Financial review of Q4 2023 and FY 2023 results
COMPANY ANNOUNCEMENT NO 04/2024 – February 28, 2024
Statement by Royal Unibrew’s CEO Lars Jensen: “Solid execution
in 2023 ensured organic EBIT growth of 7%. Despite a challenging
start to the year and poor summer weather, we managed to build
increasing momentum throughout the year. Organic EBIT growth in Q4
reached a remarkable 29%, ensuring that we comfortably ended within
our guided EBIT range.
Our business scope is significantly expanded during the past
years, and with the acquisitions of Vrumona and San Giorgio in
2023, our net revenue has almost doubled over the past three years.
Royal Unibrew is now a business with strong multi-beverage
platforms in the Nordic region and a footprint in Western Europe
with solid growth perspectives. We are confident that from where we
are now, we have plenty of earnings potential to realize in the
coming years from integrating, consolidating and growing these
businesses, while our mature markets continue their solid and
steady growth path.
2023 marked another milestone year in our sustainability
journey. For the second year in a row, we were recognized as an
'ESG Industry Top Rated' company by Morningstar Sustainalytics.
Additionally, we commenced electricity production from our solar
park in Denmark, inaugurated a biogas plant in Finland, and
received validation of our emissions reduction targets from the
Science Based Targets initiative. The SBTi validation is a
testament to our persistent efforts to mitigate our climate impact.
However, there is still much to be done on the ESG agenda, and we
remain committed to advancing our efforts to achieve our
sustainability targets.”
The start of the year was difficult as the cost base was
negatively impacted by very high inflation and price increases were
needed to offset the higher cost levels. The higher prices put
slight pressure on volumes and volume growth was negative in 2023
as consumers were hit by higher general living costs. Clearly,
gross profit margins came under pressure in the beginning of the
year and continued to be so until price increases covered the
inflation.
Poor weather, especially in the Nordics, put pressure on the
business during the summer peak season. Towards the end of the
year, performance improved as price increases were implemented. In
our multi-beverage markets, strong market positions and solid
customer relationships supported a very strong development.
Overall, volumes declined organically by 3% in 2023, while
strong price/mix impact resulted in an organic net revenue growth
of 4%. EBIT increased organically by 7%, resulting in an EBIT
margin that declined by 50 basis points to 12.7% negatively
impacted by acquisitional impacts of almost 1 percentage point.
Key highlights Q4:
- Organic volume growth of 2% (FY 2023: -3%)
- Positive price/mix from pricing initiatives and mix
improvements
- Organic net revenue growth of 6% (FY 2023: 4%)
- EBIT increased organically by 29% (FY 2023: 7%)
- EBIT margin up by 1.3 percentage points to 12.2% (FY 2023: down
0.5 percentage point to 12.7%)
Financial highlights Q4 and FY 2023In Q4 2023,
volumes increased by 28% compared to Q4 2022, totalling 4.0 million
hectoliters. The organic volume growth was 2%, with the difference
of approximately 800 thousand hectoliters explained by the
acquisitions of Vrumona and San Giorgio. For FY 2023, the volume
saw a 6% increase, corresponding to an organic decline of 3% driven
by poor weather in peak season and destocking in Italy. In Q4 2023,
net revenue rose by 22% (organic: 6%), reaching DKK 3,444 million.
The net revenue growth for FY 2023 was 13% (organic: 4%) compared
to 2022, amounting to DKK 12,927 million.
Production costs in Q4 2023 increased by DKK 333 million, a 19%
rise. Consequently, the gross profit increased by 28%, resulting in
a gross profit margin of 38.9%, which is 1.8 percentage points
higher than in 2022. This is a result of value management
activities carried out during the past two years of input price
inflation, including price initiatives across our business. For FY
2023, the gross profit margin declined by 0.7 percentage points to
41.7% compared to 2022.
Sales and distribution costs increased by 10% in Q4 2023 but
decreased as a percentage of net revenue to 22.7% from 25.3% in Q4
2022. This was primarily due to lower freight and distribution
costs, which was positively impacted by the reduction of freight
rates compared to the same period the year before. In FY 2023,
sales and distribution costs increased by 8%, falling from 25.5% of
net revenue in 2022 to 24.4% in 2023.
The fourth quarter of 2023 marked the third consecutive quarter
of organic EBIT growth, a result of highly effective execution in
Northern Europe and Italy.
EBIT for Q4 was DKK 114 million higher than in 2022, amounting
to DKK 421 million (2022: DKK 307 million) impacted positively by
DKK 30 million from the long planned sale of a brewery site in
Norway. For FY 2023, EBIT increased by DKK 122 million compared to
2022, totalling DKK 1,638 million (2022: DKK 1,516 million).
The reported EBIT margin increased by 1.3 percentage points to
12.2% in Q4 2023 due to lower production costs and lower freight
and distribution costs. For FY 2023, the reported EBIT margin
declined by 0.5 percentage points compared to 2022. In Q4 2023,
acquisitions diluted the EBIT margin by 1.1 percentage point,
whereas they diluted the EBIT margin by almost 1 percentage point
in FY 2023 compared to the previous year.
Free cash flow amounted to DKK 388 million in Q4 2023 compared
to DKK -37 million in Q4 2022, while the free cash flow for FY 2023
was DKK 1,143 million compared to DKK 577 million in 2022. This
development is driven by higher earnings and a positive swing of
DKK 535 million from a decrease in working capital.
Management’s reviewThe strong top-line
development in Q4 2023 was supported by robust commercial execution
in the majority of our markets. Additionally, Italy had a
significant positive impact on the top line, as 2022 figures were
very weak due to de-stocking in the wholesale On-Trade beer
business.
The annual negotiations have proceeded constructively with the
vast majority of our customers, and the results will be implemented
gradually throughout the first quarter of 2024. The focus has been
on addressing the general inflation in society reflected in
salaries, among other things. The integration of Vrumona in the
Netherlands and San Gorgio in Italy is proceeding according to
plan.
Net debtNet debt by the end of 2023 amounted to
DKK 6,426 million, which is an increase of DKK 1,966 million
compared to year-end 2022. The increase in net debt is primarily
driven by the acquisitions of Vrumona in the Netherlands and San
Giorgio in Italy. Net interest-bearing debt/EBITDA increased from
2.2x to 2.9x over the same period.
Developments in activities for the period October 1 -
December 31 broken into market segments |
|
|
|
|
|
Northern Europe |
Western Europe |
International |
Group |
|
Q4 2023 |
Q4 2022 |
Q4 2023 |
Q4 2022 |
Q4 2023 |
Q4 2022 |
Q4 2023 |
Q4 2022 |
Volumes (million
hectoliters) |
2.6 |
2.5 |
1.1 |
0.2 |
0.3 |
0.4 |
4.0 |
3.1 |
Organic volume growth (%) |
4 |
|
11 |
|
-16 |
|
2 |
|
Net revenue (DKK million) |
2,459 |
2,278 |
684 |
187 |
302 |
352 |
3,444 |
2,818 |
Organic
net revenue growth (%) |
7 |
|
27 |
|
-14 |
|
6 |
|
|
|
|
|
|
|
|
|
|
In Northern Europe, there was a 4% organic increase in volumes
in Q4 2023, leading to a 1% organic volume increase for FY 2023.
Net revenue increased organically by 7% in Q4 2023 and organically
by 8% in FY 2023. The positive development was driven by strong
performance in our multi-beverage markets.
In Western Europe, volume growth was adversely affected by
destocking in Italy in Q4 2022. Consequently, volumes increased
organically by 11% in Q4 2023, and net revenue increased
organically by 27% in the quarter due to a positive impact on
price/mix from the more positive product mix. For FY 2023, volumes
in Western Europe decreased organically by 14%, while net revenue
decreased organically by 4%. This performance was caused by an
exceptional good summer in Italy in 2022 making comparable numbers
difficult to meet as well as the destocking in Italy, which
impacted the first four months of 2023 negatively before
normalizing for the remainder of the year.
The International segment continues to be under pressure as the
high inflation makes it less competitive relative to local
competition that is not affected by inflation to the same degree.
Volumes declined by 16% in Q4 2023 leading to net revenue growth of
-14% in the quarter compared to the same period the year before.
For FY 2023, volumes decreased organically by 21%, whereas net
revenue decreased organically by 14%.
At the Group level, this resulted in an organic volume increase
of 2% in the last quarter of 2023, bringing the full-year
development to a 3% organic volume decrease. Strong in-market
execution and price initiatives across the Group supported a
positive price/mix impact, resulting in an organic net revenue
increase of 6% for Q4 2023 and 4% for FY 2023.
The negative impact from weaker Norwegian and Swedish kroner was
around DKK 55 million on net revenue in the quarter. Adjusting for
this, organic net revenue was 2 percentage points higher.
Developments in activities for the period July 1 - December
31 broken into market segments |
|
|
|
|
|
Northern Europe |
Western Europe |
International |
Unallocated |
Group |
|
H2 2023 |
H2 2022 |
H2 2023 |
H2 2022 |
H2 2023 |
H2 2022 |
H2 2023 |
H2 2022 |
H2 2023 |
H2 2022 |
Volumes (million
hectoliters) |
5.4 |
5.5 |
1.5 |
0.7 |
0.6 |
0.7 |
|
|
7.5 |
6.9 |
Organic volume growth (%) |
-1 |
|
-4 |
|
-17 |
|
|
|
-3 |
|
Net revenue (DKK million) |
5,092 |
4,891 |
1,083 |
591 |
605 |
631 |
|
|
6,781 |
6,114 |
Organic net revenue growth
(%) |
4 |
|
8 |
|
-12 |
|
|
|
2 |
|
EBIT (DKK million) |
807 |
709 |
76 |
28 |
50 |
61 |
-6 |
-3 |
928 |
796 |
Organic EBITgrowth (%) |
14 |
|
89 |
|
-29 |
|
|
|
13 |
|
EBIT
margin (%) |
15.9 |
14.5 |
7.0 |
4.7 |
8.3 |
9.7 |
|
|
13.7 |
13.0 |
|
|
|
|
|
|
|
|
|
|
|
EBIT increased by DKK 114 million in Q4 2023, leading to an EBIT
increase of DKK 132 million in H2 2023, corresponding to an organic
increase of 13%. The International division continued to be
negatively impacted by high costs, resulting in an organic EBIT
decline of 29% in H2 2023. In Western Europe, the normalization of
the Italian wholesale On-Trade beer market resulted in an organic
EBIT increase of 89% in H2 2023, whereas it declined by 25% for FY
2023 because of the exceptional good summer in Italy in 2022. In
Northern Europe, EBIT developed favorably in Q4 2022 due to strong
execution across our multi-beverage markets, resulting in an
organic EBIT increase of 14% in H2 2023 and 16% for FY 2023.
Developments in activities for the period January 1 -
December 31 broken into market segments |
|
|
|
|
|
Northern Europe |
Western Europe |
International |
Unallocated |
Group |
|
FY 2023 |
FY 2022 |
FY 2023 |
FY 2022 |
FY 2023 |
FY 2022 |
FY 2023 |
FY 2022 |
FY 2023 |
FY 2022 |
Volumes (million
hectoliters) |
10.8 |
10.4 |
2.2 |
1.6 |
1.1 |
1.4 |
|
|
14.1 |
13.4 |
Organic volume growth (%) |
1 |
|
-14 |
|
-21 |
|
|
|
-3 |
|
Net revenue (DKK million) |
10,023 |
8,943 |
1,738 |
1,353 |
1,166 |
1,191 |
|
|
12,927 |
11,487 |
Organic net revenue growth
(%) |
8 |
|
-4 |
|
-14 |
|
|
|
4 |
|
EBIT (DKK million) |
1,445 |
1,247 |
141 |
157 |
75 |
128 |
-23 |
-16 |
1,638 |
1,516 |
Organic EBITgrowth (%) |
16 |
|
-25 |
|
-40 |
|
|
|
7 |
|
EBIT
margin (%) |
14.4 |
13.9 |
8.1 |
11.6 |
6.4 |
10.7 |
|
|
12.7 |
13.2 |
|
|
|
|
|
|
|
|
|
|
|
In Denmark, net revenue increased by 20% to DKK 939 million in
Q4 2023, and for FY 2023, net revenue increased organically by 19%.
In Finland, net revenue increased organically by 5% in Q4 2023,
while net revenue grew by around 6% organically in FY 2023. Both
markets were supported by price initiatives and strong commercial
execution.
Net revenue (DKK million) - selected countries in Northern
Europe |
|
|
|
|
|
|
|
Q4 2023 |
Q4 2022 |
% change |
H2 2023 |
H2 2022 |
% change |
FY 2023 |
FY 2022 |
% change |
Denmark |
939 |
781 |
20 |
1,957 |
1,674 |
17 |
3,786 |
3,169 |
19 |
Finland |
735 |
700 |
5 |
1,569 |
1,554 |
1 |
3,151 |
2,958 |
6 |
Norway |
437 |
482 |
-9 |
826 |
960 |
-14 |
1,602 |
1,495 |
7 |
Sweden |
119 |
95 |
26 |
236 |
191 |
24 |
466 |
379 |
23 |
Baltic
countries |
229 |
221 |
4 |
505 |
512 |
-1 |
1,019 |
942 |
8 |
|
|
|
|
|
|
|
|
|
|
In Norway, net revenue amounted to DKK 437 million in Q4 2023,
which corresponds to an organic decline of 9%. Adjusting for the
weaker Norwegian kroner, net revenue increased organically by 1%.
In FY 2023, net revenue decreased organically by 17% and adjusting
for the weak currency development, the organic decline was 6%.
In Sweden, net revenue increased organically by 25% to DKK 119
million in Q4 2023 and adjusted for the weak currency 28%. In the
Baltic countries, net revenue increased organically by 4% in Q4
2023 due to high price increases, whereas for FY 2023, the organic
net revenue growth amounted to 8%.
Management review for the parent companyNet
profit for the year was DKK 1,032 million compared to DKK 1,571
million in 2022. The decrease of DKK 539 million against last year
was driven by increased net financial costs of DKK 95 million and
by recognition of a gain on investments in associates of DKK 460
million in 2022.
In 2023, the equity increased by DKK 552 million from DKK 4,967
million to DKK 5,519 million, primarily driven by a profit for the
year of DKK 1,032 million and a sale of shares for treasury of DKK
249 million offset by dividends paid to shareholders of DKK 720
million.
Outlook for 2024We expect organic EBIT growth
of 5-15% in 2024 (equivalent to a reported EBIT in the range of DKK
1.8-1.95 billion, including acquisitions) and net revenue of around
DKK 15 billion.
Uncertainty regarding the macroeconomic development and consumer
behavior remains unchanged. Total cost per hectoliter is not
expected to organically decrease significantly in 2024.
RevenueDue to the overall uncertainty on the
macroeconomic development and consumer behavior, we have based our
net revenue expectations on a flattish volume development and a
positive price/mix leading to a low-to-mid-single digit percentage
organic net revenue growth, as the M&A contribution from
Vrumona and San Giorgio is expected to be around DKK 1.5
billion.
We have not monitored any significant changes to consumer
behavior recently. Consumers still appear to be going out less
frequently and spending less during their outings, particularly
affecting the On-Trade sector negatively. Additionally, we
anticipate consumers in the Off-Trade sector to continue to be
seeking good deals.
ProfitabilityWe expect organic EBIT growth of
5-15% in 2024 (equivalent to a reported EBIT in the range of DKK
1.8-1.95 billion, including acquisitions). We do see deflation in
some input price categories, whereas inflation in other cost
categories is increasing in 2024. We continue to expect that total
cost per hectoliter will not organically decrease significantly in
2024.
Vrumona is expected to contribute in-organically to EBIT by
around DKK 80 million in 2024, whereas the EBIT impact from San
Giorgio will be non-material. We will do investments in Italy
during 2024, which will neutralize the underlying earnings of the
business, and the benefits, which will materialize in both Italy
and International, is not expected to impact EBIT until 2025.
As a consequence, and supported by an expected positive value
management impact, we do expect the EBIT margin to expand
organically.
Outlook for 2024 |
|
|
|
mDKK |
Outlook |
Actual 2023 |
Actual 2022 |
Net revenue |
Around DKK 15 bn |
12,927 |
11,487 |
Organic
EBIT growth |
5%-15% |
7% |
-14% |
|
|
|
|
Top and bottom end of rangeThe macro setting is
highly uncertain due to geopolitical uncertainty and pressure on
consumers discretionary spending power. The main factors impacting
profitability are:
- Consumer behavior and impact on channel mix
- High season weather
Financial assumptions
- Net financial expenses, excluding currency related losses or
gains, of around DKK 350 million
- Corporate income tax rate of around 21%
- The guidance is built on normal summer weather and travelling
activities
- Capex in the range of DKK 850-1,000 million
New long-term financial targetWe have
significantly enhanced our Nordic footprint through recent
inorganic investments, transforming Royal Unibrew into a true
Nordic multi-beverage company. At the same time, we have
strengthened and expanded our presence in Western Europe, where we
now have multiple platforms, each possessing several options for
future growth opportunities. In other words, Royal Unibrew has
transformed from being a mature, high-margin business into a
growth-oriented company with substantial potential for organic EBIT
growth.
Our net revenue has increased by approximately 70% through
acquisitions since 2019. We are now in a position where we have the
opportunity to drive significant organic profit growth by
optimizing our current business, expanding in new markets and
growing our partnerships.
We have strong confidence in our multi-beverage strategy with
focus on categories that are growing faster than the overall
beverage market and with higher margins. A focus on organic
earnings growth ensures that we make the right decisions in our
efforts to achieve our goal of maximizing value creation in the
long run, and we want this to be reflected in our long-term
financial target.
In light of this, our new long-term financial target is to grow
EBIT organically by an average 6-8% per year. It remains our
ambition to increase the EBIT margin. Given the current business
composition and prevailing input prices, we expect to organically
grow the EBIT margin in the same period.
For further information on this
announcement:
Investor Relations: Jonas Guldborg Hansen, tel (+45) 20 10 12
45
Media Relations: Michelle Nørrelykke Hindkjær, tel (+45) 25 64
34 31
There will be a conference call on Thursday
February 29, 2024, at 9:00am CET where the annual results will be
presented. Registration is needed:
https://register.vevent.com/register/BId6667e5f4e19465fb56b6eb24d94d8db
Capital Market Day:Will be held on May 7, 2024,
at Science Gallery London.
To sign up, please send an e-mail
to:investor.relations@royalunibrew.com
- Fond-RU-04-2024-uk-Financial review of Q4 2023 and FY 2023
results_FINAL
Royal Unibrew AS (TG:0R1)
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