Royal Unibrew A/S (RBREW) Earnings Call Transcript & Summary

Dear shareholders, on behalf of the Board of Directors, I would like to welcome you to Royal Unibrew's AGM. My name is Peter Ruzicka, and I'm the Chairman of the Board in Royal Unibrew. This year's AGM will be a fully virtual AGM. In recent years, fewer and fewer shareholders have attended physical AGMs. And we believe that with the virtual AGM, we can reach a broader range of our shareholders, including not least our foreign shareholders. During the course of the next hour or so, we will give you a thorough review of the company's development in 2022 and our expectations for the year that is already well underway. And here, our CEO, Lars Jensen, will also tell you about the development of our business in the beginning of this year. Then we are going to decide on the presented proposals. Should there be any questions during the AGM, the Chairman of the AGM will give you some instructions in a minute about how that will take place. Let me refer you to our very good website that you can use to communicate between Royal Unibrew and our shareholders. I hope that you are making good use of our website and the information that we publish there. And not least, I, of course, hope that when it comes to the AGM, you are all aware that all of the relevant information for shareholders are available on the website. That, of course, also means the annual report for 2022 and previous years. Let me encourage all shareholders to register via the investor portal to have all communication from Royal Unibrew sent electronically. In that connection, I would also like to encourage you to inform us of your e-mail address so that we can communicate directly to you, for instance, concerning the AGM. With those words, we will start this year's Annual General Meeting. And in accordance with Article 16 of the Articles of Association, we have again, this year, asked attorney at law Niels Kornerup to be our Chairman of the AGM. Niels, the floor is yours.

Thank you very much for appointing me Chairman of the AGM here at Royal Unibrew. I hope you will have a good AGM with a good debate in this fully virtual AGM. I already now want to mention that the transmission to those of you following the webcast has a slight delay depending on your Internet connection. It may be up to 20 seconds. Therefore, from time to time, I will slow down so that we can all get synchronized -- so that what happens here is also what you'll see on your screens. I hope you'll have patience we mean that. Before we start the AGM proper, a couple of formal things we need to deal with. Firstly, I have to ensure that the AGM has been convened legally and is competent for the transaction of the business on the agenda. I have checked that the convening notice was sent out in the correct time frame with the articles of the association and the legislation. So the AGM has been legally convened and is competent for the transaction of the business as it appears from the agenda. And I hope the shareholders agree with that. I haven't heard any indications that anyone should disagree with my conclusion. So I conclude that everyone agrees that the AGM has been legally convened. I'll add that to the minutes. Just before we started, 69.1% of the votes and share capital was represented after deduction of treasury shares. The Board of Directors has received proxies and postal votes, representing 93.9% of the represented votes again with the deduction of treasury shares. And that means that the proposals from the Board of Directors has support in up to 94% given beforehand and the final numbers will appear from the minutes from the AGM. Just like other years, we need to cover the Danish Companies Act Section 101, Para 5, that has to do with a complete account of all votes. Because according to that paragraph, you have to have this complete account of all the votes even though the result is quite clear. I propose that we do as we commonly do enroll Unibrew and dispense with that complete account. And I take the liberty to assume that the shareholders agree with this. And again, there's no indication that a shareholder is objecting. Thank you very much for your support. It's possible to see the AGM both on the company's website and via the AGM portal. Shareholders who have signed up to the AGM and want to participate in the debate need to log in and follow the AGM via the AGM portal. It's not possible to take part in the debate and ask questions if you follow the AGM via the webcast on the company website. So you have to use the portal, if you want to ask questions or comment. Now how will the debate electronic communication work? Everything will go through the AGM portal as I mentioned. And all shareholders who have signed up have received a log into that portal. If you want to take the floor at some point, you need to write your intervention in the message function in the portal and click send [indiscernible], which is send message. You select the item on the agenda in the menu and then you fill out the spaces. Shareholders who participate through a cell phone first need to click the menu with the 3 horizontal lines in the top left corner, and then they can click send message, send [indiscernible]. Please send your questions and interventions as quickly as possible, even though we haven't reached that item on the agenda yet. When we then get to that item on the agenda, I will read out the questions and interventions and there will be a response. The message function cannot be used anonymously. Those of you who represent the company are kindly asked to write your name initially and then the name of the company you're representing. Then we can present your intervention correctly. We, of course, understand that it can take a bit of time to formulate a question or comment assets in writing. If you are a bit pressurized for time, we encourage you to send us a slight warning so that we know that there is a question or comment pending. If you send that notice, you can you send it just the same way as you send a question, but you can just write a question pending or common pending or just wait a couple of minutes or something like that. I would appreciate if shareholders do not use this message function for anything else than questions and interventions that they want read out here at the AGM. Therefore, we may also pull some of the questions and comments if they cover the same subject. I would ask you to formulate your questions and comments as briefly and concisely as possible so that they are also suitable to be read out here. If you have any technical issues, please call Euronext. Euronext is our company that helps us with that. Their telephone number is 45 for Denmark 4358-8894, and I repeat 4358-8894. And please don't use the message function for technical issues. With that, we've reached the actual agenda and as it's been sent out and as it appears from the screen behind me. Item 1 report on the company's business activities during the year; two, presentation of the audited annual report for 2022 for approval; three, resolution to discharge the Board of Directors and the executive management from liability; four, proposed distribution of profit for the year, including resolution on the amount of dividend; five, presentation of the remuneration report for 2022 for approval; six, approval of remuneration for the Board of Directors for the current year 2023; seven, considerations of proposals submitted by the Board of Directors. There are 2 proposals this year. Firstly, authorization to acquire treasury shares; and secondly, approval of the remuneration policy. After that, thus Item 8, the election of members of the Board of Directors; nine, appointment of state authorized public auditor and Item 10, any other business. And with that, we'll plunge into the agenda. We'll start with covering the first items on the agenda as one, assets practice here in Royal Unibrew. So we also have the debate of the first items together. So items 1 to 5 dealt with jointly, so report on the company's business activities during the year to presentation of the audited annual report for 2022; three, resolution to discharge the Board of Directors and executive management; four, proposed distribution of profit of the year, including resolution on the amount of dividend; and five, presentation of the remuneration report for 2022 for approval. And with that, I give the floor to the Chairman of the Board, Peter Ruzicka. And after him, CEO, Lars Jensen, will take the floor to go through the rest of the report. And then Peter Ruzicka will explain the later items on the agenda. Go ahead, Chairman.

The past year has been an unusual year. In spite of that, Royal Unibrew navigated safely and satisfactorily through the many challenges such as war inflation changes in consumption patterns and much more. 2022 began in a very promising way. The world was emerging from COVID-19. We had a strong momentum in our business across all geographies, and we were prepared for growth in turnover as well as earnings. But by the end of February, everything had changed. Russia had invaded Ukraine, many commodity prices and not least, energy prices were increasing significantly. And the result was an inflationary pressure on our cost base that we have never seen before. One thing was the level of inflation that hit us, something else entirely was the timing of this inflation. It came at the most inconvenient time one could imagine. We had just implemented price increases to balance out the inflation that had hit us through the fall of 2021 when in February, the war in Ukraine broke out. And that meant that a couple of months went by before we could carry out new price increases. Months where we were hit by massive cost rises without being able to send these price increases on to our customers. And Lars Jensen will get back to that in his report. But in spite of the high-end unexpected inflation, in 2022, we managed to keep a strong momentum in our business, which was not less due to our portfolio of very strong local brands. We saw another year with unchanged or increasing market share for all our most important brands across all geographies. And on the basis of the results achieved, it's also the clear conclusion of the Board after 3 years with COVID-19 inflation warn much more that our strategy and business model are the right ones and that they are intact. Being a locally anchored multi-beverage supplier gives us the strength of the scale and the synergies we need all through the value chain. Looking at the growth in 2022. Net turnover grew by an impressive 31% to almost DKK 11.5 billion. More than half of that growth came from acquired companies, particularly Solera Beverage Group and Hansa Borg but also MC Energy, Amsterdam Brewery, [indiscernible] and Tanker contributed. The remaining growth came primarily from price increases carried out throughout the year. I'm talking about the acquired companies. The acquisition of Solera Beverage Group and Hansa Borg has created a pan-Nordic platform, which is attractive in a partnership perspective. Therefore, we are very proud that during the course of 2022, we negotiated an expansion of our partnerships with Pepsi as well as Diageo from the beginning of 2023. In 2022, we also entered into new partnerships, for instance, with ekaterra T. We continued our ambitious ESG journey in 2022, and I'm proud to be able to tell you that our latest rating from one of the greatest independent rating bureaus in the world Sustainalytics, has acknowledged our progress. And as per the 20th April 2023, we have the best rating within beer, wine and spirits globally. And we are also among the best percentile that is among the top 1% of companies in the food sector generally. But we continue to seek solutions to reduce our environmental impact. We want to find more environmentally friendly solutions for our customers so that our consumers can also get more environmentally friendly products. In 2022, we launched the biggest solar park in Denmark for our own views, and we entered into a partnership to build a biogas facility on our production side in Finland. Finally, in the end of 2022, we also sent in our ambitious target to bring down our CO2 emissions to the science-based target initiatives, so that we can have them approved during the course of 2023. Lars Jensen will get back to the whole ESG topic in his report later. As I briefly touched upon before, the net turnover in 2022 reached the highest level ever. In fact, our net turnover in 2022 was more than 3x our net turnover in 2012, corresponding to an annual average growth of 13%. 2022 started with restrictions in large parts of our business due to COVID-19. But luckily, the rest of the year was without the lockdowns of previous years. Our on-trade business has really benefited throughout the year of the consumers longing to get out and be together after a few tough years. The generally high inflation in society impacted our off-trade business more. Here, we saw that consumers change their consumption patterns over the summer as the inflation started to worry them. We could see that more and more consumers started to use discount supermarkets during the week days. While in the weekend, they would maintain their normal purchasing patterns. That shift affects our off-trade business negatively because while we have a good broad presence in all segments in the well-assorted supermarkets, our range of products is smaller in the discount stores. Net turnover increased by an impressive 31% in 2022 to almost DKK 11.5 billion. The organic development and turnover, that is the development. When you adjust for the effect of acquisitions was plus 11% because the acquired companies contributed with an increased net turnover of 20%. All 3 segments saw strong double-digit organic growth in turnover in 2022. In Northern Europe, net turnover increased by 35% compared to 2021 due to the acquisitions of Tanker [indiscernible] and Solera Beverage Group and Hansa Borg. If you adjust for these acquisitions, the net turnover increased by 10% compared to 2021, primarily driven by price increases and positive mix changes. In the segment, Western Europe, net turnover increased by 16%. And here, the acquisition of MC Energy, our French energy drink brand Crazy Tiger contributed significantly to this progress. If you adjust for this acquisition, the organic revenue growth in Western Europe was 10%. In the International segment, net turnover increased by 22% in 2022. Here, acquisitions also contributed to growth here in the shape of Amsterdam Brewery in Toronto, Canada. If you adjust for this acquisition, the underlying growth in net turnover was 17% in 2022. That's an impressive result achieved in spite of higher prices on transport and the limitation of goods as for large part of the year, we fully utilized our production capacity, and so we could have sold more goods in our international business. For the entire group, in 2022, we reached a result before financial items and taxes, that is an EBIT of DKK 1.56 billion, which is DKK 136 million or 8% lower than in 2021. Here, it's very clear that the cost increases that we have seen over the past 2 years has impacted our earnings here in the short term. We have seen higher prices on commodities, energy, transport and much more. And that is what is causing this decline in earnings. If we look at the EBIT compared to our net turnover, we can see an expression of the profitability of our business. This key figure, the EBIT margin fell by 5.7 percentage points from 18.9% in 2021 to 13.2% in 2022. This decline can be explained by the massive cost increases that we have seen. And Lars Jensen will tell you more about that. Furthermore, most of the companies we acquired in 2022 has a lower EBIT margin than Royal Unibrew, and therefore, they pull down the average. Looking at annual profits, they were DKK 1.491 billion, which is DKK 193 million better than in 2021. That corresponds to an increase of 15%. This impressive development does, however, cover the fact that when we took over Hansa Borg, we already have had a shareholding of 25%. This stake was technically priced at the same price as what we paid for the remaining 75% of the company, which led to an extraordinary technical gain of DKK 360 million. If you adjust for that fact, annual profits fell by DKK 167 million to DKK 1.13 billion. Tax of our profits in 2022 were DKK 290 million, corresponding to a tax rate of 20.7% when you adjust for the nontaxable gain from the previously mentioned technicality. Free cash flow fell in 2022 to DKK 577 million. That's a decline of DKK 719 million compared to 2021. This was in particular due to our working capital development. For instance, our inventory was significantly higher than the year before, in part because of inflation, but also because prices on some commodities and packaging materials increased significantly from the beginning of 2023. Finally, the working capital was also negatively affected by acquisitions. To the left, you can see the development in net debt in the past 5 years. And here, you can see that in 2022, it increased by DKK 900 million to DKK 4.5 billion. During the course of the year, we paid out almost DKK 700 million in dividends to our shareholders. And in the first half of 2022, we also bought back shares for about DKK 300 million. Furthermore, we carried out acquisitions to the tune of almost DKK 300 million in 2022. These transactions in combination with a weaker cash flow this year are the reasons for the increased net debt. The solvency that is the size of the equity compared to our total assets increased by 5 percentage points in 2022 and constituted 36% by the end of the year compared to 31% by the end of 2021. The reason for this increased solvency in spite of the increased net interest-bearing debt is that in connection with the acquisition of Hansa Borg in the beginning of 2022, we issued new shares as part of the payment. Looking at our capital structure, that is our debt and our equity by the end of 2022, our financial strength, competitiveness and strategic room for maneuver are all still very satisfactory. We therefore, propose to the Annual General Meeting to pay out an unchanged dividend for 2022 of DKK 14.5 per share. We have not launched a new share buyback program because macroeconomic uncertainty is high, there are still on organic opportunities and also because we want to bring down our debt just a bit before we potentially start to buy back own shares again. After this review of Royal Unibrew's overall financial development, I would like to comment on the development in our share price. In 2022, share prices were volatile and generally on a downward spiral, which also was true for Roan Unibrew. This was due to high inflation, which was putting pressure on the earnings in many, many companies and the higher interest rate, which in general, meant a lower pricing of shares. By the end of 2022, the price of the Royal Unibrew share was DKK 495.3 compared to DKK 737.2 by the end of 2021. That's a fall of 33%. That meant that the market cap of Royal Unibrew fell to DKK 25 billion by the end of 2022 compared to DKK 36 billion by the end of 2021, corresponding to a decline of 31%. As you can see from this slide, we performed below our peer group in 2022, which is, of course, not satisfactory. However, it should be noted that the share price of Royal Unibrew shares has increased by more than 30% since we announced our annual report. And now we are only 10% below the level of the beginning of 2021. And with that, I pass the floor on to our CEO, Lars Jensen. Lars, the floor is yours.

Thank you, Peter. I would like to begin by welcoming you all to this year's AGM. 2022 was an eventful year for Royal Unibrew. And as Peter mentioned earlier, the year started with expectations of a strong year with progress in the business and profit growth. But that was changed by war and the related inflation and cost pressure, implementation of extraordinary price efforts and focus on change consumer behavior over the summer also affected things. So the autumn was characterized by warehouse adjustments with our distributor who service HoReCa customers in Italy. So we had to make it down with adjustment in outlook in October. Still, I think we got well through 2022, and we have a business that's stronger than ever and the strategy that's proven its worth. Our earnings per revenue one is under pressure this year currently because of the higher cost base and the acquisitions we have made in recent years have also influenced that because they've had a lower margin that roll Unibrew at the time of acquisition. In this slide, we illustrate the various bases well Unibrew has been through in the past 15 years, just to put the current period into perspective. After a turnaround period, we had to do with managing the core business through adaptations and streamlining, we made the transforming acquisition of Hartwall in Finland in 2013. This created a new growth platform that created a growth and market improvement for Royal Unibrew through cost efficiency and better use of the production facilities. And the time until 2021 were inflation seriously started affecting the business. We focused on organic revenue growth by strengthening our growth platforms by acquiring strong local brands like Crodo cult, Lorina and [indiscernible]. The result was growth in the top line and the earnings margins were improved. In recent years, we have invested in future growth by expanding the business with new platforms, new categories and through acquisition of businesses like Solera [indiscernible] Group, Crazy Tiger and Hansa Borg. This expansion has, in the short term, reduced our earnings margin as several of these businesses at first have a lower margin than Royal Unibrew. On top of this inflation has also diluted our earnings margins in recent years. And I will come back to that specific development in 2022 later. As you can see, focus is now on creating growth in the absolute earnings and at the same time, ensure that we achieve the expected synergies from the businesses we have acquired in recent years. This needs to result in top line growth and an earnings margin improvement. However, it depends on our ability to maintain our price increases or have a drop in costs. Royal Unibrew's position as a strong regional supply of beverages was strengthened through 2022. Our multi-beverage and multi-niche strategies where we build strong market positions in different categories continue to yield satisfactory results. Part of our strategy is to focus on some select categories, which are listed in this overview and they are energy drinks, enhanced water, cider, ready-to-drink products, products with no or low sugar and alcohol and premium products. All these areas are expected structurally to grow faster than the market for beverages in general. And to that, that in most of the categories, they have higher earnings margins than our average margin. As you can see from this list, energy drinks continued their strong growth in 2022, where we realized an organic growth of 34%, and energy drinks now make up 5% of our net revenue. As I said, we are targeted to invest in the highest fastest-growing brands, categories and channels, so focus on premuimizing our portfolio to create most value. In 2022, our premium products grew organically by 20%. No low products are a very important part of our strategy as we want to offer drinks to all consumers in all situations and consumers increasingly demand these no or low products. Products with no or low sugar or alcohol grew by 10% in 2022. Finally, our category cider ready to drink and enhanced water or grew organically by 9% in 2022. Now I want to try to give a perspective to the inflationary pressure we have been affected by in the past 2 years. This graph is illustrative and shows that inflation has come in waves. The first wave was in 2021 were particularly commodities and transport increased in price and increased our cost base by about DKK 450 million. So we started 2022 with a cost base that organically was about DKK 450 million higher than at the beginning of 2021. As most of these cost increases were known because we've had annual negotiations with our customers, we have been able to cover most of that inflation with price increases in the first quarter of 2022. As we all know, Russia than invaded Ukraine, and many commodities and energy prices increased significantly, which meant that our cost base very quickly increased by a further DKK 300 million. Over the summer months, the energy prices increased further, and the total increase in the cost base reached around DKK 800 million by the end of the third quarter 2022 compared to the beginning of 2021. As I said earlier, we introduced extraordinary increases in prices in August, September 2022, but it wasn't enough to cover the increase in the cost base, which you can see in the graph with a greater distance between the 2 lines. Beginning 2023, we were hit by the third wave of inflation as prices in the contracts with our sub-suppliers as expected were adjusted upwards. So the beginning of 2023, our cost base had increased organically by about DKK 1.5 billion since the beginning of 2021, which is equal to our entire profit in 2022. We have increased prices through the first quarter of this year, and we are now nearing the point where we have caught up with inflation more or less. Hopefully, this illustrates what a huge task we've had - we've faced. But with the right strategy and hard work, we have come well through a very difficult period, which is unprecedented. Now I'd like to give you insight out to how it has affected us financially. As Peter showed you earlier, our net revenue increased by 31% to almost DKK 11.5 billion in 2022. This is an increase of more than DKK 2.7 billion and a bit more than 1/3 of that growth was organic, driven by price increases and the good commercial development based on our strategy. The other 2/3 of the growth came from the businesses we have acquired in recent years, including particularly Solera Beverage and Hansa Borg in Norway. As was also mentioned earlier, our earnings margin, the EBIT margin dropped by 5.7 percentage points from 18.9% in '21 to 13.3% in 2022. On the right, you can see that our EBIT margin dropped by 1.4 percentage points because the businesses we have acquired have a lower EBIT margin than Royal Unibrew. We, of course, expect to increase the EBIT margin in the acquired companies towards our own level. And that will happen through synergies, both in cost synergies and commercial synergies and to increasing the number of beverages, categories that different companies operate in. The cost inflation has also had a negative effect on our EBIT margin. From the outset, it has been our goal to defend the absolute earnings per volume unit and not the earnings margin in percentage. So we aim to increase net turnover through various price initiatives that correspond -- this corresponds to the amount in our cost base increased by 2021. total earnings in relation to the higher revenue has purely mathematically diluted our EBIT margin by 1.5 percentage points. It's the effect here called the base effect. The remaining effect is the organic development, which has reduced our EBIT margin by 2.8 percentage points in 2022. A large part of the organic development can also be attributed to cost increases, which mean that we have been behind price increases compared to when the cost increases have hit us. So we have had to bear the full brunt of this before in the months before we could raise our prices. Of course, all this is only possible when you have the right excellent employees. And I would like to say a huge thank you to all our employees. We have come very well through recent years, in spite of the many challenges, increasing prices, war, high use of capacity and challenging value change are just some of the challenges we have faced, and that means the willingness to recalibrate and hard work. You have performed fantastically with a high degree of flexibility and dedication, and I want to express a deep felt thank you from both Lars Vestergaard and myself. It was an unusual year again because we had to raise prices towards our customers again. And this has been a huge job across major parts of the organization. But we work together. We have a solid cultural foundation with skill, competent and committed colleagues who manage the task and ensured a satisfactory financial result but also a good starting point for the years to come. As Peter mentioned earlier, in 2022, we have also been busy in the ESG area. We achieved our short-term ESG goals, which included that we now spend more than 40% of our marketing budget on brands and campaigns that have a sustainable profile. We have also succeeded in reducing our production carbon intensity over time. Thus, from 2015 to '22, we reduced our CO2 emissions by 42% per hectoliter, while at the same time, increasing our produced volumes by 20%. This has been done with a combination of focusing on efficiency projects in the energy area and changing our product mix. The goals for recycled packaging were also achieved. We are well prepared to achieve a goal of 100% recycled, recyclable or reusable packaging in 2025. Our products were no or low content of sugar alcohol grow faster than our average portfolio and faster than the market. So we expect the greatest growth potential across geographies in that category, i.e., no or low sugar across our portfolio. When it comes to renewable energy, we have built a large solar farm here in Denmark next to brewery here in Faxe. And we are also in a partnership to build a biogas facility in Finland by our largest production plant. The first solar panels were installed in the end of 2022 and shortly after produced the first kilowatt hour and is now fully operational. When it comes to the biogas facility in Finland, we expect to open in June this year. And from that time role, Unibrew will be without the use of fossil fuels in our production in Finland. So 2023 is an important milestone in our Quest for Fossil 3 future. We will convert all our energy used to renewable energy sources throughout the value chain, and we work with our partners to reduce CO2 emissions and reuse, reduce the use of resources through a circular approach. We need to focus more on our safety culture, however, because we can do better. We are obligated to maintain and continually improve health and safety for our employees. It's our top priority and one accident is one too many, and we will continue to reduce risk by allocating more resources and sharing best practices across the group. Towards the end of the year, we send in ambitious targets for reduction of our CO2 emissions to science-based targets initiative for official validation expected in the course of 2023. And of course, we continue our support to the UN Global Compact program throughout the year. So we are well on our way to achieve our goals for 2025 and 2030. We are converting our energy consumption to renewables. We focus on the entire value chain and work with the suppliers who share our values and focus when it comes to green energy. Our energy consumption per produced unit increased in 2022 by 7% compared to 2021. This is because of acquisitions where the energy efficiencies are not as high as in Royal Unibrew. Our solar farm here in face, as I said, is fully operational and will supply about 40% of our total energy consumption in Faxe. Our CO2 emissions from our production per produced unit increased by 6% compared to 2021, but is 7% below the average of the 4 previous years. The setback in 2022 is again due to our acquisitions, but also because at the end of 2022, we switched from natural gas to oil in many of our production sites because of the uncertainty in the supply security of natural gas. And because we are not among the -- and we're among the companies at risk being caught off from gas. Waters are most important ingredients. So it's important to us. All our wastewater is treated so that we live up to the requirements and we work to reduce the consumption of water, and we reduced it by 9% from 2015 to 2022. It should be noted that almost none of our plants are located in areas where there's a shortage of water, but in areas where there are relatively large water quantities. As you can see on the right, we reduced accident frequency in 2022, but the level is still too high. The number of accidents per 1 million hours has organically been reduced by 59% in 2019. But we are working to analyze security in order to renew in a physical chemical, biological, economic or mental risks from the workplace. And our latest root-cause analysis show that we can still improve. So of course, we'll continue our work to strengthen our behavior-based security and safety training and awareness across the company. Earlier today, we sent out an update with the results from the first quarter. Our net turnover increased to DKK 2.6 billion, which is 18% higher than last year. The higher net revenue is owing to the price increases we've made to counteract inflation. And it also because of acquisitions and good progress in our businesses in total. So if we adjust for acquisitions, the increase is 7% compared to last year. Earnings before interest, et cetera, the EBIT was DKK 174 million, which must be compared to an EBIT last year of DKK 209 million, and this is a drop of 17%. The acquired businesses contributed negatively to earnings in the first quarter because we invest in integration and because Norway traditionally has had a low earnings rate in the first quarter of the year. If we adjust for the negative effect of the acquisitions, the underlying earnings dropped by 7%. Since inflation put pressure on our costs and thus earnings in 2021, our goal has been to defend the absolute profitability of our products through price increases and continuous work on our price pack and price mix strategies. We expect to reach this goal over the second quarter of this year and earnings are expected, therefore, to also improve throughout 2023. Earnings before tax was DKK 123 million, which is a drop of DKK 72 million compared to last year, other than the lower EBIT, the drop is also because of higher interest payments. The free cash flow in the first quarter is also negatively affected by the preparation for the high season. Our investment level is high at this time as we invest in both production capacity and massively in the transition away from fossil fuels. It's primarily the higher investment level that has caused that the free cash flow has dropped by DKK 45 million this year. As communicated earlier today, we have maintained our guidance intervals for 2023, which has a revenue between DKK 13 billion and DKK 14 billion and an EBIT between DKK 1.55 billion to DKK 1.750 billion. We maintain our guidance for 2023 as the development in the first quarter has been as expected. The guided revenue increase between 13% and 22% compared to 2022 is significant. We expect that the acquired businesses on their own will contribute with about DKK 0.5 billion. and price increases and new contracts will primarily Pepsi will also contribute to progress. When it comes to consumers, we expect them to still be price conscious throughout 2023, and that the development in the price mix will, therefore, influence us slightly negatively. And that's part of our guidance. Of course, our expectations are as always based on normal summer weather. And with that, I would like to thank you for your attention and give the floor back to Peter.

Thank you very much, Lars. With that presentation from our CEO, we conclude our report on the company's activities in the past year, the result for the first quarter of 2023 and our guidance for 2023. We can now move on to the items relating to our shareholders. These are the proposals for distribution of the annual profits, including the payment of dividends for 2022, the remuneration for the Board of Directors and Executive Management and election of members of the Board. First of all, I would like to present the proposals from the Board and then the Chairman of the AGM will take us through the adoption process itself. We expect that Royal Unibrew will continue to generate significant surplus liquidity and that, that will enable us to continue to pay out dividends to our shareholders and potentially also to launch share buyback programs. In 2022, the profits of the parent company were DKK 1.571 billion. Considering our financial targets for solidity and leverage as well as our strategic priorities. It is still Royal Unibrew's intention to pay out 40% to 60% of the annual consolidated profits as dividend and to launch share buyback programs when it is deemed appropriate. On that basis, the Board proposes to pay out a dividend for 2022 of DKK 14.5 per share, which is unchanged compared to last year. As Lars Jensen mentioned during his report, we have not yet launched a new share buyback program as we wish to bring down our debt level first. The Board of Directors will continue to assess the need for adjustment of the capital structure by potential share buybacks under consideration of the financial development and our expectations for the future. And now to the item concerning the remuneration of the Board for the financial year 2023. In general, we want the remuneration for the Board to correspond to the level in comparable companies and to take into consideration the requirements for the competencies, efforts and the extent of the work that the Board members do, including the number of meetings. I can inform you that in 2022, we had 14 Board meetings, 5 meetings in the Nomination and Remuneration Committee and 6 meetings in the Audit Committee. The Board has given a fixed base fee, which is approved by the AGM every year. Thus, the Board of Directors does not receive any variable or share-based remuneration. The Board proposes that the base fee for the Board in 2023 be raised to DKK 415,000 per Board member, which is an increase of 9% compared to last year. It should be noted here that it is 3 years since the Board fee was last changed and this increase is also explained in the reasoning of an independent peer study. Furthermore, it is proposed that the Chairman of the Board, just like in 2022 should receive 3x the base fee and that the Vice Chair continues to receive 1, 3/4 of the base fee for their extended duties and obligations. The Board has established a Nomination and Remuneration Committee and an Audit Committee. It is proposed that Board members who are members of these committees continue to receive an additional annual fixed fee corresponding to 33% of the base fee per committee and that the Committee Chairman received an annual fixed fee corresponding to 50% of the base fee per chairmanship for their extended duties and obligations. Furthermore, Royal Unibrew will compensate Board members for their costs for travel, meetings and so on. And Royal Unibrew can also pay foreign social fees and other fees within the EU charged by foreign authorities in relation to the Board fees. Finally, in connection with particularly extensive ad hoc work in a committee or something similar, we can provide an additional fee based on an assessment of the extent of the work. The remuneration for the Board can be seen from the screen here. The remuneration is structured according to the principles that I have just presented for the remuneration for the Board for 2023. The decline in the total remuneration for the Board from 2021 to 2022 is due to the fact that the Board had one member fewer from February 2022 compared to 2021. [Audio Gap] In here, and you can also read more in the remuneration report. As you can see, the total remuneration for the executive management was DKK 24 million in 2022. That's a decline from DKK 26.9 million in 2021, which is due to the financial development in 2022, which has resulted in a lower cash bonus than in 2021. That leads us to the election of Board members enroll Unibrew, all of the AGM elected members are up for reelection each year. So this year, we have 6 members who are eligible for reelection. Jais Valeur, who is the CEO of Danish Crown, and who've been a member of the Board since 2013. Christian Sagild, who is a professional board member and who was previously the CEO of Topdanmark AS. Christian was elected for the Board in 2018. Catharina Stackelberg-Hammarén, which was the Co-Founder and CEO of Marketing Clinic. Catharina was elected to the Board in 2019, and Catharina is from Finland. Heidi Kleinbach-Sauter who is a professional board member and who has chosen for the Board in 2019. Heidi from Germany. Then we have Torben Carlsen, who's the CEO of DFDS, Torben was elected for the Board last year. And the final person who is eligible for reelection is myself. As you know, my name is Peter Ruzicka. I'm also a professional Board member, and I was elected for the Board in 2021, and I've served as the Chairman of the Board since the 1st of March 2022. You can read more about us in the convening notice and in the annual report for 2022 as well as on the company website. Provided that the proposed candidates are elected for the Board. The Board expects to set up on the first meeting after the AGM and to elect Jais Valeur as Vice Chairman and myself as Chairman of the Board. When it comes to diversity, the Board wants the company's organization to reflect the society of today. And we know that a diverse equal and inclusive organization creates the best and most dynamic workplace. Just as it underpins innovation and long-term value creation to the benefit of our shareholders. We are particularly aware of the gender balance in the company's management level. And we have a target of at least 40% of each gender to be represented in our international management teams and on the Board. On the Board, the underrepresented gender constitutes 33%, and we have a goal of achieving that target in 2025. When it comes to our international management teams, we have seen a small decline in 2022 due to the acquisitions that we've carried out as the underrepresented gender in 2022 made up 28% against 29% in 2021. Before giving back the floor to Niels Kornerup, who will take us through the formal adoption process, I would like to thank my colleagues on the Board, the management of the company and all of our employees for their efforts in 2022. Last year's results are satisfactory, seen in the light of the difficult circumstances brought about by the war in Ukraine and the inflation. And the result is due to a huge common effort from all parts of the group from production and distribution, sales and marketing to the administrative functions in our company. All across the board, you have been working intently to solve the daily tasks and ensure the continued development of Royal Unibrew. Last but not least, I would like to give a warm thanks to our shareholders. I can promise you that in Royal Unibrew, we will do everything we can to continue to develop the company through value-creating growth. And thereby, I conclude my report, and I will give the floor back to our Chairman of the AGM attorney at law Niels Kornerup to take us through the remaining proposal and the formal vote on all of the proposals. The floor is yours is Niels.

Thank you to the Chairman of the Board and the CEO for the report and the motivation for the items later on the agenda. It's time for the debate, but before I open the debate, I can tell you that the annual report has been signed by both the Board and the Executive Board and no comments from the auditors. And as the Chairman mentioned in his report, the proposal is that the profit of DKK 1.571 billion result in a dividend of DKK 14.5 per share, which is a total of DKK 728 million, and the rest of the earnings will be carried over to next year's annual report.

And with that, I will open the debate, and we have received one intervention already from [indiscernible], who writes, do you intend to have Annual General Meetings fully virtual in future? If the answer is yes, it's certainly a drawback for your shareholders who will not get the chance to taste your very good beverages. So this was from [indiscernible]. And I give the floor to the Chairman, and those of you who want to take part in the debate, I ask you to write your comments as quickly as possible.

Thank you very much for that question. In recent years, many companies have experienced that pure and fewer take part in physical AGMs. In order to protect our shareholders' democracy, we think it's better to have virtual AGMs because then it's possible for more of our shareholders to participate, not least our shareholders abroad who make up about half of the shareholders in Royal Unibrew. And the bonus of that is also that it's better for the environment because there will be lower CO2 emissions will less travel. And we hope our shareholders will find our excellent beverages in shops, supermarket, bars and restaurants around the world.

Thank you very much to the Chairman for this question from [indiscernible], and I am asking whether anybody else has asked for the floor. I don't receive any indication of that. And if you want to comment on the first 5 items on the agenda, you do need to indicate now I still don't hear anything. So on that background, I consider the debate closed. And with the votes already received and what we've heard from shareholders during the debate. I will conclude or ask can you approved the annual report grant discharge for the directors and executive management agreed to the proposed distribution of profits and approve the remuneration report. I still haven't received any objections, so I consider all that adopted and approved. With that, we've covered items 1 to 5 on the agenda, which brings us to Item 6, which is approval of remuneration for the Board of Directors in 2023. The Chairman of the Board has already presented the proposal in detail, and I just want to sum up that the remuneration for 2023 is the following. The base fee has made up of DKK 415,000 for a so-called ordinary share -- members of the Board. The Deputy Chairman gets 1.75x the base fee and the Chairman received 3x the base fee, which is DKK 1,445,000. Chairman of the committees get 50% of the base fee on top of their normal fee. The extra fee for other members of the Board and the committees will be maintained at 33% of the base fee per committee mandate. And I'll refer to the convening notice, where you can see all these details also. I want to ask if anybody wants the floor under this item and while people consider that, I can say that all we need is a simple majority for this. There's no indication that anyone wants the floor. So I consider that proposal adopted. That brings us to Item 7 on the agenda, which is an item that comes back every year, proposals from the Board of Directors. There are 2 proposals: one, authorization to acquire treasury shares; and 2, approval of changes in the remuneration policy. Under Item 7.1, the Board of Directors proposes that the AGM authorizes the Board to acquire treasury shares. This is something which was also on the agenda at last year's AGM and therefore, it's something that comes back year after year and the shareholders and at the concept. An authorization like this is used in case of a share buyback program. It means specifically that the company can acquire treasury share equivalent to a total of 10% of the company's share capital at the time of authorization, provided that the company's total holding of treasury shares at no point exceeds 10% of the company's share capital. The consideration must not deviate by more than 10% from the official price quoted at NASDAQ Copenhagen at the time of acquisition. And this ionization will be valid until next year's AGM, i.e., in 2024. Any comments in relation to this proposal? That does not seem to be the case. So I consider this proposal adopted and the votes we already have received may conclude that. The next proposal from the Board of Directors is the approval of the remuneration policy, which has been updated. And I will refer you to the description from the Chairman of the Board and to the website where the updated remuneration policy has been available for some time now. The updated remuneration policy is in accordance with Article 39 in the Danish Companies Act and will apply to all members of the executive management and the members of the Board. Does everybody want the floor under this item? That does not seem to be the case. And again, I'll remind you that there's a slight delay. So I'll just see slowly for a bit to make sure nobody is passed by, but there's still no comments, so I consider the proposal adopted. Item 8 is election of members of the Board and in accordance with Para 19 in the Articles of Association, the directors are elected for 1 year at a time. And the members are Peter Ruzicka, Jais Valeur, Christian Sagild, Catharina Stackelberg-Hammaréna, Heidi Kleinbach-Sauter and Torben Carlsen. And I refer you to Item 1 in the convening notice and the information that has been available on the website since 30th of March of this year. Does anybody want the floor in this context? Or are there any other candidates -- that to be the case. So on that background, I will conclude that all the members of the Board have been reelected for a period of 1 year. I congratulate you all on your election and wish you all the best in your work. Mr. Chairman mentioned in his report, the Board intends to elect Jais Valeur, Vice Chairman; and Peter Ruzicka as the Chairman after this AGM. The Board will now consist of the following process. Peter Ruzicka, Jais Valeur, Christian Sagild, Catharina Stackelberg-Hammaréna, Heidi Kleinbach-Sauter and Torben Carlsen. Furthermore, the Board of Directors consists of employees. Our employee-elected members, Claus Kærgaard, Martin Alsø and Michael Nielsen. The next item on the agenda is Item 9, the appointment of state authorized public auditor. The Board of Directors proposes reappointment of Deloitte State [indiscernible]. And in accordance with the audit regulation, I can inform you that the Audit Committee has not been influenced by third parties and has not been subject to an agreement with third parties, which limit the general meeting to the election of certain auditors or audit firms. On that basis, let me ask if there are any other candidates or anyone who wishes to take the floor. That does not seem to be the case. And that means I can conclude that Deloitte State [indiscernible] has been reelected as company auditor. That exhausts our formal agenda, and the only remaining item is Item 10, any other business. Does anyone wish to take the floor? Any comments or questions are allowed. You can comment on anything concerning role. However, you cannot present any new proposals. Are there any questions or comments? That does not seem to be the case. I do not receive any indications that anyone wishes to speak. And on that basis, I can conclude that everyone has had the chance to take the floor, and that means that the debate is now closed. That exhausts our formal agenda for today. And I would like to thank you all for a good AGM today. All that remains for me is to resign as Chairman of the AGM and pass the floor back to the Chairman of the Board, who will conclude the AGM for today.

Thank you very much, Niels, and thank you very much for your great work as Chairman of the Annual General Meeting. All that remains for me is to thank you all for today, and thank you for participating in Royal Unibrew's Annual General Meeting, and I hope to see many of you again at next year AGM. Thank you all. [Statements in English on this transcript were spoken by an interpreter present on the live call.]