Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cloetta AB (CLOEF, Financial) reported a strong quarter with improved profitability.
- The company achieved 1.8% organic net sales growth, marking over three years of consecutive quarterly growth.
- Net debt over EBITDA of 1.8x is the lowest ever for Q2, indicating a strong financial position.
- The divestment of the Nutisal brand is part of a strategic move to streamline the brand and product portfolio, supporting long-term goals.
- Cloetta AB (CLOEF) continues to see stable underlying volumes despite taking significant pricing actions.
Negative Points
- Cocoa prices continue to rise, posing a challenge for input costs and potentially compressing margins.
- The overall environment remains more stable than last year, but some costs, such as packaging, are still increasing.
- The company faces tougher comparators from prior periods, which already included significant pricing to offset higher input costs.
- There is a lag between when costs increase and when new pricing comes into effect, potentially impacting short-term profitability.
- Despite strong results, the company acknowledges that it is premature to state that they have sustainably reached their mid-term target for the pick & mix segment.
Q & A Highlights
Q: Can you provide more details on the higher input costs for cocoa and its impact?
A: Cocoa prices have increased significantly, up 60-80% versus Q1. This rise impacts our costs, and while we continue to adjust our pricing strategy to offset these costs, there is a lag before new pricing takes effect. This lag, combined with the increased costs, compresses our margins. Cocoa is a significant component of our costs, and its price fluctuations will impact our overall profitability.
Q: Are there any further one-off costs related to the Nutisal divestment?
A: No, all costs related to the Nutisal divestment have been accounted for. There will be no additional negative financial impacts from this divestment.
Q: Have all the price negotiations with customers been successful?
A: Yes, although it has been challenging. We understand the inflationary pressures on consumers and our retail partners. We maintain a transparent approach, pricing based on publicly available market data. While difficult, this strategy has allowed us to achieve fair pricing for our products.
Q: What do you mean by investments in core brands?
A: Core brands are those in our core markets that either hold or have the potential to reach a top three value position in their categories. We continuously monitor their performance to ensure they meet these criteria.
Q: Can you elaborate on the impact of the favorable market mix and margin enhancement initiatives in the pick & mix segment?
A: The pick & mix segment saw a 3.4% growth, driven by favorable market mix and margin enhancement initiatives. Despite the Easter shift, we achieved a margin in line with our mid-term target of 5-7%. This improvement is due to pricing adjustments, merchandising efficiencies, and strategic assortment management.
Q: How has the divestment of Nutisal affected your financials?
A: The divestment of Nutisal, completed in early June, is reflected in our Q2 results with two months of sales included. This move is part of our strategy to streamline our brand portfolio and support our long-term goal of an adjusted EBIT margin of at least 14%.
Q: What are the key drivers behind the strong Q2 profitability?
A: Our strong Q2 profitability, with an EBIT margin back to double digits, is driven by stable volumes, favorable pricing, and cost management. The full effect of Q1 pricing adjustments and improved pick & mix margins also contributed significantly.
Q: How are you managing the increased input costs, especially for cocoa?
A: We continue to manage increased input costs through strategic pricing adjustments. While some costs, like cocoa, are still rising, we are committed to maintaining our pricing strategy to offset these increases. However, this will have a compression effect on our margins.
Q: What is the status of your greenfield facility project in the Netherlands?
A: The greenfield facility project is progressing as planned. We closed the first plant in Rosenthal ahead of schedule and received strong political support from the Rosenthal City Council. This facility will create capacity for growth, reduce costs, and lower greenhouse gas emissions.
Q: Can you provide an update on your sustainability initiatives?
A: Our sustainability initiatives focus on reducing CO2 emissions, with a target to cut greenhouse gas emissions by 46% by 2030. We have already achieved a 10% reduction compared to 2019. Additionally, we are aligning our reporting with the Corporate Sustainability Reporting Directive requirements a year ahead of the deadline.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
