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

Welcome to the Annual General Meeting of Scandinavian Tobacco Group. My name is Henrik Brandt, and I'm the Chairman of the Board. I did like to welcome everyone to the meeting, whether you're attending in person or whether you're attending by live webcast transmission on our investor portal. According to the company's Articles of Association, the Board of Directors appoint the Chairman of the General Meeting. And we have again this year asked [indiscernible] to the meeting and lead us through the agenda. The Article Association also prescribed that the general meeting should be conducted in English. We know some of our shareholders are Danish and therefore, we agreed with Christian like in previous years that he will provide a short summary in Danish at the end of each agenda item. With these opening remarks, I would like to hand over to you, Christian, please.

Thank you very much, Henrik, and very welcome also from my part to this general meeting. I hope we'll have a enjoyable or interesting couple of hours or however long, we'll go, let's see. As already pointed out, we are conducting the general meeting in English, and I will provide summary translation also if anyone wishes to make a -- or take the word, it will certainly also be possible to do that in Danish. [Foreign Language] The shareholders who follow the general meeting via a live webcast or on the Investor Portal also welcome to you. Note that it is not possible for you to make interventions or vote via those facilities. For those present, I ask anyone that may wish to speak to come to the podium when I ask you, state your name before taking the word. Final good remarks, please turn off your mobile phones, not those at home. You can have them on. [Foreign Language] Before turning to the agenda. I'll explain that I have resolved that the general meeting is lawfully convened and has the power to decide on all matters of the agenda, while this is my right and, indeed, my duty to decide as chair of the meeting, I would just like to take you through my rationale. According to Artice 75 of the Articles Association, the Annual General Meeting shall be held each year before 30 April because of regulatory requirements. Given the date we are, so here is, of course, fulfilled. Furthermore, it is provided that general meeting shall be convened by the Board of Directors not later than 3 weeks and no earlier than 5 weeks before the date of the general meeting. There are requirements about sending out notices to the shareholders and publishing it on the website. I have received documentation that notice about the general meeting has been published, including via Nasdaq and on the company's website and also sent out by mails to shareholders that have so requested on 11 March, i.e., within the required time line. According to Article 7.3, general meeting shall be held in -- at the company's registered office on Greater Copenhagen being where I can confirm we are. This requirement is also fulfilled. Article 8.1 requires the company to publish certain documents and information on the website no later than 3 weeks prior to the general meeting. I have asserted myself that this has been complied with. Finally, I note that the agenda we have in front of us today fulfills the requirements set out in Article 8.2. Thus, from my part, I conclude that the general meeting has been called in accordance with the requirements, and applicable law. I note that when we come to it, there are 4 proposals under Item 6 that will require in order to be passed or adopted approval by at least 2/3 of the votes cast and the share capital represented today at the general meeting. The rest of the items on the agenda may be adopted with simple majority. [Foreign Language] Let me know if anyone disagree with my determination on that. Thank you. That's certainly helpful because otherwise, we would have a new situation. I can inform you that we are present or represented 72.84% of the share capital. That's 57.3 million. You have been handed out voting cards. I will give instructions if we indeed need to use them. Typically, we do it in the way that I assess based on remarks made in the room and otherwise also, of course, based on proxies and -- or the proxies submitted prior to the general meeting, whether I feel it's safe to conclude that a proposal has been adopted or rejected with the required majority. [Foreign Language] Let's turn to the agenda. You have it here behind me, very big screen, I would say, but Item 1 on the agenda, that's the report of the Board of Directors. I'll hand over to Henrik in a few minutes; and then 2 is the adoption of the audited annual report. 3 is appropriation of profits as recorded in the annual report. 4 his presentation of the company's remuneration report for an advisory vote and 5 is adoption of proposal regarding remuneration of the Board of Directors for 2025. On Item 6, we have any proposals by the Board of Directors or from shareholders. I note that no proposals from shareholders have been received whereas there are 4 proposals from the Board of Directors, namely a, regarding reduction of the company's share capital; b, is extension of authorizations for the Board to issue new shares; and c is also an extension of an authorization to the Board namely to acquire own shares; D is a proposal to delete the current age limit for candidates to the Board of Directors in the articles. Item 7 is election of members of the Board of Directors and 9 is election of auditors -- sorry, 8 is election of auditors, and 9 is any other business. I'll now give the word to Henrik, Chair of the Board to deliver the report of the Board of Directors. During Henrik's presentation, the board's motivation for other items on the agenda will also be presented. Henrik, over to you.

Thank you, Christian. Scandinavian Tobacco Group's Annual General Meeting is a special occasion, and I'm pleased to present the Board's report for the financial year of '24. The year was characterized by a challenging business environment with high volatility. Therefore, I'm pleased to report good progress. Scandinavian Tobacco Group has made with the strategy rolling towards '25 with the financial performance delivered and that we have again have delivered to our commitments to our shareholders as we have returned close to DKK 1.5 billion to our shareholders in '24. Before I move on to the formal presentation of the report, I would like on behalf of the Board of Directors, like to offer sincere thanks to every employee at Scandinavian Tobacco Group for their contribution in the past year. All of the close 10,000 employees globally deserve credit for enabling the company to rise among many challenges and to deliver on our objectives and our strategy. Thank you. I'll now move to the more formal report. Let me start by reviewing the financial highlights for the past year. For the full year of '24, Scandinavian Tobacco Group delivered net sales of DKK 9.2 billion and an EBITDA before special items of DKK 2.1 billion, resulting in EBITDA margin before special items of 22.6%. Net profit for the year was DKK 940 million, while free cash flow before acquisitions was DKK 931 million. Adjusted earnings per share was DKK 13.7 per share. These results are in line with the financial guidance we communicated at the beginning of the year and which update was updated in November with the impact of the acquisition of Mac Baren. The reported net sales increased 4.4% and were record high. For the first time, we exceeded net sales of more than DKK 9 billion, and this milestone was primarily reached as a result of the inclusion of Mac Baren, which we acquired on the 1st of July last year and by continued good solid performance from our growth enablers. Our core cigar business continues to be impacted by declining markets as well as a difficult pricing environment. The EBITDA margin of 22.6% was lower than the year before and as expected, but it was within the original guidance range we communicated 1 year ago despite the impact of investments in our growth enablers and in strengthening our market positions in the core categories. I will discuss the acquisition of Mac Baren and our growth enablers later in my report. Based on the result for '24 and the financial position of the company, the Board of Directors proposes a dividend of DKK 8.5 per share, which is an increase compared to the dividend of '23. This is the ninth consecutive year that we have increased the ordinary dividend per share. Based on the issued number of shares, the DKK 8.5 per share corresponds to a total payment of DKK 731 million to our shareholders. In addition to the ordinary dividend payments, we remain committed to allocate excess capital by repurchasing own shares. In November '24, we completed a share buyback program of a total of DKK 850 million. As mentioned, the total capital return, including dividends and share buyback was close to DKK 1.5 billion or 15% of the market value of Scandinavian Tobacco Group by the beginning of '24. The increase in the dividend of the strong capital allocation are a testament to the strength of the underlying business and our ability to generate strong cash flow. I will now turn my attention to the financial highlights in each of the 3 commercial divisions. Our commercial division Europe Branded comprises business-to-business sales of all product categories in the European market where we have our own sales organization. In '24, the division accounts for 34% of total group net sales. Reported net sales increased by 8% to DKK 3.1 billion. Excluding the impact from acquisitions on an exchange rates, net sales were unchanged with growth in next-generation products and handmade cigars being offset by a decrease in product category, machine-rolled cigars and smoking tobacco. EBITDA before special items declined by 5% with a margin of 21% compared to the 23.8% in '23. The margin development is primarily a result of the high growth of our nicotine pouch business which currently operates at a lower gross margin and increasing investments in sales and marketing, including to stabilize the market shares and strengthen our position in machine-rolled cigars. Our North American branded and Rest of the World division is a long word, comprises business-to-business sales of all product categories in North America and rest of the world. In our organizational structure, the division includes the European markets where we do not have our own sales organization, eco-prices, international sales. It comprises global travel retail as well as contract manufacturing business. In '24, the division accounted for 34% of group net sales. Reported net sales increased by 3% to DKK 3.1 billion. Excluding the impact from acquisitions and exchange rate developments, net sales declined 3% with negative growth in all product categories. The EBITDA margin before special items increased by 2% in Danish kroner with an EBITDA margin of 36% compared to 36.3% in the previous year. The slightly negative margin development was primarily a result of mix changes between products and the inclusion of the Mac Baren sales. Our third division, North American online and retail includes direct-to-consumer sales of all product categories via our own online platforms, of which we have many, catalog and retail channels in North America. Handmade cigars are by far the largest product category with more than 70% of the net sales in this division. In [ 1924 ], the division accounted for 32% of group net sales. Reported net sales increased by 5% to DKK 3 billion. Excluding acquisitions and exchange rate developments, growth was 4% with all product categories delivering growth. Sales through our online business increased despite the negative growth in the total market for handmade cigars in the U.S., and our retail business delivered double-digit sales growth. The EBITDA before special items was almost unchanged in Danish kroner with an EBITDA margin of 14.8% compared with 15.7% the year before. The margin development is primarily a result of cost inflation and inclusion of Mac Baren net sales that carried a lower margin than the average previously. I will now turn to the update on the progress during '24 on the group strategy rolling towards '25. More than 4 years ago, we launched the rolling towards '25 strategy, and we are now in the final year of the existing strategy period. Since the launch, we have added strong brands. We have expanded our product portfolio to nicotine pouches. We also made multiple acquisitions, and we've launched a sustainability strategy. At the same time, as we have strengthened and invested in the long-term opportunities for the group, we have also returned a significant amount of capital to our shareholders. Overall, I'm pleased with the progress we have made in the investment in implementing the strategy even more so considering the many challenges and disruption we have experienced during this period of time, including the pandemic, as you will all remember. In the annual report, you will find more details about rolling towards '25 strategy, our vision and our ambition and as well as the 6 must-win battles that we have defined as essential to succeed in reaching our vision and deliver on our ambitions. Let me now mention some of the most significant elements we have made during the past year. Firstly, simplify everything we do, by reducing complexity and improving processes are key words to increase cost agility and improve profitability. Let me give you 2 examples. At the AGM last year, I mentioned that we are adjusting our commercial setup by creating 1 global commercial organization. During the year, we have completed the progress the process of merging our 3 commercial divisions into 1, whereby we have not only reduced complexity, but we are also getting -- we're also getting closer to our end customers and consumers and are more cost efficient. With 1 commercial organization, we have strengthened our category focused by establishing stronger product category organizations. First, handmade cigars, second machine-rolled cigars and smoking tobacco and thirdly, next-generation products. The dynamics and the drivers for each of these product categories are different and stronger focus aims to reflect the uniqueness of each of them, whether from a product, consumer, production or distribution point of view. Another example of simplifying everything we do is the transformation from the group's multiple ERP systems into 1 global system. We have, as mentioned this before, and we are now implementing the second wave in our European business and our way to complete the full rollout expectedly by the end of '26. When fully implemented, we expect to reduce operating costs and improve speed and efficiency in our end-to-end global processes. Let me now turn to another important focus point in our strategy, growing our handmade cigar business. Growing our handmade cigar business is an important lever for us to deliver on our strategy. As mentioned, the dynamics in this category are unique, and we are now -- we will now show you a short video, which will demonstrate the uniqueness of the category the reference, the video is not part of the formal report just for formality purposes mentioned. So please join us for the next 3 to 5 minutes. [Presentation]

I hope you enjoyed it. Producing a handmade cigars, as you have witnessed now is almost an art. The crafting involves endless number of small processes, whether tobacco leaves switch hands over and over again, and in this video, you have watched that we feature our factory in the Dominican Republic and show only a few steps among the handmade cigar journey. So back to the importance of growing the handmade cigar business. Our handmade cigars are initially crafted at our sites in the 3 of the most important and significant growing tobacco areas or cigars namely the Dominican Republic, Honduras and Nicaragua. Our wide brand portfolio makes us a leading player in the fragmented U.S. market and a growing player outside the U.S. Our cigars has sold to consumers through all relevant trade channels from online platforms to tobacconist retailers. We opened the first real retail superstore in Hamburg, Pennsylvania, and today, we operate 13 of these superstores in states of Pennsylvania, Texas, Florida and Tennessee. These superstores are important touch points for new and existing consumers to engage in the category and to have a good time with others sharing the same passion for cigars. We aim to continue to increase consumer engagement to the handmade cigar category and to strengthen our position in the category and plan to open 2 more stores this year. I will now talk to our investments in strengthening our platform for future growth. We need a strong core tobacco business, and that remains our main focus period. However, we're also investing in long-term sustainable growth opportunities, which are an important pillar for our success of our strategy. Whether these investments are realized through acquisitions of companies or through growth enablers, they must deliver attractive returns over time. We have currently identified 3 growth enablers, international sales of handmade cigars, that means sales outside the U.S.; secondly, our retail superstores in the U.S. and finally next-generation products, where we focus on nicotine pouches. During '24, we made good progress with our growth enablers, and they continue to deliver good growth and account for about 10% of group net sales. We expect the share of group net sales to increase further in the years ahead. Last summer, we announced the acquisition of the pipe tobacco and fine cut tobacco company, Mac Baren, that many of us know. The transaction was valued at DKK 535 million. Mac Baren has added scale and cements our position as a global leader in pipe tobacco. When fully integrated by the end of the year, we expect to deliver synergies in the level of DKK 150 million and to deliver return on investment well above our group average. This kind of transactions -- acquisitions are good examples in how we can create value through our M&A agenda. Let me also give you a short update on our sustainability agenda rolling responsibly, where we have made significant progress during the past year. Our annual report is now fully compliant with the EU Corporate Sustainability Reporting directive. And we are proud of the progress we have -- we are making with our climate-related actions and by being a community pioneer. In the extended annual report, you will find many details of our achievements within an environment, social and governance, which we have worked hard on over the past few years. Today, I will only mention 2 of the group -- the group -- today, I will only mention 2. The group has reduced Scope 1 and Scope 2 emissions by 8% in the past year, compared to the year before. And since the baseline was set in 2020, the reduction equals 25%. Additionally, we have during the year, set the best baseline for our Scope 3 emissions. We have submitted our targets for these emissions to the well-recognized science-based target initiative, also mentioned SBTi, they had -- the approval, which we achieved in '24 from SBTi was another important milestone in our sustainability agenda. This brings me to the composition of the Board of Directors and the management remuneration. All members of the Board of Directors elected at the general meeting are elected for 1 year at a time. Consequently, all shareholder-elected board members are up for reelection. The Board of Directors proposes a reelection of the following Board members beyond me, namely Dianne Blixt, Marlene Forsell, Jörg Biebernick; and Anders Obel. Henrik Amsinck has informed the Board that he wishes to retire from the Board of Directors. Our 3 employee-elected Board members, which were elected for a 4-year period, as described by the law are Mark Draper, Thomas Thomsen and Karsten Dam Larsen. I would like to take the opportunity to thank Henrik Amsinck for his valuable contribution to our work and collaboration during the past years, and in particular, in regard to our ERP process implementation Henrik. The Board of Directors proposes Ricardo Oberlander as a new board member. Ricardo holds considerable insight into our core markets and has held a number of international leadership positions in large tobacco companies. Further, Ricardo has experience within strategic business development, sales and marketing as well as technology and innovation. The Board of Directors annually carries out an evaluation of its work and performance and in collaboration with the executive at each collaboration with the executive management. In compliance with the Danish recommendations for corporate governance, I would also wish to inform you about the self-assessment made by the Board of Directors in '24. The Board of evaluation was led out with the assistance from an external consultant. The overall conclusion of the evaluation was that the cooperation within the Board and its cooperation with the Executive Board are functioning well and that there's a good alignment with most business related and strategic topics, the Board of Directors and the executive management should focus on. This brings me to the remuneration of the Board of Directors and management. It is proposed that all fees for the Board of Directors and the various committees remain unchanged from '24 with a base annual fee of DKK 440,000. The company's remuneration policy states that the intention -- the intention that the executive management is rewarded appropriately for achieving central short- and long-term business goals, and that the remuneration shall incentivize executive management to manage and grow the company to ensure its continued sustainability and in a way which aligned with shareholders' interest. The remuneration package for our executive management, namely our CEO and CFO, consists of a flat base salary and both short- and long-term incentive programs. For the year of '24, the total remuneration for the executive management amounted to DKK 29.6 million. This includes a final tranche paid to the CEO in compensation for legacy early retirement scheme abolished in 2016 at the time of the IPO. In the remuneration report, we have provided detailed information about the remuneration of the executive management and the Board of Directors. And it also contained comparison numbers to prior years. The remuneration of the executive management of the Board of Directors in '24 was in accordance with the remuneration policy. We further believe that the remuneration of the executive management fairly reflects the results achieved by the company. Let me finish the report by addressing the outlook and the financial expectations for '24. With macroeconomic and geopolitical development as well as weaker consumer sentiment in the U.S., we consider the uncertainties for our business as higher than normal. These uncertainties may impact our assumptions for volume and price development for our product categories. It may impact our cost -- be impacted by cost inflation and supply chain stability. However, let me emphasize our financial position is solid, and we remain committed to strengthen our platform and pursue our strategy also in '25. This is important for further growth, although it may temporarily impact profit margins, cash flow and return on invested capital. We will continue to prioritize actions that will strengthen our company and our market positions in the long term, also sometimes at the cost of near-term profitability. The expectation for the group reported net sales is in the range of DKK 9.2 billion to DKK 9.7 billion. Reported net sales will be positively impacted by the full year inclusion of the Mac Baren business and the continued growth in product categories, handmade cigars and next-generation products. The range for the expectation to the EBITDA margin of 20% to 23% is wider what we have normally done, reflecting the beforementioned uncertainties to our base assumptions. Continued investment in both growth enablers and in turning our machine-made cigar business around will impact margins negatively but they are somewhat compensated by Mac Baren synergies. Despite the continued investment in strengthening the position for the growth enablers, we expect profitability from each of them to improve compared to '24 and nicotine pouches, we expect to be EBITDA to be close to breakeven on an EBITDA basis. Free cash flow before acquisition is expected in the range of DKK 800 million to DKK 1.1 billion, and the adjusted EPS earnings per share is expected in the range of DKK 11 to DKK 14 per share. Let me also address the shareholder return policy, which remain unchanged. We recognize the importance of the ordinary dividend to many shareholders. Therefore, the ambition is still to deliver an annual growth in the ordinary dividend payment per share. Based on the proposal for the ordinary dividend of DKK 8.5, an increase compared to the dividend of '23, and as previously mentioned, we have for now, in 9 years in a row, increased the annual dividend per share. We are committed to deliver on our shareholder return policy. And during the past 5 years, we have returned DKK 6 billion to our shareholders, either as dividend or through share buybacks. However, let me also remind you that when determining excess capital should -- we should -- to shareholders, we should -- we do prioritize investing in the growth of our company, if these investments can meet our investment criteria. The Mac Baren acquisition and the investments in our retail superstores are such examples where the return of -- on investment -- in these investments in our view, delivers better value for our shareholders than any share repurchase program can do. This marks the end of my report. On behalf of Scandinavian Tobacco Group's Board of Directors, the executive management and all employees, I would like to thank our shareholders, business partners, customers and consumers for the interest and the trust they have shown our company in the past year. Let me finish by again thanking and congratulating employees and management on the solid results and the job well done. I would also like to thank my colleagues and the Board of Directors for their constructive collaboration and positive contribution during the year. Thank you.

[Foreign Language] The report is not subject to any voting. Among the shareholders, however, I ask whether there anyone who wants to take the floor and have questions or comments. Yes.

[Foreign Language]

Thank you to [ Claus Sarson ]. I'll just try to summarize your question. The question really relates to the nature of our U.S. business and the exposure to tariffs that has been implemented by the U.S. I would like to say, first of all, it is too early to say anything about the potential impact of the applied tariffs. Our U.S. business is about 45% of our total turnover, more than 1/3 that you mentioned. We are focusing on understanding the facts and following the situation closely. I think the situation is fluid at the moment. We don't know what the countermeasures might be. But let us see, so we are following it closely. I would also like to add that all our competitors are like we have production outside the U.S. So none of our competitors have production within the U.S. So we are all on the same sort of playing field. Having said what I said, I would also like to mention, it's our ambition in general to fully mitigate the impact from tariffs, that means the consumers will have to pay for it. It's still early days. We do have a full overview of the impacts of the tariffs. But our aims, as mentioned, is to fully mitigate the impacts. Of course, always subject to the competitive situation. So I hope this answers your question.

[Foreign Language]

Good. Other questions? Seems not to be the case. Thank you very much for the question. I think I will conclude that the general meeting has taken note of the chairs report [Foreign Language].

We'll move on to Item 2 on the agenda, and that's the adoption of the audited annual report. For 2024, it is dated 6 March 2025. The management statement is set forth on Page 163 and the auditor statement signed by [indiscernible] without reservations is included from Page 164 forwards. [Foreign Language]. I ask whether there are any questions or comments to the annual report. If not, can I ask the general meeting to confirm that the annual report is approved. Yes. [Foreign Language] Item 3 is appropriation of profits as recorded in the adopted annual report, the [Foreign Language]. As already noted, the Board of Directors proposed to the general meeting that for the financial year 2024, the company pays a dividend of DKK 8.5 per share. [Foreign Language] Are there any questions, comments to that proposal? [Foreign Language] Otherwise, I will consider the proposal likewise approved by the general meeting. Thank you. Item 4, that's a presentation of the company's remuneration report for an advisory vote. [Foreign Language] The chair presented the remuneration report as part of Item 1 of the agenda, and we'll not go through it any further. The report can also be found on STG's website. The board statement is set out on Page 15 of the report and confirms that the Board of Directors has considered and adopted the remuneration report and that it complies with the requirements in the Danish Companies Act and is consistent with the company's remuneration policy. The auditor statement is set out on Page 16 of the report and confirms that the auditors have found no reason to point out any emissions with respect to the disclosures included in the remuneration report. As said, the report is subject to an advisory vote. [Foreign Language] I ask whether there are any questions or comments to the remuneration report? [Foreign Language] seems not to be the case. I hope I can therefore say that the remuneration report for 2024 has been approved in the advisory vote by the general meeting. Yes. Item 5, remuneration for the Board of Directors and Board committees for 2025. [Foreign Language] You have the proposal presented by the Board behind me. It is unchanged compared to 2025, and I'll just run through it. Ordinary -- there's a base fee for all the members of the Board of Directors received DKK 440,000. The Chair of the Board receives 3x the base fee and the Vice Chair receives 2x the base fee. The Chair of the Audit Committee receive a fee corresponding to 75% of the base fee and other members of the Audit Committee receives a fee corresponding to 37.5%. Each -- the Chair of each of the Remuneration Committee and Nomination Committee received a fee corresponding to 50% of the base fee and other members of those committees receive a fee corresponding to 25%. It should be noted that the fees for the Chair and members of the committees are in addition to their fees as Chair, Vice Chair or member of the Board of Directors. In addition, the company may -- in accordance with the company's remuneration policy, pay social contributions and similar fees that may be charged by foreign authorities in relation to fees paid to members of the Board of Directors. In addition to that, payment may also be made in respect of travel expenses, et cetera. [Foreign Language] Are there any questions or comments?

[Foreign Language]

Sorry. Yes, it was the General Counsel of the company. I pointed out that the presentation is incorrect. The Audit Committee, the Chairman receives 75% of DKK 440,000 and other members, 37.5% of DKK 440,000. And then I'm not the one who wants to calculate how much that is, that's... [Foreign Language] Okay. Thank you, Meta. Yes, Good. Any questions, other questions or comments or corrections, I should say then. Seems not to be the case. Can I consider the proposal approved [Foreign Language].

Item 6, that's proposals from Board of Directors and the shareholders [Foreign Language] No proposal have been submitted by any of the shareholders. The Board has made 4 proposals. If we change slide namely reduction of the company's share capital, extension of authorization to -- for the Board to issue new shares. C is the extension of another authorization to the Board namely to acquire own shares and D is deletion of age limit for the candidates for the Board of Directors. [Foreign Language] Let's take them one by one. A, thank you. The Board of Directors proposes that the share capital is reduced. In November 2023, the company announced a share buyback program with the purpose to adjust the company's capital structure and meet obligations under the group's share-based incentive program. The buyback program ended in November 2024, and it is proposed that some of the treasury shares acquired are now canceled, resulting in the share capital being reduced by nominally DKK 6 million. After the reduction of the nominal value of the company's share capital will be DKK 80 million. According to the practice of the Danish Business Authority cancellation of part of treasury shares is comparable to a capital reduction. Therefore, before implementing the proposal, if it's adopted, the company's creditors will be requested to file any claims they may have against the company within a period of 4 weeks. If no claims are raised, the capital introduction -- reduction will be implemented thereafter. If approved, you have on my left, you're right, how the Article 3.1 will look, namely that the company's share capital is normally DKK 80 million divided into shares of DKK 1 each or multiple thereof. [Foreign Language] Are there any comments or questions to the proposal? Seems not to be the case. [Foreign Language] I then consider the proposal approved by the general meeting. Thank you. 6B is a proposal to the extent the authorization to the Board of Directors to increase the share capital without preemptive subscription rights for the existing shareholders. [Foreign Language] The proposal -- or the current provisions are set out in Article 5.1 and 5.2. However, they expired those authorizations on 26 March 2025. It's basically proposed that the authorizations are extended for a period of 5 years from today's date, i.e., until 9 April 2030. You have the revised wording up there. I can confirm that there are no other changes in substance to the authorizations currently included in the Articles of Association. [Foreign Language] Are there any questions or comments? [Foreign Language] Seems not to be the case. Can I consider the proposal approved by the general meeting? [Foreign Language] Thank you for that. Likewise, 6C is extension of the authorization to the Board of Directors to acquire own shares. [Foreign Language] Similar to what we just had, the current authorization sits in Article 6.1 on of the Articles of Association and that authorization expired on 26th March 2025. It is again proposed to prolong without any other changes the authorization to the Board to acquire -- to buy back or acquire own shares for 5 years until April 9, 2030. [Foreign Language] I ask whether there are any questions or comments? [Foreign Language] Seems not to be the case. Can I consider the proposal approved by the general meeting. Thank you. Finally, 6D, that's deletion of age limits for candidates for the Board of Directors, [Foreign Language] It is set out in -- currently set out in Article 8.11.1, the Board finds that age should not itself disqualify an otherwise qualified person from serving on the Board of Directors and note that the Danish recommendation on good governance do not contain any recommendation with regard to the age of the directors. As a result, the Board of Directors proposes that Article 11.1 be amended by deleting the words any persons that as of the date of the general meeting is 70 years or more cannot be affected to the Board of Directors, meaning that the revised wording will say as set up behind me that the company is managed by a Board of Directors consisting of 6 to 10 directors -- 6 to 10 directors elected by the general meeting to hold office until the next Annual General Meeting. [Foreign Language] Are there any questions or comments? [Foreign Language] Seems not to be the case. Can I conclude that also this proposal is adopted by the general meeting. Thank you. Item 7, election of members of the Board of Directors. [Foreign Language]. All members of the Board of Directors elected by the general meeting are up for reelection. As already noted by Henrik, the chair, Henrik Amsinck has decided not to stand for reelection. The Board of Directors proposes reelection of the remaining current members of the Board of Directors elected by the general meeting, namely Henrik Brandt, Jörg Biebernick, Dianne Blixt, Marlene Forsell and Anders Obel. The Board further proposes election of Ricardo Oberlander. [Foreign Language] By acclimation, I just wanted to ask either there are any other proposals. Okay. Now you can give them a hand if you want an appreciation. See whether we can also have cheer up for the next point, that's election of auditors. As always, a very exciting part. The Board of Director proposes to reelect PricewaterhouseCoopers as auditor of the company in accordance with the Audit Committee's recommendation. It is further proposed to elect PricewaterhouseCoopers to provide statement of assurance on the content of the sustainability reporting in the management's statement in the annual report for the financial year 2025. [Foreign Language] I need to ask whether there are other proposals. Can I then consider the proposal approved by the general meeting? Yes. Good. Thank you. Now we come to Item 9 on the agenda. Any other business. As you know, we cannot make or we cannot adopt anything on this, but if anyone would like to take the stage for a comment or a question. [Foreign Language]

[Foreign Language]

So the question relates to the Mac Baren acquisition. In terms of that there was a claimed deficit in the business and how big the pipe tobacco can -- is as a share of the total pipe tobacco business of Scandinavian Tobacco Group? I can say that the price we paid for Mac Baren and the due diligence we did on the acquisition was and what we have seen subsequently is in accordance with our forecast and analysis prior to signing the documents. And we are excited about the opportunities to integrate and harvest the synergies of Mac Baren into the Scandinavian Tobacco Group. It goes without saying that there are a lot of complexity in that business that also -- we have also pre-acquisition also decide that certain of the products we will stop because there are many overlapping products in the portfolio. To your second question, the pipe tobacco, this is a fine cut and pipe tobacco business, and we have a -- with the addition of Mac Baren pipe tobacco, we have strengthened our position in pipe tobacco. We are the worldwide leader in pipe tobacco. A category that unfortunately is declining, so there was a need for a consolidation and -- but we feel confident that we will take the business positively forward.

[Foreign Language] Are there comments? It seems not to be the case. Yes. [Foreign Language]

[Foreign Language]

Thank you for the question. The question was twofold. One question was, where do we produce and how much do we produce in each and every location? And the second relates to the -- excuse me.

[Foreign Language]

Yes. So where do we produce, which countries and how much we do we produce in each and every country. The second question was not really a question, it was an urge to go out and buy shares, share buyback. To the first question, we do produce across the Central America, in Nicaragua, Honduras, Dominican Republic, we produce in Europe in Belgium. We produce in Sri Lanka and Indonesia. So we produce quite across the world. But the most important part that is subject to tariffs is, of course, the handmade cigar business. That is -- that is where we are mostly exposed and this is production that takes place in Dominican Republic, Honduras and Nicaragua, as I mentioned in the earlier. We have never announced how much we produce in each and every country. But when we talk tariffs, the most exposed, if you will call it like this, it is, of course, the handmade cigar business that is produced in Central America, all our competitors are also outside the U.S. So it's the same level playing field. So we feel we are equal with our competitors in this respect. Now with respect to the share buyback. As you probably will have noticed from the annual report, our leverage, our so-called debt leverage, how much debt do we have compared to what we earn. So this is what we call our earnings EBITDA compared to the debt we have, the net debt we have. It's around 2.5x. This is what we say this is where we would like sort of to be max. And we expect this to be more or less on the same level as we go out of the year. And the reason for it being 2.5 is of because of the acquisition of Mac Baren. So at this stage, we are content where we are. But of course, we will always consider in principle share buybacks. But as we have forecasted for the year, the cash flow, it is evident that the leverage at the end of the year will be more or less the same. So we never comment really on when we initiate share buyback. But I think the reader can conclude from all the prognosis that we have given whether there will be a share buyback or not. I hope this answers your question.

[Foreign Language] Let's try another time. Any more comments, feel free. We have plenty of time. Oh, we have. [Foreign Language]

Thank you, Christian, for chairing the meeting once again. On behalf of the Board of Directors, I would like to thank those of you shareholders who have attended the meeting whether virtually or physically. For those present in the room here, that will now be time for a small break, not break, but there will be time for a snack and a drink in the room next door, and a chat. And for those who are virtually participating virtually, I would like to say thank you, and goodbye. I hope to see you next year. Thank you.