Lotus Bakeries NV (LOTB) Earnings Call Transcript & Summary

Hello, ladies and gentlemen, and welcome to the Lotus Bakeries announcement of the Full Year 2021. My name is Josh, and I will be moderating today's webcast. Please note that this conference is being recorded. [Operator Instructions] I'll now hand you over to the presenters of today's conference: Jan Boone, CEO of Lotus Bakeries; and Mike Cuvelier, CFO of Lotus Bakery.

Thank you very much, and welcome to everyone to our call. I'm Jan Boone, CEO of the company; and next to me is our CFO, Mike Cuvelier. We hope that this presentation will give you further insights of our 2021 results. And as been discussed, there is a possibility for Q&A afterwards. We're going to go to the first slide. I hope everybody sees the same screen and on the first slide is a snapshot of our company, Lotus Bakeries. And we are very proud today that we reached the EUR 750 million milestone, and it's quite a historical moment for our company. How did we get there? An internal growth rate of 30% in 2021 for an absolute value growth of EUR 87 million, and that was the reason of reaching this milestone. That was, for sure, also above our own expectations starting the year. We were able to combine this organic growth with the same strong profitability level as the year before, being 20% of REBITDA. Our net debt-to-EBITDA ratio improved further to 0.6, thanks to the strong cash generating years that we had. And on top of that, we take also social and environmental responsibility towards all our stakeholders very seriously. And the stakeholders being the employees, consumers, customers, suppliers, our local community. And I think we can proudly state that ESG is fully embedded in our organization. Mike will elaborate on this topic later on in the presentation. But I want to highlight packaging. Packaging is probably the most visible parts being a consumer goods company. And we committed ourselves to get to 100% technical recyclable packaging by end of 2025. And we're getting close. The last percentages are the most difficult ones, but we will get there. And changing packaging is to be done very diligently. And it needs to fit on the packaging line. It needs to protect the product properly. And we need to be able to claim sufficient shelf life also. We have a dedicated team within Lotus Bakeries working on that part of ESG. On the next slide, you see the time line of Lotus Bakeries. We're not going to go through all the details. Just wanted to highlight this year. 2021 is a milestone year because of its overwhelming organic growth, and that's how we will remember this year. And now entering 2022. 2022 is -- will be a year full of challenges. And I wanted to highlight a couple of these challenges for 2022. And the first one is cost inflation. As you all know, cost prices of labor, raw materials, packaging, energy and transport are increasing significantly. The end of this -- of last year, we had announced our new prices and explained the increase to our customers. We implemented fair new prices and we want to have prices towards the consumers to remain affordable. Offering our products at an affordable price is part of our strategy, and it's a very important part of our strategy. And that's why we also use as KPI, household penetration. This being said, we want to see our incremental costs to be fully compensated by this price increase. And on top of that, it's our goal to find additional cost improvements within the supply chain through optimizations and efficiency gains. So that's the first big change for this year cost inflation. The second one is COVID. COVID is not gone yet, unfortunately. It might be less powerful, but it has still an impact -- potent impact on absenteeism levels in our factories. And today, the impact is present in all of our factories, but still manageable. And hopefully, we do not get a significant COVID outbreak in one of our plants. That's really very important. So, so far, so good. The third challenge is capacity, and we need to increase capacity of Biscoff to be able to realize our growth targets. And therefore, we did announce beginning of last year, our expansion plans. According to the timings agreed upon, we will have the investments operational in the third quarter of 2022. We can still increase capacity in the meanwhile, by increasing efficiency in the plant in the United States and optimization -- specific optimizations in Lembeke. And Mike will give some more details in relation to CapEx in the minutes in his part of the presentation. So 3 major challenges: cost inflation, COVID, and capacity. This being said, we believe that makes can cope with these 3 important challenges while realizing its growth ambitions. So that's brings me to the next slide. It brings me to Slide #4. And this graph proves that Lotus Bakeries has grown consistently over the last decades. Our average growth rate over that period was more than 10%. And now splitting up all our branded sales and the 3 strategic pillars. And we're very proud to see that Lotus Biscoff and Lotus Natural Foods, the growth rate in 2021 was extremely high, 15% for Biscoff and 20% of Lotus Natural Foods. And the Local Heroes that also performed also quite well with 3% increase. And normally, in the years to come, the parts -- the Lotus Natural Foods and Lotus Biscoff part in the total sales will increase in years to come. And so today, it's 51 Lotus Biscoff and 22 for Lotus Natural Foods. So close to 3/4 of the total turnover. And our belief is that this percentage will grow. This split up is based on all branded sales, and let that be clear. On the next slide, you see a global overview of all our different plants. We're not going to go through all the different plans. But when we talk about expansion plan, we've talked about the 2 Biscoff plants in Lembeke, Belgium, Europe and Mebane in the United States. And also in our factory in Courcelles our Raffle factory, and Wolseley, our Natural Foods plant in South Africa. And these 4 plants, the majority of the CapEx, the EUR 100 billion will relate to these 4 locations. On our next slide, we see a little bit of a summary of our growth strategy, and that strategy is quite clear. If you want to globalize Biscoff you want to internationalize Natural Foods and at the same time, respect all of our stakeholders. And now let's look at our achievements and ambitions for Biscoff. What is the secret of success of Biscoff? And many people have asked me, how come it grows consistently, significantly and in all geographies. And the first aspect in the success of Biscoff is a strong cost price. We are able to produce Biscoff in a very efficient way. This enables us to bring our products to the consumer at an affordable price. You can never become a global mass consumer brand if you don't start from a strong production cost price. And Biscoff wants to be attractive for all families, and therefore, you need that affordability. So that's the #1 priority or #1 aspect and the reason of success of Biscoff internationally. The second one is Biscoff has a long shelf life being 1 year, and that's really the minimum you need to be successful in international markets. We have many other products in Belgium and in Holland. But the shelf life is not sufficient to be able to become an international products. Third important aspect is that Biscoff has a unique -- on top of that universal appealing taste and unique texture enables also a versatile way of using Biscoff. And besides the Cookies, we have Biscoff Spread, we have Ice Cream, we have Chocolate. And also, our consumers at home have different recipes with Biscoff as an important ingredient. And they also use them as toppings or in milk shakes or whatever. So very versatile usage. So these 3 aspects are crucial: strong cost price, long shelf life and that unique universal appealing taste where we allow versatile usage. The fourth aspect is also important. We know how to repeat success. We created based on all these years of experience a repeatable model. And the leading KPI is household penetration, how many households do buy and use Biscoff? There are 4 main phases, as you can see on the slide: create, build, accelerate and expand. And there is a specific playbook that we link to each phase. On the slide, you can see that we plotted all the countries, almost 70 countries in total. And the top row consists of our top 11 focused countries. And these countries are the larger consumer markets in which we can target on all of the households. In 2021, so last year, 9 out of the top 11 countries have shown double-digit growth. In general, in the last years, the different countries are gradually moving to the right-hand side. And we believe that this consistent way of working where the different countries make use of the global commercial experience is extremely valuable. And this is -- on this slide, this is a different way of presenting it. And indicates the level of household penetration for region and the darker direct, the higher the household penetration. So you basically can see our potential, and you can also see why we say we have just begun. What is our ambition now with Biscoff? Today, we've realized EUR 332 million sales with Biscoff, and that includes Cookie, Chocolates, Spreads, Ice Cream. And we will continue on this growth path, and our ambition is to grow at least 10% per year to get to EUR 0.5 billion Biscoff sales in 2025 -- end of 2025. And this is a dual challenge commercially and also operationally. And we believe that we can do it. It will not be a walk in the park because every year, 10% on higher figures because each 10% is an absolutely -- absolute higher -- a higher challenge. But we believe with the elements, we know today that we can realize that 10% growth to get to EUR 0.5 billion in 2025. And this is a geographical split up of our Biscoff sales. #1 country is United States, closely followed by the U.K. And U.K. did very well the last years. #3 France, Belgium, China, Netherland, Germany, Spain, Korea, Switzerland, et cetera. So you see our product is getting more and more international, and I also see that some very large international consumer markets are doing and performing extremely well. We also can see that we still have a lot of work to do in the years to come. Another way of presenting it is in this slide and already 28 countries, we do sell more than EUR 1 million. This is a top 10, the ranking of the global cookies in the world. We are the fastest-growing global cookie brand within that top 10. And that growth brought us now to #7 spots. There's a long way to go but our vision in the long term is to get to spot #3. And this is based on retail sales value. But a nice jump to spot #7. I'm very, very proud of that. That was an update about Biscoff. Now we're going to talk about Natural Foods, our second strategic pillar. You see some pictures of our wonderful Natural Foods brands. They're Nakd, TREK, and Kiddylicious. And this is a bit our growth strategy. And we acquired these British brands, and they are all British market leaders. They gave us the unique better-for-you platform. A British platform that we will internationalize. And you will see that we're doing quite well in that mission. And we are able to offer internationally a variety of healthy products for all ages. Kiddylicious for BEAR for children, Nakd and TREK for adults. And all of these brands offer also a healthy snack for different consumption moments: home, work, school, while sporting, et cetera. And our ambition is very clear. We want to internationalize these brands. Outside of the U.K., many retailers show also interest in healthy snacks. And that's what the consumer is expecting from its local store or e-commerce channel to find these healthy snacks and a category is an evolution and fully on track. And it's also our mission to bring innovations. Within these brands, we do bring a lot of innovations. And that's what the market also expects. Talking about acquisitions. We are on top of the markets. We follow the marketplace very closely. And if there are interesting companies to acquirers -- acquire we will investigate. And if it's a real opportunity, we might go for further external growth. We'll either go for majority stake and the majority stake means also that we will integrate it within those Natural Foods or will go for a minority stake using our funds FF2032. On this slide, you can see where we started. And we started with more or less EUR 60 million of sales combining all these brands -- all these British brands. 6% was outside of the U.K. So actually, when we acquired it the founders just focused on U.K., they did a terrific job, bringing it to a higher level and creating market leaders within that segment. It's our mission to bring it to an international level. And you can see that now 26% of the total sales is now outside of the U.K. There is a lot of potential, but we are going on the right track. And here, you see also a split up of our Natural Food brands. Also here, U.S. is the #1 country, mainly with BEAR and BEAR is doing extremely well in the U.S. Second country is Netherlands and Belgium, Australia, France, et cetera. We produce this BEAR snacks in South Africa, where we can locally source from the best apples and pears and we export these to the U.K. and also to the United States where we pack locally. So for both of these most important markets for BEAR and pack locally. It's very efficient to transport BEAR in bulk. Next slide is a snapshot of FF2032. And you see that we have invested in really 5 different companies. We have foreseen more or less EUR 40 million to invest in the years to come. We want to invest and scale up countries. So brands that have already certain track record. So it's not our intention to invest in seed money. We find it very important that we believe in the product and the product concepts and that we believe in the founder because we will not mingle in an operational aspect of the business. It's the founder who has to do that. So it's crucial that we believe in the founder. We take minority stakes. And most of them, we also have a Board seat. In most cases, it's our CEO of Natural Foods, Isabelle Maes, who takes that Board seat like the one we just acquired, The Good Crisp Company. And that's again chips company commercializing better-for-you chips. And it's a very fast-growing brand within the interesting chips category and are fully focused on the United States. And FF2032, it's also with our window to the world. For us, it's so important to understand the new trends, innovations, what's going on in the market. And it's for all of us and also from me personally very inspiring to talk and to meet and to learn from all these different companies. And here you see a picture of our newest acquisition and great tasting chips of The Good Crisp Company. Okay. That's my part of the presentation. And now I'm going to give the floor to Mike.

Thank you, Jan. And also good morning from my side. I will briefly go into some updates and progress on our ESG ambitions. And then, of course, in the final part of the presentation, I will go into more details on the financials. As already mentioned, ESG is really also at the heart of what we do. It makes an integral part of our way of doing business. And also is becoming more and more integrated into our reporting. And so also the reason why even today also, we want to give a short update on our actions and our ambitions but we also will use the annual report that is coming out in April as a medium to elaborate on that even more. If you look at the updates on the different pillars. On the environmental side, Jan already elaborated on the ambition and the status on the packaging. But at the same time, we, of course, remain carbon neutral in all our 12 production sites and offices. And we have been carbon neutral since 2015. But what is new is that we, in 2021, initiated a so-called screening on Scope 3. And we will also give more details and more actual numbers on that in our annual report that is due in April. And also linked to that, we will formalize in 2022, our commitment to the science-based target initiative, which will also mean that we will define a carbon target reduction. On the social pillar, gender diversity and equality is kind of already guaranteed is part of, again, the way that we do business. At a company level, we are at equality: 52% is female, 48% is male. But what we believe is even more differentiating from a lot of other companies and also peers is the equality or close to the 50-50 equality between female and male in the leadership team. And the leadership team being a group of general managers and corporate directors in the company. On the community side, I just want to reiterate again that we have a strong Sustainalytics score. A score that brings us in the top 3% and the top 10% of the packaged food and food products companies, respectively. Our palm oil, which is an important raw material for us is 100% RSPO certified, so guaranteed in terms of origin. All our key suppliers need to sign and commit to our code of doing business and our code of conduct. Our Lotus Biscoff Chocolate has the Rainforest Alliance stamp and certification. And we also, again, want to talk about our Lotus Foundation for Education. Basically, our community efforts and our support to community is always focused on education for children and youngsters because we believe that education is the key to escape poverty in some countries or progress socially. In the next part, I will go into the financials. If you look at the key performance indicators, they are all green. Our sales is increasing with 13% as already mentioned. Our REBITDA is increasing almost proportionately to EUR 150 million. Our free cash flow before expansion CapEx is also increasing with 17% and is a very important element of why we are able to reduce our debt further. We are at EUR 82 million of debt and below 0.6x REBITDA. And of course, this also allows us with a strong net result, to also give a dividend to the shareholders increasing this year with 13% to EUR 40 per share. Looking at the next slide and putting the sales growth in a different perspective. The 13% is one thing, but the absolute sales growth has never been higher than 80 -- than this year, EUR 87 million. We come from very strong growth years in 2019 and 2020 where we realized growth between EUR 50 million and EUR 60 million. But this year, EUR 87 million is actually quite a number. And as already mentioned, we continue to do that with the same level of profitability of 20% REBITDA. We have a very strong top line evolution and our REBITDA is also further expanding. So we are always between the 9.5% and the 10% of CAGR on all these parameters. And going a little bit more into detail on our income statement. If you look at our income statement on the cost side, I think we already talked a lot about the sales. But if you look at the cost side, you first have the line of raw materials, packaging and co-manufacturing. Actually, if you look at raw material, packaging and co-manufacturing as such, inflation in 2021, of course, existed, but has, to a large extent, been able to mitigate. We've been able to mitigate that because we have fixed contracts with suppliers over extended periods of time. What we do see, though, in this line item is an important increase in transport costs. More specifically, the auction freight components of the transport, the cost components, whereby we bring our products into the different areas of our sales offices has increased significantly. And of course, that part of the cost cannot be mitigated as such with fixed price contracts. At the same time, if you look at the services and the employee costs, they have increased but they have increased at a pace, which is lower than our sales increase. So they have been able, again, to mitigate also the cost increases that we've seen. The services line also includes increased marketing spend for media, which we said is EUR 5 million higher for the full year compared to prior year, but is included primarily in that services line and is, as such, also absorbed in terms of cost increases. Labor cost increases are there to support the growth of the company and invest in the organization. But again, also there, we do that very diligently, and we are able to pace that according to the sales growth. The other operating income line and expenses line is showing an evolution which is related to a movement, a reclassification of intermediary sales of half products in 2021 as compared to 2020. But the underlying cost components are similar. If you then go below the recurrent operating results, we have the nonrecurrent results, nonrecurrent expenses. In prior year, those expenses were primarily related to COVID-19 expenses to keep our plants safe and operational. In 2021, those costs are made up on the one hand, for preparation and startup of investments like in U.S. And at the same time, also, we've done a restructuring in Natural Foods offices in the U.K., where we merged offices and we will be able or we are able, as of today, to realize synergies by doing that in back office and warehousing activities. The profit before tax is actually at exactly the same level as prior year at 15.6%. The reason why we have a somewhat lower net profit at 12.1% is the tax is same. The effective tax rate in 2020 was exceptionally low because we had some one-off positives. If you look at the effective tax rate this year, 22.6% is actually in line or even slightly below the guidance that we give on our effective tax rate being 23%. This 23% is still our ambition, but it is clear that this rate has the tendency to go up in the future. To give a very important example for our group in the U.K. where we have a considerable part of our business, it has been announced and also enacted that the tax rate will increase to 25% as of 2023 compared to the current 19%. So in the end, we realized a recurrent net profit of almost EUR 49 million, 12.5% on sales, and that's also the basis for our dividend distribution. As already mentioned, we have a stable cost structure, and you can see that also in the different percentages of the cost components on the sales. Our evolution of recurring net profit follows the same CAGR as we've shown before, anywhere between 9.5% and 10% in terms of top line, recurring results but also net profits. And then we go into the next slide, quite important, talking about CapEx. First, on 2021. In 2021, we've had about 12 -- in total, we had a CapEx of EUR 60 million. EUR 12 million of that is so-called maintenance CapEx and that EUR 12 million is in line with prior year and with the low number as a percentage of sales of 1.5%. So we keep basically that base level of maintenance CapEx very consistently also towards the future. But of course, our expansion CapEx has increased significantly from prior year and is all part of the expansion program that we already announced in the beginning of last year. For next year, for 2022, we've called out an expansion budget of EUR 100 million. This is a record amount of CapEx for the group, and it's actually the continuation of the expansion projects that we already talked about and which are very important for Biscoff in the plant in Lembeke, Dough Room and a new Sandwich Cookie line. And in the U.S., of course, the doubling of the capacity with 2 additional Biscoff lines in a new plant. At the same time, we will finalize and make operational a new waffle line in Courcelles in Belgium. And given the significant growth of Lotus Natural Foods. And also very specifically there in United States, we will invest in expansion in our factory in South Africa and the U.S. for Lotus Natural Foods. Our total investments apart from the EUR 60 million of CapEx includes also the additional EUR 6 million or close to EUR 6 million that we've invested in the fund this year. As already mentioned, we show a very nice decreasing net financial debt level despite the significant amount of expansion CapEx that we've done this year and we are below 0.6x EBITDA. We have a very strong balance sheet, very low leverage, a very nice evolution of our equity. But also, as you can see, we are able to grow with a small amount of additional working capital, which again gives us the possibility to generate a lot of free cash because we are -- we have a record operational cash flow of EUR 151 million with a limited investments in additional working capital with a very well-controlled maintenance CapEx need of 1.5%, as already mentioned. So it gives us a cash conversion before expansion CapEx of 92%. And even after the expansion CapEx that we've had this year, still at [ 16% ]. Our earnings per share growth follows the same CAGR strength of close to 10%. And our dividend, if you look at the evolution, is, of course, ever increasing since 2001. At that time, about EUR 1 and now at EUR 40. And that also is in line with our guidance in the sense that our dividend as a percentage of recurring net profit will be at least and in this time, also close to 1/3 of that profit. If you look at our medium-term financial ambitions and also looking back at 2021, we can actually say that we realized all those ambitions. And of course, more importantly also, we continue also to be -- to have these financial ambitions for 2022 and beyond, meaning that with Lotus Biscoff, we will realize a double-digit growth and also with Lotus Natural Foods on the international part, we focus on similar growth. Our EBITDA margin needs to remain at least at 20% on sales. Our maintenance CapEx needs to be below 2%. We continue on our expansion CapEx plan, and we are on track to realize also these new investments in the second half of the year. And our dividend, as already mentioned, at a minimum 1/3 of the recurring net profit. This is the end of the presentation. I will give it back now to the moderator and the people that can ask questions.

[Operator Instructions] Our first question comes from the line of James Targett from Berenberg.

I'll follow-up with 2. Just firstly, on the kind of the inflation outlook. Could you maybe talk about what level of inflation on your cost level you're expecting for raw materials and transportation, et cetera? And related, what level of pricing you expect that you are negotiating -- negotiation with retailers you expect to land in FY '22 and when that will kind of hit the P&L to try and think about the timing during the year you expect your full cost recovery. That was my first question. And my second question was just on the inventory write-down of EUR 3.4 billion. Just could you talk about what that referred to? That would be helpful.

Okay. Thank you, James. Interesting questions. Yes, first of all, about the price increase and price negotiations. We have, as said, announced our price increases a couple of months ago to our customers. We explained in detail the underlying cost increases for our products. And no need to say that these cost increases are real. And as a manufacturer, we need to increase the prices accordingly, right? Fair but consistent. And at the same time, we need to make sure that the affordability of our cookies to our customers remains strong. And our goal is to compensate fully by these price increases, all the cost increases combined with higher efficiency and looking for optimizations in our supply chain, which we believe we will find in 2022. And also looking diligently at our overhead costs to make sure that -- and Mike just mentioned it, that we can keep the 20% of EBITDA for the future. And yes, given the significance of the inflation, we also can see today that the discussions with retailers are tough. And on the other hand, we are also more firm than ever before because we need these price increases. And they are necessary to keep the sustainable margins that allow us to continue to invest. And we hope that we can include the agreements with the customers in the coming weeks and the coming months. And some of these negotiations, and that's normal are still ongoing. So I hope this gives you a bit of insights or an answer on your first question.

Can I just follow up on that, if I may, just to try and get -- is there any sort of color you can give on the magnitude of the inflation though? Are we talking double-digit cost inflation for the year, maybe mid-high single-digit price increases. Anything you can sort of clarity give on that would be very helpful.

It's below double digits. I hope that gives you an answer of your question.

The inflation is below double digit? Yes, sorry, the inflation...

Sorry costs or a price increase towards our customers are slightly below double digits. That's quite an accurate answer on your question, I hope. And to your second question, I'm going to give the floor to Mike.

I think as far as the inventory write-downs are -- as they are called out in our income statement by nature, this is kind of the, let's say, a normal way of inventory reductions. On the one hand, we have the inventory, which is being operationally managed and which throughout the production process, there is some waste, and that's one aspect of it. On the other hand, we continuously -- we have a broad assortment of products, of course, and we continuously need to monitor the shelf life. And so it's quite a normal level of also at finished product level, taking inventory out of there. This being said, it's not abnormal, but at the same time, it's a big amount. It is a big number. And I think it's also something when we talk about efficiencies, operational efficiencies that's also definitely an area where we think we need to seek the opportunities.

And as you said, you include that in your REBIT figure?

Yes, of course. Yes. Yes. And the REBIT is all included.

Our next question comes from the line of Maxime Stranart from ING Bank.

Yes. I hope you can hear me well. 3 questions from my end. First of all, looking at the working capital especially the payables, we are seeing quite an increase in terms of percentage of sales compared to historic figures. Is it level you see sustainable going forward? Secondly, on Biscoff and the 15% growth. Could you provide some more granularity on the impact on new products [indiscernible] add on this as compared to existing markets? Finally, you mentioned that U.S. is booked for Natural Foods and [ Biscoff ] is the big markets -- one of the biggest markets today. Could you [indiscernible] on the performance in terms of the sales you've seen in the country right now? That's what is for me.

Thank you, Maxime. We did not hear your questions super clear, but we think we got most of it. I think the last one is for Mike.

Yes. So indeed, Maxime, in terms of working capital, like I think what is very important is that we manage the different elements of that working capital. And in the end, I think we can again show nice growth with a low level of working capital, the payables are somewhat higher at the end of this year. This is also very much related to the ongoing capital expenditure initiatives that we take. So that's the reason why that level of payable does not necessarily follow the sales level evolution. On the other hand, I think all the other parameters do show also an improvement. So is this sustainable? I think with the capital expenditure program that we have, I would say, in the short term, yes, it is sustainable.

Okay. I think your second question was related to Biscoff and the new products and categories. So we are today active in 4 categories: Cookies, Spread, Ice Cream and Chocolate. And we've seen in 2021 that in 4 different elements we could show growth. The larger pillars, of course, the Cookies and the Spreads. And certainly, within the Cookies and the sandwich cookie or the filled cookie, did extremely well. We see that, that filled Biscoff Cookie is put next to the regular cookie in shelf. It helps increase also the shelf visibility of Biscoff. And we see that filled cookie is very appealing to younger public and getting listings for that product is quite high, not easy, but we don't have to explain too much to our customers. And therefore, we also want to and we need to increase capacity for that cookie. In respect of spreads, spread is still going really good. It's going in different geographies, very, very strong. And as I said also, not only the cookies, but also the spread has a very first value. In the beginning when we brought it to market in Belgium, it was used just to spread your sandwich, but now we see that they use it as stuffing. They use it as ingredient to make tarts, et cetera, et cetera, which is nice that we see that Biscoff taste present everywhere and on different occasions. So we are selling more and more also the taste -- the Biscoff taste and having a unique taste helps in that. We brought innovation to ice cream. We see that the sticks are doing very well. And the sticks have also a very strong Biscoff taste. As well as the pint -- the original pint has also a very strong Biscoff taste. So we see, as a learning within our categories -- our Biscoff categories, that Biscoff flavor needs to be very present. If it's only a slight Biscoff flavor, it's not good enough and it's not differentiating enough. And then the chocolates and the chocolate we introduced in Belgium, as you know, now step-by-step brand internationally. Of course, I don't need to say that chocolate category is a very competitive market not only in Belgium but all around the world. But it's also a way for us to bring the Biscoff brand and to be visible everywhere in the store, and it's also a reminder of the brand. So yes, 4 categories, new are doing well. And for next year, we're really going to focus on these 4 categories. We still have lots of work to do in that. But we don't regret that we stepped into the ice cream and the chocolate category. And then I thought your third question was in relation to the United States and Natural Foods. There, as I mentioned also in my presentation, it's mainly BEAR. With BEAR, we bring something new in the U.S. We bring a super clean fruit snack and that's something new. And that's something none of the other U.S. brands has brought to the market. And that's, I think, one of the reasons of success. And also the playfulness of the packaging is really attractive for our U.S. consumers. We see now in the U.S. that we reached a certain volume. We are progressing in distribution in the U.S. and we are very hopeful that we can bring BEAR to one of the largest fruit snacking brands in U.S., but it's looking good there.

Just a follow-up on this one. My question was also on the basically absolute level of sales you see in the U.S., both for Biscoff and for Natural Food. I don't know if you can give any -- well, detailed information on this one?

Yes. Well, we don't give it in detail that you take the slides and the percentages of the countries, you can more or less calculate it in absolute value, but we don't get it per brand and per region.

Our next question comes from the line of Alexander from Kepler Cheuvreux.

Do you hear me well?

Yes, yes, perfectly.

Okay. First of all, congratulations on the nice results. I just had some follow-up questions on the CapEx. I guess, at midyear, you said EUR 150 million over the next 2 years. And now in 2022, there will be EUR 100 million of investments. Will the EUR 150 million -- can we assume that the EUR 150 million will also be increased somewhat? And if so, is it mostly related to inflation element? That's the first question.

I think the EUR 150 million was specifically for the, let's say, first investments of Biscoff in Belgium and U.S., including also our waffle plant in Courcelles. The EUR 100 million for next year also includes some other items, like, for instance, Lotus Natural Foods, South Africa and U.S. to also deal with that -- with those expansions. So the EUR 150 million as such is still valid and it still -- has still the same scope. But the bulk of that will indeed be spent this year and next year. The tail of that in 2023 will be rather limited.

Mike means, indeed, this year being 2021, sorry. And so 2021 and 2022, that we need the bulk of the EUR 150 million. And 2023 will be rather limited based on what we know today. And so as announced in Q3, most of the expansion -- major expansion plans should be finished. In COVID times, we also have to make sure that the timings can be reached. And today, the different project teams have confirmed us that the timing is still valid that we -- and hopefully, they can keep that timing. It's a strict timing. It's a strict -- so -- but we need that extra capacity for Biscoff and also the waffles. The project teams know that it's important.

And if we talk in capacity, so I remember -- I recall that in 2020, you made 6 billion cookies. Now these investments in these additional lines, how many -- I know it's different -- it's a different product. But in broad terms, how many extra cookies can be produced?

As you mentioned yourself, different types of cookies. So -- and cookies it's a bit difficult to say, but there's a 1 waffle line additionally. And then we will have 2 lines in the U.S. And also in Belgium, we will have an extra line ready.

Okay. And how much capacity just to have a little bit of a bit of a view on how much capacity is going to be increased because we know the numbers of dollars that is going to -- or euros that's going to be invested, but not on the actually relative capacity?

It's not so -- I would love to give you a very accurate figure, but it depends a lot of the efficiency of these lines from the start. If you compare with the lines in Lembeke, they are extremely efficient. In the U.S., the factory is quite new. And we are still scaling up that efficiency. So the 2 lines in the U.S. will be -- that will be -- take some time to get to the same efficiency as the ones in Lembeke, which is normal. And then you have the waffles, which is another category. So it's very difficult to say how much capacity, let's say, that in Biscoff you would have last 3 lines. And today, we have about 17 different Biscoff lines. So to give you a bit of an idea.

Okay. That's very clear. And then maybe one last one...

Maybe just 1 more, let's say, something on that is the Dough Room. So -- if you look at the total expansion CapEx budget, the Dough Room, as we already mentioned, is a very important element of that total. So don't take the number as such and referred it to the capacity increases, the Dough Room is a step-up investment, which is also important and needed. But that gives us the opportunity now in the future to attach again, more production lines to it because that basically needs to prepare the dough to feed those lines. So I just wanted to give the comparison to the budgeted number that we talk about now versus the capacity. It's more than just plain booking capacity.

And absenteeism is also a very important element now. We have high absenteeism today. We can cope with it. But if that further increases, it impacts also the capacity. So there are more -- that's why I said, I cannot give you a clear cut number. They're more than the lines elements, it's the efficiency of the lines. It's the Dough Room that is added to the absenteeism, et cetera.

Okay. And then maybe one final question from my side. I just saw that Austria moved from create to build versus your last presentation. Just could you elaborate on what are the different approaches in moving towards more build category?

It's good that you noticed. We were thinking of it, would somebody notice that Austria made a jump. So I think in Austria, what we have done very well is the out-of-home market. So being present at the restaurants, cafes, hotels, et cetera, already for a couple of years. Of course, during COVID times, that didn't help too much for our retail sales. But now opening up -- opening up hotels, et cetera. It helps a lot for our retail sales. And the household penetration is, of course, only based on retail sales. And you see that based on the authority that we have been built in out of home, it helps to get listings in retail. It helps the rotation specifically in that retail market in Austria. So yes, it's doing well, keep on doing well. We have now a known sales office also for a couple of years in Vienna. So we hope that they will show increase in the years to come.

Okay. And is the out-of-home already completely -- I mean, completely back into the figure? I remember it was 10%, but...

You mean back to the level of pre-COVID?

Yes.

It's still -- if you look at its total sales, it's still more or less 10% or it's again more or less 10% of total sales.

Our next question comes from the line of Kris Kippers from Degroof Petercam.

Can you hear me?

Yes, yes, perfectly.

Congrats also on the nice growth numbers, indeed, very, very good. I just have a couple of questions, a bit of linked to each other. Firstly, on Natural Foods. It grew very strongly. Of course, the internationalization is also taking place, which is good. But what about the U.K. situation? Could you give us an update on any competition there still? And do you actually have some volumes there that could result in some more vertical production going forward? And then, of course, linked to the balance sheet on Natural Foods, if you would go for M&A. Is it still the case, I guess, that multiples are quite demanding with everybody looking at those jewels, of course, in the organic food business. So could you shed some light on that, what you're willing to pay? Or are you currently in a group that I would say has gained a certain size. And as a result of that, you could indeed leverage sales much more than you could do 10 years ago when you started in this niche?

Thank you, Kris. The U.K. in 2020 for Natural Foods had a difficult year. And now we've seen that in 2021 they not only recovered, but it's better than pre-COVID. So we're very happy with that situation. I'm happy that our originally U.K. brands are doing really, really well. I think in respect of synergies, as Mike mentioned, we brought the offices of Nakd, TREK, BEAR together. Still marketing teams are split, but we're looking more for synergies. But you also see these people together in one location, and that's also good for the conversation amongst each other because they are acting more or less in the same category. And it helps also as to act as a category captain within Natural Foods in the U.K. So we still can show growth in U.K., and we will also show growth in the U.K. this year to come. In respect of M&A. We acquired these brands 5, 6 years ago at nice multiples, everybody back then said, we bid it expensively. I think now everybody says, "Oh, you were able to buy these brands very cheap." So multiples, certainly for fast-growing healthy snacking brands in larger consumer markets like U.K. or other larger markets are high. And that's why we think it's a smart way to work through the funds, investing in scale-up companies. And hopefully, one of these companies could become core of Lotus Natural Foods in the years to come. This being said, we also look at M&A in general. And preferably, we would invest in a natural foods or healthy snacking brands rather than traditional biscuits. We want to fully focus on biscuits on Biscoff internationally. And we think today that if we add much more in other international brands, that it would dilute the intention of Biscoff. In healthy snacking, we still think there is -- there could be in subcategories interesting companies or targets. On the other hand, everybody is looking into that space. Also the very large consumer goods companies, they're looking into that space. And 5, 10 years ago, they did not look at companies that had a turnover of EUR 20 million, EUR 30 million, EUR 40 million. These targets were too small for these very large corporations. But nowadays, they also look at that size and that type of company. So the competition is high. And so multiples are also quite high in that space. This being said, we don't need any external growth. We show and we have proven that we have a very nice internal growth, but that we have brands also that deliver that internal growth.

Okay. And then just a second question, could you share with us perhaps just as for modeling and private label, where are we roughly today? Could you elaborate on that? Because given the fact indeed that Biscoff, the Natural Foods are growing so rapidly. And of course, local brands a bit less, but I think that private label should be quite minimal nowadays. Is that correct?

Yes. I think more or less private label is more or less 10%.

Thank you very much. We have no further questions in the queue, so I'll hand you back over to the speaker for any concluding remarks.

Okay, no? Thank you all for your attention. And I hope to give some more details to the results. And thank you also for the interesting questions we were able to discuss with all of you. So have a nice day, and talk to you soon. Bye-bye.

Thank you. Bye.

Thank you to our presenters for the presentation, and thank you to all the participants for listening in to the Lotus Bakeries Announcement Full Year 2021 results. We wish you a very pleasant day. Thank you.