Anora Group Oyj (ANORA) Earnings Call Transcript & Summary

Okay. Good afternoon, everyone, and a warm welcome to this Q1 pre-silent call from Anora. My name is Milena Hæggström, I'm the Head of IR here at Anora. And in today's call, our CFO, Stein Eriksen, will be discussing the recent events and go through the Q&A with you. [Operator Instructions] And thank you. Let's then welcome Stein. Please go ahead.

Yes. Thank you, Milena. And like Milena also said, welcome to this pre-silent Q1 call. As you know, we are entering into a silent period then starting from Monday, 7th, and lasting until the reporting of the Q numbers -- Q1 numbers, the 7th of May. As you know, it's still early days, and we are currently then closing the books and preparing the numbers. But that being said, I think it's appropriate then that we give you some reflections of the quarter so far. But before moving over to Q1, let us do a quick recap of 2024, so if we change the slide, because I think 2024 gives some good indications then moving into 2025. Let's first have a look at the net sales. As you know, it amounted to EUR 692 million, it was down from EUR 727 million in 2023. And there were several reasons for the decline versus last year. But the main elements, I think we can sum it up in 4 elements. First of all, we lost 2 partners, impacting net sales. And there was the resignation of Francois Lurton in Sweden in March '24. And then also in the Spirits segment, we -- the distribution of Braastad Cognac, produced by Tiffon, was transferred to a third party in 2024. That was number one. Number two, the Larsen divestment. As you know, we sold Larsen. We still continue to distribute Larsen in the Nordics, but then lost international sales. And then reason number three, we did exit some -- or discontinued some low-margin filler business in Denmark. And lastly, we had lower sales in the Industrial segment due to lower sales of side products, then mainly ethanol, feed and starch. And the lower sales in Industrial contributed with around 1/3 of the total decline in net sales in 2024. Moving over then to gross margin. We were happy to see that all segments in '24 improved their margins for the full year, and that was mainly related to, yes, I would say, improved revenue management. And this was a main contributor then to that comparable EBITDA, ended at EUR 69 million for the full year, explained by mainly improved profitability in the Wine segment, driven by both gross -- high gross margin and lower OpEx. Spirits segment ended below 2023, explained by lower sales volume and some higher OpEx. And the higher OpEx, as you probably remember, were related to higher A&P investments. And then the Industrial segment also had the EBITDA decline impacted by the lower net sales that I already talked about, but had a good -- did some good work on OpEx and managed to counteract some of the net sales decline with reduced cost levels. And finally, our Board of Directors proposed a dividend of EUR 0.22 per share, and this is then to be approved by the upcoming AGM in Anora, the 15th of April this year. So that was a quick summary of 2024. I think we then continue to Q1. I think this slide illustrates in quite a good way that Q1 is a very small quarter when it comes to both turnover and profitability. On the left-hand side, you see the turnover in Q1 compared to other quarters. And on the right-hand side, you see the comparable EBITDA, which during the 2 last years has been between EUR 8 million and EUR 9 million. And as you then can see, it's a very small portion of the yearly results. And also here, you see how big Q4 is compared to the other quarters, both in terms of sales and profitability. And of course, very much so, this is related to the sales during the Christmas holidays for the Spirits segment, but also partly for the Wine business. I think also when we are talking about Q1 this year, just please be aware that we also have some [ paralyzation ] effects this year due to timing of Easter. We have one extra sales day. However, last year, we have positive, I guess we can call it, pipeline effects of selling into the monopolies that fill up the stores before entering into the Easter holiday effect, and this we will first see in Q2 this year. So we do expect some negative Easter effect compared to last year. If we then move to the next slide, and look at more some specific quarter-to-date publicly available information. On the left-hand side, you see that since, I guess we can call it, the bloated market growth during the pandemic, the development has been more challenging during the last quarters from a market perspective, and the volume development in the monopoly channel has been negative now for 15 consecutive quarters or, I guess, we can say 14 consecutive quarters, but we have got numbers also from all the monopolies for January and February, and this is publicly available information. So what we see is year-to-date February, Norway monopoly volumes are down with 4%, 5%, depending on Spirits and -- or Wine. Finland continues to be down with 11% to 12%. While Sweden is the country with a lease decline of around 1% in volume, hence -- and we still have got the market figures for March, but it seems like then also Q1 will be another quarter with a fairly strong volume decline. Just want to state that, that being said, if we compare 2024 versus 2019, we did see a small volume increase. And in the longer run, we do also expect a rather flat volume development in the long run going forward. But of course, like I said, so far, it seems like the monopoly development in Q1 is fairly weak. Moving over to gross margin, which I think -- if we change the slide. I think at least until very recently events that happened yesterday, it's fair to say that the prices on input costs have flattened out, here exemplified with the development in Finnish barley. But -- and on the right-hand side, you can see that Anora, during the last quarters, have regained lost gross margin mainly due to improved revenue management. Also, just to remind you that we started a more active hedging policy back in the end of Q4 2023, in order to then avoid strong deviations in gross margin due to big changes in currency, and this is also something we have continued with, as you know, in 2025. If you look a little bit on the balance sheet, moving over to the balance sheet and the cash flow, so if we change the slide. Just restating where we ended in 2024, we ended, I would say, at a fairly good financial position. We ended with liquidity reserves of EUR 352 million compared to EUR 382 million the previous years. But then also bear in mind that we paid down EUR 50 million of the term loan in September 2024, that explains then the reduced liquidity reserves. Cash flow in the fourth quarter was fairly strong. And hence, the net interest-bearing debt ended in '24 on of EUR 122 million, down from EUR 138 million the previous year. And leverage ratio ended at a fairly decent level, I would say, at 1.8. Also, of course, bear in mind that we are continuing then the sales of receivable program, and sales of receivable in '24 ended at EUR 164 million versus EUR 174 million the previous year. As shown on the right-hand side, you see that the cash flow is also -- like I showed on one of the previous slides here, that the cash flow also varies quite a lot throughout the year. And also here, you see that the case with the operating cash flow, especially in the beginning of the quarter, is impacted by the payments of excise duties related then to the Christmas sales from the previous years, but February and March being normally more cash positive months. And also here, on the right-hand side, you see how important, of course, Q4 is also from a cash flow perspective. Talking about the balance sheet and the sales of receivables. I think I also mentioned in the Q4 that we will have a little bit more cautious view on sales of receivables going forward, and this is also something we have had an eye on during Q1. So this was a little bit about -- yes, how much we can say about Q1 so far. Just if we move to the next slide, before moving over to the Q&A. As mentioned, the markets so far in Q1 has been slower, I would say, than expected. But we all then expect partly recovery during 2025. And as to year 2025 guidance, our comparable EBITDA is expected to be between the EUR 70 million to EUR 75 million as previously communicated. So I think that was my comments regarding Q1. And then, Milena, I think we can leave over to the Q&A session.

Yes. Thank you, Stein. And let's open up for questions. [Operator Instructions] So the first question is coming from Maria Wikstrom at SEB. Please go ahead, Maria.

Yes. Firstly, I wanted to touch base on what kind of volume assumptions you have built in your guidance?

No, I think we have, as previously mentioned, Maria, been using fairly flat volumes. So -- but of course, also remember, like I said, Q1 is a very small quarter and also we have several levers to pull in case the market continues to be weak going forward.

And then I think I need to ask, although I would think -- I mean, positively, you are quite unimpacted on this yesterday's announced tariffs. But if there is something that I'm missing out in case of Anora, I mean, please enlighten me.

It's an extremely good question, right? I mean there are a lot of balls in the air right now. And of course, we are currently investigating it. But I won't give you a precise number in this call. I think it's fair to wait until we have investigated a little bit more in detail the consequences for Anora. But what I can say is that we are selling to U.S. for around USD 1 million yearly. So we don't expect any big impact, as you can understand, on sales or net sales. But of course, when it comes to procurement, that's where we have the biggest exposure. And we will, of course, investigate, yes, and look further into how to -- yes, on different actions, but really depending on what measures EU and Norway is going to take towards the import that we have from -- currently from the U.S.

And then about the FX. I mean given the Swedish krone has strengthened quite a bit lately, so can you remind me on the hedging policy that when should we start to see the benefit of stronger Swedish krone?

Yes. So basically, we are hedging between the -- as you know, we have 3 pricing windows in Norway and 2 in Finland and Sweden. So what we do is to lock the currency effect between the pricing windows. So of course, right now, we will have -- since we have locked the currency for some months going forward, then we will have -- I would believe if the Swedish krona continues to strengthen towards the U.S. dollar, then we will have negative effects on the currency. In the short run, yes.

In the short run.

Yes, yes, yes. But this was an instrument that we implemented in order not to have any big deviations in the gross margin between the pricing windows. But we are hedging quite a substantial part of our FX between the pricing windows. So especially the nearest pricing window, all the currency is currently hedged or most of it.

Because I would think that the stronger Nordic currencies is a positive for you, right?

In the longer run, yes, exactly like you say. In the long run, it will have a positive effect. In the short run, it will probably then have a negative effect since we have already hedged the currency. But it's exactly like you say, in the longer run, absolutely, then it should be positive. Yes.

Thank you. Do we have any more questions? [Operator Instructions] Maria, I think your hand is still up or...

I had one more, but let's have Rauli first.

Okay. So please go ahead, Rauli.

Yes. I was just wondering the -- you have mentioned that you, of course, tried to increase your sales more than the market and you have certain measures ongoing, which should be visible already now in that, at least during the first half. So have those been implemented already now in Q1? And can you say anything about kind of how they are doing?

Yes. No, we are currently looking at, like I said, measures to improve sales. You know what, Rauli, I think I want to wait until Q1 reporting to give you any specific answer. But we are not standing still, to put it like that. We are looking at measures to improve sales, yes. And also, like I said, we still haven't got the market numbers either for March. So I want to be a little bit careful what to say regarding our market -- our own performance versus the market.

Okay. Then we have a question from Sanna Perälä. Please go ahead.

Just wanted to ask about the Danish operations or the Globus Wine integration and the challenges you've had there still recently. So is there anything in Q1 we should be aware of? Or is it going according to plan so far?

Yes, it's a very good question. Not any specific things that I'm aware of. So I hope I'm not surprised either, to put it like that. Yes, but it's going according to plan, I would say, and not any major changes to my knowledge, no.

Okay. Then, Maria, you had one more question. Please go ahead.

Yes, I had a follow-up. So we talked about, I mean, volumes down in Q1. But then if we talk about price mix, so how would you describe the price mix in Q1?

I think we -- as I've shown on one of the slides, Maria, you saw that we had a good gross margin development to -- during the last quarters. And I also said that 2024 is maybe representative also for the continued development into 2025. So yes, being careful not to say too much. But we haven't seen any major changes in the input costs so far, and we have continued with improved revenue management. That's what I can say, also in 2025, an effect from 2024. So yes.

So the gross margin expansion, if I understand right, I mean, should continue.

That's what -- that's how I would see it, yes. Yes. Yes.

Okay. Do we have any more questions from the audience? [Operator Instructions]. It seems that we do not have any more questions, and there's no questions in the chat either. So thank you all for joining us today, and I wish you a happy weekend. And it looks like a sunny one here in Helsinki. Thank you.

Thank you.

Thank you. Bye.

Bye-bye.

Thank you. Bye.