Q1 2020 result 24 April 2020 Henri de Sauvage-Nolting, - PowerPoint PPT Presentation

Q1 2020 result – 24 April 2020 Henri de Sauvage-Nolting, President/CEO Frans Rydén, CFO Nathalie Redmo, IR

2 Summary Q1 2020 Net sales (SEKm) Organic growth • Organic sales negatively impacted by COVID-19 -4.0% 1,518 – Branded: Negative impact from convenience, entertainment -2.5% Branded (1,559) and travel, partly mitigated by grocery and e-commerce -8.0% P&M – P&M: Significant reduction in consumer demand and retail fixture closure EBIT, adj (SEKm) EBIT, adj • Decrease in operating profit (EBIT), adjusted 152 10.0% – Lower volumes and negative FX effect, partly offset by cost (166) (10.6%) efficiencies • Free cash flow negatively impacted Free cash flow (SEKm) Net debt/EBITDA – Decline driven by negative working capital movements -20 2.4 • Strong financial position – Dividend proposal withdrawn, ambition to resolve on a (111) (2.4) dividend

3 COVID-19 update – impact and actions taken Consumers and customers BRANDED Branded sales by channel* Impact on branded Mitigating actions • • Food Increased demand in Food & E-commerce Branded big packs 30% • • Closure or fewer shoppers in other channels Adjusting A&P to new media Other 70% consumption channels • Negative mix from less impulse sales • More Candy focus PICK & MIX P&M sales by restrictions* Impact on P&M Mitigating actions Limited • • 34% Retailers closing fixtures to avoid crowding Branded in P&M fixtures (Sweden) • • Consumers uncertain, drop in demand Packaged P&M Partial 36% • • (Norway, Finland) Unfavorable geographical mix Increased in-store hygiene 30% Extensive (UK, Denmark) * Approximate % based on 2019 full year figures

4 COVID-19 update – impact and actions taken Employees, production and suppliers EMPLOYEES & PRODUCTION SUPPLIERS All Cloetta Factories operational Limited impact from governmental restrictions • Increased absenteeism • • Some delays from Italian 3P Drop in Efficiencies but deliveries good • Prioritizing A-list SKUs • Delay in CAPEX No material disruptions in the supply chain • Actions on health & safety 3P warehousing and freight plans in place ✓ Travel bans, office closures, meeting restrictions, hygiene increase in factories, Actions on suppliers field hygiene in store ✓ Direct and indirect suppliers assessed weekly Actions on costs & cash ✓ Increased inventory on critical components (raw ✓ Merchandizing/Field, market organizations & pack and finished products) ✓ VIP+ step up ✓ Cash committee

5 Financials

6 Changes in net sales Negative impact on sales from COVID-19 First quarter -2,6% 1 559 -4,0% +1,4% 1 518 Branded packaged: -2,5% Pick & mix: -8,0% Q1 ’19 Q1 ’20 Organic growth FX

7 Sales development Sales in the quarter impacted by COVID-19 Branded, % of Q1 '20 sales 3,6% 3,6% 2,4% 1,6% 1,4% 1,4% 0,6% 0,6% -2,5% 74% Q1 ’18 Q2 ’18 Q3 ’18 Q4 ’18 Q1 ’19 Q2 ’19 Q3 ’19 Q4 ’19 Q1 ’20 Pick & mix, % of Q1 '20 sales 18,1% 26% 6,4% 0,0% -3,3% -8,0% -11,4% -13,5% -15,6% -19,4%

8 Q1 Financial summary Impact of COVID-19 partly offset by cost savings Gross Profit SG&A • Gross profit decline driven by lower 600 40,0% Q1 '19 Q1 '20 volumes and negative FX effect -384 30,0% 39,0% 580 -386 566 38,0% 25,0% -388 25,8% 25,8% 560 -390 37,0% 20,0% • SG&A decrease driven by cost savings, 540 -392 -391 36,0% 540 -394 15,0% 36,3% partly offset by negative FX and items 35,0% -396 35,6% 10,0% 520 affecting comparability. -398 34,0% -400 5,0% 500 33,0% -402 Q1 '19 Q1 '20 -402 -404 0,0% • Operating profit, adjusted, driven by lower volumes and negative FX effects, Operating profit, adjusted Operating profit partly offset by cost efficiencies 166 170 170 164 12,0% 12,0% 160 160 11,0% 11,0% 152 149 150 150 10,0% 10,0% 10,6% 10,5% 10,0% 140 140 9,8% 9,0% 9,0% 130 130 8,0% 8,0% 120 120 7,0% 7,0% 110 110 6,0% 6,0% 100 100 5,0% 5,0% Q1 '19 Q1 '20 Q1 '19 Q1 '20

9 SG&A Lower SG&A from cost savings; holding ratio to sales despite topline drop First quarter 25,8% 25,8% +11 -391 -2 19 -402 -6 Q1 ’19 Q1 ’20 Items affecting FX Cost savings comparability

10 Cash flow Q1 ‘20 • Lower Free cash flow driven by lower EBITDA, 166 negative working capital movement and higher -99 investments 73 – Higher inventories driven by actions to 93 -87 safeguard supply, coupled with lower than -20 Cash flow before Changes in Investments in Free cash flow Other investing Cash flow Cash flow for expected sales. changes in working capital PP&E and activities from financing the period working capital intagible assets activities – Higher investment in PP&E at the start of the quarter Q1 ‘19 204 • Other investing activities last year reflecting -50 155 final settlement of earn-out consideration -43 111 190 -146 Cash flow before Changes in Investments in Free cash flow Other investing Cash flow Cash flow for changes in working capital PP&E and activities from financing the period working capital intagible assets activities

11 Strong financial position 2 793 2 336 800 Non-current facilities • Cash and headroom in facilities 700 Commercial papers 300 Commercial papers Amounts in SEKm exceed current part of utilized facilities 619 Cash Current facilities 1 693 • Compliant with covenant 1 017 Non-current facilities requirements on Net debt Utilized Available /EBITDA > 4,0 Covenant • Decision to withdraw dividend 3,5 given market uncertainty Net debt/EBITDA 3,0 Target 2,5 2,0 1,5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2017 2018 2019 2020

12 Strategic update

13 Key Business Priorities: remain valid for 2020 Cloetta to organic growth and 14% operating profit margin, adjusted • Continue on strategic direction to further strengthen key 1 brands, adjusting to new market and consumer realities • Adjusting advertising spend to new media consumption • In-store communication and increased hygiene routines • 2 Alternatives offered, including wrapped assortment • Reignite P&M after fixtures open to regain shoppers • Sweden P&M business not to break even by year-end • Actions taken to reduce costs, including temporary layoffs 3 • Delay in announced investments in factories • Cash Committee established to drive cash program

14 Organic growth for branded business • Continue on strategic direction to further strengthen key brands – Adjusting to new market and consumer realities – Define big pack strategy to capture P&M shoppers who move into packaged • Adjusting advertising spend to new media consumption – Less outdoor, more towards TV and social – More towards candy • Launches building our brands – Easter foam to repeat the X-mas success – Line extensions from main brands instead of complete new platforms

15 Pick & Mix, profitability and growth • In-store communication and increased hygiene ‒ 1,5 m distance stickers, gloves, cleaning • Alternatives for a seeking P&M shopper ‒ Wrapped products for UK retailers ‒ Pre-packed CandyKing boxes ‒ Branded Cloetta boxes and bags ‒ Rebuild closed fixtures to branded sales points • Reignite ‒ Rework the CK 2.0 concept to assure shopper on hygiene ‒ Prepare media support plan • Sweden business not to break even by year-end

16 Reduce costs and greater efficiency • Adjust P&M costs to follow volume loss – Temporary layoffs and reduced hours – Stop using third party support • Perfect Factory runs virtual – Travel restrictions and no external visitor policy – Program runs with local teams and virtual – Great start of year with operational efficiencies • Step up on VIP+ – Use situation to drive cost down faster – Bring forward planned re-organisations – Imposed higher target delivery on indirects • Cash committee – Centrally steered cash team – Payment terms focus – Bring down stock level

17 Expected impact from COVID-19 Branded packaged products Demand expected to be lower during the second quarter Pick & mix Demand expected to continue to be significantly reduced Operating profit, adjusted Expected to be significantly lower in the second quarter Capital expenditures Decrease expected in planned capital expenditures

18 Q&A