Pandora A/S (PNDORA) Earnings Call Transcript & Summary

Good morning. It is my great honor to welcome you to the Investor and Analyst Day 2024 at Pandora Crafting & Supply here in Bangkok, Thailand. This is the heart of rich craftsmanship of the world's largest jewelry brand, Pandora. Before we commence the first session, please allow me to introduce the speakers at the presentations. In order of appearance, may I introduce Anders Boyer, Chief Financial Officer, Pandora; Aussie Jeerasage Puranasamriddhi, Chief Supply Officer and Managing Director, Pandora; Joyce Lam, Vice President for Innovation and Product Development, Pandora Crafting & Supply; Mads Twomey-Madsen, Senior Vice President, Global Communications and Sustainability, Pandora. May I also introduce Pandora's team. First, from the Investor Relations and Communications team, Bilal Aziz; Adam Fuglsang; Andreas Kristensen, Matilda [indiscernible]. And we also have joining us here, Natasha Laul, Senior Vice President Commercial Finance, Pandora; [ Kristin Kruger ], Vice President, Finance, Pandora Crafting and Supply; Howard Bruno, Vice President, Crafting & Supply Quality; [indiscernible], Vice President, Plant Head AAA; Luciano Oliveira, Vice President, Plant Head BBB; and Lars Nelson, who'll you see tomorrow, the Vice President, Plant Head of Lamphun. Joining us here today are also the strategy team and also here are your group leaders for the day 1 tours. Now please join me in welcoming Anders Boyer, Chief Financial Officer, Pandora on the stage for the welcome and introduction to Pandora and its business model. Anders, please.

Thank you very much. And good morning, everyone, and a very, very big welcome to Thailand and our state-of-the-art crafting facilities here. I hope that your travels here have gone well, that you're not too jet lag. And if you are, then don't worry, it's only going to get worse during the day, I'm pretty sure. But we'll do our best to keep you entertained and energized. Also, a very big thank you to our host, Khun Aussie and the team. You know, Aussie, it's always such a pleasure for me to be here and today and tomorrow it's going to -- that's going to be the case as well. Most of the 2 days, today and tomorrow will be about experiencing the facilities yourselves seeing what happens here in Thailand with your own eyes because that's kind of why we are here, but we will start out with a couple of presentations during the morning just to set the scene. Some of you will remember that last year, when we had the CMD in London, we only had crafting presentation in a breakout room, so a pretty short presentation. And we intentionally left out a formal presentation in the main room because we think that in order really to understand what Pandora is doing in Thailand, you need to be here. So for the next 20 minutes or so, I'll start out by explaining what makes Pandora unique and what our competitive advantage really is trying to put a few more words on that. And then also explain what is the role of crafting and supply in forming the competitive edge of our company. Now if I can change the slides, just going one back -- there you go. Before I get into the business model and our competitive is, I'll just take a step back and remind all of us on the bigger picture of our strategy. At the CMD last year, we announced that our Phoenix strategy that we launched back in 2021 is working quite well. And as a result, we moved ahead with the next chapter on our journey, which is about trying to accelerate growth even more because simply put that what we have been doing since we launched the strategy back in 2021, it's working quite well. And therefore, now during the second chapter of the strategy, we're just continuing along the same path, increasing investments in current and future growth while we are attempting to restage the brand to be known as a full jewelry brand and accelerated growth. And with a market share of less than 2%, there's quite a lot to run for. And you -- we will continue to see the building blocks of the Phoenix strategy to drive growth also beyond 2026, which is kind of the formal time frame for the Phoenix strategy. But even beyond that, the building blocks are going to keep driving top line growth. At the core of the Phoenix strategy is the mission that we have to change the perception of Pandora into a full jewelry brand. And through the investments in elevating brand desirability, the goal is to stretch the brand a little bit slightly in order for it to appeal across all usage occasions and all of our collections. But of course, while we stay firmly as an accessible brand, that ain't going to change. But simply put, what we would like to end up with is that if a consumer is looking for a piece of branded handcrafted precious metal, jewelry, at an accessible price. We would like them to think, "ah, yes, Pandora, that's the brand for me." And broadly speaking, we already have the products not least now that we have launched the ESSENCE collection a few weeks back. So it's mainly about changing the perception of the brand. All right. There you go. This is the strategy reel that we presented at the CMD in London last year. And it's also the one that we update you on in our quarterly announcement. And as you know, the strategy centers around the 4 growth pillars that you have in the pink circle in the middle being about the brand, design, personalization and markets. And we've spoken about these pillars that quite some detail in -- at the CMD last year and also every quarter. So this is not the topic for today. But the message that we would like you to take away or just repeat is that we have multiple growth opportunities, just keep doing what we're doing and have been doing since we launched the strategy back in 2021. And we don't need all of these growth pillars to succeed in order to deliver on our target. Another key message more relevant for today and tomorrow is that a critical enabler behind this strategy is, of course, that we are able to craft high-quality during on-time and at a low cost. And that is what we will be diving into during today and tomorrow. I'd probably have to do this twice -- sorry. I'm not very well at this. There we go. All right. You probably all remember this, the financial algorithm of Pandora and what the investment case looks like. And we've added this slide from the CMD last year, just as a reminder. And at the CMD last year, we announced new 3-year targets. And those targets, they start -- so the left on the slide up here with the high single-digit annual growth -- organic growth and then combined with high gross margins in the second black box and high EBIT margins in the third black box. And then when you combine that with our high cash generation and our cash return policy, you get to what is stated in the last black box being that we can drive an earnings per share growth in the mid- to high teens over the next couple of years. And our crafting facilities plays a key role in delivering on this financial algorithm. Of course, the crafting facilities plays a key role in the second black box here being the high gross margins. But they also play a key role in the high cash generation and the return on invested capital that we are generating because the crafting facilities that we have are actually not net-capital intensive. And partly because our jewelry is handcrafted to a fairly large extent. You will see that we don't have a big machine standing here in Thailand in Lamphun and where it's just sort of spitting out the jewelry and then return volume up and down depending on demand. So the way to think about it, the role of the crafting facilities in this algorithm could be like this. A few weeks back in May, we announced the groundbreaking at our new facility in Vietnam. And that facility will add 50%, 5-0 percent capacity at a total capital expenditure of around 150 million, USD 150 million. Let's call that DKK 1 billion on. So that means that we only need to invest around 3% of revenue in order to increase capacity by 50%. So another way to put that is that at our scale, the impact of depreciations in our cost of goods sold, the COGS is very low, resulting in that our cost of goods sold is almost fully variable. And in a simple way, and maybe that's -- it's too simplified, then I apologize for that. But in a simple way, you can say that the investment in Vietnam is only equivalent to around 1 month of gross profit generated by the revenue at full capacity at the factory. That is a very asset-light business model. So now that brings me nicely on to talk on the next couple of slides about the Pandora ecosystem. One of the questions we often get is that what is exactly in the Pandora business model that enabled you to deliver on the algorithm that are in the black boxes that I just went through. We get questions, so how can you operate at -- with a gross margin of around 80%? How can you keep operating with the EBIT margins in the mid-20s? Why can you operate with a ROIC, return on invested capital of 45%? And the answer is that it's all simply a function of the ecosystem we have built up over the last couple of decades. And it all starts with the brand. The brand is the core reason for the scale that we have in the business. The brand is the core reason why we can operate with the scale that we have in a physical store. And the brand is the core reason we operate at a store on average with more than 40% EBIT margin. Pandora is the most well-known jewelry brand in the world, and most of you know that. And that's great. And it is valuable in itself, and it's not easy to replicate, not easy to copy. But what is even more valuable for the company is the fact that Pandora owns the space of jewelry with a meaning in the minds of consumers. And that is even more difficult to copy. And that brand equity has been built up hand-in-hand with the Moments platform. It takes decades to build up a jewelry icon. And our icon being the Moments platform, has been built up over the last almost 25 years. And that platform, that icon is the foundation for our brand equity. And owning a unique position in the mass market means that we are allowed to play the volume and scale gain, so to speak. Last year, that -- the brand drove demand for 107 million pieces of jewelry globally. So how do we leverage this brand-driven scale in order to build the business model that is even harder to replicate. And that's 2, that's 2 pieces on top of the brand. First of all, we have invested in and built an unmatched global distribution platform, which is mostly in-house or direct-to-consumer Pandora operated stores. We have a total of around 6,600 points of sales, of which almost 2,700 are stand-alone dedicated Pandora concept stores. Someone else could choose and decide to say, well, we want to duplicate the store network. It would take a lot of money, it would take probably quite a long time. But what you cannot just duplicate is the productivity of the stores, of course. So being the revenue or gross profit per square meter and that obviously then again, just links back to the brand. The other piece of the parcel on how we leverage the brand-driven scale to build a business that's hard to replicate is crafting and supply, of course. And that is why we are here. So over the course of the next couple of days, you will see firsthand what we have built and the complexity of being able to mass produce handcrafted, jewelry at the scale that we do here. Over the past years, Pandora has been able to leverage this crafting scale to drive a cost advantage. And for those of you familiar with the Pandora story, you know that our gross margins have always been high. And over the last 5 years, we have even been able to lift that to the high 70s in -- on gross margin. And a lot of that is down to the benefit of what happens here in Thailand. So our in-house crafting and supply facilities allows us to deliver on the brand promise of both high quality on the one hand and affordability at the same time. So to summarize, we have -- what we have here is a strong ecosystem. It all starts with the brand, which drives demand and an unmatched scale. And around this, we have built a strong infrastructure with in-house crafting on the one hand, an in-house, so to speak, distribution platform. And that forms a model which is quite unique in a fragmented and mostly unbranded global jewelry market. And we believe that this model yields significant benefits compared to a subscale competitor set. And at the same time, it underpins the financial algorithm that I mentioned earlier on. So zooming in a bit on the role of crafting and supply in this ecosystem and our gross margins. Hopefully, this chart should help illustrate that what we have put up here is the gross margin since 2016. And there's 2 lines up here. The green line is our historical reported gross margin as you can find it in the annual report. On the pink line, you will see the gross margin adjusted for more mechanical or technical factors such as forward integration, channel mix, foreign exchange and commodity prices. So the other way to think about it is that the pink line is supposed to represent this on the underlying gross margin development and mainly being an effect of the result of ASP development and the cost of production. And you can see how the pink line have been on an upward trend during the last 5 years. And one way to think about it is to look at the pink line in 2 phases. First, you have 2016, '17, '18, where there was quite some ASP pressure due to excessive promotions and a number of other things, but not least excessive promotions, which hurt the gross margin. Then in 2019, as many of you know, the transformation begins and then through a combination of detox in the brand and subsequently raising prices and keep working with lower and lower production costs, you see the positive impact on the gross margin. And I'll zoom into the cost of production just on the next slide. But the message we want you to take away here is that there is no one-off factor explaining the increase in the gross margin. It's all about a consistent and sustainable story on managing our prices and keep trying to lower our cost of production. And that brings me nicely on to the next slide where we are taking a step down, assuming into the average cost of production for each piece of jewelry. And again, here, what we have showed up here is an indexed average cost of production, where we have adjusted the numbers for foreign exchange, commodity prices and product mix in order to give you a view of the underlying development. So you can see here over the last 5 years or so that we've actually managed to slightly lower the average cost that it takes to produce a piece of jewelry. And that's despite the fact that the starting point here in 2019, Pandora was already super efficient. So it's not easy to become even more efficient than we already back in 2010. But as you can see here, the cost of production is down a bit per unit. Also despite inflation every year and annual salary increases that needs to be absorbed. We think this is a great outcome and it speaks to the infrastructure that we have built, which allows us to build -- drive significant productivity and scale benefits. I don't know, Aussie, later on will speak to a bit about how we measure to the decimal of a second on how we produce each piece of jewelry. So when you combine the picture up here with the ASP progress over the last number of years, you have the sort of the ingredients for the gross margin progress that we've seen since 2019. I also wanted to just zoom into the cost of goods sold from a somewhat different angle in order to demonstrate the cost flexibility that we have. What you can see on this chart is that only around 4% of our cost of goods sold are truly fixed. So that the dark black box to the far right. And this is essentially mostly depreciations. Only 4% is fully sort of fixed cost even though we are almost producing everything in-house. So this means that we have plenty of flexibility in adjusting the cost of goods sold up and down in line with how much we are selling. And that flexibility underpins the resiliency of our gross margins. This is a gross margin bridge starting from 2023 and then looking ahead. Many of you will remember that at the CMD last year, we said that we expected the gross margin to remain high and even increase. And that's also what has happened in the 3 quarters that has been announced since the CMD in October last year. So now the question obviously is how does all of this tie into the future gross margin? And there's a couple of messages on this slide up here. First of all, just repeating, the gross margin will remain high. There's no structural one-off or similar that drives the current gross margin up to almost 80%. And secondly, as you can see in the black bar just in the middle here, that at unchanged commodity prices, the gross margin would exceed 80% at a point in time. So the third message is that -- and that's what you can see on the last part of the bridge up here that the latest development in silver prices and gold prices, of course, gives some headwind. And as you can see on the chart up here, the increase in silver and gold prices since last year drives that 260 basis points headwind versus last year at the current spot prices. The chart up here does not include any mitigating actions to offset some of that increase in commodity prices. And of course, there will be mitigating actions. But I can't give you a complete and solid answer yet on exactly how much of the silver and gold impact that we can mitigate. The increase in silver and gold prices have mostly happened during the last, I don't know, 8 weeks or so. And we need a bit more time in the leadership team to give you a full answer. We are not just looking into mitigating actions on the gross margin level, we're looking across the full P&L to see how far we can get in mitigating that 260 basis points of headwind. But we will talk more about that on August 13, when we are announcing the second quarter results. You know that we are building a factory in Vietnam. And once we are up and running at -- in Vietnam, the cost of producing a piece of silver in Vietnam will be similar to here in Thailand. Maybe even a touch slower, but at least sort of maximum similar here. There will be some ramp-up costs as we get ready to produce in Vietnam. So there will be some ramp-up costs in '25, next year, and '26. It's not -- it's not big, big money, but you can think about it as being in the 15 to 30 basis points of gross margin impact in '25 and '26. But again, the key message that we want you to take away on this slide up here is that why there will be random factors that we can't fully control like the silver prices, the fundamental drivers of our gross margins are rock solid. Wrapping up, what we have at Pandora is a unique ecosystem that is very hard to replicate. We have developed a brand which owns a unique position in the minds of consumers and around that brand, we have built up infrastructure with crafting at scale in-house and distribution at scale that is also mostly direct to consumers or Pandora retail and Pandora operated store. And that business model drives a very attractive financial model, financial algorithm that you can see illustrated up here. So let's get into the meat of why you are really here. So this is the agenda for today and tomorrow. I think you should have that in your app, the Pandora app already. So I will not walk through it in 2 great detail, but we have a couple of more presentations in the room here before we break for lunch. And then after the launch, we will have the factory to us for the remaining part of the afternoon. But next up is a deep dive into the crafting and supply here in Thailand. So left for me is just to say, once again, a very big welcome to Thailand and a very big welcome on the stage to my dear colleague, Khun Aussie. Thank you very much.

Thank you very much, Anders, and good morning, everyone, and a warm welcome to Pandora Crafting & Supply. Our world-class crafting facility where we craft dreams into reality. My name is Jeerasage and please feel free to call me Aussie. I am the Chief Supply Officer here at Pandora. It is our great pleasure to have you joining us here across all over the globe. We are very, very much looking forward to sharing you our journey of growth together. Some of you may have already joined us in 2017, which we had a grand opening of our Lamphun plant in the north of Thailand. On the other hand, some of you will be the first time to visit us. It has been almost 7 years since then. There have been many, many impactful events around the world. COVID situations, geopolitical tensions, macroeconomic uncertainties. Even with all these turbulence, and as Anders say, Pandora has come out even stronger, and crafting is -- and crafting and supply is one of the key drivers. As we always say, you have to see it to believe it, to cheer magnitude and sophistication of our operation, the passion of our people. So we have separated the focus of the 2 days events of the 2 locations in the most effective way to use your time and of course, for your fullest appreciation. Please always bear in mind that craftmanship is the heart and soul of Pandora in which you will [indiscernible] witness in the 2 locations. For the first day, in Bangkok here, we will focus on the centralized functions, including innovation, product development, quality, laboratory and, of course, our plating operations. As we also -- we'll be showing you how we have enhanced our craft and ship with technologies, automation and digitalization. While on the second day, we will emphasize on the full end-to-end casting process, including an exciting workup for all of you to try your craft and ship skills. So hopefully, that you will be looking forward to that. And then as Anders spoke earlier about what had changed numerically over the past years, let us share with you in a short video to capture a transformation in a physical sense over the 7 years, what happened aircraft in and supply. Please enjoy. [Presentation]

I really hope that you enjoy the video summarizing our journey. Now let me take you a little bit back to the origin of Pandora Crafting and Supply. Why Pandora established our first crafting supply in Thailand? The country offers a mix of great benefit that the large-scale manufacturer and a brand like Pandora has and will always continue to enjoy. First, Thailand is in an area with low risk in terms of natural disaster and, of course, global conflicts. Thai society is also very, very peaceful and harmoniously. We have the land of smiles. The Thai government also provides great support for foreign investors such as taxes and duty exemptions, Thailand is one of the few countries where we, foreign investors could also own a piece of land. In addition, Thailand has always been known for craftmanship, artistry, attention to details. its rich culture, heritage and tradition promotes Thailand as one of the most important jewelry hub of the world. Lastly, Thai economy is still growing, and the country infrastructure is very strong. The country continues to have growing ecosystems for jewelry businesses with a vast number of material suppliers, partners, research and development institution. With those benefits, our founder, Khun Per Enevoldsen fell in love with Thailand and started our operation in 1989. Since then, our Thai operation has been always the heart and soul of Pandora. We have our fully first crafting supply in 2005 here in Gemopolis Industrial Estate. As the company grew, we invested more in expanding our footprint. We established our innovation center in 2012 to few more innovation and product development capabilities. We then set up the new state-of-the-art greenfield crafting facility in the north of Thailand in Lamphun in 2017. We then consolidated our crafting facility here in Bangkok to create 2 world-class manufacturing hub, AAA for our silver products and BB for our plated products in 2018. Our investment did not stop there. We expanded our A12, our innovation center to keep upgrading our capability and also set up a logistics center in the year 2019 and 2020. Besides strengthening our operations, we continuously to pursue our sustainability ambition as Matt will also talk about it a bit later. We have all our facility with a 100% renewable energy since 2020. And then we also shifted to 100% recycled silver and gold since December 2023. Now let's fast forward, we are scaling up to support Phoenix strategy, fulfilling our ambition as the world's largest jewelry brand and also becoming a full jewelry brand as well as strengthening our supply resilience. We now have 5 productive and efficient -- and effective, flexible and a job including robust and resilient components to form what we call Pandora Crafting & Supply Network. Here in Bangkok, we have our world-class AAA crafting facility for silver products. This site is equipped with what we call flowline finishing concept, maximizing our flexibility and agility. It is really one of a kind, and you will see it very, very soon. In the North of Thailand, we have our sustainable leading Lamphun factory, producing both silver as well as gold item. You will visit this factory tomorrow. Pandora also decided to follow and established the new facility in Vietnam. The new site will combine our knowledge, experience of the 3 existing sites enhancing the latest technology to pave the future of the jewelry manufacturing. The final piece of the jigsaw is also our OEM and our ODM. Working closely with our partners across the globe allowed us to balance our capacity and bring innovation now that we are learning to our operations. Just before I forget, I think I skipped over the BB. Our BB plant is also our leading plating factory equipped with 2 plating lines to complete end-to-end plating production. So in total, our in-house manufacturing capacity is 110 million pieces today. And we will be scaling up to 170 million when Vietnam is up and running in full speed. And as Anders mentioned earlier, the Pandora brand allows us to produce the scale that is simply unmatched globally. I would also would like to take the chance to update you regarding our new facility in Vietnam. You may ask why Vietnam? We conducted an extensive research across the globe to identify the location for a new facility. The team originally identified 27 potential countries across the globe. After thorough analysis, we really concluded to choose Binh Duong province which is near to Ho Chi Minh City in the South of Thailand as the new location with these reasons. One, Vietnam is also well known for its high craftmanship skills. This country has a rich cultural background and resonance for its handcrafted goods. Two, Vietnamese government also actively promote and support foreign investors in setting up new manufacturing facilities through a range of incentives and policy. And third and not the last one, but last but not least, Vietnam has also become an attractive destination for global companies, which is -- with its economic strength, the country keeps on improving its infrastructure as transportation network, airports, renewable energies and other strong basic utility. Lastly, as Anders touched this point, cost also should be comparable to Thailand, if not slightly below when running on similar productivity and, of course, loading levels to Thailand. Pandora is investing USD 150 million in setting up this new state-of-the-art facility by equipping it with the latest crafting processes and technology and really hoping that you will agree with me that it's a great-looking facility. Also, we are also very happy to tell you that USD 150 million that Anders and myself is talking about here is already inside our CapEx financial plan as communicated in the Capital Markets Day last year. The site will add 60 million of jewelry pieces in which 40 million is silver products, while 20 million will be plated products to further fuel the growth of Pandora. The site will run on 100% renewable energy and is designed to meet LEED gold standards to conserve energy and has minimum impact to the environment. As you may also have heard, we had just do our groundbreaking ceremony, of course, together with Alexander for our Vietnam crossing facility on the 16th of May. Now we are starting our construction phase, which will be completed for commissioning in the late 2025. We expect to produce the first pieces coming out of that facility in Q1 2026 as communicated. Now let us also tell you a little bit about our other Lamphun project is. As you might recall, we have another investment in our capacity expansion program. In the North of Thailand, which is the first facility is right next to our current facility in Lamphun. This facility is to supply another 20 million of plated products. But as we have communicated, due to prudent precaution on macroeconomic situation and also risk mitigation we have put that project on hold so we could focus on our Vietnam facility. The construction site is kept at extremely good condition, ready to ignite -- reignite when needed. The facility will require 13 to 16 months to operationalize. This means we can view our growth journey quickly if more capacity or even additional risk mitigation is required in the future. Now let us take a little bit of a deep breath together, and then let me give you more insight to our crafting and supply operation where we craft dreams into reality. Pandora is the world's largest jewelry brand and crafting and supply is the foundation of crafting at scale. Last year, we produced 102 million pieces of jewelry in-house. These scales allowed us to invest in innovation, advanced technology, automation, enhancing quality, efficiency and speed. This scale -- this also share fixed costs across our large volume, helps us maintain high gross margins. To achieve this level of capacity, we employ 12,000 highly skilled craftspeople who worked in harmony under a highly efficient processes. This setup ensure each jury pieces meets our quality standards while maintaining efficiency and also scalability. Lastly, our operating model allows us to adjust our capacity by managing our working time and resources to respond to demand fluctuations. We continuously train our craftspeople to have multiscale to support the processes needed. We also have an extensive partner to support us with materials, with components or even finished goods in case our in-house capacity needs flexibility and agility. Now for you to understand the full picture, our crafting and supply begins with our consumer-centric designs. So on that note, let us hear from Stephen Fairchild, our Chief Product Officer, how the global designers in Copenhagen where it's collaboratively with our crafting and supply to bring esthetical designs to life. Please enjoy. [Presentation]

So let me elaborate a little bit more. We call our process of turning innovation and designs of our product as our brand end-to-end process. This process begins with inspiration, innovation designs, then turning these ideas into design by our global designers in Copenhagen using hand sketches. Then these sketches will be handed over to our crafting and supply. We will start our 3D computer-aided designs, or what we call CAD, then creating samples by using 3D printing. At this point, we will have the first jewelry sample in the real world. During the development of products, a series of quality assurances on both material and product are being conducted to ensure a very high-quality standard. The next critical and very crucial process is called preproduction. This is where we test, we optimize the way we craft our jewelry so that we can multiply from that 1 piece to that million pieces while optimizing costs, quality and, of course, lead time. At this stage, we will prepare our highly-trained craft people to ensure that they have the right skills to support the mass production. The optimization journey does not stop there. We continue to improve our crafting at scale. As Anders mentioned, the process is never ending, and we will continue to hunt for more efficiency going forward. And Anders, that's a promise. Once again, I would like to emphasize that the end-to-end promise -- sorry, process, is not crafting and supply internal process. All functions across Pandora, ranging from marketing, commercial, designs, product and retail play crucial roles. Pandora has a big, big advantage that we own the whole value chain vertical integrated, allowing crafting and supply and, of course, Pandora, to collect all information, then analyze and use the insight to evolve the way we craft our products and, of course, optimizing our EBIT margins. Behind the effective and efficient processes is our passionate people. They are the most valuable assets. And I really hope when you walk inside our facility, that you will see that our people are really, very happy and will always wear a big smile. We keep investing in our people. We developed production academy program to continuously and structurally train our people. With 1 master trainer, we have 10 trainees. The setup ensures the trainees to get close support to bring up their required skill. We also invest in providing above the standard benefits to support our employees. For example, beside the wages and salary, Pandora also provides meal allowances, transportation to and from the facility to their home, air-conditioning working environment, health and accident insurance, as well as engaging social events for both internally and externally to our community. With all these benefits, we are able to keep our turnover low at approximately 7%, which versus the over 10% in the market average. This allows us to -- this lower turnover allows us to really keep our skilled people fully engaged and motivated with Pandora, and of course, while attracting new talents. Craftsmanship is the heart of our operation. And I keep on repeating that the intricate designs and artistry jewelry crafted by skilled craft people creates unique value and desirable products to delight our good consumers. Pandora has more than 3 decades of experience in crafting, with every attention to details. And we are committed to continue to enhancing and mastering our crafting skills. Nevertheless, in today extremely competitive jewelry industry, while continuing in mastering our craftsmanship, it is so crucial to combine craftsmanship and technology. The mixtures allowed us to create more desirable products while optimizing our cost, quality and services. Technology plays a crucial role in our operation. Technological advancements allowed us to achieve unparalleled precision, consistency and efficiency, while also driving innovation and pushing the boundaries of our jewelry crafting. Additional, data and digitalization are becoming increasingly and inseparable importance to what we do here at crafting and supply. By capturing and analyzing the data of our operation, we gain very invaluable insights into our crafting process. This data-driven decision-making enhances our performance and ensure continuous improvement. To illustrate more the essence of combining craft and tech, and you will hear this word more when you walk through our crafting and supply facility, is that we look into our evergreen iconic products. These products have been in our portfolio since 2019. Anders has showed you a wonderful chart of the underlying progress of our gross margins and how we have been able to keep our cost -- average cost per unit consistently low. Hopefully, the examples -- some examples that you will see on these slides will even bring that more to life. For example, on one of our silver bracelets with the heart-shaped glass, we used 8.4 minutes to produce in 2019. By improving our crafting ability in wax processes and goldsmiths operation, we can reduce that by approximately 17% of the total time. In addition, the other 12% improvement came from the 2 new machines that we have put into the operations. The same approach goes for all the products where we're enhancing our skills and implementing new technology, yields positive impact to our productivity. I really want you to think together with us about that scale that we produce, multiply that by the productivity improvement that we're doing, this moves the needle immensely. It speaks to the underlying gross margins of our business that Anders has been emphasizing. Once again, I want to emphasize that our journey doesn't stop there. Every year we continue to drive productivity harder and harder and find a way to leverage our scale. Because our team, we truly believe that continuous improvement is a journey, not a destination. So always more and more to come. In summary, our crafting and supply will continue expanding our scale, robustness and resilience to serve the demand with capacity expansion programs, for example, like in Vietnam, as our key initiatives. We will safeguard the future of Pandora by keeping innovation and developing our new products process to fuel our growth. Craftsmanship is always the heart and soul of Pandora, while we will enhance by technology, data-driven performances, digitalization to deliver market-leading, high-quality and most affordable, beautifully crafted jewelry. Taking care of our people is our promise. And we will always keep that close to our hearts according to our value: we dream, we dare, we care and, of course, we deliver. We will always strive for excellence in our performance through continuous improvement mindset to deliver Pandora's ambition in meeting consumer's ever-changing demands. Conclusion, we keep investing in our skilled people, the necessary technology, innovation, data analytics and digitalization. We can competitively offer beautifully jewelry with the highest standard of quality and cost and most accessible prices to give a voice to people's [lives]. With that, thank you very, very much for your kind attention. Now I would like to invite Anders back on the stage, and we are looking forward to your questions. Thank you very much.

Thank you, [indiscernible], and welcome back, Anders. Before we go into the Q&A session, I do have a bit of an announcement. If you are wondering where the WiFi password is, it is actually on the table, on a little small card that you find there, at the back, there is a WiFi password for your convenience. Now let's go into the Q&A session. And should you have any questions, feel free to raise your hand. Our team will be there to assist you. Yes, this gentleman over here, the microphone is coming to you.

Yes. A question for you, Anders. So when you talked about mitigation of the commodity price inflation, I would like to ask you, not for guidance on how much you can mitigate, but maybe you can explain a little bit about what's in the toolbox when you talk mitigation?

Yes. That's a relevant question, Lars. In an odd way, I kind of like these external shocks. And maybe that's a bit too big word, because it always gives me and Alexander an opportunity to shake the tree a little bit, creating sort of an extra burning platform to look at things with a different lens. So starting from the top line, a couple of things that we have been looking at anyways for the last 6 months. And that includes the organic growth for network expansion. We have been guiding that we will be delivering a 3-point CAGR from network expansion between '23 and '26. I don't know that you have a view on that, to see you smiling. And then there might be an opportunity to grow a little bit faster than that, but that we are looking into, regardless. That's -- but still a question mark whether we can do that. Another thing that we've been looking at for 9 -- 6, 9 months as well is the -- our multi-brand network. So the -- we think that we are underpenetrated in the -- on the multi-brand partners across a number of countries. It's not big revenue numbers, but it's -- comes with incremental, let's call it, 60% EBIT margin. And we have been working on that for a while, and too early to conclude, but we may be able to talk a bit more about that on August 13. And then lastly, on the top line, it's about prices. Obviously, when input cost goes up, we'll have to look at whether the 1 to 2 points of annual ASP increases, whether that's something we can do. Unfortunately, consumers don't really know about silver prices. It's different with gold. A lot of consumers know what happens with gold prices. Silver that's not the case. But when silver is up like it is, we will have to take another round looking at ASPs, and we're doing that as we speak. Then further down on the cost of goods sold side, the starting point is that we're super-efficient already, thanks to what is happening here with -- in Thailand already, but there might be pieces that we can do, but from a little bit of a different lens. And that's about product design and for -- and you'll probably remember this, 10, 11, 12 years back when silver prices took a spike up, then Pandora invented, so to speak the, what we call, the open works design. So Pandora used to have charms that was sort of solid pieces of silver. And back then, Pandora redesigned some of the products that become sort of more open works where you can look through the pieces of jewelry. The beauty of that was that it saves silver. But the consumers thought that the value proposition was even more interesting, because it looks more elevated. I don't know whether we have such a magic bullet in the pipeline, but it's something that Aussie together with Stephen and [ MC ] are looking into over the summer, whether we have opportunities along those lines. And then below the gross margin, gross profit line in the P&L., we're also looking at -- taking another look at OpEx. So everything down through the P&L is in play. So just a couple of examples.

And then a question for you, Aussie, if I may. So you gave the 4 examples on how you have reduced crafting times and showed specific SKUs. That reduction, was that sort of steady, and then you have a big a-ha, and then steady, then you have the next big a-ha, or is this a more gradual evolution that you see continuing?

Yes. Lars, thank you very much. It's a great question. Let's say, in our crafting and supply, what we have is always a continuous improvement work that we continue to always do. So there are -- because as you can imagine, the efficiency, productivity that we can improve, it's of course on a steady basis, and we keep on improving. But there would be also some disruptive improvements that we need, because just imagine the improvement that you can do will come up and with, of course, the law of diminishing returns, it will -- so then you need that disruptive thinking and then change that it goes up -- so it goes together from our continuous improvement plus also some disruptive thinking. And that's what our team is doing, and also Joyce. And then you will also see a little bit later when you go through the plans, especially for the guests who have been here before a couple of years, and I would love to encourage you to see how much improvement, how much advancement, how much evolution that we have made, then that would be that. Thank you.

Two questions for me to start with. So on -- could you maybe comment a bit on the slide where you have the capacity expansions? There you show -- what is the COGS level for the OEM, ODM capacity, just in terms of comparing that to the other facilities? And then I assume that that is higher, and then that you will not use that when you inaugurate the Vietnam facility?

Yes. Absolutely. I mean financially, I will hand it over to you. Yes.

That's the reason that the -- we only do 4%, 5% of production with the OEMs. It's a nice flexibility buffer to have up and down to accommodate swings in demand. But the price is meaningfully higher on the cost per unit. And I'm looking at you, Aussie, can we give an indication? Because normally, if you look at this, of course, they use the same amount of silver as we do. That's what it is. On the rest, and I'm also looking at Christian, in the middle down here, so being a VP of Finance here, is around 30% higher price when we go with OEMs.

Yes. I think we knew the number, but we were not sure if we can disclose.

It's done. Too late.

And maybe just a follow-up on that, on the buffer part. Will you use that after you also inaugurate the Vietnam then? We still have that as a buffer capacity, the OEM, ODM?

Yes. We'll keep maintaining that. We should always have a certain buffer capacity in -- we should never run at 100% capacity, also from a pure risk management perspective. So we will always have that.

And if I may add, I think it's a great question. Let's say, usually, we always keep our OEM and our ODM as partner. We have a certain percentage as Anders said. But the main reason is for capacity, of course, having that flexibility. But always, I mean, we want to be the best. We are the best. But we cannot be the best at everything. So we work with our partners, we also bring in new ideas, innovations, and those kind of things as well. So that's why we are -- so we have a very healthy ecosystem of our partners here in Thailand. And of course Vietnam, we are starting already having also our ecosystem also in Vietnam as well. So we will continue to do that.

Then just a nitty-gritty question on Slide 12. Is that development on a like-for-like basis, as I guess there's been quite a change in complexity of the products? So Moments products has, in general, been increasingly complex, but then some of the fuel for more products are less complex. So I was just wondering whether that is.

At Slide 12, as far as I can see down [indiscernible].

Thank you.

That one? Yes. That's on a like-for-like basis, yes. Otherwise, for example, diamonds is not a big thing yet, but that will completely skew the picture.

[indiscernible] Two questions, please. First of all, you just said that it could be top line initiatives to mitigate the commodities headwinds. Can you elaborate a bit more why a bit more space and also a bit more sales with this multi-brand parties would actually increase the margins? And also on the -- I think there was this mention that Thailand offers positive things on the tax rate. So overall, in your overall tax rate, what's the impact in terms of tax rates from being operating in Thailand?

Yes, maybe I can start out with -- on the top line. These are initiatives that we have been working on regardless. So when we made the announcement at the Capital Markets Day last year on a 3 percentage points CAGR from network expansion, we knew that the opportunity space is much bigger than that. But we didn't feel comfortable going beyond 3 points of CAGR. But when you look at the Capital Markets Day presentation last year, we said that we had identified 7,000, we call it, viable commercial locations where Pandora could have a store. And of that, we only announced that we will open up 400 to 500 new stores between '23 and '26. So a fraction of the global number of white spaces that we have. So let's see whether we actually think that we can grow beyond that. But on average, when we open up a new store, the EBIT margin is 35% to 40%. So if we can accelerate network expansion, it is margin accretive on a group level. And the same with -- to the extent that we [indiscernible] multi-brand partners and work with different type of partners, that's going to be margin accretive as well. But we're not going to do it if it's not the right commercial decision, of course. But we have established back in -- I think it was in October last year, October, November last year, we established or reestablished actually a small team in global office looking at our network from that lens. It's kind of gone unnoticed for the last many years, the focus has mainly been on the concept stores and our own retail network. And it's become a little bit at the expense of the multi-brand partner, which serves a purpose in either very small cities or serves a purpose in -- to build up sort of knowledge of the brand. But let's see, we'll communicate a bit more on that in 2 months' time, at the second quarter announcement. And then on the tax rate, ever since the establishment of our first factory here in Thailand a long time back, we have been enjoying much lower tax rate under the BOI, Board of Investments scheme in Thailand. Now this year, 2025, those incentives are still in place, but with the new OECD minimum tax rules, most of that savings disappears this year because we will, ironically, the saving that we have in Thailand ends up being an additional corporate tax payment in Denmark. That's the OECD minimum tax rules. But historically, the benefit has reduced the effective corporate tax rate by 150 basis points, so that June up until last year. But that disappears this year and then that's already baked into our effective tax rate guidance for 2024.

And maybe just a clarification. So I think on Slide #14, so you mentioned the 260 basis point headwind. In terms of the time -- it will take time to get there, thanks to hedging and passing through inventories, et cetera, so if you -- again, everything else being equal and without all the mitigating factors, so what's the timing to get to the 260?

Second quarter of '25, so just a little bit less than a year out. So second quarter next year.

So if you had to quantify just the impact on full year 2024?

Okay. Zero.

Thank you so much for all of your questions. Do we have time for 1 more question for the gentleman in black?

I'll do it quickly. I'll just do 1 question then. Just when I look at the Pandora web page, there's still roughly 600, 700 different charms that you're selling. And when you showed the impressive slide with how much you have improved time on different products, is there a chance that you have not looked at all of the charms that you have and all of the products that you have in terms of how much complexity they add to your production in terms of time and cost that you spend on them compared to the brand perception and how much it actually increases incremental sales?

Yes. If I may, yes, I think it's really, really a good question, because if -- but can we explain the improvements that we have? It's also working on 2 things. One is by product, by DBs, so those are the improvements that we do. But we also do by processes. So to your point that you mentioned, there will be -- if we -- for example, when we do -- and you will see it when you go inside, where we improve the wax setting operations, for example, that would touch on all products. So that improvement will go into every product. But there are some, and you're absolutely right, there are some products which we say, "Oh, this one, we have a great opportunity. It's the best seller. We want to work on this in order to also improve our gross margins. Then we will work on that. So we're doing that in both. Yes.

It's turned off. No, it's working again. And is there anything that you, from a management -- executive management perspective, can do from -- in terms of mitigating actions from this SKU overview taking some complexity out? Or is that not where Pandora today?

Yes. We are looking into the -- so from a design perspective, both as of existing jewelry but also what's in the pipeline to be launched, whether that's something that can be designed in a different way, given what's happened, so to speak. So that is in the cards. But as of today, there's no concrete things in the idea box. That's to be looked at over the summer.

And if I can add, Anders said, that you find it very, very interesting. And if you -- when you also walk inside it, you also see the history of our product, actually our products have become more and more, I would say, more consumer-centric, from a 1-piece charm, going into different components. But if we didn't do all these improvements, just imagine the cost per unit, as Anders mentioned, would have gone up, but actually went the other way. So that's a little bit what we're doing at the crafting and supply. And hopefully, you will see that when you walk inside.

Thank you so much for the questions, and thank you, Anders and Aussie. Thank you so much.

Thank you. Thank you very much. Thank you.

Well, it has been a very insightful morning and I'm sure it will continue for the rest of the day. But for now, I would like to invite you for a quick 10-minute break. And just at the back of this room, we will reconvene again at 11:45. Thank you. [Break]

Ladies and gentlemen, welcome back from the break. Now let's dive into our next agenda. We would have, first, Joyce Lam, Vice President, Innovation and Product Development, on the innovation; and followed by Mads Twomey-Madsen, Senior Vice President, Global Communications and Sustainability, on the sustainability agenda. Now let's join me to welcome Joyce Lam on the stage, please. Thank you.

Good morning, everyone. I hope you have come back with a good break. I'm glad today to share with you how Pandora is leveraging innovation to support our growth. I'm Joyce Lam, Vice President of Innovation and Product Development. Innovation is vital element to fuel any company's growth. In Pandora, innovation is our DNA. From Moments concept, which we launched 20-plus years ago, to latest patented machine we develop in-house, Pandora is continuously fueling and disrupting jewelry industry as well as jewelry product category. Pandora has an innovation vision to guide our efforts to be a leader in innovation, with 2 keywords. First, consumer. Consumer is at the heart of everything we do. We have to understand the need and desire of our consumer, to help them through our product to tell their stories, to connect special meanings and to help them to express themselves, yet in affordable price. Second keyword for us in innovation is scalability. With producing 100 million plus pieces per year, that mentioned by Aussie before, which no other jewelry company in the world is close to this number, it gives us a unique opportunity to leverage innovation. Craft and tech innovation is one of the key to drive production efficiency. It is not just about installing more machinery but about how to support our unique craftsmanship with new materials, new toolings, new jewelry capabilities, and new technology to deliver good-quality product to consumer at right cost and right price. With that vision, we define key purpose of our innovation: Create value for consumer and optimize the cost of crafting. This outcome are driven by 3 areas of innovation. First, product innovation. These relate to new materials, new features, new category of jewelry, which Pandora hasn't launched before, to deliver desirable and full jewelry assortment for consumers. Service innovation. These are services that improve our consumer experience, which interact with Pandora. Craft and tech innovation. These include technologies that relate to manufacturing to be able to produce better quality product in accessible cost. As innovation management is the key to success, we have innovation board to govern our innovation priority and process. Pandora has a lot of successful product launch. In this page, I would like to share with you the story behind it and how it connects to product innovation. First, Moments concept. Our first charm bracelet concept was launched in 2000 and still be our core collection for Pandora. It is not just beautiful and unique design; it is a Pandora patent mechanism, which helps us protect our iconic product. Rose gold and yellow gold plated products are not new for jewelry industry, but it was new for Pandora when we launched in 2016. It is not just to respond to the consumers' demand for more colorways of jewelry product has set a good foundation for our success today in timeless collection. Enamel was part of Pandora finishing process for a long period of time, to add color to our jewelry. Enamel With Effect, though, was newly launched in 2022. This innovation allows the consumer to have new experience with their jewelry such as color changes due to temperature or light intensity. This not just brought us good sales, but bring us a lot of attraction in Instagram and TikTok. If you are fans of Pandora, you must be very familiar with our iconic snake chain. In 2023, new patent chain, Studded Chain, was introduced to provide more variety of our bracelet and it was well received by consumers. This becoming our new iconic product. Jewelry might look small, especially our charm, yet there is a great deal of design detail, and thanks to the craftsmanship, we are able to execute those detailed elements to consumer. We are not just mastering craftsmanship, as Aussie mentioned before, we are evolving in craftsmanship. In order to continuously create excitement and newness in product to consumer, we need to continuously evolve our crafting capability. This page highlights our crafting journey, and I would like to bring you to a deeper review of each. Murano glass, it's highly crafting process. It requires layer and layer of glasses under fire to form the required color and shape. Beyond Murano beads, we are evolving to achieve different shapes. It provides much better variety and we're well-accepted by consumers. For example, these days, we are making butterfly charms and tortoise charms with Murano glass. The phase stone-setting becomes an important design element of our product. More and more stones to be set on our jewelry, especially our timeless collection, with different cut of stone. This effect can be achieved by delicate design with high-skill craftsmanship. Shaded enamel, it is very sophisticated effects, which you can also see on the left side how the worker is executing on this product. It requires highly-skilled craftsmanship and their judgment on applying right amount of color in right area, and blend into the required effect. This capability helps us to mimic the natural texture, stone pattern, like flower petal, cloud or some natural stone pattern, while create lots of newness element to consumer, and every piece is unique. Interactive element. When you look in detail of Pandora products, there are a lot of small movable parts, from spinning wheel of bicycle charm to sophisticated padlock with function. This interactive element on jewelry adds a lot of value to the consumer. They are all assembly by hand. You can imagine the level of capability required of our craftsmanship. While it supports the execution in good quality and cost, we have to leverage technology to support our craftsmen to provide high-quality metal parts to them, which brings us to next pillar of innovation technology. It is not easy to optimize jewelry process because it's highly crafted. Yet with the high production volume and the increasing expectation of quality from consumer, we need to apply technology where it makes sense. Alternative manufacturing for us means manufacturing process beyond traditional jewelry process. Plastic injection and stamping are 2 of the examples. They are wildly used in watches and electrical appliance industry. They help us to reach a high tolerance requirement. How high? Like 25-micron tolerance, meaning it's half of your hair thickness. This level of tolerance we are after while it's around -- that high volume and low cost we can achieve through this technology, it would be unreachable by traditional jewelry process. This capability helps us to reach a wide range of product possibilities. Auto-snake chain is an iconic product of Pandora with high volume. We improved our efficiency by automatically produce our snake chain bracelet. The machine is internally developed by our engineering team, and it's patented. 2D and 3D wax setting. We apply menu stone setting in sophisticated design, like you see on previous page, while we also introduced automatic wax setting to improve the efficiency on simple design with high volume. Vision soldering. As we move along our strategy to full jewelry brand setup, there are more assembly process similar to fine jewelry. To achieve the level of refinement, we are using vision detect system to support soldering process. Wire forming. With more chain and necklaces, bracelets around the collection, we introduced wire forming machine to allow us to simplify manufacturing steps by forming high-quality wiring and soldering in 1 step. Now I hope you have some idea what Pandora is capable of innovating on product and craftsmanship and technology. One of the key elements to bring innovation to succeed is our innovation capabilities. Innovation Library, it is not just capturing Pandora knowledge, but also industrial trend of new materials and technology relevant to us. Innovation Lab enable us to provide MVP or prototype for new concept in very short time to validate innovative idea with design and marketing. Recently, we just expanded our muscle on machinery with new capability. This enable us to provide more intelligent machine solutions and machinery tooling fabrication possibility and capabilities. And you will have a chance to see and experience some of that in the afternoon factory tour. Lastly, innovation is not a solo or isolated journey. We are creating an ecosystem of innovation by bringing together diverse players and fostering a culture of knowledge sharing. Ecosystem creates a condition necessary for innovation ideas to develop, scale and succeed. In January this year, we had an event called Crafting and Supply Summit, where we delegate 1 day as an innovation day to allow our partners to share with us, not just CNS, but also marketing and designer on their innovative idea for jewelry industry, to identify the opportunities to collaborate and generate values together. If the partner has great idea, Pandora is the right platform for them to work collaboratively with us, then jumpstart their innovations. Looking forward to show you our innovation center in the afternoon tour. With that, thank you very much. I would like to hand over to Mads for another important topic: sustainability. Thank you.

Hello, everybody. Good to see you. I'm Mads Twomey-Madsen, and I got the pleasure of heading communications and our sustainability arm at Pandora. And what I'm going to talk you through now is sustainability. I'm going to show you how, to Pandora, this is not just about complying with a growing amount of regulation, but very much also a part of being a leader in our business. So in short, when it comes to ESG, we believe we're a low-risk company with a lead position. In very few words, we are low carbon emitter. We have shifted our main raw materials to be recycled or come from renewable sources. And because we're vertically integrated, we have a very, very high degree of control and transparency in what we're doing. And that's in particular important when it comes to sustainability. So on the chart, you see a couple of acknowledgments that pretty much reflects the position we have in our industry. Let me just mention a couple of them. So the carbon emissions target, we'll get to it later, is validated by the science-based target initiative. It aligns with the Paris Agreement and it aligns with what science says is necessary to keep global warming at 1.5 degrees. For the second year in a row, we're recognized by CDP with an A score for our climate action and disclosure. We're also recognized by CDP as a supplier engagement leader. From MSCI, we're AAA rated for the eighth year in a row. And we got a low risk ranking from Sustainalytics. Time Magazine's made a list of world's best companies, and on that list we're 21 on sustainability. Of course, we remain committed to the principles of the UN Global Compact as well. So if we look back at the history of Pandora, giving back to local communities has been a core part of how we operate. It's been a lot about education because we know that education is a main lever to not just raise individual well-being but also economic welfare. And so you'll see that here in Thailand, for the past 18 years, we've had a My School project with that we've been refurbishing or constructing school buildings. Colleagues here nominate a school building every year and we refurbish or construct the building. And that has helped some 8,000 children over the years. At a more global scale, we are the -- one of the largest partners for UNICEF. This also is very much centered around education and empowerment to learning. So to date, we donated USD 11 million since we started this program a few years back. And that has resulted in aid coming to more than 1 million children in form of educational programs and emergency relief. Fast-forward to today and you'll see that sustainability is a cornerstone how we operate the company. It's also one of the foundational elements in the Phoenix strategy. So you see up here 3 pillars. Those are our main strategic pillars when it comes to driving sustainability. And we've set targets across these low-carbon, circular, inclusive, diverse and fair. And I'm just going to talk you briefly through the main parts of that. So on the left-hand side: low-carbon. We have one of the most ambitious climate targets not just in our industry but pretty much ranking up against global peers. We set out to half our emissions across all scopes, so Scope 1, 2 and 3 by 2030, and we're well on our way to getting there. I'll show you more about that in a second. On circularity, you might have picked up that we reached our target of shifting our main raw materials, silver and gold, to 100% recycled. We're going to do that next year, but we actually completed it December '23. And with that, we're quite sure that we are in the lead when it comes to circularity in the core of our business. On inclusion, diversity, we've set a target a few years back to get to gender parity in our senior leadership. And since then, every year, we've climbed several percentage points and are standing at about 34% now, again, on track to get to gender parity at the latest in 2030. As you probably know, we've integrated these targets in our incentive programs and also in all company financing. So just a few weeks ago, in line with that, we launched a new EUR 500 million bond. And you see that that is linked to carbon emissions and diversity, gender diversity. So with these public targets, we commit our brand, and with our link in incentive programs, we commit deeply into how we incentivize our senior leaders. And then we add this extra layer of corporate financing sustainability linked to show that we're really serious about this agenda. So I'm going to give you a bit of a closer look at the carbon emissions part of our sustainability program and how we plan to lower them. For Scope 1 and 2, so what we do inside our own 4 walls, this makes up just 3% of our total carbon emissions, and that's very much due to the efforts we've been making in shifting to renewable energy. As Aussie said, here in Thailand, our operations run 100% on renewable energy. So the remaining emissions are pretty much about refrigerants and some on-site fuel use. The big chunk of our work then sits in Scope 3. You got the pie over on the right-hand side, that's 97% of our total emissions. And you see it break down on categories. Typically for a company like ours, crafting materials would be a larger relative part. But thanks to the shift we've done on recycled silver, recycled gold, this is a relatively small part of our Scope 3 emissions now. So we believe we're quite on our way in demonstrating how it's possible to separate growth and emissions. If we take up baseline year 2019, so this is the baseline year we set for carbon emissions, since then, we cut emissions across all scopes by 27%. And in that same period, you will know that we've grown the company revenue by about 29%. So it's a very nice development. We're on track to get to our target for 2030. It's not a done deal, and it's not going to be a linear journey either. So with the expansions we're making on production in Vietnam with the network expansion and with refurbishing of stores. We had some bumps on the way. We'll see probably an increase, a slight increase this year and next but we're comfortable that we're going to drive down towards our 2030 target. I'll just put a couple of words on how we're going to get to that. You see the [ move ] on the right-hand side. So in our own facilities, we continue to drive for energy efficiencies. So just last year, we put in new lighting, new air compressor solutions here in Thailand. They helped us quite a lot. In our stores, we've already rolled out a good bit of renewable energy. We continue that and expect to complete a full shift to renewable energy this year for all stores. Here in Thailand, we already run on renewable energy, but what we're doing is solidifying that with even more kind of direct and own production. So we just established up in Lamphun, we're going to a more direct line based on biomass energy. So for Thailand, we're now running on 27% own renewable energy on-site. In Scope 3, so the big piece, we're doing quite a lot. So we're looking at shifting our transportation to biofuels. We're looking at shifting from air to road. We're cutting travel emissions. We're asking our franchisees to also shift to renewable energy in their stores. We work with suppliers across the board to help them shift to more renewable materials and to purchase renewable energy. And then as a key component in this, as we mature the data and get more and more specific data from our suppliers, we expect that some of our estimates turn out to be conservative now, and so that's also going to drive down emissions. So that's our plan for now on carbon, we can take more questions on that later. A few words just on another key aspect of sustainability. So waste, this is something that the company has worked with for many years, and we're in a quite good place. So we recycle 99.8% of our waste from crafting. It's used as an input to other industries. So if you take gypsum, it goes to composting and brick production. We take Murano, it goes into glass bottle production and rubber is used as a fuel blend for cement production. So the past 2 years, we haven't sent 1 kilogram of waste to landfills, and we aim to keep it that way. So to wrap up this piece, I was going to talk a little bit more about the scale of the transformation we think we're representing the changes we made with materials on silver and gold and then the newer one on lab-created diamonds. So making this shift to recycled silver and gold is not something done overnight. We spent the past about 4 years doing this, and 100 colleagues have been involved, a lot of them here in Thailand. In particular, it has required that we work very, very closely with more than 40 suppliers. And what has to happen in making this transformation is that we've decided to run our recycled program according to the strictest standard available in the industry. It's the responsible jewelry councils chain of custody. And so suppliers would have to adapt their supply and their production lines to be able to segregate non-certified or non-recycled silver and gold from the deliveries they are making to us. And that has taken a lot of time. It's now in place, and we have a very mature supply chain in this regard also. So what's the climate impact on silver? You see up here, it's quite noticeable. So recycled silver has 1/3 of the carbon footprint compared to freshly mined. For gold, it's even more, it's 1%. So we're making serious carbon reductions when we shift to recycled. We estimate that we avoid around 58,000 tonnes of CO2 by running on recycled silver and gold and if you put that in perspective, our total emissions are 264,000 tonnes of CO2. So it's a very, very big difference we're making by just this one shift on materials. Lab-created diamonds are transformative in terms of how we address consumers. They're also very transformative when it comes to environmental impact. So the reason for that is that the diamonds we use in our jewelry are made with a 100% renewable energy, and that makes the whole difference in carbon accounting, you reduce the footprint by 95% compared to a similar mined diamond. So it's a very, very different product that you provide. So here probably is one of the only cases in consumer products. You have something that is both cheaper for the consumer wallet, and it's also a whole lot cheaper for the planet. So what we did was we asked Ramboll, the engineering group, to give us a couple of numbers and that's the last slide to put some of this into a tangible perspective when it comes to what the consumer gets in and what the world impact is. If we start with my favorite, Charm, it's a family tree. Charm, the one I have here, made in sterling silver, we're now able to manufacture this with a carbon footprint of about 0.2 kilograms of CO2. Now that would be the same as a [indiscernible] that you might have gotten earlier this morning. And if you're up to 2, well, that's 2 silver charms already. The lab-grown diamond ring on the left-hand side is one of our flagship product. So it's a 1 karat ring set in recycled gold, that one would have a carbon footprint of just about 11 kilograms and that is the same pretty much as a pair of average jeans that you're wearing in here. It hopefully lasts a whole lot longer. So we asked Ramboll to calculate what if the whole diamond industry was run on diamonds that had this type of footprint and to give us kind of a sense of the difference we're looking at it, it's the same as replacing about 2.4 million cars in New York City with electric vehicles. So it's a real meaningful difference that these innovations are making and we think it points to the future of luxury. We think we're in the lead for that future. So with that, I'll open up to questions. I'll invite [ Joyce ] up here on the stage with me. And we'll talk about sustainability and innovation.

[Operator Instructions]

The first an offer then a question. So gender-parity, I assume that also means in the models you use if you have too few male models, I would volunteer for that. Then a question to you Joyce, so I mean given your background from [indiscernible] to Join Pandora, how unique is the sort of end-to-end integration you have here? And maybe from a different angle, is that a hindrance for Pandora acquiring another brand and then integrating it into production? So if you acquired Kendra Scott or Brilliant Earth or something, would it be completely impossible to fit that into this way of thinking production?

Last very good question. The first question, let me think a bit first, how can I answer that? The second question first, if we -- or how can we insert a brand into Pandora? I think we lately have a very good example, which is, ESSENCE, the collection we just acquired from the market, and we just launched as well. So this is the product segment, which is a bit like what I'm wearing now. So they are not traditional Pandora jewelry, and it fits very well because that becomes fitting the white space that Pandora jewelry has not yet tapped into. So that in terms of going to food jewelry brand assortment, in fact, opened a lot of rooms for us to acquire different types of product categories. So ESSENCE like Anders mentioned before, its launch might be a few weeks' time. So a bit observing the performance in terms of sales, but then the pilot was very positive. So that's also definitely see good progress on that. Now to your first question, compared to Swarovski to Pandora because Swarovski have a lot of information they haven't disclosed, I also could not disclose as well. But just in terms of how much Pandora is integrated or well integrated because we are a vertically integrated company. So from the design to retail, I think one very, very unique proposition of Pandora is how we leverage the innovation since very beginning on the value chain compared to other brands. And then since that time, we are highly integrated consumer in the conversation, which is also different because sometimes when brand or a company, they do innovation, it's for the sake of new technology but in here, it's a totally different approach. It's very pragmatic. It's very consumer-oriented. And it's also linked to, at the end, how it's go to market as well. So I think just on that part of end-to-end integration of design or innovation to the market. Pandora is very well advanced compared to other brands. I hope answering your questions.

To the lady over here on the middle table.

I ask a question for Joyce. How much of our innovation is proposed by us and how much is proposed by our suppliers? And how do we work with them to bring that to life and who shares the IP in order to prevent that from competitors getting that? Just curious about that process?

Yes. I wish I could answer that. But in fact, the innovation is very diverse. We have machinery innovation, material innovation, product innovation, the figure you ask we even happen to do a proper statistics on the number or ratio. So I could not give you the percentage. But there is really a different model. So some are completely come from in-house. So some are completely come from the partner. So if they have the patent, we have to have a contract with them on how to handle that. And sometimes it's also co-create so it really depends on the scenario we have different models. But one thing is very good because Pandora is very familiar with the patent process. When we saw there is an opportunity, which can protect our own brand on new innovation that we will have no hesitation to go after that.

The gentleman over there.

A question on how much more expensive is recyclable silver? And maybe could you comment a bit on what is studies on consumer preferences and awareness of buying jewelry, which is recycled versus nonrecyclable?

Yes, very good. So I think our take is that -- so we pay a premium to go recycled. And with using recycled instead of not at all using recycled, you're looking at a cost of about USD 10 million on an annual basis. So that's cost that we're absorbing because we believe this is the way to go for our business. You will not see it in our stores coming to them at the moment. But what we know is that when we test various types of concepts for consumer preference, circularity beats carbon many times over. So this is the part of sustainability that many consumers can relate to and kind of accept immediately, right? So we do believe we're building for a position in this space.

Then just a second question. Maybe if you could comment a bit on the De Beers not abolishing the Lightbox initiative they have, what kind of impact do you see from that?

So we wouldn't comment on De Beers. What we can say is we feel very comfortable with our supply situation.

All right. Would there be any more questions? Yes, for the gentleman in the first row, middle table.

A question for the innovation part, can you maybe talk about the balance that we're seeking between automation, which is more for mass production versus more kind of flexible production model given the different SKUs and more lines that we're opening up.

It's a very, very good question. In terms of that, when you go to the factory tour this afternoon, you will witness yourself, majority of our process is crafting. Craftsmen is highly, highly SKU trained craft people. While we use the machinery, we would say it's supporting their operation. How is supporting means, for example, the interactive element you saw before, we support them to make a better tolerance metal part by machine and then the craftsman assembly by hand. So this is how we are leveraging technology where it makes sense. It could be in terms of processes, it could in terms of the high-volume item. So that's a big connect to all the answer on the last section as well. It's had really twofold. Processes, which is labor intensive, then we would think how we can leverage technology to support them. On the other side, high volume item, we would detect possibility and opportunity to optimize the cost. So it's how we usually use the technology and craftsman.

And just a quick follow-up. The ESSENCE for example, is it completely new lines in our production facility? Or how much is it shared with other lines?

ESSENCE, it's new for our production, but it's within our existing capacity. So that is how we are able to transform ourselves to produce different types of jewelry. And that's why we have to evolve continuously of our craftsmanship.

That would be the end of the Q&A session with Joyce and Matt. Thank you so much for the session.

Welcome back. I would imagine that a few of you are actually looking forward to sit down again. I want, but I -- even though we know there was a bit of some parts of what you've seen today was [indiscernible] of what you saw yesterday. Then there's always a power in repeating messages and especially when you see it in the right sequence today or from the beginning to the end I think, it becomes much more logical, what does handcrafting jewelry at scale, what does that really mean? I think it stands of the [indiscernible]. It's 18 months [indiscernible] I was here last time, and I'm pretty amazed at what has happened just in the course of 18 months. I can see that the CapEx that has been approved by someone has come into play, including in the few [ moments ]. So good to see. I just want to do a very brief recap before we go into, [ I think was the 42 minutes of Q&A ], if I remember right, something like that if it's still on time. You saw this slide yesterday with [ Pandora One ] ecosystem. This is something that we are quite proud about. Obviously, some has been built up over the last 25 years [indiscernible]. And it all starts with the -- and then just repeating with the brand, the fact that we have the most well known jewelry brand in the world, and the fact that, that brand is both known as the brand that where you can build your own piece of jewelry, the brand that owns the space of meaningful jewelry, that's really the core of why we see the traffic that we do into our stores around the world, and then that traffic leading into an average store of [ 4-wall ] EBIT margin above 40% and an improved level at 25% EBIT margin. That's kind of the core of what is our competitive edge and what is difficult to replicate for someone else. And then around the brand, we have built distribution at scale and crafting at scale. And the last piece that's what we have spent over the last quarter [indiscernible] end-to-end integration from design, manufacturing, own distribution centers actually as well. We run most of the distribution in-house as well and then direct-to-consumer distribution. That is what drives efficiency and consistency and the high margins that we have in the business. And it's also that unity between the brand crafting and distribution that allows us to join a company, which we think that will be more and more clear that this is a growth compounder that we can keep driving a nice steady revenue growth over the years. And over the next couple of days, we [indiscernible] dive into the last [indiscernible] and we made a slide that summarizes some of the key takeaways [indiscernible] so that's in the [indiscernible] I'm just worrying if you can't see it from behind and you have them in front of you. First of all, one of the key takeaways that we want you to take away from the last 2 days is that we have -- with the crafting at scale, we can produce at low cost. And [indiscernible], call it very low cost. I don't think you find many jewelry companies around the world with almost 80% gross margin. [indiscernible] we've [ recruited up ] a lot of companies around, even though there's not that many listed companies are actually [indiscernible] [ a found ] and it being an [ 80% ] gross margin. So I would say, thank you, [indiscernible]. Thank you, Lars, and thank you for the crafting team here, and thank you, [indiscernible], 80% gross margin and [indiscernible] at very low cost per unit. But secondly, I think this is super important [indiscernible] has become very visible during the last couple of days. The fact that it's cheap production, it doesn't come in low quality. Normally, you would say [indiscernible] it's cheap stuff and [indiscernible] low quality, but it's actually -- it's the other way around. We actually produce jewelry and quality that's comparable to something that's much more high end and I think even [indiscernible] [ vendor ] earlier today saying, well, maybe without the quality of our products is above what you will find and with something which is much, much more [indiscernible]. I don't want to be quoted for that, but it's definitely no cost doesn't mean [indiscernible], that's what we wanted to take away. Then with the scaling that we have that enables us to drive [indiscernible] people, processes and leverage technology to a degree you wouldn't be able to do if you were our main competitor being the local unbranded privately held 1 or 2-person company. That's still 70% of the jewelry market. That's that kind of [ off comment ] of course, there's no way they're probably [ going ] to think about leveraging processes and technology in the way that we do. Then [indiscernible] take away that with in-house manufacturing at this scale, we can supplement on the pure creative part of innovation done by [indiscernible] and the team across Milan and Copenhagen, but also [ provide ] innovation within different types of material production methods and the product functionality. I think we see ample examples of that within the last convocation. Some people who are new to the Pandora story would be, say, intuitively being concerned about that. When you have in-house crafting but also in-house distribution or we have a lot of fixed costs. I think [indiscernible] yesterday, on the cost of [ goods sold side ], that's definitely not the case. With only 4%, of our -- 4%, 5% of our cost of goods sold being truly, truly fixed. So that's not a [indiscernible] the P&L because we have in-house crafting not at all. And then finally, I think regarding the company with a low risk sustainability for [indiscernible] jewelry is a low carbon emission business. But then when you add that whether we have in-house crafting, we have sort of pretty good control on this part of the value chain from a sustainability perspective, not just carbon emission, but also from a people perspective. And I hope also that has come across in a good way in the next couple of days. And this is why Max yesterday, he -- in one of the first slides, he said that [indiscernible] is a low-risk sustainable profile. I have to say not going to work because some always when you say that then something would happen, but we dare say that the company is a pretty low sustainability risk profile company. So with that, [indiscernible] can we stretch that a little bit or would that be dangerous? But let's see how -- I know a long questions have been asked during the day, but otherwise [indiscernible].

[indiscernible].

Okay. Quick questions and quick answers then. That's what we will we doing and feel free to ask questions to anyone.

[indiscernible]. But as you guys transition towards becoming a cultural brand, which I think is one of the main objectives of [ competing ] strategy, it was apparent to us that the unit cost of production is obviously a bit higher because the [indiscernible] is warm or at least the time it takes the mix [indiscernible]. Does that means that you will have some pressures in your efficiency ratios as the product mix evolves?

[indiscernible]. Let's say, of course, [indiscernible] we also mentioned [indiscernible] to rebrand the products will be different in terms of time. But of course, we take the same approach, [indiscernible] and when we design those products, we also go for the [ cost ] point. So you do not [indiscernible]

Yes. I could also add just from a commercial lens, our [indiscernible] team, our [indiscernible], the innovation team are very, very involved in having product innovation to have margin targets that are equal or accretive. So even though they will be having a higher cost per unit, we get price [indiscernible]. So that is a very tight governance structure to protect.

[indiscernible] is fluctuating over time, we're seeing headwind in silver price and now it seems that we are going to get a lot of resources, management time on how do we solve this, [indiscernible] for [ scrutinized ] business. I guess that -- you would also have the other perspective is that [ silver prices' selling price ] and the [indiscernible] because there are so many things we see around these [indiscernible] and just continuing what we are doing and not focusing on the small [indiscernible] doesn't make sense, but you just focus so much of these mitigating actions [indiscernible] keep doing what you're doing basically [indiscernible].

Just a question, [indiscernible]. I think if we had been in the situation where we would need to initiate into [ saving something ] 50 new things in order to think about mitigating the headwind on commodities, then it might have been a different answer. But as I mentioned, there's some of the -- if you look at the drivers I mentioned this on ASPs, that's a machine that's falling anyway. So where we can go up. So we just have to -- let's test that now with what's happening in the world, gold and silver prices going up, are there pockets where we can increase prices more than [indiscernible]. It doesn't drive a lot of additional work. Then on the other 2 top line drivers you mentioned was about network expansion and all integrated also for [indiscernible] brand expansion that was running already. So now we just talk about [indiscernible] in the light of what is happening so that's not new. So what is new is the one where we look at, is there something we can do on the product design side that's triggered by the circumstances. So that's probably the main additional thing that comes on the table. They'll be taking initiatives [indiscernible] approach where getting a view on forming the view between marketing, design and crafting and supply is that -- is this something that we should do further. And then we'll see whether [indiscernible] small pockets that [indiscernible] probably too small, there's some 1 or 2 big ideas that we can pursue. And that's part of the reason why we can't give you an answer yet on to what extent we can mitigate the higher commodity price. The [indiscernible] is full already, so it is definitely a trade off but I think it irresponsible not to dedicate some time and resources to have a structural shift in the silver prices like this.

Yes. So one of the often mitigating drivers you're looking into potential price increases. Maybe could you talk a bit about what are the process there? How do you do it? How you structure it? How does it work just maybe the flow inside or how do you evaluate whether you should do a price increase or not?

We have a small team sitting in [indiscernible] organization, our Chief Commercial Officer, [indiscernible] typically the way they work is [indiscernible] of hypotheses on what -- across what type of products or what kind of type of price points might be a pocket for us where we could price off based on sort of different consumer insights and looking at other types of gifting and moving other types of jewelry. And then we test that hypotheses online, where -- and I'm not sure I'm explaining it in a good way [indiscernible] in a certain zip code, in the U.S. as an example. [indiscernible] Florida, as an example, then we will go and look for this type of [ jewelry ], you see a higher price than you would in the rest of the U.S. Then we then you can track what happens to the elasticity when you do that. Then for legal reasons, when you get -- if that consumer in Florida gets all the way through to check out the price being -- getting back to the original [indiscernible] different prices. But that's how we are testing whether the hypothesis works and what's the elasticity. If it works out, then it gets to the [indiscernible] team [indiscernible] ahead up or not. That's kind of in a simple way of the process.

And the initial [ for ] is potential, how much price increase this [indiscernible]

It's 1%, 2% a year [indiscernible]

[indiscernible] But is that in the same range? Or is it potentially more or [indiscernible]?

That's the work to be done between now and August 13 in the Q2 announcement to seen with a new lens on it, we see opportunities to do more than this 1% to 2% per year. So that will be too early to think about it. One way, I said yesterday that, in general, consumers don't know about commodity prices, but they know more about gold prices and silver prices, okay, then it could be then on the plated part of our collection, whether we can -- is the potential to pass on the higher gold prices to a big extent than what we can do on the silver price. That could be one [indiscernible]

Two quick questions. One, a little bit of an update on [indiscernible] going down. So we saw 2 [indiscernible] that potential [indiscernible] into the future. So just show you what [indiscernible] recently with different reviews that's gone into the marketplace, sort of the peers, and the others and whether you're going to expand your SKUs from an upgoing results to a very specific design? And the second one well, I'd like to go for that one first if that's okay?

Yes. Maybe [indiscernible] but from a supply perspective, we've got to find a number of perspective whether that's any issues from a supply perspective with what has been communicated from one of the players in the industry recently starting off [indiscernible] confirm who [indiscernible] our supplier, so it's confident we have a little bit of a hypothetical answer and I know that someone sitting [indiscernible] here, but there's no impact on our supply situation for what is going on. We have a number of different suppliers anyways that we can solve [indiscernible].

In terms of the thought process from a couple of years ago, do you feel like the lab grown is on track with what you expected?

It's been a slow start than what we expected. We started out in [indiscernible] in U.K. in May '21. May '21 was, [indiscernible] that's why [indiscernible] the U.K. and the learning curve on how to sell this in the stores has been longer than what we had anticipated. On the other hand, I think the halo effect of the brand has been, in a positive sense, has been stronger than what we thought. So the uplift that we see on the brand metrics for people who know that they're selling that from diamonds have been more positive than what you have. [indiscernible] believe when we're going to start out on this journey some time back. I think what we have seen so far is definitely a clear [indiscernible] the brand can be slightly higher price point, even though on average, I think the ASP platform diamonds is more than 10x up more than -- 10x up compared to a standard [indiscernible] product. So it's obviously, very differently. But the fact that, that still means that a lab-grown diamond is 70% below a mined diamond from a retail price still plays very well into the affordability proposition of the brand.

And then can I just jump on affordability, thinking about your plating products. I was really positively surprised by the quality and your certification and whether [indiscernible] depth that you have in terms of percentage of precious metal that's involved but I don't see that in the stores. I'm talking [indiscernible] that through on social media, but not all of your purchases are on social media because a lot of them will go in [indiscernible] generation is [ gifting ] and so it would be great to see that actually in store malls, for example. And I just wondered what is the time line on the marketing side for messaging around really the [ elevation in the education ] on what you're doing aside from the elevated price and the gift inside and the personalization side? It seems like a lot more that you could quickly do. So I just wondered from a marketing press perspective what's the plan?

Yes. [indiscernible] we actually debated it for a long time, we should think that we are under communicating what happens in Shanghai and in Bangkok. So the crafting element or the quality element we can and should push in a stronger way. We haven't concluded on exactly how we do that and how we build that whether you build that into your -- so video messaging or whether that's more something that is going to be part of the sales ceremony when you aren't in the store. So the business be [indiscernible] in the store, telling the story about that the piece of jewelry that you're standing in your hands actually. Handcrafted and on average, I think it's been through [ 25 ] and something like that and average [indiscernible] product. As I've picked up a couple of questions around the last couple of days, on that [indiscernible] something that is under played, and there's probably a bit of a shame, and we're going to go to see when we do consumer research, we can see that, that does have a tendency to believe that is an affordable product, i.e., quality company [indiscernible], and we need to be better at passing on that message because [indiscernible] in the way it leverages the investment, that happened [indiscernible].

[indiscernible] the idea in messaging in store [indiscernible] store in the first place, you think by [indiscernible] for affordable jewelry are a decent proposition, but not the [indiscernible] jewelry at the very high end.

[indiscernible]

Yes. So thanks for two amazing days, and I learned a lot. First of all, [indiscernible] all these efficiency gains that we will now put into the [ numbers ] for the first time. So my question is this [indiscernible] on that efficiency curve both in Bangkok and [indiscernible], where are you? Is it just at the beginning or are you in the middle that is becoming flatter or a higher dividend. And to the extent you still see a lot of room for efficiency gains I would think business model-wise is still going to be, should we call it, [indiscernible] EBIT-margin expansion because we will invest more in driving topline. [indiscernible] business market beyond 2026?

Maybe we'll start off with the efficiency, [indiscernible]. I think it's also related question you asked us yesterday, and take of course for my productivity, we are always continuously [indiscernible], and that's where we will always continue. I think if you look at the -- where we -- I think we have still very much potential. We are always forward-looking. And then, of course, with the technology with the enhancement of the data and digital, we still feel we're still at early stage. And we do feel that we can continue [ any ] further. And of course, as we always have target together with them, we always have set an improvement year-on-year [indiscernible] Yes. And then on the longer piece, what happens beyond '26 as a starting point, although we have said that between now and 2026, we see between 100 and 200 basis points of EBIT margin expansion, not just locating the commodity price discussion for [indiscernible] but then when we look in ahead even longer than 2026, I think the way that we -- obviously haven't communicated anything [indiscernible] in 10 years. But we think that beyond '26, if you ask me today, then the thing is like how we manage it now that yes, we are reinvesting in some of the leverage or the leverage or the leverage back into driving the business. But then at the end of the day, that agreement basically needs to drive a higher absolute EBITDA on the bottom line. So if we had been sitting investing [indiscernible] what we do today [indiscernible] organic growth, okay? Then that reinvestment also really pay off. But with [indiscernible] top line grow the business we've been seeing the actual EBIT becomes higher. So that's a kind of the dynamic that we will keep looking at. But with a 79% organic growth like what we said at the CMD, then there would be some leverage coming [indiscernible] to the bottom line. But it will say, okay, we could keep staying at 27% EBIT margin after 2026, 12% organic growth per year, okay, then that might be a good trade-off. But that's kind of the trade-off really to [indiscernible].

[indiscernible] there was a follow-up, you need to invest in [indiscernible] hardware to achieve those efficiency gains [indiscernible] come down.

Yes. Well, I think the kind of investment level you're looking at with the machines that we've been looking at here [indiscernible] move the medium to any [indiscernible]. So a positive cost, when I have the discussion with [indiscernible], I would say that is way too expensive. But if you look at it in terms of the [indiscernible] capital, it's not probable in [indiscernible].

[indiscernible] just a follow-up question. I guess [indiscernible] automation driving a lot of efficiencies, driving the margin [indiscernible] what you mentioned in terms of the storytelling around handcrafting and how that's helping elevating the brand. Do you want to become a full [indiscernible]. Like how -- when you look at your research, like how important actually is it to the consumer that something is handcrafted or do they not care? Like how are you [indiscernible]?

Yes. [ Christian ] and I had exactly that discussion I think it was earlier today [indiscernible]. Last Austrian president comes to Copenhagen, just hypothetically ,we could do without 12,000 people in China, [indiscernible] make everything with fewer head count in Thailand, just doing everything with a machine. Even though it is a good business case, you'll probably say no, because and that's just putting things on the extreme because there's a value in being able to say that it's handcrafted. And there's a limit on how fine you can go and then still say this is a handcrafted piece of jewelry. So that [indiscernible]. I don't hope that -- this is just some idea on -- that [indiscernible] hang on to say, this is handcrafted jewelry that's kind of -- as far as we can go. I mean because we'll further than what we do today. But there's a limit to how far we can go.

And do you have any idea, like, to your point on consumer education like what percentage of your customers actually know what the manufacturing process is?

You're down to more of the hard core [ fans ]. So it's quite limited still. So I think that's clearly an opportunity for us to build that in the minds of consumer. And very important, the [indiscernible] criteria for consumers is quality, and we can score higher on that one. The last question if there's one?

Did you suggest that after 2026, the reinvestment [indiscernible] business will step down?

I think it depends on what kind of return [indiscernible] on the additional investments that we'll be going. I think fundamentally, the algorithm that we see now doesn't change because once you communicate about what the strategy [indiscernible] there's probably going to be a lot of similarity to how we drive the business today, given that, as I said yesterday, the starting point is 1.4% market share. In [indiscernible] jewelry market we're not playing in the [indiscernible] market but still small scale. So -- yes. Yes. I know that some of you have a flight to catch, but we still have a couple of [ importance of things ] we still have. We haven't announced yet the winner of the competition, and I'll save that for just 1 more minute, but we are at the end of it. At the end of the 2 days here, at the crafting facilities. And I hope you feel educated, wiser on who [indiscernible]. I made a bet with the team before getting here. And I hope that at least for at least 2/3 of you who came here and haven't been here before, that we will get a wow. So this is just really [indiscernible]. And I think I [indiscernible] along those lines during the last couple of days that it is different to see this with your own eyes rather than just reading it on a piece of paper. And that's -- I usually work with my -- the left side of my brain, so the [indiscernible] part of the brain [indiscernible] too big of a surprise to use. But that's a couple of places in 2 places in [indiscernible] where I feel that the right side of the brain, the stomach [indiscernible] gets into play. And one of the places is obviously here at the crafting facilities I keep saying that to [indiscernible] and the team that I just love to come here. And you -- if you feel a little bit down, you can either go to the medical center as you [indiscernible] or you just go visit the crafting facilities, and then you can reenergize. I kind of get the same feeling when I visit [indiscernible] and if you enter into a discussion with a good [ safe ] colleague, good store manager about how do you use jewelry to tell something about yourself. You get kind of the same feeling at a much smaller scale, obviously, you get a much bigger scale here in Thailand with the 12,000 [ colleagues ] at the crafting facilities.