Release Date: October 25, 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 5.7% organic growth in net sales, reaching SEK2.2 billion.
- The Pick & Mix segment showed significant growth, with an 18.6% increase driven by strong volume growth and margin-enhancing initiatives.
- The company achieved its highest rolling 12 months adjusted operating profit ever.
- Net debt over EBITDA is well below the long-term target, landing at 1.6 times, indicating a strong financial position.
- Cloetta AB (CLOEF) has successfully turned around the Pick & Mix segment from loss-making to profitable, achieving its margin target of 5% to 7% for three consecutive quarters.
Negative Points
- The historically high cocoa prices are expected to impact costs more significantly in Q4, posing a challenge to maintaining high margins.
- The Pastilles and Gum categories continue to face challenges, affecting overall volume/mix performance.
- The reassessment of the greenfield project due to increased energy supply risks may delay potential capacity expansions.
- Despite strong profit growth, the operating profit margin target of 14% is still not achieved, indicating room for improvement.
- General salary inflation and increased marketing spend have driven up sales, general, and administrative expenses.
Q & A Highlights
Q: You mentioned the Swedish candy trend in the USA. Can you elaborate on what you see and how it affects you? Is it a market you will invest more in? And what are the M&A potential going forward?
A: Yes. Pick & Mix is building on the trend of consumers looking for more individualization as they pick the candy according to their personal preferences. It's been very strong in the North, and now we also see demand in other markets. We have turned Pick & Mix from loss-making to profitable, and now we're evaluating the next steps for expansion.
Q: What are the alternative options to the greenfield project?
A: The reassessment is due to changes since 2022, and we haven't started building yet. We are revisiting options such as internal adjustments, contract manufacturing, and buying additional capacity. We've learned from closing a plant in Rosenthal, which was initially dependent on the greenfield. We'll reassess all options for the best solution.
Q: How has the historically high cocoa price impacted your results this quarter?
A: The high cocoa price did not significantly impact this quarter. However, we expect to see the full effect of these higher costs in Q4. We are taking mitigating actions, including further pricing adjustments at the end of Q3.
Q: Can you provide more details on the margin-enhancing activities in Pick & Mix?
A: The margin-enhancing activities include pricing, volume growth, efficiencies, merchandising, product assortment, and fixtures. These efforts have resulted in three consecutive quarters of profitability within our target range of 5% to 7%.
Q: What is the status of your strategic priorities, particularly regarding product portfolio optimization?
A: We have strengthened profit through margin-enhancing activities in Pick & Mix and focused on an efficient product portfolio by discontinuing less profitable products and harmonizing recipes. Since 2021, we've reduced stock-keeping units by 30%, exceeding our annual target for 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
