already during the presentations. And as usual, please, we ask you to mute your microphones and note that we are recording this presentation. And the on-demand version will be published on our website at anora.com. With this Jacek, please go ahead with a couple of words of introduction.

Thank you very much. I hope you can clearly hear me well. Very good morning to everybody on the call. It's my first call with this audience as the Anora's CEO. So, as you would guess, I'm a bit nervous, but I trust we'll manage to run -- we'll go through this important exercise. I think I owe you a bit of introduction about myself. I would not spend too much time on this, because it's less relevant probably than the actual business performance, but still, I want to make a bit of a personal introduction to this important team. An 11th day on the job, but obviously I'm much longer in the business. I have more than 30 years of experience in managing business operations across multiple companies and multiple geographies. I'm originally Polish, but I have been working most of my career internationally. I worked in the U.S. in the U.K., in Norway, in Denmark, in Russia, and obviously, in Poland for a period of time. I have multiple background, so brand building plus sales execution is my primary area of concern. Although, for more than half of my career, I was in general management position. I managed 4 companies in 3 different markets in 2 industries. This my fifth one, although this -- what makes this one special is that it is the first listed company that I'm managing. So I, obviously, have a bit to learn in this respect. The most relevant experience, which I can see was already noticed because somebody called me, an ex-Carlsberg guy, is indeed my Carlsberg tenure. I was 12 years with Carlsberg, 6 of these years were on the executive committee of Carlsberg as part of the team of Cees 't Hart who has turned around Carlsberg business over the last 6 years. And during this time, I was the Executive Vice President for Western Europe, which is probably the most relevant thing here, because at that time I was in charge of all of the Nordic markets. And before that, I was also in charge of Eastern Europe operating out of Saint Petersburg in Russia. What may be also relevant for this job is that I was a CEO of Ringnes in Norway between 2011 and 2014. So I'm more or less know the context of the Norwegian or Nordic markets for that matter. As I said, it's my 11th day on the job, but I would be very happy to answer any questions that are directed to me. I may not have all the answers to all the questions. But if I don't have them, I know how to find them and provide to you later. So with this, I think we can move to business update. Can we switch the slides? Yes. Thank you very much. All I can say at this stage about the Q3 performance is that it is a bit of continuation of the trend that we have seen on a year-to-date basis. I would say that this numbers, looking at them objectively as an outside -- with an outsider perspective, I think these numbers are slightly better than the Q2 numbers. But we have to admit that this more of a continuation of the trend we have seen on a year-to-date basis, which is most definitely not a complement. We started seeing some ramp up in our mitigation plans, some impact from pricing, some impact from cost efficiency measures. And we also have a bit of relief on the raw materials as in the input prices. But, definitely, it's very visible already now that more is needed to stabilize our financial performance, improve profitability, and get on the right track and deliver a type of turnaround that we can all be proud of. So more is needed. You have seen this morning that we have announced another set of measures to adjust our cost base to the workload that we are expecting to be ahead of us. I would get to the subject later in the presentation, and we'll provide together with Sigmund a bit more detail on the subject. So to summarize, more is needed to cover for the profit deficit that we face in our results. To be more specific about the numbers, and I will focus on comparable EBITDA, and net sales obviously, because there are other factors, especially, the Larsen divestiture that influenced other lines, and I will leave the pleasure of discussing it to Sigmund. On net revenue side, we see a negative quarter. On a year-to-date basis, we're still positive, but for the quarter, we are minus 5% to 8%. We need to keep in mind that we have cycled the full 4 quarters, 12 months with Globus now. So we're comparing ourselves to the proper like-for-like now with Globus in the historical numbers. Globus actually, in case, you were to ask about it, was performing well in net sales performance. So it is the other parts of the business, especially the wine, the partner wine in Sweden, and partly Norway that depressed this net revenue. The comparable EBITDA EUR 3.2 million below, 14% or 13% something percent below last year -- the third quarter of last year, which is definitely not a good performance. The impacts from Wine segment only is EUR 6.7 million, so we have managed to mitigate [ soft quarters ] through the actions on the other parts of the business, which as I said before, is still not adequate. We will get to the wine performance in a second, but it's not hard to see that this what is burning a hole in our pockets, so to speak. The partner wine, especially partner wine in Sweden is our biggest headache now, both operationally, but also from the financial point of view. And I'll get later in our wine discussion to the actions we are taking to correct it over time, rather than spending another presentation on discussing the reasons for it, because I believe we all more or less know the reasons behind it. The highlights of this quarter were, obviously, a well-structured and well-executed. Larsen divestiture, again Sigmund will show us more detail on the impact. It has gradual impact from price increases. They were introduced -- the large ones were introduced in September. So we will gradually see the impacts from this increases going forward. And also part of the cost cuts was already executed, and there is more in the pipeline, because we quite clearly see that more is needed, both to adjust our structure and cost structure also to the workload or the priorities that we have, but also to actively manage profitability. So that much on the overall Q3 results. Let's go to the segments, because I would like to provide more detail on the segment performance. Can we switch the slide please? Yes. Thank you very much. The 8% decrease in net revenue. It is, obviously, a headache to see this lost revenue, which is driven also by translation and the country mix that we have and the impact of currencies, obviously. But the real headache that we have is, obviously, the EBITDA performance. We lost 3/4 of our EBITDA quarter-on-quarter compared to last year. So it's not a small number and it's a massive net profitability of this part of the business. As I said before, the reasons are quite well-known, so I would not bother you repeating them again. It is, obviously, the partner business that is where we are struggling. The 3/4 of this issue is Sweden, the remaining part is Norway. Our own brands and local currencies -- in local currencies -- partner-wide local currencies, this performing actually quite well. But the impacts from these big factors, especially related to currency and loss of partners in Sweden, is making the gap that we have to cover so big that we struggle with covering it. Obviously, there's a translation and transactional elements to the currency. In fact around 1/3 is translation, around 2/3 is the transaction. So paying a bit more attention to the transactional part of it is something that we need to do even more intensely than before. In terms of the mitigation plan, I would highlight the 3 things going forward. The first one is, obviously, price increases. We have I think utilized the September window reasonably well, and we will see the impact gradually in the quarters to come. But it doesn't mean that this journey is over. We have another window opening in some these -- some of the markets in January in Norway, I believe. Yes. And in other markets gradually, throughout the first half of the year. So we need to use this pricing window as well in the monopolies to correct the situation pricing front even further. Then on cost savings, as you might have noticed, or if not, we'll provide more detail throughout this call. Wine or wine structure and wine business is part of this planned intervention into the organizational setup, and operating model. And we'll get to it later. And then the last thing, which is a bit broader, but I think equally important, that we will more actively than so far manage the partner mix that we have. We want to increase the share of the partners who are eager to build value together with us through a combination of increased pricing, reduced or improved efficiencies and jointly addressing the challenges related to currency devaluation. So we want to team up with the partners who want to support us in this value creation journey. That much on wine. I'm sure there will be more questions. So I trust that together with Sigmund we'll be able to address them. Can we switch to spirits? Yes, on spirits, on the relative terms, obviously, and I have to be careful of how I position it. But in my view, at least, again, taking an objective, I believe, still view the Q3 numbers. In relative terms, it is a highlight of our performance in Q3. It's a good performance. It's a strong performance, I would say. Yes, we have flat net sales. But in the markets where the monopoly business declines, we managed to increase our share within the monopoly segment. At the same time, the headwinds that are severely impacting our wine business are more or less the same headwinds that the spirits have to deal with. And so the actions they are taking -- we have taken in this area are quite similar. They're related to pricing and including efficiency and mix management. Mix management at all levels, so brands, channels, categories, partners. And we seem to be doing it better for better financial performances at least. Yes, we don't have this impact of lost partners, but still all other headwinds is something that the spirits organization has to deal with as well. And we do it quite well, I would say. The big difference, obviously, that you would pick up on immediately is the different share of own or split or mix between the own brands and the partner brands within the spirits business, where we have a little bit more control over our destiny on many levels. And maybe this the right point to talk about our stance or my thinking, at least on the partner business. Our discussions on the wine partners and the impact that this meltdown, especially in Sweden, has on our performance. It may create a wrong perception that our partner relations will be scrutinized aggressively. Yes, as I said before, we'll be working hard to improve the mix, knowing partner mix, the share of partners who are eager to support us in value creation on the wine side, especially. But generally, a partner business is a very important part of our overall business model and in our underlying performance. It's in our DNA to provide the high level of service and support to our partners. We have something very unique to offer within the Nordic partners, to global partners. We have long history of collaboration with really large partners. As an example, we have now did big switch from Brown-Forman to Coca-Cola Hellenic under Finland brand. After 18 years of collaborating, we are switching to another large partner. So in our DNA there is this belief that having strong, mutually supportive relationship with partners is critically important for us, and we have good evidence that it works well for us. However right now, right here and especially in our wine business in Sweden, we virtually struggle with this. Maybe this context is worth mentioning also. Globus. I know Globus is usually mentioned in this calls in the context of surprises, following the acquisition has some questions around the quality of due diligence. So I had a pleasure of visiting the Globus business earlier this week as part of my onboarding. I -- obviously, we have to fix the issues related to profitability and recover from a ditch in which we found ourselves. But in terms of what Globus wine business brings to overall Anora, this is all positives, I would say. They're injecting lots of energy, new thinking, good understanding of the wine business, especially on the wine branded business. And also very good understanding of the grocery channel, which by definition, they may be missing or the underdeveloped in the monopoly markets. So it's a bit of a mixed picture on Globus. I just want make to sure that when we discuss the financial part, we don't forget about the positives behind this acquisition. It's just our job to make sure that they materialize. The last point I would make here at the end of these 2 segments' discussion is that, we recognize the criticality of the fourth quarter. I noticed already comments, which are absolutely correct, that by missing the consensus on EBITDA by around 10%, we're creating some sort of question mark around our ability to deliver on the guidance. We are, as you can see, we are iterating the guidance. And it's based on our strong confidence that we have the right plans for the first quarter on the volume side, mostly around utilizing the seasonality of glogg of Blossa, obviously, and also aquavit, but it's very heavily dependent on volume. There is also heavy dependency on the first quarter. Sigmund would make more comments about this, but I just wanted to highlight that we recognize the criticality of the first quarter and also the importance of the volume delivery in this first quarter. On the industrial -- can we switch slide? I will not spend too much time. I will not pretend that I'm an expert on the industrial side of the business. What -- all I can see is that it is a stable source of revenue, even if it comes at a lower level of marginality than the rest of the business, it's still a decent marginality and good contribution to our gross profit and EBITDA. Obviously, there are also fluctuations that we see in the third quarter in revenue, depending on external factors. Yes, very, very frequently. What I appreciate is this business -- it's our ability to offset these fluctuations in the revenue at the gross profit, or especially at EBITDA level. And this is exactly what we can see in the third quarter. We had quite a lot of headwind on the top line front, but we delivered according to expectations on the EBITDA. We have different levels, obviously, of pricing power across the 3 elements for external sales. So starch, technical ethanol and animal feed. But at least it's a decent mixture of categories and we are able to manage this mix effectively. So for this -- that's it. I think for now, yes, I will have a bit of summary at the end. I will spend a little bit more time at the end talking about the adjustments to the operating model that we are planning, the reasons behind the impact that we should expect. I will be happy to address any questions that you might have. But with this, I would like to hand it over to Sigmund for more detail on the financial performance. Thank you.

Thank you very much, Jacek. So if we switch to the first Slide please, before we dive in the financials, some words on the overall market development in our core markets. So the Finland, Sweden, Norway and the Denmark. And what we see here as an overall picture is that the sales in the monopoly markets are continuing to decline slightly versus the same quarter last year. Although, now we are getting to the point where the big impacts from normalization after COVID are starting to get into the numbers, so the declines are lower in percentage terms than they were for the same quarter last year compared to '21. In terms of the categories, what we can see is that, spirits are declining somewhat more than wine. As you know, over the longer term, the trend in our market has typically been that, on the volume level spirits have grown somewhat slower than wines than have, although with a lot of variations between different categories within spirits. And then in terms of the markets, the biggest declines came in Denmark, driven by spirits there, with wine somewhat of a less decline. And then Finland, and then Sweden and Norway, the declines were less significant. Another interesting thing to look at here is to compare to the pre-pandemic level, so the same quarter in 2019 versus this latest one in 2023. And what we can see here is that Sweden now is almost at the levels, it's still slightly up versus the pre-pandemic level. Finland is below by 6%. And in Norway, it does seem for various reasons, be it new shopping habits or other factors such as the relative weakness of the NOK even now versus the SEK, that there is still more volume, significantly more, I mean, 15% almost more sold at the monopoly in Norway in Q3, 2023 compared to the same quarter in 2019. So for Anora, of course, we are -- we aim to be present everywhere in all of these markets. But all of the things equal, as you know, from previous calls, we have a somewhat higher market share in Norway, both on wine and spirits than we do in Sweden, which is the market where there is a border trade. And so -- and also have higher margins in the Norwegian monopoly than in some of the other channels. So all of the things equal, if there is a, let's call it, permanent volume shift to the Norwegian monopoly, that is good for us. If we then move to the next slide. So here we see, and this is a new slide for those that have been following us for a while here. You can see that the seasonality of our business in terms of the group net sales. So, obviously, the furthest most quarter is a Q1. And then you have Q2 and Q3 that are, if not entirely equal, then roughly at that level. And then Q4 is really the quarter where a lot of the things happen. And then as Jacek previously elaborated, this quarter, our sales were down by 5%. And -- but on the year-to-date basis, they were off 7%. But that -- it has to be said, is greater then, as you can see in the bottom-left corner, by wine. But here it's the full year effect of Globus through first quarter, which is driving the year-to-date. And then on spirits and industrial, they are more mitigated net sales increases dampened by the currency translation effects, but driven by -- on spirits, by the net sales expansion, especially internationally with amongst other things Koskenkorva doing well. So if we move to the next slide please? And here we see the impacts of the longer term perspective. So we are comparing here on the left, the Q3 for '19 on a performance basis, 2021. And then Q3 of last year and this year, which are comparable. They are apple-to-apple in the sense this was already in our net sales numbers same quarter last year. And there you can see that the net sales decline is driven by wine and by industrials for the reasons that Jacek mentioned. And then spirits is basically flat. Again, it's currency effect, lost partners in wine, and then we have taken very significant pricing. But the latest round is only in only in September and thus, it's not compensating for these impacts. You may wonder, well, where is the Larsen divestment? It's not in those numbers because it's included in that consolidated income statement in a line that is reported, the other operating income. And the Larsen effect there at EUR 12.2 million, so that's the larger part of that EUR 14.3 million that is on that line. And then going forward, this will have a negative impact on our sales of EUR 6 million and EUR 2 million on comparable EBITDA. So if you're wondering where is that big revenue? Well, that's where it is, and it is on a different line. If we then move on to the next slide. Here we have, again, this is a new format compared to what you have been used to, again, providing with the perspective on the seasonality of the business. As you can see, and then you understand from our relatively high level of fixed OpEx. The increased net sales, or the seasonality of the net sales typically leads to a crescendo, if I may call it like that, of profitability with the smallest -- the first quarter being very, very piano. And then we have a fortissimo at the end with the Q4. Typically, last year it was not quite the case. There were a number of factors that has affected us into this year that depressed last year's Q4 figure, but that's, obviously, a factors take into account when we look at what is yet to be delivered. So this quarter, as Jacek mentioned, it is definitely a mixed bag, not at the level that we wanted to be. You have 2 out of 3 segments that are improving, but then you have the wine segment where there are very significant profitability issues. And that's the reason that we are down. And again, the price increases, as of September, so only one month here in Norway and Sweden, and then price increases for Finland effective as of October. We move to the next slide. That is a bit the same picture as what we are showing in the previous one with the wine being in decline, and then the others increasing, compensating somewhat. And then if you look at the picture of Q3, in historical perspective, you could see here that the comparable EBITDA is about at the same level in terms of absolute EBITDA as the pro forma 2019, so the last pre-pandemic year. Now, you can see that the margin has not recovered. And the very simplified explanation for that is that, of course, we have added their very significant revenue from Globus. But in EBITDA terms, still in this quarter, the contribution there is quite limited. But I think it bears remarking that in terms of the overall EBITDA of the group, we are almost back to the same level as we were in 2019. And then it's also very important then to remark what did these years of 2021 and partly '22 look like in this boost that we got from COVID? Although, I think it's fair to say that last year probably that boost was not very significant, but it was in '20 and '21. Very good. If we move to the to the next slide, please. Barley, our favorite crop, in close competition with the Norwegian potatoes from which we make fantastic alcohol in a sustainable way. And I think that it's a bit reassuring to see that we have come down somewhat from the Mount Everest of last year in terms of the barley price. Although, I have to say that, as you can see from the graph, at this EUR 215 per tonne, we are still at significantly higher levels than we were in previous years. So it is something that is -- although, a 26% below the previous year, it is something that impacts our financials. And right now, the harvest, I think, can be said in Finland was not fantastic, but it was also not terrible. So, I mean, our estimation now is that there is a tight market for some needs. There are barley imports to Finland. And we expect that the price is forecasted to stay above this normal level for '23, '24, but we don't believe that it'll increase from the current levels. So there you have it. If we then please move on to the next slide? And here we have -- we have also a new slide. Working capital is very much a focus of ours. And as you can see, the net working capital as -- I mean, admittedly with some downward rounding, but still it is very close to 0% of net sales for the last 12 months at the end of September. Part of this is a purely seasonal impact. Typically, working capital, it decreases. And especially, then it's the decrease in the fourth quarter, so more to come. But there is a big difference here. So inventories here has decreased EUR 285 million, but it has to be admitted here in the spirit of transparency that, that impact is entirely due to the Larsen divestment. We think that the inventory levels are still too high and are working very, very hard to benefit really from the high sales season in Q4 to take them properly down on a like-for-like basis. That's something that normally happens as a matter, of course, due to the to the seasonality of our business with high sales and then lower production and purchases in the last quarter. But then we are working over and above that on concerted efforts to take the inventory down on a like-for-like basis by around EUR 30 million. To be fully transparent, that is very much still work in progress and we will have to report back to you on exactly where we end up. I don't think that we'll be managing all of that adjustment this year, but it's in our plans to manage significant decrease. And really that is for Q4 to come. And then the other explanation for the net working capital being down is that the trade and other receivables have decreased significantly. And this is due to the fact that we have, as you know, expanded our sales and receivable program very significantly, then selling also the monopoly receivables in Norway and Sweden that are related to [ net surplus ] parts of our business. So all in all, then that leads to this very low level of net working capital currently which will vary with the seasons, but vary from a lower level. If we then move to the next slide, please? So here, so the operating cash flow, on a quarter-by-quarter basis. And I think here I want to emphasize the year-to-date operating cash flow, which has improved significantly versus last year. And when -- it has a negative impact year-to-date, when today it has a positive impact. And 2 reasons explaining that. One of them -- and they are basically the ones that you saw on the previous slide. So it has to do with the positive impact from the sales of receivables namely. And then in some sense it also has to do with the fact that we haven't really had the big inventory increase that we had last year. So last year's poor performance is not being repeated, so to say. And then you may ask, but where is the -- why is the net cash flow from operations? Why is it negative actually in Q3, which is not a positive impact versus last year? And the explanation here is a little bit technical. But, basically, the idea is that there is a seasonal impact also of our receivables, where normally then from the beginning of Q3 to the end of Q3, the receivables decrease, increasing the operating cash flow. But, of course, since we have now increased our sales of the receivables, they were already sold and a positive impact in our balance sheet at the end of Q2. And as a result, the seasonal impact in Q3 was not around to provide us with a positive boost. So you can say, obviously that the fact that those receivables they are sold is one element of variation, positive and negative, with the seasons that has been eliminated. And that was helping us in Q2 and then hurting us in Q3, but on a net basis year-to-date is a positive. In terms of overall cash flow, obviously, very positively impacted by the Larsen divestment about which more later. And in terms of the CapEx, it's somewhat up versus last year. There are variations from quarter-to-quarter, obviously, but here we are putting a lot of effort into replacement investments and to improve work safety and energy efficiency for sustainability purposes. If we then go to the next slide, please? So, leverage, I mean, this has been a big topic. Our leverage increased versus the previous very low levels. The beginning '22 behind pre-impact. One impact was the acquisition of Globus Wine, which added to our net debts since it was debt financed. And, unfortunately, as you know, it didn't add in the end that much to comparable EBITDA, because the profitability was lower than what we believed at the time of acquisition. So that is one factor. Second factor then is that we added this EUR 30 million in inventory, which was also increasing our net debt. And last but not least, in then the subsequent quarters as our comparable EBITDA was poorer than it was in the same quarter years before, and that happened now for a number of quarters in a row, this ratio, which has net debt over comparable EBITDA also worsened due to the fact not only that net debt increased, but also that comparable EBITDA decreased. So the good news is that with the Larsen agreed sales price of EUR 58.5 million paid at the closing on September 29, we have been able to, in spite of this decrease in the comparable EBITDA on the rolling 12-basis, to decrease the leverage to 3.5x which is slightly lower than at the end of the same quarter last year. I mean, we still have some way to go to our targets of being below 2.5x. But the avenues there are clear. It's to get our comparable EBITDA up, and it's to get our inventory down. In terms of other elements about debt structure and liquidity position. We have a very strong liquidity position. We have a revolving credit facility that is unused, and we are financing ourselves mainly than in Finland to the use of commercial papers. If we then move to the next slide please? Yes, so our long-term financial targets for 2030. I mean, we have not -- we have not put any colors here, and that probably is for the good, because there would be a lot of red. But still it's important to put it here. I'm sure that you'll keep us honest with your questions. But we try to do that ourselves as well by showing this slide. And here the only metric, which is, let's call it, in line with our targets is the one on the annual net sales growth, which is at the upper end or even for '22 a bit above the range that we've communicated. And then the big challenge or issue for us is the comparable EBITDA margin, 16% is the target. Admittedly, that is a target for the end of the period. But still, I mean, it's quite clear that in terms of our performance, we are not where we should be. And then you have the same with the net interest bearing debt, we just talked about it, so I'll not go into that. And then in terms of the dividend payout ratio, which you could call a green, but, of course, that is of little comfort to you. So I will not even make that attempt, because one thing is the payout ratio in terms of the net result. But if the net results are poor than the absolute amount of dividend that U.S. shareholders, for those of you on this call, which I assume is most of you, is lower than what you can reasonably expect and lower than what we are aiming to deliver. So there, our focus is on getting the comparably EBITDA and getting the net result up. And then mechanically it'll follow that dividend payout ratio or actual dividend payout will be better. Although, of course, it bears to be said that the flexibility that we have, if we then improve on this net interest bearing debt metric which we have done with the Larsen sale and which we want to do with the working capital, obviously, then that provides us more flexibility for a higher dividend. And then I believe that I still have -- do I have one slide left? Let's go to the next story and send back to Jacek. Yes, it is. I think it is back to you.

Yes, I think you --

Sorry for the confusion. I don't know. Maybe I am the nervous one as well. Back to you the Jacek.

Thank you very much, Sigmund. So I have 2 slides to wrap it up before we get to the questions. Firstly is the quick summary of Q3, which will be a bit of a repetition in the summary of what I talked about in the beginning of our call. And then I will give some more information on the press release that we have published earlier today on the planned changes to our operating model. But first, let me start with the summary. As I said, I personally believe it is objectively better than Q2, but it's very relative, because Q2 was really at the low end, I hope, of our performance. But Q3, definitely, was far from stellar to say politely. And also the fact that we missed the market consensus is, obviously, not a good news. We have some packets of strong or decent or acceptable performance here and there. I mentioned trying to be balanced about it throughout my introductory parts. So definitely own wine performance or things like Koskenkorva in the international markets and a few others are the things we could mention. But, obviously, their impact pales in comparison with the overall performance. And the key thing that, as I said, burns a hole in our pocket, which is the meltdown of the partner wine business, especially in Sweden. And at least at the current level of our -- the quality of our planning and execution, we were not able to so far offset it. But it's not for the lack of trying, but we will have to try a little bit harder to do that. And I will talk about it later in the context of these changes to our operating model. The second thing here I would mention which is the last point here is about the Larsen acquisition. Obviously, it is a one off, but it was a very desired and beneficial to our balance sheet and the quality of our financial divestiture. So it needs to be highlighted as one of the accomplishments of this third quarter. And next then if could we switch the slide? I think I have this final slide about the changes to our operating model. Yes, let me give you some background to this. It is important for us to recognize that this is the plan that was prepared by the management over the last few weeks. This is not something that we prepared on the back envelope when I had arrived. My small contribution to this whole thing may be accelerating the execution of the plans that were already on the table and maybe slightly strengthening and increasing the scope of the actions that we are planning. Because, obviously, we'll follow -- we'll be compliant with all local labor laws and regulations. It is at a planning stage and we'll engage the employee representatives in discussing both our plans and the consequences it will have for specific individuals. So we'll do it in the right way. But the intent is very clear. We need to make changes to our operating model, which should not be at the same time a surprise, because Anora is a young company and our operating model will continue to evolve in order to improve efficiency of our operations. That's the first thing. Second, to improve the effectiveness of our strategy execution. We have communicated some strategies and we need to deliver on them. And then also, obviously, profitability. The general theme here, it's not about reducing headcount, it's about reducing workload, or maybe, in other words, reducing the number of priorities. I want us to do fewer things, do them better, and do them longer to be more persistent on certain subject, but also to have resources and attention given to these subjects. So the intention here also is to reduce complexity to strengthen commercial focus on things that work and things that move the needle or things that need fixing, and because we don't fix them then it need -- move the needle in the opposite direction. And this reduced workload or reduced number of commercial priorities that we're planning will have an impact, obviously, on the workforce that we'll need to deliver on this. We need to improve the clarity in our commercial choices, in our -- in choosing the battles and discipline in executing on these choices. So it'll require some hard choices, first and foremost on the agenda side, but then it will also have some consequences for the workforce. So if implemented, after the consultations and after discussions with the employee representatives, we expect that the impact of this will be around 40 headcounts, 40 employees that will be affected for the total bottom line effect of EUR 3 million to EUR 4 million. Again, I would like to reinforce that we'll do in the right way, the Anora way, which is in compliance with local labor laws and regulations. These are plans and the management intent at this stage and it's subject to further discussions, but we are very intentional about making this happen because the business requires this. That's all I have at this stage. Sigmund, I think did we miss anything?

Well, I'm not sure that we did. And I see that there are many, many interesting and good questions waiting for us, though, probably.

I didn't had a chance to read them. Yes.

So I think that, I don't know, Milena, if you want to read them out or if I should read them out, then we can get started on those?

Yes, most certainly. I can start reading them out here. Where they start. Yes. So there are many questions on the chat, and you can still send those over. And you can also raise your hand to ask a question. We will first go through the chat questions, and I will start here. So first question is from Rauli Juva. Can you share what are the expectations for Globus for Q4? Any meaningful improvement or EBITDA contribution expected there?

Yes I mean, we will not share specific figures for Globus. But I can say 2 things, and I see that there is a similar question also from Joni Sandvall about profit improvement is going in Globus, and did we reach positive EBITDA? So let me try to answer the 2 questions together. And the answer is yes. We did reach a positive EBITDA for Globus in Q3 of this quarter. And unlike last year, when the reported EBITDA for Globus was also positive, actually more positive than it is this year, we now think that the numbers and the accounting is correct, and it is a real achievement. So that is a lot of hard work from the Globus team behind that to reach that positive comparable EBITDA. But we are now at least on the right side of the 0. Although, a lot of work still remains. So that's one point about the underlying. And then another comment, which is about the contribution from there, and especially the contribution there relative to last year. So here, there are a bit of opposing effects with Q3 when you are comparing to last year for -- and the Globus impact and Q4, because as you know these, let's call it, accounting irregularities or inflated profit and inventory values were discovered during the year-end closing. So they were all reported against Q4. So the reality of it is that, Q3 and Q4 will have for this Q3 and are is projected for Q4 to be better on an underlying basis versus what we believe the equivalent results were last year. But in terms of the impact to the group's EBITDA, this quarter, we saw a negative impact from Globus versus last year, because last year in Q3, they were reporting and we were reporting inflated numbers due to this accounting problem. And then it'll be the opposite impact in Q4 when this big write down of inventory of EUR 3 million, which occurred in Q4, will no longer be there. So I hope I answered your question.

Yes, thank you. And then continuing with the question from Joni Sandvall. Have you seen any change in demand following on monopoly price increases in September? And have you seen price increases from competitors?

I think that the first question I think is a bit too early to tell. I mean, as you saw most of the markets, at least, the monopoly, they were in sort of negative territory, part of which is still just a normalization effect after COVID. I mean, I think -- but then there are many effects going on as well. I think that it's fair to say, because here you are asking about monopoly price increases, than that maybe the demand is a bit weaker rather in the on trade channel in some of the countries, Finland and Norway maybe, in particular. So how all of this plays out, will demand drop following those price increases for the market as a whole? I think that it's too early to tell. We haven't seen a massive drop now, although the monopoly volumes are in negative territory. But that was the case also prior to the price increases. And whereas we have seen price increases from competitors? Yes, we have, and I would say mostly in the same order of magnitude as Anora. Although, if you want the more details, I think that it's fair to say that on a year-over-year basis, we are taking somewhat more than the market on spirits, and we are still taking somewhat less than the market on wine, especially on the partner wine side. So -- and that's something that, obviously, as you know, we are evaluating on a running basis.

And following question to that from Joni Sandvall. So if excluding the lost partner deals in wine, what was the underlying growth?

There I have to -- it's not -- admit ignorance. I have to admit that I don't have the immediately that figure there. I mean, I have to admit that also internally now, our focus is not necessarily on trying to come up with a new metric that is sort of making us look good if we exclude all of the bad news.

Exactly.

The fact is now our focus is on facing this reality, which is there, which is that we lost these big partners. They were also quite profitable partners. And we have regained some partners, but not to the extent of the ones that we lost. I mean, I would say that, and I have to come back and do the more detailed map. But on the existing portfolio on a like-for-like basis, we are doing a good job. We are winning tenders. We are launching new products, both own. And then on the own, we are clearly growing 11% in local currency. But also on the partner side, we are having good success with the tenders. And market share performance is also decent. So a large part of the problem if that's what you're aiming at is the lost partner deals, but that's part of the game, right? When you are in the wine partner business, if you are losing more partners than you're gaining and more profitable ones than the ones you are onboarding, then you have a big problem that we are trying to address.

Continuing question from Rauli Juva. How much of the current cash are you planning to utilize in paying back debt? And when is that expected to materialize?

Yes. I mean, I think, let me not give a super precise answer to that. I mean, we are in the middle of a process to have a look at harmonizing and joining our various cash pools from the ex-Arcus and ex-Altia sides. And then we will have to figure out with our new Treasury Director who just joined the company exactly how we make use of that cash. I mean, wanting to not forget as well is that there is a very, very high cyclicality, right, of our business with the working capital needs going up. So that cash varies even within the month. But let's just come back with a more precise answer on what we do. I mean, let's also not forget that in terms of, as you thought from the figures, we have very significant amounts of commercial paper that is out in the market. So it's also in the first instance, as we already done a matter is simply not rolling over those commercial paper. So that's happening kind of as those mature, those short-term commercial paper.

And a question from Joni Sandvall. How is the center of excellence strategy progressing?

Center of excellence, that is a short question and -- but a very complex answer. And maybe I try to give my answer. And then then maybe also, if Jacek is comfortable with that, his observation on that. So I would say the center of excellence strategy is proceeding well. I think that this is an opportunity also, because I know that many of our employees are probably watching this as well, to give a huge amount of credit to everyone who is involved in those efforts. And those are white collar employees, blue collar employees on the line who are helping each other, teaching each other with moving wine volumes from Norway now in the first instance to Globus wine, with everything that has to be done administratively and in terms of technicalities to actually ensure the safe and high quality production. It's really something that needs to be recognized. So I would say that it is proceeding as planned. Well, thanks to huge efforts of everyone. And at the same time, as you know, reality is always a bit more complicated than the PowerPoint slide. So there are plenty of challenges, but we have very good people who are working on addressing those.

Thank you. If I can add a few words to this one, and with a bit of outsider perspective first, because obviously I had a chance to go through the overall plan and also talk about the execution of this plan with the right people. We also know that we have a change -- handover in management of the supply chain part of the business, industrial part of the business from Hannu to Risto. So I had a chance to spend a good amount of time with both of them and also with employee representatives to discuss how this is progressing. Having observed similar exercises in the past in different organizations, I have to say, it is compliment to the people who are managing, who designed and are managing this process that it is progressing surprisingly friction free which speaks to the clarity of the choices made and also the quality of execution of this. And then if we are on track, and Sigmund seems to be confident that we are on track in delivering the committed benefits behind it, generally it's a thumbs up on centers of excellence execution. Thank you.

Thank you. And then we have a question from [ Yuri ] [indiscernible]. You guide for an adjusted EBITDA for Q4, between EUR 29 million and EUR 37 million as you have not narrowed the interval. What would it take for you to reach the higher end of the guidance which looks challenging to say at least? Or is it just left for optical or consistency reasons?

Well, I think this is one of those situations where, obviously, I think that you come to this call to learn things, and then obviously I also learned things. So, I mean, I can only say that this a good point. And as we've mentioned both of us, both Jacek and myself, our Q4 will be very, very challenging. It's quite dependent on our volume and to some extent on the behavior of the NOK and SEK versus the euro. So I think that's a fair point that you make. And I won't comment on that on that further, other than saying that I take the feedback.

Thank you. And a follow on question from [ Yuri ] , a couple of questions on net working capital and inventory. Further reduction potential for inventories, you say, but is this effect positive in entirety offset by a similar reduction negative in payables, and hence no reason to assume a permanent downward shift in net working capital adjusted for all the seasonal fluctuations, of course?

Yes, it's a good question. I think that the fair point here to say though is that in terms of the payment terms that we get from our suppliers, they would then be typically be shorter than the amount of time that we are keeping this inventory in our stock. So I'm not sure that's entirely correct, but you are right that of course, there is an offsetting impact also. That's quite correct. But there are obviously other benefits as well without the purely net working capital such as simply the space or the operational efficiency in our warehouse.

And a follow on question on factoring and sale of receivables, what is the approximate implied annual interest level or implied rate of return when sold? What is your cost of capital on this scheme?

I won't disclose the exact annual interest level but I would say that you can imagine that first, since these are short-term, this is implicitly as some sort of short-term financing. And the counterparty is implicitly a AAA, since it's a government counterparty, you can imagine that the margins that our esteemed bank connections are charging us on this financing are the lowest sort of available. So I think that's about what I would like to disclose.

And a question regarding Larsen. How much trade and other liabilities have you historically had related to the financing of Larsen business, and then some background on assets sold?

Yes, background. Well, as we said, the inventory was about EUR 31.5 million. So that’s the asset side of things. There were also some receivables around a EUR 1.5 million, and I'm talking now about point in time estimates, and then on the liabilities, about a EUR 1.5 million.

And then a question from Joni Sandvall. Can you comment on Larsen seasonality and impact on Q4?

I think drinking cognac for Christmas or gifting it to your friends and family and cousins and then business context, et cetera, I think is a magnificent idea, and I strongly encourage you to do that. But I think that normally that is also a habit. I know in Finland especially, there are very beautiful sort of gift packaging as well. So those jokes aside, I mean, I think you can do deduce from that Larsen seasonality is a bit skewed towards Q4. So there is more than fair share, let's call it more than 1/4 of the seasonality is clearly coming in the fourth quarter. I mean, as a rule of thumb, I would say that use the seasonality of the spirits business at large and maybe add a little bit because it is the type of product that maybe is even more seasonally dependent, but less so than for example aquavit or glogg.

Okay. This was the chat questions, then let's move over to the live questions. So if you want to ask a question, please raise your hand. And we have a question from the telephone lines. So let's check if I can unmute or if you can unmute yourself.

Yes. I think this is Maria Wikstrom from SEB. So I think most of my questions are asked, and I think you already touched this subject already a little bit on the different way. But still thinking about your full year guidance. And if I would put back the inventory write down in Globus wine that happened last year, Q4, I think you still, in order to get to the lower end of the guidance range, you would need to grow your adjusted EBITDA by 21%. And now you were done 50%. So if you could just walk me through that. I mean, if it's the price increases and how much they would represent and what gives you confidence that you would actually hit the low end of the guidance range?

I mean, it's those things. I'm not sure that I'm going to quantify all of them, but it's basically 3 components. One of them is the full impact of the price increases. So one's done in September, and then additional ones in Finland, quite significant starting with October. So not something that you can see at all in the Q3 numbers. So that's one thing. Second thing is in terms of the cost of goods sold the year-on-year comparison is that by the time that you had reached Q4 last year, there was more of the bad use, so to say that was already in our base. So the raw unpacking material inflation, it was coming gradually through last year. And so but it was not yet deflating our base of last year. And so from that point of view, the comparison numbers are somewhat easier for us. And then last but not least, there is then the continued focus on OpEx and lower marketing costs than last year. So there is still some to come on that front. So those are the big elements that in addition to the Globus wine. But I think that it's, as you and others have pointed out in your various analysis, it is a challenging quarter for us in terms of where we are very much dependent on the volume and other things going our way.

And then my other question is on the wines partner portfolio, and I mean, now you say that the existing partner business, I mean, that was performing well. But I think, I mean the Jacek mentioned that you're going to look more into detail the profitability of the partner business. And I'm just wondering that how you're going to limit these kind of exits in the future that I would think that, I mean, if I were your partner, I kind of wanted you to invest in the business, and now we have a second round of the cost cutting going on. So how you can convince your partner that, I mean, they really want to work with you going forward as well?

Well, I mean, I think that first, I mean in terms of what I was saying, I was talking about the commercial, I think that performance was related to the commercial performance of the existing partner portfolio, right? Not necessarily the profitability. So that's one point. And the second point is around the services that we are providing to the partners, which we still think and I think this is sort of our objective statement. If you look at our Oracle, Salesforce be it in Norway, Sweden or Finland, it remains market-leading, right? And we remain Norway, the leader and #2 in Sweden. And I believe also still the #1 in Finland. So, however you look at that is affected in terms of the capabilities that we can offer the partners on assisted level they're still the best in the market. So that's number one. Second, then it is individual and don't forget the partner business is we have a number of different operating companies. So this is on a partner-by-partner basis. And rather to make, than to make kind of like big statements, I would say about the overall ability. So the reason that we believe that we can convince our partners to keep staying with us is due to all the very, very talented people working on the partner business day in, day out. And they are on everyday earning the trust of their partners. So it's difficult to make kind of like an overall statement other than the fact that efficiency or no efficiency or system capabilities remain the best in the market. And we are a leader with some of the highest in-house competence in working with wine in these markets.

Yes. Maybe if I can add something to conclude this subject. As I indicated, we were more actively than so far manage the partner mix for the reasons that we discussed before. At the same time, I strongly believe that we have a lot to offer, especially to partners that are willing to create value, to build value of their brands together with us. We have a lot to offer to them. We are still pitching for new partners, and our success rate is good. It's not good enough to cover for the losses of the 2 large partners, but there are still good arguments for us to use, especially in the relative context of the market in general, because the headwinds that we are facing are not typical for us. Yes, in the Swedish markets or in the Norwegian markets, all importers are facing exactly the same issues, but still the quality of services that we provide are and probably the best. So the fact that we would more actively manage the partner mix in search for better profitability of this part of the business does not mean that we are not committed to the partner business. And this was the second part of my commentary earlier today. And it doesn't mean that we give up on the services that we need to provide to them to be an attractive partner.

And if I may ask, I don't know, yes, if it's too early to ask, but I mean, if we think about the 2030 strategy, and I think there is a lot of elements, there was a lot of talk about the growth, of course, like the own international expansion, but also M&As and now I think even more we have now needed to focus on the cost side in order to get the profitability up that how would you think, I mean yourself, I mean, to prioritize these things that, I mean, what should we see first and is the M&As now a bit on hold before we get the fixed profitability, or how should we think about that?

Yes, it is definitely too early to talk about this. I need to collect more data, more insights. But if I were to give a quick answer to your question is that the job number one is to improve profitability, to reduce our net debt leverage, to improve the company's dividend capacity for the future. So in terms of priorities, taking care of the business here and now is absolute priority for me at least. We are still committed, and one of the reasons why I am with Anora is that I was excited and still am by the way, with the strategy as established and communicated through the Capital Market Day in November. I shared the ambition of building Nordic-infused, so to speak, brands that can travel internationally supported by the sustainability messages in the enabler for this for this expansion. So if we describe the strategy in this way, I'm definitely committed to it. At the same time, the job here and now, especially when you look at the targets that Sigmund was presenting is quite straightforward, is improving the profitability as measured by EBITDA percentage reducing net debt leverage to create higher power for potential future M&As and improve dividend capacity in the process. This is my short and mid-term priority set. It does not mean that we stop researching the markets for potential M&A opportunities because many things take place. But in terms of turning around the business, it's about taking care of the organic part of it.

And finally, if I just made touch upon the overall raw material and situation and on the cost side that, I mean, we discussed about the barley price, but what about the other components? If we talk about glass produce, I guess delivery costs are down, but if we can talk about the other cost elements in the cost of goods sold as well.

I think that on the whole what we can say now that is on a quarter-to-quarter basis, so Q3, Q4 we are now looking at something which is more stable and then going into next year, looking for some decreases, but on a year-over-year basis and still input prices were increasing somewhat quarter-on-quarter still this year, the year-over-year effect, '24 over '23 on raw unpacking material, I would say is still on rather neutral level. But I think that the worst of the worst seems to have abated, right? So if anything, we are getting increases now. I think that there are kind of delayed effects as I believe we've mentioned in previous calls. Sometimes there are contractual restrictions to when, I don't know, glass manufacturers can increase their prices and then they are covering for the energy increases or problems of last year rather than this year. But apart from those cases it's more on the stable or down with trend. And with on average, I would say collective quarter-on-quarter.

Thank you, Maria. And it seems we don't have any more questions on the chat and if there are any additional questions, then please raise your hand. But if not then I would like to thank all the speakers and all the people joining for great lively questions today. And our next event will be on the 14th of February. You will be joining us on Valentine's Day for the full year results. So welcome then. Thank you for today.