Gr. Sarantis S.A. (SAR) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Mina, your Chorus Call operator. Welcome, and thank you for joining the Sarantis Group conference call and live webcast to present and discuss the Sarantis Group First Half 2023 financial results. participation the conference is being recorded. The conference is being recorded. [Operator's Instructions] Please be reminded that this presentation contains the formal disclaimer with regards to forward-looking statements. The presentation and discussion are conducted subject to this disclaimer. At this time, I would like to turn the conference over to; Mr. Giannis Bouras, Deputy CEO, Mr. Christos Varsos, Group Chief Financial Officer; and Mr. Konstantinos Rozakeas, Group Strategic Adviser. Mr. Rozakeas, you may now proceed.

Ladies and gentlemen, good afternoon. Thank you for your participation in today's conference call. Before we start, I would like to introduce the new Sarantis Group management. As you are aware, exactly 3 months ago, changes in Sarantis group management have been made. Specifically, Mr. Giannis Bouras, after 3 years of very successful holding position in as a Chief Commercial Officer, was promoted to deputy CEO, taking all the reporting lines on sim and of course, the responsibilities to run the group. At the same time, Mr. Christos Varsos with an attractive career path, joined us as the new Group CFO. Recently, Mrs. Eleni Moustakidou joined us as a new IR manager. Following this short introduction, it is time to put the speeds to Giannis and Christos in order for them to present Sarantis strategy and, of course, the first half 2023 financial results. Giannis please proceed to the presentation.

Thank you. Thank you, Konstantinos for the introduction. And hello to everyone. Thank you for joining the call. And over the next few slides, we are going to give you a little bit of more background around the upon results. Before we start with the half numbers, as you already received from yesterday, I would like to have an update on the strategic priorities of the group and a general business update for the first half of the year. Sarantis is a consumer goods company focusing on the consumers. So for us, it's very critical to remind or review a little bit of our story because that's a very critical one and defines the role of Sarantis in the different markets that we operate. No question that Sarantis is a long-standing reputable company, built on excellence and ownership and humbleness, trust and, of course, sustainability. And this is part of our new values of Sarantis that we have launched last year and defined and differentiates Sarantis from the rest of the companies. It is also critical that Sarantis group is consisted by a lot of passionate people dedicated to our business, delivering and committed for maximizing the results for the company. At the same time, Sarantis is always nearby or other stakeholders and as indispensable partner. And this is very critical. It's one of the [ differentiators ] that I will explain to you later. -- nearby means, close mentally, physically and business-wise with our stakeholders. And nearby also to our local community that work hand in hand we are moving on with our journey and by providing a better today while caring for tomorrow, which is also critical and differentiating for Sarantis Group. And this is a big message for us. We care for the future the same way we care about the present, and this is part of the family culture that represents Sarantis as a group. Here I'm presenting a little bit about the scope of Sarantis and our competitive advantages, what are critical when we discuss about the business going forward. Our scope remains the key focus on our Central Eastern Europe territory. And of course, as you would see later, selected international markets on beauty. We are focusing on home care solutions on personal care and beauty. And as you already know from our recent and our history on bolt-on value asserted acquisitions. Also, traditional Sarantis has been working with strategic distribution partnership, which is part of our portfolio, especially in Beauty Care. But what makes Sarantis different versus the rest of the companies? One big differentiator for us is the fact that we operate in the Central Eastern Europe region with very deep local consumer understanding, consumer is at the center of our category design and we designed for the territories, which are not many companies that are designed for that regional level. Also, we are digitalizers of local jewel brands through the acquisition strategies Sarantis has inherited big reputable brands in the territory that we have the skill set to revitalize them and make them even bigger in our markets. Critical also for making all this happen is our investments in the infrastructure in the region because Sarantis is investing everyone in the value chain, whether it's supply chain, whether it's commercial distribution in all our countries with people on the ground working hand in hand with our partners. Difficult for our household and home care solutions supply chain is cost competitiveness. So significant investments went behind all this over the last years, and these are coming out to life with believe supportive and great results for us for our future. I mentioned also before, our long-term approach and is part of the family culture we care about today and tomorrow in the same way. Last but not least, we are frontline leadership as an approach, what means, and this as a result in the past decision-making. And as we're moving on into our future, Sarantis is a regional company that we don't want to become a small multinational, but more of the big start-ups in terms of mindset. So this is something that helps us to make decisions faster, compete with our competitors in different ways and differentiates Sarantis from the rest of the companies. A few things about our strategy. We have 3 pillars on our strategy, but also linked with our mission that we have revised last year. And a few things about our mission as a company, the consumers are at the center by uplifting the mood of them, right, with the simply beautiful simplicity is the keyword that we want to define our next steps as a company, making the lives better every day, we're having every day products in our portfolio and working very closely with our stakeholders to create value. The 3 elements of our strategy is, of course, the strong growth, whether that one is organic growth because that's critical. We believe that's critical organic growth to create a sustainable organic growth system and with acquisitions that are coming on top. A big part of our strategy the simplification and efficiency, which means that we are locking value and reentering the organization, and you will see a few more details later on. Of course, organization capability, if you want to move forward, you need to develop your organization, and this is what we are investing on, because people is the most important asset of the organization, and we need to upskill in the game of our end leadership development at the same time. Moving to the first one on the growth side. As you can see, we try to segregate a little bit the categories that we are working in a different way that makes things much more simple and focus from our point of view and for all of you to understand. So we are segregating our group growth drivers in 4 categories. First one categories of beauty and skin care. Second one is a personal care. The third one is a home care solutions and the fourth one in strategic partnerships. Private label slate is part of the home care solutions category, and I will explain more details in the next slide. As you would see, Sarantis has a significant number of reputable brands in every of the category, brands that are either developed by the company over the years or acquired over the period the last previous years. In the first 3 categories, due to skin care, personal care and home care solutions, Sarantis also has a strategy, as I said, several acquisitions as a part of to maximizing the incremental line. Now a few words about each of the categories. On the beauty and skin care, our objective is to disproportionately grow this category. And why? First of all, the category is high gross margin, which is improving our portfolio mix, right? The second one is also we have been selective on expanding the category in the different categories. We are developing superior consumer propositions with a relevant communication, and we are backing up all these initiatives we increase consumer investment to build trial and we are very serious about the growth of this category. This category in general is in a growth momentum mean in our territory. Personal care is a core profit generator for us. We have a traditionally has been very big players in this category. We are focusing on distribution expansion, right? And we try to make consumers in all channels. We are reaching younger consumers via innovation and brand building. As I said before, we revitalized local jewel brands as a competitive advantage. And in some of the categories, in the mass fragrance category, we are best-in-class, and this is one of the categories that Sarantis operation many, many years ago. In the home care solution, it's a different game, a significant growth driver for us with a lot of investments over the last years. Sarantis has a leading position across the region, and we have a category growth obsession because this category is underdeveloped compared to other household categories in the supermarket and in all channels. Just to give you a perspective, penetration numbers are between 30% to 60% while in other categories, the penetration are reaching 80%, which means category has the room to grow. Sarantis has been, I would say, has to work on this category growth story via our brands and our mega brand process I am talking later, second point, to maximize the core segments of the category. At the same time, we are working in store because in-store is very critical to navigate consumers and increase the penetration. Superior quality also is important as we innovate in this category for superior compared to the rest of the players in the market. And at the same time, working with communication to educate consumers about the use of the category and the solutions that we are providing. Private label is part of the category and private label has the role to play during the transition of our significant investments in supply chain over the last 2 to 3 years. The fourth one is the strategic partnerships category, which is providing market leverage. In this part, we are focusing more on fewer and more long-term strategic partnerships. And in most of the cases, they are complementary to our own portfolio to drive synergies and add value. The fifth one is, of course, acquisitions. They are complementary. They are building on top. Stella pack is on the way. We are still pending the local regulatory or approval. And of course, we're exploring new acquisition opportunities in high-growth strategic priorities, as I mentioned before. A snapshot of how we performed the first half of the year on this category, you will see that we have a strong growth in the top priorities. In the beauty skin care, I have to say, we have a significant growth, both in volume and value, and it is almost 14% contribution to our sales. The personal care, more value growth and with a strong momentum in home care solutions, value growth in back in back because we have significant growth over the last 2 years. The private label business at the moment is a 6.8% of our business. As I said, it's mainly garbage bags in the home care solutions category and support supply chain rising investments and the strategic partnerships is a moderate growth, focusing on winning products and brand propositions. There are, of course, some like-for-like comparisons in terms of growth, but we are doing better than we present here as we have stopped some cooperation with some of the partners this year. And this is a result of the overall 9.23% growth in the first half of the year. Now I spoke about innovation before. And as you will see here, some examples that we are very proud of regarding our innovation agenda over the year. Starting from the left, clinéa is a new brand. It's a new skin care brand with a fast-to-market sustainable, clean refillable beauty brand in the PharmaCann in Greece. This is a product that we have developed in our R&D center here in Athens Greece. And we are very proud of all these loans. It's an international proposition with a lot of potential in our markets. On the skincare side, again, Bioten is one of our biggest brands, a lot of meaningful innovation to recruit new users, significant investment on the brand communication, and we have selected geographical expansion, and we have a very successful launch of the brand over the last 1.5 years in the Philippines and Southeast Asia with great results and very promising results for the skincare brand of Bioten. Third one is another example of the core portfolio -- or professional care portfolios this trade is a mass fragrance brand. We have launched a new brand, which is more about gamers. Game is a big community in our territory. And this initiative is a very strong transpo appeal into the market. It's a new platform that we are launching to penetrate among younger generation because this is also important to recruit the [ young ] consumers in our brands. Now according to the home care solution category, we are the first one launching a new Garbage bag, Flex & Strong as we call it, with the new technology with 3 layers made from 100% recycling plastic. And this is giving extra strength the product, per market. And again, that means that we are innovating in these categories to create a difference and provide value to the consumers. And the fourth example, which is not only because innovation is not only product, it's around the [indiscernible] store execution as we're talking about our Home Care Solutions category, as I mentioned before, our objective is to drive the growth of the category by educating consumers and navigating consumers in stores where the decisions are made to big right products. So investing that in with consumers understanding the way they buy the categories, we are developing the stores in a way that consumers can get the navigation easier, and of course, make the light easier when they go in store at the minimum possible time. So this [indiscernible] store approach, we believe a lot, and we believe that this is a big driver for the growth of the category. Now going to geographies, you will see a little bit different now as we are looking at our geographies in 8 different geographical clusters, which is Greece international markets, Poland, Romania, Ukraine, Czech and Slovakia, West Balkans, Bulgaria and Hungary. Note as you will see later, not every cluster is the same size, but each cluster has a unique role to play in our growth agenda. One of the benefits of Sarantis is that we are creating solutions, tailor-made solutions, but with a regional scale. So we can develop something for one country that can be scaled up to the rest of the countries. Speak to market, quick decision-making and agility. It's also important the way we look at the market. Just to give you an example, these markets are working directly with me and the leadership team. So fast decision making quick decisions to get and capture all the opportunities for the market. And we have a cross-utilization of knowledge and capabilities and innovation across the market, which is very difficult to scale up all the benefits that we have seen in one market to the others. Now as you will see all the markets are growing apart from Greece, but Greece, if you see like-for-like excluding WELLA business that we lost last year, even Greece is growing by 2.1%. All the graphs have a good growth. Some of them growth is impressive. The size of these markets, of course, varies. But for us, it is important to understand that our strategy, our ideas are ways of working. They are working across the market. This is a confirmation of our strategy, and that strategy is working well. Now we concluded with growth. Let's move to the simplification and efficiency, and we say release value and energy in the organization. There has 2 parts. One part is already in progress. And just to give you an update, we have optimized our portfolio reducing the SKUs by 40% over the last 2 years. This has been an important element for us moving forward and not simplifying care business because SKUs is the complexity that we are handling in our business. That is helping us to stock management to better stock management and cash release, and you will see some numbers later. We are very proud that new Polipak plan is in full operation, and we believe we start seeing the benefits of that because it's one of the biggest and more modern factories in garbage bag in Europe. Innovation. As I said -- I shared with you a few examples, innovation fewer and bigger initiatives versus lend small initiatives. So that's a big change. That is helping us to focus more on our big initiatives and invest behind winning propositions. And the last one, which is, I would say, it's not more on simplification growth is a growth thing. We talk about revenue growth management initiatives by focusing our promotional optimization in the market and the HERO SKUs that you have heard maybe before, SKUs are the winning SKUs in the market has been proven over the years that we invest more and more money to drive the growth because consumers love them already, and we know that and give them the proper focus and investment to drive the growth further. We believe that out of this we have -- that have contributed to our growth in the first half of the year. Of course, we don't stop. And as we said, is in progress, it means we continue the journey of the first 5 points, and we are ready to start now in our more digital agenda as we are starting new projects of integrated business planning, including investments in systems and the new SAP version implementation that will start at the end of this year, beginning of next year, the design, plus plenty of other digitalization projects that they are helping us to simplify and make the business even more efficient. Organization capability, the last one, the last pillar of our strategy. As I said, people is the most important asset of Sarantis. We need to embrace our epic we call it capabilities to support the business plans for the next day. And as we did develop the values and the vision in the mission last year embracing that one, increasing the awareness across the organization, it is important. Last year also, we have invested on an engagement survey to take the pulse of our people and understand whether the engagement level and how we are working and how we need to move forward. We are developing organizational design in a way that promotes agility and fast decision-making, as I said before. And this, we believe, is going to unleash the power of the frontline. Frontline means we're making the decision as close as possible to the market to the point closer to the issue or closer to the opportunity. We are working on the investment of the capabilities of the development of tomorrow. And of course, all of this, we believe that we are shipping our employees value proposition towards more [indiscernible] diversity. I think this is a summary from our point of view. I will pass over to Christos Varsos right now to continue with the financial.

Thank you, Giannis. We delivered Solid's first half performance, growing both top and bottom line and expanding our margins. Our net sales grew by 9.23% to EUR 232.35 million, supported by our focus in our core categories, revenue growth management actions and pricing initiatives at the end of the prior year. Our EBITDA grew by 27.26% to EUR 28.73 million, supported by top line growth, gradual normalization of the raw material costs and control of expenses. Our EBIT grew to EUR 21.58 million or 34.55% versus the same period in 2022. Finally, our earnings before tax grew by almost 60% to EUR 23.47 million supported by better performance of financial expenses. The same strong picture is reflected in our margins with gross profit margin improving by 190 basis points to 37.11%. And similarly, all margins are improving significantly. EBITDA by 175 basis points to 12.36%, EBIT margin by 175 basis points to 9.9% and turning before tax by 39 basis points to 10.10%. As of 30th of June, the group maintained a net cash position of EUR 5.7 million, supported by the profitability, but also by the improvement of working capital by 11 days versus half year 2022. Moving to our full income statement. You can clearly see the growth across all lines. focus on our core portfolio, growing our home margin categories of beauty skin sun care and Personal Care helped the mix of net sales, while our ability to capture growth opportunities and pricing initiatives that we implemented in the second half of last year supported our net sales growth. This, together with the gradual normalization of raw material costs and divestor prices allow gross profit margin to grow across our categories and geographical footprint. In absolute terms, gross profit grew by 15.18% to more than EUR 86 million, improving the gross profit margin by 192 bps versus prior year, coming to 37.11%. The above and the control of expenses supported EBIT margin growth by 175 basis points to 9.9%. Except the strong operational performance despite the EBIT line, we also achieved strong earnings before tax with the support of financial expenses, which improved versus prior year, mainly due to interest income or our deposits and FX. Earnings per share grew by 66.4% to EUR 0.2866 of the euro versus EUR 0.1722 in the comparable period. Moving now to the performance in net sales and debt by BU, split between the BUs that we will be reporting our performance from now on. We had a balanced performance across the BUs, with all of them having significant growth, both in top line and EBIT. In Greece, we see net sales reducing by 2.85% to almost EUR 775 million. The reason for the decrease is the termination of the partnership with Hotel considering the mass distribution of the latter Cosmetics in half year 2022. Without this impact, on a like-for-like basis, the net sales increase would grow by 1.24%. At the same time, the EBIT and EBIT margins on a reported basis are reducing by 20% and 205 basis points, respectively. These were affected by the launch of the new clinéa brand, which Giannis is described in innovation in the beauty team Sarantis category. Clinéa in was lost at the latter part of the first half with the investment back in the loans, whereas the revenues follow in the second part of the year. On a like-for-like basis, excluding clinéa, the EBIT would grow by 3.24% and the EBIT margin by plus 13 basis points. Beauty skincare, as already mentioned, in the highest market category key to our core strategy for the group growth. So investment in losing clinéa is fully in line with our strategy. The effect of clinéa is one of the timing nature and get normalized on the second part of the year with the net sales arriving without significant additional investment. In terms of our categories, as already explained by Giannis, we will be reporting our performance in the following categories: Beauty and Skin Care, Personal Care, Home Care Solutions, part of which is private label, which, however, we report separately to support the understanding of the dynamics of the categories, our strategic partners and lastly, other sales. Again, we see balanced performance across our categories with strong growth in net sales and healthy margins with significant upside from prior year. In Beauty Skin Care, the EBIT and EBIT margins are again affected by the clinéa loans as showing a reduction. Excluding the clinéa impact, on a like-for-like basis, EBIT will grow by almost 21% and EBIT margin by 62 basis points to more than 18% margin. As already mentioned, the clinéa impact has a phasing effect and the second part of the year will be normalized. Moving now to our balance sheet. We have a healthy balance sheet, which provides high power firepower and flexibility to invest organically to support the digital transformation of the group and be able to fuel M&A activity. As of 30th of June, we had a stable financial position with net cash of EUR 5.7 million. The net cash position was achieved even after making the large payments in the first 6 months like the dividend of EUR 10 million, buying out the 20% minority interest in Polipak EUR 5 million and repaying in full Polipak external debt of EUR 20.5 million. Cash position was fueled on the one hand by the profitability, but also by the improvement of operating working capital by 11 days year-on-year. The strength of group's balance sheet support financing with better terms as we move forward. Finally, Stella Pack acquisition is underway and will be completed by the end of the year. The acquisition will be funded by a combination of cash and new debt, which has already been arranged. We enhanced shareholder value. In the first 6 months of the year, we paid dividends of EUR 10 million, a 38% payout ratio to the full 2022 net profit. The earnings per share rose by 66.4% to 0.2866 of the euro versus 0.1722 in prior year. We have a share buyback program in place. We canceled treasury stock of more than 3 million shares from 1st of August, which we have acquired in previous year's buybacks. Moving now to our anticipation for the full year results. Given our strong results in the first half of the year, we would like to provide new guidance for the full year 2023. Net sales will be in line with the initial guidance we have provided earlier this year of EUR 480 million, which represents 7.8% versus 2022. Our new EBIT guidance estimates that organic EBIT will grow by 7.5% versus our previous guidance to EUR 43 million versus EUR 40 million initially guided. This represents a 33.37% growth versus 2022. Actually, with a EUR 33 million EBIT we have projected, we are managing organically to come back very close to our 2021 full year results. In terms of margins, the EBIT margin for the full year will be 8.9%, an increase of 60 basis points versus the 8.3% of the initial guidance. 8.9% reflects an improvement of 166 basis points versus 2022 full year EBIT margin. I would like now to pass back to the operator to open the floor for your questions. Thank you.

Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator's Instructions] The first question is from the line of Viral Natalia with Eurobank Equities.

I hope you can hear me. I have a question regarding the digitization projects you mentioned earlier. If you have a CapEx forecast on this and if you have any inputs if you will -- any of these will be financed through the RRF funding or you're thinking some things, all the projects are set in investments and digitalization. And I also have a question regarding guidance. You gave us for the EUR 43 million in EBIT. That actually implies that in H2, we will see similar EBIT levels. And usually, we see a higher H2 so I was wondering if this is just -- if you have any insights on this and then decelerating growth in running rates, do you actually see decelerating growth rates or not?

Okay. So thank you, Natalia. Regarding the CapEx, we have the infrastructure plus digitization, so it's 2 elements. And we expect that over the next 3 years for both supply chain infrastructure projects and digitization will utilize CapEx, except the normal CapEx of EUR 35 million over 3 years. This will be funded by CAF and debt. And actually, we're looking towards a specific RRF, as you mentioned, we are in the discussion to see also RRF funding, especially for the digital part and for the green part of the infrastructure elements.

Regarding the H2 finally and the EBITDA margin, it is true that the first half of the year has been impacted positively in terms of margin because there are 2 things. One thing is that the pricing that we took at the beginning of the year and last year has more a bigger cumulative effect for the first half. This is the number one. And number 2 is that the second half of the year, what we see would see more intensive competition because, as Christos mentioned, we have a normalization of raw material prices across categories that is making the competition more intensive. And in some categories, there are some volume pressures. So that one is resulting a different balance between the EBIT margin from the first half to second half.

We also anticipate an impact from the inflationary pressures coming mainly from employee cost as we're doing pay rises in May. So now we'll be citing the full second part of the year with this in mind. I hope this answers your question in full.

Do you have a sustainable level of EBIT margin, if I may. Like looking ahead, like 8% to 9%, would that sound reasonable to view and your -- based on what you're changing on your SKU changes and everything you're doing in the model.

You see that this year, as you show with our new guidance is this year clean from acquisitions. So it is clearly the organic growth. So yes, closer to what we guided for the full year will be the base moving forward. And our plan is to improve this as we move ahead with our different initiatives on the cost as well.

The next question is from the line of Giannoulis Dimitris with ResearchGreece.

Thank you for the presentation. First of all, I would like to thank Mr. Rozakeas for what seems to be 20 years of interaction that we had. And I wish to wish the new management all the best. And now moving on to a couple of questions following up from the last question about the second half. Is it fair to say that you are budgeting for a lower gross margin compared to the first half of the year? Number 2, wondering what the $1.4 million interest income you booked in the first half because against your cash position seems to me, at least quite a big rate. And the last one about the parent cash flow statement, wondering what this EUR 34 million of acquisition money is about, if you could explain.

Can you repeat your last one, current EUR 34 million of acquisition, what do you mean?

Yes, in the company's cash flow statement, the parent level. There is a EUR 34 million outflow for acquisitions, the cash flow statement, if I'm not mistaken.

Okay. I don't see the EUR 34 million. But anyway, okay, we can take this separately, if you want. We see regarding the patient margin of the second half of the year, as I said, this is resulting in some pressure from the market. What we talked about the previous question about the EBIT margin at the end of the day, the pressure is on gross margin because we will complete higher in the market, right? So we see the pressure there, slight pressure that will result in the overall margin for the full year at a similar level with H1 or a bit lower, right? So that's the guidance we have today, anticipating the competition coming for the second half of the year. And of course, the normalization of the price increases that we did right? So this is regarding the margin.

Now for the net income that we described, the EUR 1.4 million of interest income, this comes from our deposits in Poland and Serbia. So it is on a high, let's say, higher than normalized euro interest income. So you have a significant rate variation and the time deposits actually produce a large amount that is staying. Now on the cash flow element, what you're describing, the EUR 34 million at the company. Most likely, you're talking about the investment in Polipak by buying the minority and repaying the investment and repaying the debt of Polipak, which happened by doing from the parent company share capital increase, which we funded in Poland.

[Operator's Instructions]. Excuse me, we have a follow-up question from Mrs. Natalia with Eurobank Equities.

Yes, I have a follow-up question regarding -- if you could share with us how Greece is doing in terms of volumes and the current trading condition like resales, I mean because in H2, we don't have this extraordinary of WELLA discontinuation. So how are we seeing this currently?

Look, regarding Greece, especially Greece, is one of whom our most complex markets with a lot of different categories and a lot of different brands. What we're expecting in the second half of the year, Greece will keep growing organically. We have the impact of the first half, as we said, with WELLA. Market conditions in Greece, they are better than we were expecting and we were expecting at the beginning of the year. And the good thing for us is also that in our core categories, we are winning shares. There are although some categories in Greece that there has to do with specific channels like B2B channel or some health care channel, which is in pharma, but the categories are facing an issue from a volume point of view because of the post-profit effect because this -- some of the categories has been increased significantly to recovering more than 60%, 70% and now normalizing to a different level. So it's a bit complex to explain to you. We need to go category by category to explain. The good thing for us is that in Greece in our core categories were growing significantly versus last year, and we're expecting that to continue. Operator, I think we have some questions on the Q&A from the Webcast as well.

Thank you. We will move on to the webcast questions. The first question is from Mr. Emmanuel de Figueiredo with LBV Asset Management, and I quote, assuming the acquisition of Stella Pack is done, could you give an estimate on range of the net debt position at year-end?

Yes, we're working towards Stella acquisition, as we already mentioned, the actual acquisition I've mentioned will be partially funded by existing cash and debt. After the acquisition of Stella Pack, we expect that net debt will be around EUR 35 million. Net debt, EUR 35 million.

The next webcast question is from Cipla Agrawal with Copen Sachs Asset Management. And I quote, can you give an update at the approval of Stella Pack.

On Stella Pack, we are expecting the approval from the committee. We're still waiting. We don't have any worries about that. It's a matter of the process. It's true that the process has been a little bit slow, but we're expecting that concluded by the end of this calendar year.

We also have a question from [ Tibot Metin ] with [indiscernible] and I quote, "regarding Stella pack. I know everything is not under your control that it's been almost 1.5 years since you announced the acquisition. Could you please provide more details on the expected timing of the synergies, which were expected to start this year.

As I said before, I mean, the update is what I said that we're expecting the final approval. We know that Stella Pack is adding another EUR 70 million to EUR 75 million on the top line. We know that from an EBITDA point of view is around EUR 8 million, and we have calculated the synergies at EUR 3.5 million at the range in 2 years' time. So these are the numbers. And as I said, it just -- it's a matter of time, it's a matter of the process. It's true. It's a 1.5 years. And we have to -- we can't do anything more than that. We don't have any reason to believe that something is not working, but it's a matter of time. This is what we have and we know until today.

We also have a question from Maurice Walt with Discover Capital, and I quote, "what is currently the biggest challenge for you."

I don't know whether there is a big challenge. It depends on the category, on the different parts of the business. It's, I think, as I said, working with our people, we try to make even the biggest channels manageable from ourselves. And I think at the end of the day, the biggest challenge, if you have an action plan, it's not a big challenge anymore. Things that we cannot control can be the biggest challenges for us, right? Whether we have something unexpected, whether we have something that the rope markets that we operate like we had a year ago with the war in Ukraine. These are the things that we cannot control that sometimes can be the biggest challenges for our team. Nothing more than that.

Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you. Thank you, sir. We also have a question from Spiros Tsangalakis from Pantelakis. Where are you exploring new acquisition opportunities? Are we going to see any acquisition moves have 2?

At this moment in time, we are focusing on our current organic growth agenda plus the Stella acquisition at this upcoming Other than that, nothing that we are always open, but nothing robust in our hands right now.

A new well cast question just came in from SibraAgraval with Goverman Sachs Asset Management. Can you please give an update on M&A pipeline and any new potential distribution agreements?

As I said, on the M&A side, there is nothing we can say about Stella, all the new distribution agreements, nothing there as well. As I said, we are working on fewer and bigger and more strategic partnerships, and this is what we are focusing right now. So we're working with our current partners to develop their business and their brands together with them.

Thank you. Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.

Nothing from our side. Apart from thank you all for participating in our call. Thank you for the questions. Thank you for listening. And now we are always open for any further clarifications to any questions. So our team is at your disposal. Eleni here is ready to accept any requests. And also from my side, as a closure, I would like to thank Costas for 2 things. First of all, helping Sarantis to become one of the most successful regional businesses in our sector in the region and, of course, helping us me personally and Christos and everybody for this beautiful and nice transition. Thank you, Costa.

Thank you Giannis. Thank you very much, and all my best for the future for you and the company. Thank you.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.