Release Date: August 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Reported net sales increased by 6.3% to DKK2.4 billion.
- EBITDA margin improved to 24.5% compared to 23.1% in the same quarter last year.
- Free cash flow before acquisitions was DKK177 million, up from DKK159 million last year.
- Next-generation products and handmade cigars delivered strong net sales growth.
- The acquisition of Mac Baren is expected to add 8% to group net sales and deliver meaningful synergies.
Negative Points
- EBITDA margin for the first half of the year was lower than last year.
- Machine-rolled cigars saw a decline in organic net sales by 2%.
- The market for handmade cigars is estimated to contract by a mid-single-digit percentage.
- The distribution of third-party next-generation products has been paused, impacting future sales.
- Net profit for the quarter decreased to DKK297 million from DKK304 million last year due to higher special costs and net financial expenses.
Q & A Highlights
Q: Can you provide guidance on your confidence in driving organic sales growth and improving EBITDA margin in H2 2024?
A: We are confident in showing growth in our top line and improving our EBITDA margin compared to the first half of 2024. This is driven by continued growth in the handmade category from international sales and the US, as well as the opening of three retail stores in the US. However, uncertainties remain regarding the decline rate in our main markets and the pause of online sales of ZYN. (Marianne Roerslev Bock, CFO)
Q: Did ZYN make up 3% of North America online and retail sales?
A: Yes, ZYN accounted for 3% of group sales and 8% to 9% of online sales. (Marianne Roerslev Bock, CFO)
Q: How did Europe Branded achieve 6% growth despite a 4% decline in machine-rolled cigars?
A: The growth was driven by strong sales of handmade cigars and next-generation products, especially in Sweden with our XQS brand, along with pricing strategies. (Niels Frederiksen, CEO)
Q: What is the rationale behind the acquisition of Mac Baren?
A: The acquisition aims to cement our positions in pipe tobacco and fine cut, driving synergies. The addition of nicotine pouch brands and manufacturing capabilities is a secondary benefit. (Niels Frederiksen, CEO)
Q: What has happened with US market regulation since the FDA deeming regulations were vacated in late 2023?
A: There have been no significant changes. Premium cigar launches can happen again, giving us more freedom to launch new products. (Regis Broersma, Chief Commercial Officer)
Q: Can you provide guidance on net financials for H2 2024?
A: Expect slightly increasing net financials in the second half. (Marianne Roerslev Bock, CFO)
Q: What should we expect for one-off costs in the coming quarters?
A: We have taken acquisition costs for Mac Baren but not integration costs. We expect more costs related to the ERP implementation in the second half and into next year. (Marianne Roerslev Bock, CFO)
Q: Is it possible to quantify the EBITDA drag from the next-generation products business in Europe?
A: The net investment in next-generation products is around DKK20 million to DKK25 million for this year, diluting our EBITDA margin. We aim to become profitable market by market. (Marianne Roerslev Bock, CFO)
Q: What is driving the growth of XQS in Sweden, and what is the price position in the UK market?
A: Growth in Sweden is driven by expanding distribution points and investing in brand activation and product innovation. In the UK, XQS is priced just below market leaders. (Regis Broersma, Chief Commercial Officer)
Q: What metrics are the sales team being centralized on with the new commercial structure?
A: The sales teams are running on data-driven KPIs, with adjustments made to visit frequency and categorization based on market analytics. (Regis Broersma, Chief Commercial Officer)
Q: Is the business working to target an OpEx to sales ratio, and should we expect further savings ahead?
A: We continuously identify initiatives to optimize our cost base, but we are not ready to give a clear target on the OpEx ratio. (Marianne Roerslev Bock, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
