Good morning to you all, welcome to our first half result webcast. I'm Lars Jensen, I'm the CEO of Royal Unibrew. Today, our CFO, Lars Vestergaard, joins us on another line, so we hope that the technology will work as expected. Let's turn to slide number three. The second quarter of 2023 marked the first signs of improvements in profitability, as we recorded positive organic EBIT growth of 3% in Danish krone. This was especially driven by strong performance in our Northern European multi-beverage markets, where EBIT grew organically by 19% and 24% in local currencies in the first half of 2023. The organic volume decline of 4% in Q2 was a consequence of tough comparable numbers in Western Europe and international, whereas volumes in Northern Europe increased by 3%.
The organic net revenue growth of 5% in Q2 was driven by the implemented price increases, while negatively impacted by weaker Norwegian krone and Swedish krona. The organic net revenue growth in local currencies was 7% in the quarter. The inorganic EBIT, impact on EBIT from M&A in the second quarter amounted to DKK 10 million, which is negatively impacted by the weaker Norwegian krone. The integration of Hansa Borg and Amsterdam Brewery in Toronto are progressing well. The free cash flow for the first half of 2023 amounted to DKK 545 million, an increase of DKK 235 million compared to last year, and is the result of a high cash flow from operating activities that compensate, that more than compensate the higher CapEx. The result of the first half of 2023 has led us to adjust our full year guidance.
We are now expecting a revenue of around DKK 13 billion, compared to DKK 13 billion-DKK 14 billion previously. A reduction that is caused by a combination of lower Norwegian krone and Swedish krona, plus the lower revenue that has been caused by the weather during July and the first weeks of August. EBIT is now in the range of DKK 1.6 billion-DKK 1.75 billion, compared to DKK 1.55 billion-DKK 1.75 billion previously. Lars Vestergaard will return to the financials in more details later during this call. Please turn to slide number four. Let's look at some ESG highlights from the first half of 2023.
In April, we received an updated and improved ESG risk rating from Morningstar Sustainalytics, where Royal Unibrew was rated number one in the global beer, wine, and spirits business, which we are very, very proud of. We have improved our water consumption efficiencies from 3.1 liter per liter to three liter per liter, primarily driven by a change in product mix, whereas our per liter consumption of energy and CO2 emissions are still negatively impacted from the switch from natural gas to oil. To become 100% CO2 emission-free at our production sites by the end of 2025, we have established decarbonization roadmaps with specific actions for all of our markets, and we are well on track to meet these targets.
In June, we reached an important milestone with the completion of a biogas plant in Finland, and by getting our solar park in Denmark fully up and running. Both these projects and several other projects around our geographical footprint reduce our dependency on fossil fuel. As part of our climate target submission for the Science Based Targets initiative, we have stepped up on our ambition for Scope 3 emission and added a target of 50% reduction in absolute CO2 emission from Scope 3 alone in 2030, compared to our 2019 baseline. Finally, of the highlights we are mentioning here, we have invested in cardboard solutions for our packaging system to reduce or even eliminate the use of plastics on our road to provide 100% recycled, recyclable or reusable packaging in 2025. Now, please move to slide number five.
It has indeed been a busy first half of 2023 for us. We have been working hard to make sure that our businesses are performing well in an uncertain and unprecedented environment. As I've already mentioned, we have been very successful on our task in our multi-beverage market in Northern Europe, where we overall have gained market shares. In Italy, we can finally say that the destocking in on-trade through the wholesalers in the beer area, normalized during the second quarter. In the past three months, and that is from May to July, we have experienced a balanced sales in and sales out figures, and as I will show on a slide later, the Ceres brand has gained share also in 2023. During the first half of the year, we have had two very successful product launches with great prospects.
In Denmark, we launched a Faxe Kondi Appelsin, which quickly became very popular among consumers, and in record time is competing for the market-leading position in the orange segment, with around 25% market share. In Finland, we launched an original long drink version with pineapple flavor, which quickly became the summer beverage and has claimed a double-digit market share of the RTD market in Finland. We have been busy in making sure that we are spending our money well, with focus on return on investments, but higher production costs and higher project-related costs have outweighed the lower sales and distribution costs, including lower marketing costs the last year. We have also ordered a new PET line for the Danish business, making sure that our production capacity can keep up with the strong growth in our business.
The line increases our capabilities, both commercially and with regards to ESG. As I'm sure you have all noticed, in July, we agreed to acquire Vrumona in the Netherlands, as well as a brewery in Italy. The Vrumona transaction is expected to close in September or October of this year, and will create a new growth platform for Royal Unibrew in Western Europe, being the largest-- second-largest soft drink player in the Dutch market. The production facility in San Giorgio, Italy, should be more seen as a capacity expansion to support our growing Italian business as well as our international markets. More details on both acquisitions will come in connection with the closing of the deals. Now please turn to slide number six. On this slide, we have tried to put our European performance a little bit into perspective.
We have compared the performance of Royal Unibrew Northern and Western European segments with the European businesses of two of our main peers. From the first graph, you can see that despite an organic 22% volume decline in Western Europe, our total European volume only declined organically by 1%, as Western Europe volume was up by 3% in the first half. From the graph in the middle, you should be able to see that very strong price mix of 13% in Northern Europe drove an organic net revenue growth of 10% in Europe, despite the organic net revenue decline of 14% in Western Europe.
On EBIT, Western Europe, EBIT declined by 50% in the first half of 2023, driven by the destock in Italy. As Northern Europe EBIT grew 13% organically, we managed to secure an organic EBIT growth of 11% in our European business. Comparing our organic volume, net revenue, and EBIT performance to peers, we are satisfied with the underlying development, taking into consideration the impact for the destocking in Italy in the first half. Now please move to slide number seven. As promised, before I turn the words to Lars, a few words on the development in Italy. As said earlier, the on-trade wholesale beer channel normalized in the second quarter, thereby ending a period of destocking, impacting our Italian business negatively on sales in.
What is important is that it has not impacted our brand negatively as we read the data, and we have now seen balanced sales in and sales out for the past three months. As you can see on this slide, the Italian beer market grew by 4.3% in, on, on a year-to-date July basis, whereas Ceres has grown 10.2 in the same period. That is an outperformance of the market by almost six percentage points. We therefore remain confident that the Ceres brand is strong and healthy, and we continue to expect good growth going forward. We have also selected some data for our two other categories in Italy. Our CSD category, the grew 19.3%, on the year-to-date July numbers, which is a clear outperformance to the market of 12.3%.
Our energy drinks portfolio in Italy has not been able to keep up with the market growth year to date, but very promising, and after some strategic changes, of commercial priority, we have been b.ilding up momentum, and our portfolio outgrew the market by 6 % points in July. The Lemonsoda Energy is now the 3rd-largest energy brand in volume, in Italy and in our stronghold in north of Italy for our soft drink portfolio. Lemonsoda Energy reached a market share of 4.5%, which makes it more than double the size of the 4th-largest brand in the region. With that, I will pass on the word to Lars.
Thank you, Lars. Good morning to you all. Looking at the financial performance in Q2 2023, our volumes increased by 1 % point to 3.9 million hectoliters, supported by M&A and our extended partnerships. Despite going up against tough comparable numbers for Western Europe and international. Price increases implemented during the past year supported a strong price mix effect, leading to an increase in net revenue of 12% in the quarter, also supported by growth in our partnership business and M&A, while weaker currencies impacted negatively. EBIT increased organically by 3% in DKK, despite weaker currencies and the destocking in Italy. We will explain the dynamics behind the EBIT development in more details in the coming pages. The EBIT margin declined by 1% point, from 15.9 to 14.9 into the Q2 2023.
Acquisition of Hansa Borg and Amsterdam diluted the margin. It was also negatively impacted by weaker Norwegian kroner. Free cash flow amounted to DKK 949 million, compared to DKK 669 million in Q2 2022. The development is driven by higher cash flow from operating activities. That more than compensated for higher CapEx. If we go to slide number nine, please. The slide gives a view on the development within our three business segments in H1 2023. Starting with Northern Europe, total volume showed an increase of 10% to 5.4 million hectoliters. Organically, volume increased by 3% compared to 2022. The significant price increases implemented in the Baltics resulted in volume declines, impacting the Northern European organic volume growth negatively by almost 4 % points.
That said, net revenue and profit contribution increased in the Baltics despite significant volume decline. Net revenue increased by 22% to the DKK 4.9 billion, of which around 9 % points contributes to M&A activity, resulting in a 13% organic net revenue growth in the first half. Price increases taken throughout the year positively impacted the top line, whereas weaker currencies in Norway and Sweden did have a negative impact of around 2 percentage points. Adjusted for weaker currency, organic revenue growth in local currency was 16% in H1. Earnings before interest and tax for H1 increased to DKK 637 million, and was DKK 100 million higher than last year. The EBIT margin declined by 0.4 % points, from 13.3 to 12.9. In Western Europe, volumes declined by 22% in H1, while net revenue declined by 14%.
Soft comparable growth numbers from stocking in the wholesale market, in the on-trade channel and poor weather in Italy were the primary reasons for the decline. EBIT declined by DKK 64 million, corresponding to a 50%, reaching DKK 65 million for the, for H1. This meant that EBIT margin declined by 7 % points to 9.9. The weaker profitability was caused by the destocking in Italy, lower than expected volumes, and the poor weather in Italy. Profitability improved during the second quarter as the Italian wholesale channel normalized. Finally, in international, total volume showed a 21 percentage points decline in H1, to 500,000 hectoliters, corresponding to a 25% organic decline. The inorganic development is explained by the acquisition of Amsterdam Brewery in Toronto.
Net revenue was flat compared to the year before, at DKK 561 million in H1, corresponding to a 15% organic decline. The African market was challenged throughout most of the first half by political unrest and weak macroeconomic development, but most markets stabilized towards the end of the quarter. EBIT for H1 amounted to DKK 25 million, which was DKK 42 million below H1, 2022. The margin declined from 12% to 4.5%, and that was driven by the implementation and start-up investments for festival contracts in the UK, costs related to the acquisition of Amsterdam Brewery and negative scale effects. The organic EBIT margin declined by 5.2 percentage point in H1, and by 2.7 percentage points in Q2.
Now a short comment on the development in net revenue and EBIT in Q2 2023, if we can turn to page 10, please. Net revenue increased by 12% to DKK 3,211,000,000 , so from DKK 3.2 billion to DKK 3.565 million. More than half of this was driven by acquisitions, whereas the organic growth in DKK amounted to 5%. EBIT increased by DKK 26 million from DKK 511 million in Q2 2022 to DKK 536 million in Q2 2023. The impact from M&A, including a significant negative contribution from weaker and a weakening krona, was DKK 10 million, whereas the organic growth EBIT amounted to DKK 16 million in the quarter. Slide 11, please. Now look at the, at the cash flow.
Our cash flow before changes in net working in working capital increased by DKK 14 million to 940, DKK 987 million, which was driven by a higher non-cash adjustment than last year. Changes in net working capital positively contributed by DKK 106 million, which was a positive swing of DKK 353 million compared to H1 2022. Despite investments and leases increases by DKK 55 million, our free cash flow before M&A and financing increased by DKK 235 million, increased by DKK 235 million from DKK 310 million in H1 to DKK 545 million in H1 2023. Please turn to page number 12.
If we look at the outlook for the full year of 2023, which we have adjusted to take into account the performance so far in 2023 and the higher visibility we have. We have been through the high season, we now expect an EBIT in the range of DKK 1.6 billion to DKK 1.75 billion, compares to DKK 1.55 million to DKK 1.57 million expected previously. Based on net revenue of around DKK 13 billion compared to DKK 13 billion-DKK 14 billion expected previously. We have reduced our expectations to net revenue because of the poor weather in the Nordics in July and August, and because of the Norwegian, the weaker Norwegian krone and Swedish krona.
Assuming unchanged foreign exchange rates for the remainder of the year, the full year negative impact on net revenue is expected to be around DKK 250 million from currencies. We have narrowed our EBIT guidance range by DKK 50 million, giving a higher given the higher visibility, but still reflecting the uncertainties related to the consumer. The increased low end of the range is primarily driven by strong performance in our Nordic multi-beverage markets. Net financial expenses, excluding currency-related losses or gains, are expected to be around DKK 200 million for the full year. We expect an effective tax rate of around 21% of profit before tax. CapEx for 2023 is expected to be around 5%-6% of net revenue, as we have increased our investment in ESG projects.
With that, I would like to hand the word back to Lars Jensen.
... Thank you, Lars. now please turn to slide number 13, and before we will take your questions, I would like to give a few words on our current priorities. We have now mitigated the input price inflation, experience since the beginning of 2021, and some input prices have started to roll over, while others continues to increase. on top of that, salary increases, driven by higher living costs and currency-related inflation, that means that we still need to increase prices going forward. And, and what does that mean? That means that we are, likely going to be in a territory of, of call it, normal price increases of about 1%-3%.
The about DKK 1.5 billion of headwind that we got after the inflation started to kick in, that has been covered up. We still have a bit to do because of the currency in Norway and Sweden, which, if you isolate that, is just a matter for these two markets, and the rest is more a normal situation that we foresee. What does that mean? That means that we will price as the market can bear, and there's no reason why the underlying price development of beverages should not follow the general inflation in the societies. Therefore, we remain focused on monitoring consumers' reaction to the higher prices.
Consumer behavior has been relatively unchanged and robust during the first half of the year, but we do expect affordability to remain a key focus for consumers also during the rest of the year. We also continue to expect that private label and discount brands will gain some share in the overall market. This also means that we need to remain cost conscious, while at the same time continue to support and invest behind the growth opportunities that we see in our markets. This is instrumental in supporting continued solid underlying growth on the top line, but especially in making sure that we will create solid organic earnings growth going forward. With the agreed acquisitions of Vrumona and the Italian production facility in San Giorgio, our integration pace is not slowing down.
Vrumona is a healthy and strong business, which do not need immediate integration, but that will await available resources, while the integration of the Italian production facility will be managed locally by Royal Unibrew's strong Italian organization and is expected to be a smooth and relatively uncomplicated process. With the acquisitions done over the past years and the resulting, resulting capacity expansions, the opportunity to optimize our production footprint has increased. In the coming period, we will therefore also need to focus on the optimization of production, securing a better production economy, but also reducing our CO2 footprint.
The growth we are experiencing underlines the continued need of securing production capacity, to which we will continue to direct CapEx, and it is becoming ever more clear that ESG ambitions also will need investments going forward, and we need to focus making sure we have the right capital allocation to secure satisfactory results in both these areas. With those words, I will hand it back to the operator, and we are now ready to take the questions.
Thank you so much. Dear participants, as a reminder, if you wish to ask a question, please slowly press star one one on your telephone keypad and wait for a name to be announced. To withdraw your question, please press star one one again. Please stand by, we will compile the Q&A roster. This will take a few moments. Now we're going to take our first question. The question comes from the line of Andrea Pistacchi from Bank of America. Your line is open, please ask your question.
Yes, good morning, Lars and, and Lars. I have two questions on costs, please, and then a brief question on Lemonsoda. On your sales and distribution expenses were more or less flat in Q2, so maybe down a little bit on an organic basis. Could you talk a bit about the moving parts there? What is marketing spend? What is sort of distribution costs or maybe other factors? How you think about discretionary spend for the rest of the year and going into 2024, also, given that some of your peers seem to be stepping up investment? On the COGS, on COGS, please, one of your peers called out higher glass costs in 2024. How do you see glass next year?
More broadly, I mean, you, you commented a bit on how you're thinking of costs going forward and the need possibly to take a little bit of price. Are you able to say whether you expect overall COGS to still be slightly inflationary next year, or whether actually you should see a bit of COGS deflation? Then the last thing, just going back to those comments you were making on Lemonsoda Energy in Italy, which had a very strong start when you launched it. You were saying it's been underperforming a bit better in July. Could you maybe just give a bit of color on why you think in the last few months it was underperforming and what you've changed that now is getting it back on track? Thank you.
Thank you, Andrea. I'll, I'll start with the with the Lemonsoda and COGS, and then Lars can talk about the general cost picture thereafter. If you look at Lemonsoda energy, we, we had a very solid launch. What happened? Obviously there's a number of factors. First of all, this is a category where the where the competition is getting tougher and tougher, and where we see a, also a From the, from the big guys in the market, but also from a lot of small new players trying to enter the category because it's, it's growing, it's growing fast and it's a profitable category. It is getting crowded.
We, we experienced that after having been in the market for about a year or so, having a really strong trial on the product, we saw that pricing was creeping up even to prices that was high-higher than Monster. When, when the prices got higher than Monster, we saw that we were losing, we were losing share in the market. When you are a small player, you don't wanna, you don't wanna lose in market share, you wanna gain market share. We have, we have made a number of changes to price points, promotions. We have, we have been good in getting listings also into the convenience channel.
There's a number of, I would say, elements and learnings from both the Nordics but also from the Baltics, where we launched Cult 2.5 years ago or so, that we have utilized in our rethinking on getting into another growth momentum in Italy. That is what we have experienced during the last, I would say, two, 2.5 months, and that is, that is helping us in gaining momentum. Then we have put an extra emphasis on the North, because this is where Lemonsoda is strong.
Instead of fighting in the whole country, we have started in the North with these initiatives, and that is helping us on the performance. It is a, it's a little bit of the same discussion around France and Crazy Tiger. It's the same kind of process that we go through with within the energy drink category in general. A comment on the COGS side, and now you, you ask very specifically around glass. We, you know, we do not want to comment on specific categories here because that also involves, I would say, discussions with how the supplier is looking at this.
I think the general picture that we see here is that some categories are, are going down, and most of the categories that are going down, that's driven by lower energy costs. Of course, there's a, there's a, there's a hedging mechanism that plays in here also for our suppliers in terms of when do they get effect of lower energy costs. Then we see some of the agricultures that are holding up pretty high on the pricing. Of course, some of it will also be dependent on how, how harvest and crop will come out. We, we see kind of like, let's call it a balanced view. We will of course, during a, a, a certain period of time, have some benefits of, of lower energy costs.
If you look at the fundamentals, we do not foresee a lot of, a lot of big changes. That means, no big positives and no big negatives. That's the way that we look at it right now. That means that we are looking at a more normal scenario, as I commented on, and that means that we should make sure that we price as market can bare and try to gain a little bit of share in the market, and thereby is back to the old growth formula of Royal Unibrew. Then I would like you, Lars, to take the questions on the cost.
Yes. If we look at the sales and distribution cost, it is of course, a line that come from, that is based mainly on different elements. In there you have logistics, which is coming down in cost due to energy and so on. Then you have a sales and marketing cost. When we look at how much money we spend in this layer in line, we of course, clearly follow what is our share of voice in the markets to ensure that we invest sufficiently behind our brands. Secondly, we follow the consumer behavior very, very closely.
It is clear that some consumers are, are struggling with cash these days due to high interest rates and all the money they have spent on higher energy costs. When we look at how we spend our commercial money, in some cases, it's more important that we have good promotions in store, we have good visibility in store. The way we separate the, let's say, our commercial spending, it's all about the consumer and how do we make certain we have the right offerings in store for the consumers.
If you look for the rest of the year, I think we will make-- we will continue to follow, do we invest enough behind our brands, very carefully to ensure we have our share of voice, and, and if competition believes that we should start to increase, some marketing spend, we will monitor that very carefully. I think in this consumer environment, it's, it's as important that you have very attractive offerings for consumers that sometimes are short of cash. We are, as we've said, for, for quite a few quarters, we are monitoring this area very closely, and making certain that we do not lose out in terms of share of voice.
More importantly, that we have attractive offers that meets the consumers where they are right now. And it's clear that some consumers are struggling with the inflation and the high interest costs they have on their bills. So we do see a lot of consumers going into discounters where the share of private label is higher, and that is, that's of course, something that we monitor closely to ensure that we are capturing these consumers.
Very clear. Thank you.
Thank you. Now we're going to take our next question. Just give us a moment. The next question comes from line of André Thormann from Danske Bank. The line is open, please ask your question.
Thank you so much. I just have two questions. Thank you. First of all, is on the result in Hansa Borg. It looks like your organic EBIT growth in Northern Europe is equal to the total EBIT growth. I wonder whether you can confirm that there was a 0 contribution for the first five months in on absolute EBIT in Hansa Borg, and also give some elaboration on why, because I get that's not satisfactory for the first five months. The second question is in terms of Italy, and I wonder whether you can just elaborate a bit on what you're looking at now in the second half, now that these issues about destocking seems to have been fully resolved. Thank you.
We are not satisfied about the performance in Norway, obviously, and we need to separate that in two. First of all, we have a currency effect that has hit us by a hammer. I think we are not the only one that have experienced that. We have seen some of our competitors downgrading their results because of FX fluctuations in the Nordic countries. There is a time lag on passing on price increases, and that vary depending on if this is the monopoly systems or if this is up against the on-trade customers or off-trade customers. We are, we are very focused on passing on the effects to the consumers. It has a time lag, but that gap will close.
That's one. The other one is that when we took over the business, there was that the previous management did not, I would say, pass on price increases fast enough already. We inherited a little bit of a challenge on being out of bounds between COGS and the pricing. Our new management have been working super hard on fixing that, which is a combination of, as you would know, Royal Unibrew, of making real price increases, but also working on the mix, the mix of products, the campaign mix, the channel mix, and so on, so forth, to try to compensate for that.
That is, that has been, in the beginning of the year, it is something that has not been solved. The change of management came in in January, but when you're looking at the, the recent period, we see that that gap is also starting to close. We are, we are equally optimistic on the Norwegian business going forward. There is, of course, an optionality that is not possible to take into any spreadsheets, and that is if the Norwegian krone, and by the way, the Swedish krona, will, will strengthen at a certain moment of time, then there is, of course, an optionality for us on, on that one. On Italy, we are, we are happy with the market performance as such.
Of course there's a lot of fluctuations because of the, of the, stocking, last year that is uncalibrated with the, with the, with the sales in, sales out number, so to speak. That means that even though that we are saying that everything seems to be in order, you cannot see it on the numbers, and we are going to struggle with that for the remainder of the year, because we have months of both stocking and destocking also in the second half. We are pretty confident on on our performance versus the market in Italy. I think we have seen and, and there's a lot of probably weather related to that. We have seen the beverage market being a bit soft in July, but that we keep our, our good momentum.
That's the situation in Italy.
Thank you. Just, just one follow-up. Did I hear you correctly, that you will still struggle with destocking in the second half in Italy? Was that correctly understood?
We're not going to... we, I think you're overexaggerating here, on, on the wording here. I'm saying that destocking in the market is done. When we are comparing month to month with last year, there was a, a destocking in the late part of the year last year, and then this is going to normalize, and then we would expect that that will give a positive effect in that specific month, whereas in, in, during the, the summer season, last year, so July, as an example, we also had stocking in July. That is, of course, impacting it negatively. You would see that it is not a it's not a straight line from here, so there will still be fluctuations, between the month. So that is what I'm saying.
Thank you so much. That's very clear.
Thank you. Now we're going to take our next question. Just give us a moment. The next question comes from the line of Richard Withagen , from Kepler Cheuvreux. Your line is open. Please ask your question.
Yeah, good morning, Lars and Lars. I've got three questions, please. First of all, I want to come back to the question Andrea asked on, on marketing sales. Maybe you can talk a bit about your thoughts on broader brand support and marketing promotions, everything. Especially, what changes do you expect as consumers remain under pressure, inflation comes down, maybe we can even see some deflation at some stage. So what do you expect to change over the next, you know, six to 12 months? Second question is on the production footprint. I think, Lars, you said that you are looking at that production footprint of Royal Unibrew. So maybe you can, you know, what, what kind of plans do you have?
Is, is this gonna be a major overhaul or, or, or, or not that major at all? Is there additional CapEx involved? Then maybe lastly, a bit of a longer-term question. I think you still have your, your midterm margin targets. Now we've seen, you know, also the Vrumona acquisition, probably a bit margin dilutive to that. Maybe you can sort of give us some insights how you expect to get back to that midterm margin target and, maybe also some, some time frame around that?
Thank you. I would, a general comment on the market, sales marketing slash commercial costs. For us, this is always to strike the right balance between people, marketing, and sales support that we do towards our customers, helping them selling more. There's no straight formula here. In some markets, we prioritize to have much more people on ground. At the end of the day, then maybe spend a little bit less on the brand building that you do not see in store, but move the money in store.
In other markets, we prioritize to do much more, traditional, call it, marketing, which is, which is, either digital or, or, from the cinema or from television or whatever, then we have, we have less to execute in the store. We always try to strike the right balance between those three, for what makes sense for us in terms of the growth aspirations that we have and the opportunities that sits and what competition does. If you look at the total cost here, there's also a lot of efficiencies to be gained if you hit that right. That is, that is, as I would say, a very strong discussion in Royal Unibrew, to try to hit that hit that right.
We do not have an aspiration to spend less because we see a lot of growth opportunities, so we would actually like to see more, spend more so that the, the snowball can grow, can grow even, even bigger. On the production footprint, we have been struggling, I would say, since the mid of COVID, for two reasons. We, we are- we had a strong growth during COVID, on the volume side, which did not crawl back, when COVID was over. We didn't-- We had to postpone some of the CapEx projects that we had at that time because we couldn't get extra and people in and, and working.
We, we have been running behind on building up capacity and matching the growth that we have seen and that we foresee. That means that we need to add capacity. Capacity for us comes in two ways: so you have the lines, and then you have the brewing. We have been struggling a bit on the brewing side, and that means that we have been moving products between countries, which is very expensive. If you look at it at a European picture, I don't think Europe supports that we should build up more capacity in Europe for brewing.
That is the reason why that the scenario of acquiring the San Giorgio brewery is, is, is much more feasible than building up extra brewing capacity in any of our, in any of our breweries. Then we would like, at the end of the day, to move production closer to the consumers, to be more on the ESG forefront, to be closer to the markets so that we service the market much better than we do by shipping around goods for weeks or even months around the world. This is where we have identified four areas where we are looking at different projects. It is a long-term planning cycle in terms of all of this.
Short term, you would argue that it takes, buying a, a, a brewery in Italy, takes off a bit of the pressure on CapEx, you would argue. If we wouldn't have done it, the CapEx would probably have been even higher than the CapEx that we are, that we are guiding. Vrumona is also adding a bit of capacity to the network. We are, we are already by now building a number of scenarios on, on how, we can make usage, of, of that, for the total Royal Unibrew network. We are, we are adding new lines, and we will add more new lines, as, as long as we can see our growth is continuing. That's. We, we, we see this as a positive.
Maybe finally, before, if Lars has any supporting answers on, on the, on the margin. First of all, it's a, it's a long-term target, it's not a midterm target. The other pieces that what we have said all the way through is that we will only be able to get back to that if we would see a scenario where COGS would decline to a more, call it, reasonable and normal level. And that is, of course, still a topic. Will it happen, and when will it happen?
We have, in or thinking, we have said that, in a long-term perspective, so in a 3-5-year perspective, we believe that it's, it's reasonable to believe that COGS will go down, and that we would be able to put a part of that on the bottom line. That's the core assumption. That's the way that we look at that. I don't know, Lars, if you have any supporting comments.
I think what, what, what we may add, to, to this discussion is that the, the target we have of being around 20%-21%, the EBIT margin, if you look at old Royal Unibrew from before we made the acquisitions in, in Norway, Sweden, that gave us different types of businesses. Those businesses are clearly, if you just take out the inflation, impact on the top line, close to 20%. For us, it's extremely important that, that we continue to have a target that is high margin, because it gives us a lot of robustness, and high cash generative, businesses. We've acquired some businesses that are different in nature from what we've had before, where there's more trading business.
They have an extremely high ROIC, the invested capital is very low on, on these businesses. That, of course, makes the target slightly more, more demanding. I would say, I think that the philosophy for Royal Unibrew to be a high margin business is still ingrained in the businesses that were high, high margin before, are still high margin. We haven't changed the way we run these businesses. We've put a big stretch on ourself in terms of the new acquisitions that we bought with low margins, and to get them back to up to 20%, that is a, that is a, a high task. Of course, it's something that we are aiming to do because we believe that high margins is important.
Of course, it is a, it is a demanding task with, when we dilute, the margins with many acquisitions.
With that, Richard?
Excuse me, Richard, do you have any further questions?
No, no, that's fine for me. Thank you, thank you.
Thank you. Now we're going to take our next question. Just give us a moment. The next question comes from line of Thomas Lennart Pedersen from Nordea. Your line is open. Please ask your question.
Thank you. Good morning, everyone. Two questions from my side. Regarding the international division, you're saying here that the markets in Africa stabilized. Can you maybe expand a bit on what exactly you mean by stabilized and perhaps the run rate into Q3 here, how is that doing? The second question is on the integrations, especially Norway and Canada, if you can also please give an update on how they are performing and maybe an updated timeline here also. Thank you. That's my questions.
Thank you, Thomas. Yeah, on the international side, we have of course, in Africa, I would say we have enjoyed, I don't know, almost say five years in a row without having any larger turmoil in the region. We have had three markets, three of our big markets being hit simultaneously. What we do see is that some of that seems to be stabilizing. That's mostly the political scenery. That means that, you know, on the coups that have been tried, or still in, still relevant, in the countries, that the situation around those have stabilized, and that means that we can start to sell again in the markets.
The 1st month where we have seen sales-out numbers from our partners seems to be in line with what we did last year at the same time. It's still, of course, a vulnerable situation. I think what we will still struggle with is a lack of ethics and a depreciation of local currencies. There are some of the markets that will be with higher fluctuations than we normally have. If we look at our top two markets, those seems to be back on last year's levels going into Q3. When it comes to integration, in particular, you said on Norway and timeline.
Our timeline, the most important timeline that we're working on, for Norway is the implementation of SAP. We still foresee that that will happen with an implementation during next year. If we don't hit it, I would say, for April, we will do it after the season because we don't want to have any, any interference from IT-wise during a high season. I think the likelihood is probably that we would, that we would do it just after the season and thereby be live, some way, early autumn or so. That's the biggest piece of the Norwegian integration. The rest is on track. Also, the IT is on track, but the rest is on track compared to what we expected.
On Canada, we are on plan. That means that we are, we are now migrating the biggest region in Canada, Ontario, into local production. So we're doing that as we speak now, and that means that we would, we would lose destocking short term, because the local liquor board, they are selling all of the old SKUs out before that they stock up with the new ones. So, you know, there will be some months of fluctuations, but sales out is solid. Then we will start harvesting all the logistics synergies and the commercial synergies thereafter, from, I would say, late, late Q4 and then into next year.
The, the full, full year effects of, of the Toronto insourcing will be from the 1st of January, to be realistic from, from a bottom-line perspective. So that's on, on track.
Perfect. Thank you very much.
Thank you. Dear participants, as a reminder, if you wish to ask a question, please, please slowly press star one one on your telephone keypad and wait for your name to be announced. Now we're going to take our next question. The next question comes from line of Søren Samsøe from SEB. Your line is open. Please ask your question.
Yes, good morning, guys. Just a follow-up question on the Hansa Borg acquisition. There doesn't seem to be any earnings contribution in first half, as we talked about earlier. Could you maybe say... I mean, this is pretty far from the DKK 210 million normalized EBITDA contribution you guided when you made the acquisition. Could you try to quantify how many integration costs you have taken on this in the first half, and if that would be a similar, similar amount in the second half of the year? Also, you know, what other differences there could be in Norway in the second half versus first half?
Then finally, if you can, maybe talk a little bit more about the, the synergies we can expect to come in, from this acquisition. Thank you.
Yeah, Søren , so, so I think that priority number one, two, and three in Norway is about pricing. It's all about pricing to make that right. When we get, I would say, the pricing in order, it is, it is much more like a normal business, with, with the earnings that we acquired. So that is what we are working towards, from a, from a commercial perspective. Then, and then, thereafter, we are trying to, to get some of the Royal Unibrew thinking on multi-beverage into the business. There's a lot of cross-selling opportunities in, in all channels.
We have launched energy drinks, and, and, if you look at the market share numbers in Norway, even though that is still small, we are the only one, apart from the two big brands in the market, we are the only one that is actually growing from a brand perspective. You know, and that's, call it integration cost. That's the kind of cost that you would, that you would foresee here. There's nothing, you know, big in the first half or in the second half here. It's, it's, yeah, I would call it normal course of business. It's not something that you should, you should think about. What you should focus on in, in, in your thinking around Norway, that's about getting pricing right.
That is all what it's about, and then, of course, keeping costs in control so that we are, that we run an efficient machinery.
Oh, okay. Okay, we shouldn't expect a big delta in the second half, is what you're saying. Then, in terms of the financial expenses, you guided for 2023 yesterday, also, we have some acquisitions coming in. Could you maybe give us a little bit of guidance on 2024? What will be the all-in interest rate, once the acquisitions are included? Also, how much of your debt currently is variable versus fixed?
Will you take, the interest question, Lars?
Yeah. We have hedged a part of our debt at the beginning of this year, and it's clear that the share of our debt that is hedged, of course, goes down as we increase our debt with the acquisitions. We have more and more floating as interest costs. The majority of our debt is in Danish krone or euros, and we pay market standard rates on that.
I would say the interest cost will go up for us in as long as the short-term interest rate goes up and as our debt increases in the remainder of the year due to Vrumona and the Italian acquisition. And of course, the interest cost for next year is you can add you can add a normal margin to the. If you look at the additional debt we will get next year, you can add a normal margin on top of a euro interest cost, and then you'll get the effect from that.
Okay, thanks. Then finally, a question on the working capital, the positive changes on working capital in first half. Maybe just give us a little bit more color on that, so we know sort of what to expect for, for the second half working capital development. Thank you.
I think the working capital seasonality follows our normal patterns. If you think about last year, we had some big moving parts in our working capital due to the big cost inflation that we saw. There was some moving parts in there. If you look at the full year of 2023, you should expect a normal pattern. If you go back to the patterns that you saw before, before the inflation hit us. We don't expect that there will be a massive impact on the full year in terms of working capital. We had very high inventory as we went into 2023, and of course, it would be nice to get that a little bit down.
On the other hand, we have capacity constraints in our system right now, so we need to build some inventory for the high season. Do expect the normal patterns. There are no significant movements in terms of payment terms to either suppliers or customers.
Okay. Thank you very much.
Thank you. Dear speakers, there are no further questions, and I would now, I would now like to hand the conference over to our speakers today for any closing remarks.
I'd like to thank you all for your participation and, and good questions, and we look forward to, continue the discussion after this call. Have a nice day.