Scandinavian Tobacco Group A/S (STG) Earnings Call Transcript & Summary

Good day and thank you for standing by. Welcome to the Scandinavian Tobacco Group Full Year 2023 Results Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Torben Sand, Please go ahead.

Thank you, and welcome to our webcast for the full year and fourth quarter results for 2023. My name is Torben Sand, I'm director of Investor Relations and Communications. And I am as usual, joined by our CEO Niels Frederiksen and CFO, Marianne Rorslev Bock. Please turn to Slide #3 for the agenda for today's webcast. The agenda is as follows: Highlights of the full year followed by an update on the strategy Rolling Towards 2025. Then we will switch to the performance in our 3 commercial divisions. Followed by key financial developments for the group including an update on net debt and leverage. This will be followed by details on our outlook and guidance for 2024. We will conclude the webcast as said with a Q&A session, where we will be more than happy to take any questions you might have. And before we start I, as usual, ask you to pay attention to our disclaimer on forward looking statements at the end of this slide presentation. With this please turn to Slide #4 and I'll leave the word to Niels.

Thank you, Torben. And welcome and good morning to everyone on the call. 2023 became another eventful year for Scandinavian Tobacco Group. We've taken important steps to become the undisputed global and sustainable leader in cigars. And at the same time we've established the group within adjacent product categories. During 2023, we made a number of important acquisitions, and further invested in laying strong foundations for long-term sustainable growth of net sales, profits, and cash flow. Trends for our key product categories remained broadly unchanged throughout the year. With consumption continuing to decline and pricing mostly offsetting the volume trends. In a moment we'll give you a little more insight into these overall trends. But let me give you a few key financial highlights for 2023. Reported net sales was broadly unchanged at DKK 8.7 billion with a small organic growth of 0.3%. Our Growth Enablers, which contains international sales, our handmade cigars, retail stores in the U.S. and our Next Generation Products accounted for 8% of group net sales. The EBITDA margin declined 24.1% compared to 25.9% in 2022. Free cash flow before acquisitions was almost DKK 1.1 billion versus almost DKK 1.3 billion the year before. And adjusted earnings per share came in at DKK 14.4 versus DKK 16. During the year, we returned close to DKK 900 million to shareholders as dividends or through share buybacks, close to 9% of the market value of the group at the beginning of 2023. Marianne will go into more details on the fourth quarter performance as well as the drivers behind the full-year results. I will now turn to an update on our strategy, so please turn to Slide #5. We have made significant progress in achieving our ambitions since we launched the Rolling Towards 2025 strategy. We did that more than 3 years ago. 2023 became another year where we delivered good progress. Today, Scandinavian Tobacco Group is a stronger company, and we believe that we are well positioned for the future. Our earnings have stabilized at a higher level than before the pandemic. Our balance sheet supports both acquisitions and continued strong shareholder returns, and we see increasing growth opportunities across the Growth Enablers. And I believe it's fair to say we are on track to build a larger and more profitable company. During 2023, we invested almost DKK 600 million in new companies and brands. The integration of both Alec Bradley and XQS have been completed, and both brands are now fully integrated within our commercial divisions. Together with the acquisition of Agio Cigars in 2020, MOSI, Room101 and La Perla Habana, which was acquired by our online business in the U.S. during the fourth quarter of 2023. We have significantly strengthened our market positions during the past 3 years through acquisitions. Through those -- through these acquisitions and with the launch of brands like STROM in the nicotine pods category, we've added multiple strong brands to our portfolio of both cigars and Next Generation Products. We decided to invest more in the areas where we see growth potential like Next Generation Products, retail stores in the U.S. as well as the international sales of handmade cigars. We are confident that these categories hold further growth opportunities and will be able to contribute to improving our group performance over time. Let me also give you a short update on our sustainability agenda Rolling Responsibly, an integrated part of our group strategy. And during 2023, we had several priorities, but let me mention a few. Firstly, we've embedded sustainability initiatives into key business processes and will continue to do so in the future. Secondly, we've commenced the preparation to meet regulatory compliance demands set forth by the Corporate Sustainability Reporting Directive, where we took the decision to deliver our first fully integrated annual report already this year, 1 year ahead of the regulatory requirement demands. And thirdly, we are working towards reaching our commitments on climate. The group reduced its Scope 1 and Scope 2 emissions by 4.3% in 2023. And since the baseline was set in 2020, the reduction equals 22.9%. And we now -- we have now set the baseline for our Scope 3 emissions, and we intend to submit our targets for Scope 3 emissions to science-based targets initiatives for approval in 2024. Now please turn to Slide #6. Our consumers remain at the center of everything we do, and we focused our efforts on building more touch points with our consumers across each category. Our drive to strengthen our brand portfolio was intensified during 2023 and these efforts will continue into 2024. Let me give you a few examples. The launch of the Cohiba Experience by opening of the first exclusive Cohiba Cigar Lounge in Santa Barbara, California, in a partnership with Ritz-Carlton. We furthermore opened 2 new retail stores in Texas, bringing the total to 9 by the end of 2023. We opened 3 Club Macanudo concept stores, one in Margaritaville in the state of Louisiana in the U.S., one in Jakarta, Indonesia and one in Taipei, Taiwan. All these openings have taken place in the early months of this year. We've added Alec Bradley to our brand portfolio of handmade cigars as well as the addition of La Perla Habana to our exclusive brand portfolio within our online business. All of these achievements aim to increase our consumer engagement to the handmade cigar category and to strengthen our position in this category. We will continue to explore these opportunities going forward. Please turn to Slide #7. At the same time, we have made significant progress on our strategic agenda, we have also achieved strong financial results. Net sales increased from DKK 6.7 billion in 2018 to DKK 8.7 billion in 2023, an increase of close to 30%. The EBITDA margin has improved from about 20% in 2018 to 24.1% in 2023. And the free cash flow before acquisitions has each year been above DKK 1 billion. And adjusted earnings per share and return on invested capital have taken significant step change. And you add to this that for the past 5 years, we returned more than DKK 5 billion to investors, we believe the financial results have been good. Now let's turn to Slide #9, where I'll give you a little bit more detail on the organizational change we've also announced in relation to our announcement of our financial results. We are operating in an increasingly challenging environment characterized by changing consumer behavior, economic uncertainty and stricter regulations. And we no longer think that our current commercial setup is optimal, and therefore, we are now creating one global commercial organization, and we are confident that this will make us more competitive. The new commercial setup will help our teams make decisions faster and prioritize better and reallocate resources to where the growth opportunities are. With this, I will now turn to the performance by division. So please turn 2 slides to Slide #11. I will start the overview with Europe Branded. Reported net sales for the full year increased by 3% to DKK 2.9 billion, with organic net sales increasing 2%. In the fourth quarter, organic net sales growth was 7%. The main driver behind the organic growth is a strong performance by Next Generation Products portfolio, including XQS, STROM and !act as well as a strong performance delivered by our fine cut brand BREAK in Germany and sales of handmade cigars to our European markets. The machine-rolled cigars continued to be impacted by the overall market decline and preliminary data suggest it was down about 3% for the full year and 2% in the fourth quarter. And then, of course, our loss of market share, in particular, in France, U.K. and Belgium. The market share in our key markets for the full year declined by close to 1% to 30%. But during the fourth quarter, the market share improved compared to the third quarter, partly as a result of our increased investments to regain market share and volume category. Pricing remained a key contributor to offset volume declines in all categories. EBITDA before special items decreased by 12% to DKK 683 million with an EBITDA margin of 23.8% versus 27.7% last year. The EBITDA margin was 24.7% in the fourth quarter compared with 28.6% a year ago. And the margin development was primarily driven by the scale impact of lower volumes, cost inflation as well as our increased investment in the fourth quarter in regaining market share. With this, please turn to Slide #12, where I'll speak to North America Branded and Rest of the World. For the full year, North America Branded and Rest of the World reported and organic net sales decreased by 5% with reported net sales being slightly more than DKK 3 billion. The positive impact from acquisitions and the negative impact from development in exchange rates more or less offset each other. And in the fourth quarter, both reported and organic net sales was down by 1%. The organic development continued to be driven by lower volumes in handmade cigars in the U.S., where consumption has not yet stabilized following the strong growth the category experienced during the pandemic. We estimate the volume decline for handmade cigars was about 5% for the full year 2023. In 2023, EBITDA before special items for the division decreased by close to 10% to DKK 1.1 billion with an EBITDA margin of 36.3% versus 38.4% in 2022. The development in the margin primarily relates to general cost inflation. I will now turn the attention to the performance of our North American Online and Retail division. So please move 1 page ahead to Page #13. Reported net sales for the full year increased by 2% to DKK 2.8 billion with organic net sales growth at 5%. Fourth quarter organic net sales growth accelerated to 10%. The development in organic net sales is primarily driven by new store openings in the retail business, where we opened 2 new superstores in Texas, but we also saw some momentum across stores opened in previous years. Our distribution of ZYN in the U.S. developed positively. Performance of the division improved throughout 2023, also helped by more consumers returning to the online sales channel. We expect the rebalancing between the sales channels to continue, although the rebalancing stagnated somewhat during the fourth quarter. Retail now accounts for a steadily increasing share of net sales in the division and delivered double-digit organic net sales growth versus last year, driven by new store openings. This resulted in retail accounts for about 9% of divisional sales in the fourth quarter. For the full year 2023, the EBITDA before special items increased by 10% to DKK 433 million, with an improvement of the EBITDA margin to 15.7% from 14.5% in 2020. In the fourth quarter, the margin decreased to 14.7% compared to a strong fourth quarter of 2022. The decrease in margin was driven by increasing promotional spending and general cost inflation. I'll now hand over the word to Marianne. Please turn 2 slides to Slide #15.

Thank you, Niels. I will start my part of the presentation by giving you a few more details to the fourth quarter results. First of all, we are pleased to see that our investments in refueling the net sales growth paid off during the fourth quarter. Organic net sales growth was 5%, the highest level seen since the pandemic. Our investment in the Growth Enablers are accelerating growth. And in the fourth quarter, the Growth Enablers share of total group net sales increased to 10%. Investment in regaining our positions in machine-rolled cigars in Europe stabilized with the market share index improving slightly compared to the third quarter. The investments in net sales stabilization and growth have had and will for a continued period have an adverse impact on EBITDA margins, but these are, as mentioned, important steps to take to secure long-term sales and profit growth. As a result of these investments as well as due to general cost inflation, the EBITDA margin declined to 22.7% in the quarter compared with a strong Q4 -- fourth quarter in 2022 at 25.8%. Now please turn to Slide #16. We have already talked to the development in net sales and EBITDA margins for the full year and the quarter, but let me add a few comments to these. Reported net sales decreased by 0.4% to DKK 8.7 billion. The effect from the exchange rate development, primarily the U.S. dollar was negative by 2.4% or DKK 209 million, whereas the positive impact from acquisitions, primarily Alec Bradley and XQS was 1.7% or DKK 148 million. In total, this results in organic net sales growth of 0.3%. In the first quarter, the exchange rate impact was negative DKK 575 million, and the impact from acquisitions was positive with DKK 52 million. The special cost in total of DKK 92 million expensed in 2023 relates to the ERP implementation one process. All in all, the net profit for the year was DKK 1.2 billion compared to DKK 1.5 billion in 2022, and the adjusted earnings per share was DKK 14.4 versus DKK 16 in 2022. The decline is driven by lower EBITDA as well as an income in 2022 from sale of a property. For the full year, the free cash flow before acquisitions was DKK 1.053 billion compared to DKK 1.264 billion in 2022. Excluding proceeds from the sale of property of DKK 242 million in 2022, the free cash flow before acquisitions was in line with 2022. The underlying free cash flow was impacted by special investments in the expansion of retail stores, track and trace compliance and others of about DKK 200 million, whereas the impact from growing capital changes was close to 0. For 2024, the cash flow will be impacted by the increase in our growth investment, whereby special investments will increase to the level of about DKK 300 million, and at the same time, the impact from increased sales and the build of market positions within Next Generation Products is expected to impact working capital negatively. With this now please turn to Slide #17. In addition to the details to the financial performance from a group perspective, I would like to update you on the long-term trend in the EBITDA margins by the group and by division. Each quarter, we delivered details to the development of the actual quarter by division and to the development compared to the same quarter the previous year. In this slide, we have outlined the development in the fourth quarter EBITDA margins over the past 6 years since 2018. In the appendix, we have included the full-year trend. These long-term trends will give a different maybe better insight into the underlying progress in our strategy and financial ambitions. Our financial ambition of increasing the EBITDA margin over time, subject to changes in business mix as well as acquisition and investments in growth is anchored in our strategy Rolling Towards 2025. We believe that we have improved margins over time, and the past performance is giving us comfort we will continue to deliver on the ambition in the years ahead. Please turn to Slide #18. Before moving to the outlook and guidance, I will give you a brief update on our net debt and leverage position and the status on the current share buyback program, which was initiated in November last year. During the fourth quarter, the net interest-bearing debt decreased by DKK 0.4 billion to slightly below DKK 4.1 billion by the end of the year. Compared with the end of 2022, the net interest-bearing debt has increased by DKK 0.4 billion as a result of the cash flow from operations, capital allocations and investing activities, most notably the acquisition of Alec Bradley and XQS. The leverage ratio decreased as we already had indicated in the relation to our Q3 results in November to a level below 2x. It was 1.9x versus 2.1x by the end of the third quarter. The leverage ratio by the end of 2022 was 1.6x. Please turn to Slide #19. We have a clear and transparent shareholder return policy, including the ambition to increase the annual ordinary dividends per share as well as the objective of distributing excess cash to our shareholders. The latter is based on an ongoing evaluation and comparison of the projected leverage ratio against the target of 2.5x. The capital distributions will always consider potential acquisitions and other liquidity needs. We remain committed to this shareholder return policy. In 2023, we allocated close to DKK 900 million to our shareholders with more than DKK 700 million paid in ordinary dividends and the remaining close to DKK 200 million as a repurchase of shares in the market. In the past 5 years, we have returned almost DKK 5.2 billion to our shareholders. With a proposed dividend payment per share of DKK 8.4 a share to be approved at the AGM on the 4th of April as well as the ongoing share buyback program running to the end of February 2025 for a total aggregated value of up to DKK 850 million, we remain committed to this shareholders return policy. Please turn to slide to Slide #21. Before moving to the expectation for the financial year 2024, I'd like to give you a little more insight to how we see the longer-term outlook for Scandinavian Tobacco Group. In the beginning of the call, we'll talk to the progress we have made in implementing Rolling Towards 2025, our strategy which aims to build a larger and more profitable company. Acquisitions have been a key source of growth historically, and we expect them to remain a key pillar of our strategy. However, we also need to accelerate organic growth. With our increasing investments not only in our Growth Enablers, which are international sales of handmade cigars, retail stores and Next Generation Products, but also in our core business, we expect to accelerate in itself in the coming years. In the coming years, we expect the core categories, cigar and smoking tobacco to deliver flat to low single-digit annual net sales growth, while the Growth Enablers are expected to deliver at double-digit annual net sales growth. Near term, the financial results and especially the EBITDA margin will be impacted by our increasing investments in Growth Enablers, but these are, as said, important to support our ability to deliver stronger and sustainable financial performance over time. The adverse impact of the group EBITDA margin from the current level of investments in the Growth Enablers is temporary and we expect margins to reverse towards 24% by the end of the strategy period. Beyond Rolling Towards 2025, we expect to continue to deliver annual top line growth, led by our investments in the Growth Enablers and with like-for-like margin enhancement, driven by Growth Enablers as well as continuous cost efficiencies. We expect to update the market on our strategy plan beyond Rolling Towards 2025 in the first half of 2025. The largest uncertainties to deliver on our financial ambitions are major changes to consumer trends and regulation, material and fast occurring cost inflation as well as financial performance of our NGP portfolio. With this, please turn to Slide #22. I'll now give you more details on the full-year outlook. 2024 may be another year with consumption of our core products cigars and smoking tobacco declining at a more than the historical structural decline rate. The market for handmade cigars has not yet stabilized and consumers are still adapting to changes in disposable income and higher interest rates. However, we expect price increases on our products, continued growth in our online retail distribution channels as well in our international market to more than offset the decrease in consumption. We expect organic net sales of handmade cigars to increase compared with last year. The consumption of machine-rolled cigars and smoking tobacco in our European market is expected to develop close to their structural decline rates with price increases and recovery of market share expected to offset the volume decline. Net sales from our NGP portfolio are expected to increase by more than 50%, driven by market share expansion and rollout to new markets. Based on the expectations for our different product categories, group reported net sales are expected in the range of DKK 8.8 billion to DKK 9.1 billion. All 3 commercial divisions are expected to deliver growth in the sales with the highest growth in Europe Branded, driven by increasing sales of NGPs and pricing in the core category. The Growth Enablers are expected to increase to a level of 10% of group net sales in 2024. The EBITDA margin before special items is expected in the range of 22% to 24%. The margin is being impacted by increased investments in our Growth Enablers, cost inflation and mix changes. These impacts will only be partly offset by price increases and continued cost optimizations. The largest uncertainties for net sales and EBITDA margin remain changes in consumer behavior and end market and/or product mix as well as unexpected cost inflation. Free cash flow is expected in the range of DKK 800 million to DKK 1 billion and will be impacted by special investments of up to DKK 300 million, which we mentioned earlier. These investments include the retail expansion in the U.S., track and trace implementation in Europe and the continued rollout of SAP 4/HANA ERP solutions. Working capital is expected to deliver a negative contribution, primarily relating to the expected increase in net sales, higher cost prices and expansion into the new product categories. Adjusted earnings per share is expected in the range of DKK 12.5 to DKK 14.5 per share, including an estimated impact from the current share repurchase program of DKK 0.5. As always, the expectations are based on current exchange rates. This concludes our presentation for today's call. I will now hand back to the operator and take the questions you may have.

[Operator Instructions] Our first question, and it comes from line of Niklas Ekman from Carnegie.

Yes, a couple of questions from my end. Firstly, if we can start from the top line, you are targeting growth of 1% to 4% based on your guidance here. And you're talking about flat or growth in all areas. And I'm wondering, particularly about Europe Branded, if you exclude the Next Generation Products, how confident are you that the Europe Branded business, the underlying cigars business there that it has stabilized? Are you seeing clear signs there that your market share is stabilizing? That's my first question.

Yes. Hello, Niklas, and thank you for the question. I think that it's fair to say that we are, of course, encouraged by turning the market share trend around in the fourth quarter. But knowing the history where we did not achieve our goals in 2023, we are, let's say, focusing a lot on the activities that are stabilizing and growing market share. These -- some of these activities will be ongoing and some activities will be launched later in 2024. But we feel we have stabilized the situation, but we would like to see 1 or 2 quarters more of stabilization or increase before we kind of finally can say that we've turned the development around. But it's, of course, comforting that what we've done in the fourth quarter worked.

Very good. And on the same topic, kind of about looking at the Growth Enablers, 80% these now make up. Is it right to assume that that's roughly evenly split between cigars outside U.S., the retail stores and the nicotine pouches. And on the same topic, which one of these do you think will be the main driver over -- both in '24 and kind of over the next 2 to 3 years? Where do you see the strongest growth potential?

So I think it's fair to say that in round numbers, they are about of an equal size in 2023. And when we look forward, you can say that the -- you look at the various categories, the largest growth potential obviously sits in the next generation category, but it's also the most difficult one to pursue. Then you can say retail expansion is very much depending on us returning to a stable flow of new store openings. And we've invested quite a bit in that capability in 2023. And then the international handmade cigar opportunity is also interesting, but it is a little bit more of a slower burn. We need to build stronger brands. We need to expand distribution capability, and we need to, let's say, build even more of the consumer touch points I mentioned during my presentation. So that's kind of how I would think about them, but it's all areas where we are, let's say, building insights on an ongoing basis.

Very good. And also a question on the cash flow. You mentioned your cash flow has always been consistently been above DKK 1 billion in the last 5 years and now you're guiding for less than DKK 1 billion. And you're obviously talking about CapEx being up a little bit. But if -- are we also talking about a significant increase in working capital because that seems to be the way to get to a cash flow below DKK 1 billion, you would have to see either significant margin contraction or a significant increase in working capital. Can you just elaborate on the drivers here?

Yes. So let me do that, Niklas. And you have actually talked to the drivers. It's correct that we also talked to in our presentation that we will invest more in our Growth Enablers in 2024. And to give you an example, we are investing in 2024 in 4 stores, retail stores in U.S., of which 3 will open in late 2024. One will be built in '24, but not open until '25. So that is a cash outflow here. We also expect working capital to increase as we will invest in these Growth Enablers but also because we expect top line, line to grow. And then we have which we always do allow ourselves some flexibility in working capital that can be difficult to predict precisely.

I also wanted to ask on your comment about margins having stabilized. And obviously, we've now seen margins declining for the past 2 years, and you're essentially guiding for margins trending lower also in 2024. So what do you mean when you say that margins have stabilized. And how confident are you that the margin decline that you're essentially guiding for in '24 that that will be temporary and recouped towards the end of '25.

So let me start here, Niklas, and then Niels can add. So for 2024, we are guiding on the EBITDA margin between 22% and 24%. And that -- the lowest part there is lower than what we achieved in 2023. It is driven by the investments that we believe we need to do in our Growth Enablers. It is also driven by that our top line -- pricing in our top line can offset our volume decline, but not, again, these investments and potential more inflation. Then if you look a little ahead, the investments that we are doing in the Growth Enablers are taking the margin down in these Growth Enablers. But we need to get those back to a higher level in order to say that, that will be a continuous business.

Can I add at my end is that I think we have worked on the Growth Enablers for quite a while. And I think we are saying this year that we are making increasing investments because we believe in these growth opportunities. We're also saying it will affect both margin and cash flow in the short term. But to me, these are signs -- good signs of investments being available to us. And as I've said on multiple occasions, we continue to pursue both the organic growth opportunities that we see and they are centered around the Growth Enablers. We are continuing to pursue acquisitions. And we are, of course, also continuing to preserve the core business. And if we can succeed across all these 3 areas, we will, of course, start to see things come even better together.

Very good. And finally, just a detailed question on net financials. What is your view for '24? Do you expect similar levels around DKK 180 million as you saw in '23? Or would that go up or down? Any guidance there?

That's a very good question. It's a very good question, Niklas, on where we believe the interest rates will go. So let me first remind that we have a bond that we need to renew in 2025, and we might do that already in 2024. But the expectation for the financial items is that they will increase versus 2024 or 2023.

[Operator Instructions] And the question comes from the line of Sebastian Grave from Nordea.

I guess my colleague touched upon a few of them, but allow me to rephrase here. So first on your, you can say, 2025 guidance. So I mean in your guidance section, you state that you expect margins to revert to 24% by end of your strategy period. And I mean, to me, this sounds like firm guidance on 2025. So maybe you could elaborate a bit here what is the underlying assumptions for you to make a 24% margin in 2025. Now thinking about both in terms of volume development of handmade cigars, the pricing environment as well as efficiency gains for the one process investments? That would be my first question.

Thanks, Sebastian. And let me try to answer that. Let me first clarify that when we say that we will go towards 24% EBITDA margin at the end of the strategy period. That is end of 2025. That is not a guidance for the full year 2025. And I think Niels talked also to the margins before. It is our -- part of our Growth Enablers where we need to see that the investments that we are doing now will bring us back to a more comfortable profit level.

And fair with the -- it's not a full year '25 guidance, I get that. But if we see continued accelerated declines in the consumption of handmade cigars, not only in 2024, but also in 2025, will you then be able to achieve your 24% margin goal by 2025?

So the -- again, the structural decline rate that we partly have seen in handmade cigar, we have been declining more than that in 2023 that we have also talked to. We do expect all our analysis as we do expect that over time, that will stabilize. If it doesn't, then we have a new situation.

And then -- and also maybe back to the focus on market shares in Europe. So -- or at least -- or you can say the lack of the same because I think reading through the report, there was not a lot of focus on the market share as there has been in previous quarters. So is there anything to read into this? Does it mean that you are more comfortable now with your current position, which has improved a bit? Or is it a reflection that you prioritize to gain volumes elsewhere in the business? Or what should we read into this? Is there anything to read into it?

I think that there is no doubt that for our machine-rolled cigar business in Europe, the main priority is to reverse the market share development. This is critical for our overall volumes, and it's critical for our margins. So that has not changed from what we talked to before. So that ambition remains unchanged. And we will focus more on market share improvement in 2024 than we have done for quite a while.

And then I have my last question is on CapEx. So as I read your guidance, you say DKK 300 million special CapEx mainly relating to one process and retail expansion among other things. Now adding DKK 100 million of maintenance CapEx, I get to somewhere around DKK 400 million. Is that the level to look for over the coming years given that you -- I mean are you still in the early phase of your retail expansion? And you also have a few years back on the ERP investment. So is it fair -- is it fair to assume that you're going to see these elevated level of CapEx in the years going forward?

I think it's fair to look at these levels during the current strategy period as we will come out with an updated strategy beginning of -- or end of 2024, beginning 2025, then we will also announce more around the CapEx. So for the strategy period, I think that is a good level to start with.

[Operator Instructions] Dear Speakers, there aren't further questions over the phone. I would now like to hand the conference over to Torben Sand for any written questions.

And there seems to be no further questions. And with that, we will thank you all for listening in to this webcast, and we will wish you a continued good day. Thank you, and goodbye.

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.