Good day, and thank you for standing by. Welcome to the Scandinavian Tobacco Group full year results 2021 conference call. Well, at this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. Now I'd like to hand the conference over to Mr. Torben Sand, Head of Investor Relations of Scandinavian Tobacco Group. Thank you. Please go ahead, sir.
Good morning and welcome everybody to this fourth quarter and full year 2021 conference call of the Scandinavian Tobacco Group. Please turn to the next page. As said, my name is Torben Sand. I'm Head of Investor Relations, and I'm, as usually, joined by our CEO, Niels Frederiksen, and our CFO, Marianne Rørslev Bock. The agenda for this webcasted conference call is the highlights for the full year and the fourth quarter of 2021. Then we'll give an update on sustainability, regulation, and the ERP project One Process. We'll give an overview of the performance in our three commercial divisions, and then we'll turn to key financial developments for the group, including an update on capital allocation.
Finally, we will give you some flavor on the guidance for 2022, and as always, we will have a Q&A session at the end. Before we start, I'll ask that you all pay attention to our disclaimer on forward-looking statements in the back of this slide presentation. With this, please turn to slide number three, and I'll leave the word to Niels.
Thank you, Torben, and a warm welcome and good morning to everyone on the call. For the full year 2021, Scandinavian Tobacco Group delivered a particularly strong financial performance in line with the guidance communicated in August and reiterated in November last year. The results were well above the original guidance from March last year of an organic EBITDA growth of more than 7% and a free cash flow before acquisitions of more than DKK 1 billion. Therefore, allow me to conclude that 2021 has been another good year for the Scandinavian Tobacco Group, and for the second year in a row, we've delivered well above our long-term financial ambition of 3%-5% earnings growth, even excluding Agio synergies.
Throughout the year, demand for handmade cigars remained strong, and the favorable market and product mix, which we've mentioned in previous quarters, impacted our results positively. Additionally, synergies relating to the Agio integration delivered about DKK 100 million in additional savings this year. The key financial highlights for the full year of 2021 are net sales increased organically by 4.5% to DKK 8.223 billion. EBITDA before special items was DKK 2.233 billion, an 18.4% organic growth versus last year. Adjusted earnings per share was DKK 14.8, up from DKK 9.8 in 2020. Free cash flow before acquisitions was DKK 1.393 billion, and the return on invested capital improved to 14.5% versus 7.7% in 2020.
Based on the 2021 results and a year-end leverage of 1.5x , we propose an ordinary dividend of DKK 7.5 per share, and we intend to increase share buybacks in a new program of up to DKK 700 million. On the back of this overview, before I will let Marianne present the 2021 performance by division, I would like to give you an update on our sustainability commitments and the latest regulatory developments. Marianne will also give you an update on our ongoing ERP project. Please turn to slide five. In 2019, we made a decision to reboot and lift our sustainability work. Since then, we have worked diligently to define our ambitions in this area and how we can accelerate the integration of sustainability into our business.
We continue to make solid and steady progress in 2021 across all our four focus areas, which are people and communities, planet, ethics, and governance. We have now either launched new activities or we are reviewing existing ones to ensure we have the policies, metrics, and where necessary, targets in place to deliver impact for our material stakeholders. An important milestone in 2021 was the first group-wide measurement of our energy consumptions and CO2 equivalent footprint for 2020 and 2021 expressed as scope 1 and 2 emissions. As we said on our Capital Markets Day in London in November last year, we will present a new and upgraded sustainability strategy in the first half of 2022.
As part of getting this new strategy well underway, we are committing between DKK 10 million and DKK 20 million in 2022 to ramp up our sustainability initiatives, and we look forward to come back and explain our new ambitions. Please move to the next slide. Let me now turn to an update on regulation. I have previously explained that Scandinavian Tobacco Group has extensive experience in dealing with and adapting to new regulation, and often our core categories are treated more lenient than cigarettes. Further, our success to date within this area is based on an in-depth understanding of new potential regulation and a strong track record of being able to navigate both the supply chain challenges that follow from new regulation, but also the changes needed to be able to keep delivering relevant consumer propositions. Regulation pose a challenge, but it also represents an opportunity.
Every new piece of legislation makes life more difficult for our smaller competitors, and we've seen over the years that new regulation can prompt a decision to exit the industry and sell the company. In Europe, the two major pieces of legislation related to Scandinavian Tobacco Group are the Excise Tax Directive and the Tobacco Products Directive. Both remain in process. The Excise Tax Directive relating to potential revisions on the tax differential between the tobacco categories, potentially renewed minimum excise duty rates, and taxation of new product categories remains on track. The release of proposed changes is expected during the second quarter of this year. The Tobacco Products Directive is relevant to STG in relation to a potential ban on characterizing flavors for our product categories and certain ingredients, as well as potential EU introduction of plain packaging for some product categories.
Here, the formal proposal for changes are now only expected by the end of 2024 or early 2025, where the previous expectations was sometime in early 2023. I would also like to mention the Packaging and Packaging Waste Directive, which is up for a revision in the course of 2022 and 2023. This directive is not tobacco specific, but it could impact our products in relation to plastics use, recycling, and the like. Together with the Single-Use Plastics Directive, the two directives aim to reduce and/or eliminate the use of plastics, a task we believe we are prepared to take part of. In the U.S., there's no material news in relation to potential new legislation, but we are expecting some news over the coming quarters around the important potential ban of characterizing flavors in cigars.
Now I will leave the word to Marianne for an update on the ERP project, One Process. Please move to the next slide.
Thank you, Niels. Let me just start by excusing that my voice sounds like I had a very joyful evening yesterday, which is not the case. It is simply just an old-fashioned cold. Let me first take a step back. In 2020, as part of the modernization and professionalization of the company, we made the decision to invest significantly in updating the group's enterprise resource planning, ERP system. The project is called One Process, and by 2024-2025, our current 12 different ERP legacy systems will be exchanged by one new global ERP system, which will strengthen our ability to deliver continued growth and profitability. The implementation of the new ERP system is progressing as planned. At the end of 2021, the clarification phase was completed.
The clarification phase made it clear that we needed to expand the scope, but also that we needed significantly more internal and more experienced resources to ensure a successful implementation. This resulted in a revised investment forecast, and the total cost associated with One Process is now expected to reach DKK 600 million-DKK 700 million, versus previously DKK 280 million-DKK 340 million. In addition, the clarification phase also helped to identify annual benefits from One Process, estimated at DKK 150 million-DKK 250 million when fully implemented in 2025. I will now turn to the focus to our three commercial divisions. Next slide. I will start the overview with our 2021 divisional performance with Europe Branded. Net sales for the full year 2021 decreased by 3% to DKK 2,735,000,000 .
Organic growth was negative by 3%, with a termination of a distribution agreement impacting growth negatively by almost 2%. Gross profit before special items decreased by 7% to DKK 1,501,000,000 , and the gross margin was 54.9% versus 49.6% last year. EBITDA before special items was DKK 754 million, with an EBITDA margin of 27.6% versus 20.6% last year. The margin improvement was driven by price and mix, savings from the integration of Agio Cigars, the termination of the distribution agreement, and a DKK 62 million fair value adjustment of inventories impacting negatively in the first half of 2020. For the full year 2021, the market share index was 32.2% versus 33% in the full year of 2020.
Our assessment is that it is primarily driven by the supply issues that we have experienced in the second half of 2021, where the market share index declined to 31.5% in the fourth quarter. For the quarter, net sales decreased by 2% to DKK 699 million, explained by a negative organic net sales growth of 2% and EBITDA before special items increased by 10% to DKK 171 million, with an EBITDA margin before special items of 24.4% versus 21.9% last year. The increase in margin was driven by pricing and mix, savings in relation to the integration of Agio Cigars and termination of the mentioned low margin distribution agreement. Please turn to the next slide.
Looking ahead, we are seeing, as we also communicated on the Capital Markets Day in November, a structural decline rate in machine-rolled cigars volumes going at about -3% versus previously -3% to -5%. Additionally, remaining benefits from the integration of Agio Cigars of about DKK 50 million, simplification initiatives and price increases are expected to support long-term margin expansion in the division. In a five-year perspective from 2020 to 2025, Europe Branded is expected to deliver organic net sales growth below group average, though still slightly positive, and a margin expansion above the group average. With this, please turn to slide 11. If we turn our attention to the performance in our North America Online and Retail division, net sales for the full year 2021 decreased by 2% to DKK 2,620,000,000 , with an organic growth being positive by 2%.
Gross profit before special items decreased by 2% to DKK 1,050,000,000 , and the gross margin was 40.1% versus 40.4% last year. EBITDA before special items decreased to DKK 470 million, with an EBITDA margin of 17.9% versus 19.4% last year. For the quarter, net sales increased by 3% to DKK 658 million, composed of a 1% negative organic net sales growth and an exchange rate effect of 4%. The organic development was driven by a negative contribution in the online channel, partly being offset by strong growth in our retail superstores. EBITDA before special items decreased by 7% to DKK 125 million, with an EBITDA margin before special items of 19.1% versus 21.1% last year.
The margin development is driven by a higher sales-related cost and an increase in promotional spending versus an unusually low spend in the second half of 2020 and the retail expansion. Please turn to the next slide. Going forward, we believe that the division will continue to benefit from the increase in consumption of handmade cigars in the U.S. since the outbreak of the COVID-19 pandemic. We believe current demand is sustainable and the category will return to the long-term volume trend at around -1% from this higher base. Growth in North America Online & Retail will come from investments in consumer insights and the expansion of the brick-and-mortar retail channel. We remain confident that a substantial part of the active online customers acquired through the pandemic can be retained, and we continue to add superstores to our retail network.
Our seventh store is planned to open in San Antonio, Texas, in the beginning of the second quarter, and we plan to open another six to eight cigar superstores in the U.S. in the coming two to three years. In a five-year perspective from 2020 to 2025, North America Online & Retail is expected to deliver organic net sales growth above group average and a margin expansion which will be positive through, though below the group average margin expansion. I will now turn to the last of our divisions, the North America Branded & Rest of World. Please turn the slide. For the full year of 2021, net sales in North America Branded & Rest of World increased by 14% to DKK 2,877,000,000 , and organic growth was positive by 15%.
Gross profit before special items increased by 26% to DKK 1,562,000,000 , and the gross margin was 54.3% versus 49.1% last year. This was driven by market and product mix and price increases. EBITDA before special items was DKK 1,135,000,000 , with an EBITDA margin of 39.5% versus 32.2% last year. This was driven by gross margin development, cost improvements, and a DKK 31 million refund of certain duty and excise taxes in the U.S. In the fourth quarter of 2021, net sales in the division increased by 15% to DKK 656 million, composed of a 10% positive organic net sales growth and a positive exchange rate effect of 4%.
The organic development was driven by an increase in the volumes of handmade cigars in international markets, machine-rolled cigars in U.S., as well as in the product category accessories and contract manufacturing. EBITDA before special items increased by 68% to DKK 215 million, with an EBITDA margin before special items of 32.9% versus 22.4% last year. The margin improvement was realized with improved gross margin driven by market and product mix, and a relatively easy comparison with the fourth quarter of 2020. Please turn to the next slide. As already mentioned, we expect consumption of handmade cigars in the U.S. to stabilize at its 2021 level. Based on this and strategic initiatives like the launch of the Forged Cigar Company, pricing key increases and other, we expect handmade cigars to deliver positive organic net sales growth for the division going forward.
We also expect the positive mix impact experienced in 2021, primarily driven by smoking tobacco in U.S. and Norway, to normalize and thus contribute negatively to the growth in 2022. In a five-year perspective from 2020 to 2025, North America Branded and Rest of the World is expected to deliver both organic net sales growth and margin expansion in line with the group average. Now please turn to slide 16. I will now turn the attention from the divisions to the group level, and I will primarily talk about the full year developments. In the slide deck and in the company announcement we released in addition to the annual report, you can find more details on our fourth quarter development. In the full year 2021, net sales increased by 2.2% to DKK 8,233,000,000 .
Gross profit before special items increased by 10.8%, and EBITDA before special items increased by 22.3% to DKK 2,233,000,000 . Organic growth in net sales was 4.5%, and organic EBITDA growth was 18.4%. As I mentioned in the divisional update, both North America Branded and Rest of World, as well as North America Online and Retail, delivered positive organic net sales growth, whereas Europe Branded delivered negative growth in 2021. For the group, the increase in gross profit was driven by the organic growth in net sales and a 3.6% improvement of gross margin from 46.4% to 50%.
The margin improvement was partly driven by a fair value adjustment which impacted 2020 results negatively by DKK 62 million, but the margin improvement was also driven by mix and pricing. The OpEx ratio declined from 23.6% in 2020 to 23.2% in 2021, primarily driven by savings from the integration of Agio Cigars, but also general efficiency improvements across the business operation. All in all, this resulted in the 18.4% organic EBITDA growth for the year and an EBITDA margin before special items, which improved from 22.8% in 2020 to 27.1% in 2021, the highest ever EBITDA margin in the group history. Let me now give you some more details on special items.
In total, special items was negative by DKK 55 million, which was lower than the DKK 90 million we communicated in relation to the third quarter results in November. The difference relates primarily to a reversal of previously recognized impairment of buildings and machinery. The total special items for the year include DKK 22 million in relation to the integration of Agio Cigars and DKK 19 million for the ERP project One Process. A full detailed overview of the special items is available in the annual report. Net profit for the year more than doubled versus 2020 and came in at DKK 1,391,000,000 , which also is the best result ever in the history of Scandinavian Tobacco Group.
Finally, adjusted earnings per share was DKK 14.8 per share, compared with DKK 9.8 per share, equal to an increase of 51%, and the free cash flow before acquisition was unchanged versus last year at DKK 1.4 billion. The cash flow development includes an almost zero impact from working capital compared to a positive impact in 2020 of DKK 294 million and somewhat higher investment, both offsetting the positive impact from operating results. With this, please turn to the next slide. During 2021, the net interest-bearing debt decreased by DKK 8 million to DKK 3,266,000,000 . For the fourth quarter, the net interest-bearing debt decreased by DKK 94 million. The unchanged net debt for the full year is attributable to our capital distributions of more than DKK 1.2 billion, which I'll come back to in a minute.
The leverage ratio declined to 1.5x by the end of 2021, compared to 1.8x at the end of 2020. The decline is driven by the increase in EBITDA, with the net debt, as mentioned, almost on par with the end of last year. With this, please turn to the next slide. I will now give you an update on our capital distributions, starting with the dividend payments. As you probably already are aware, our shareholder return policy aim at delivering an annual growth in ordinary dividend payments and to pay out any excess cash capital to shareholders, either in the form of special dividends and/or share buybacks.
At the upcoming annual general meeting on March 31st, the board of directors will propose a 15% increase in the ordinary dividend from 21% to DKK 7 .5 per share, versus DKK 6.5 per share in 2020. Due to the share buyback programs we have conducted since September 2020, the company today own 5.2 million shares on top of the 2.5 million shares that was canceled in April last year. Considering the company's own share, the actual dividend payment in danish krone will increase approximately 10% to around DKK 700 million. Please turn to the next slide. As said, in addition to the dividend payout, the company has since September 2020 launched two share buyback programs.
The first was a DKK 300 million program that was completed February last year, and the second was a DKK 600 million program that was completed by the end of February 2022. In the diagram, there is a split between ordinary dividends, special dividends, and share buybacks since 2016. In 2021, we distributed almost DKK 1.2 billion to our shareholders, more or less equally split between dividends and share buybacks, and comprising a 55% increase in capital allocation versus 2020. Since 2016, we have distributed in total DKK 5.4 billion to our shareholders if we include share buybacks year to date in 2020 and the upcoming proposed ordinary dividend payment in 2021.
In relation to the results release, we have also communicated that the board of directors yesterday approved the new share buyback program with a total value of up to DKK 700 million. The level of this program is fully supported by our guidance for 2020 and the current low leverage ratios of about 1.5x . Now please turn to slide 21, and I will now leave the word back to Niels for more details on our financial guidance for 2022.
Thank you, Marianne. Now, even on the backdrop of the past two years' exceptionally strong performance, and despite current uncertainties related to consumer behavior, to cost developments, supply chain stability, as well as the geopolitical tension with Russia, we expect to deliver continued growth in 2022. As mentioned earlier, consumption of handmade cigars in the U.S. is expected to stabilize at the level of the end of 2021. Furthermore, consumer behavior across our product categories and markets has started to normalize as COVID-19 restrictions, as well as travel and border restrictions are being removed. As we get further into the year, we expect market visibility to improve further, even though Russia's invasion of Ukraine and the geopolitical tension in the area are negatively impacting the visibility for the financial performance of the full year.
We also expect that additional price adjustments will compensate for cost inflation and the disruptions in our supply chain will be fully resolved in Q2 2022. Given these considerations, our guidance for 2022 is an organic growth in EBITDA in the range of 0%-6%, free cash flow before acquisitions in the range of DKK 1.1 billion-DKK 1.4 billion, and an adjusted earnings per share increase over 5%. The organic EBITDA growth expectation includes the full year impacts of synergies from the integration of Agio Cigars of approximately DKK 50 million and an increase in operating costs relating to the ramp up of our sustainability initiatives at the level of DKK 10 million-DKK 20 million, increased cybersecurity initiatives, as well as the normalization of certain costs that have been lower during the COVID-19 period.
The development in organic EBITDA growth also reflects the absence of other income from the refund of certain duty and excise taxes of DKK 31 million, which was realized in 2021. The guidance also includes the potential loss of net sales and profits from Russia and Ukraine crisis, where we've stopped all trading with Russia as per last week. Based on the projected earnings growth, we expect the group's free cash flow before acquisitions to be in the range of DKK 1.1 billion-DKK 1.4 billion. The free cash flow before acquisitions is expected to be impacted by investments in the retail expansion in the U.S. and the ERP project One Process. Also by a negative impact from working capital of around DKK 100 million and a negative impact from special items of around DKK 200 million.
The adjusted earnings per share is expected to increase by more than 5% from DKK 14.8 in 2021, including a positive impact from the share repurchases of around DKK 1 per share and a marginal positive impact from currency developments. This concludes our presentation for today's call, and I'll hand the word back to the operator, and we are ready to take questions.
Thank you. As a reminder, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to withdraw your request, please press the pound or hash key. Once again, it's star one for questions. Our first question comes from the line of Niklas Ekman from Carnegie. Please go ahead.
Thank you. Yes, a couple of questions, if I may. Firstly, you mentioned here at the end, you had some minor exposure to Russia. What is that total exposure if you look at the Russia, Belarus and Ukraine? What is the magnitude of that exposure?
Marianne, will you take-
Do you have more questions?
Okay.
Yeah. I was just thinking if Niklas has more questions, we might note them down, or Niklas, and then take them.
Okay. Yeah. I can give you all my questions. The second question is on kind of the same topic. Do you expect any kind of impact to your consumption based on the massive increase in cost inflation that many consumers are facing? I expect this should be less of an issue for you, but still interested to hear your take. Third question is on the ERP investments here that you mentioned, DKK 600 million-DKK 700 million, a doubling from your previous expectations. My question is if that is new information. I can't find this in the Q4 results statement. I can't seem to find it from this indeed. I was wondering if this is new communication here from the presentation today.
A fourth question is on the excise tax directive that you mentioned. What kind of outcome are you expecting from that? Is there anything that you think could have any material impact on your products? Thank you.
Why don't I start out, Niels and Torben. On the Russian exposure, it is a minor exposure that we have in this region, and we have decided to completely withdraw sales into Russia, and that is incorporated in the guidance that we have given today. I will not give specific numbers on the sales to Russia, but a minor effect on the total group. On the impact on consumptions in relation to cost inflation, I think the way to answer this, and Niels can probably complement, but we have seen we are in categories and in the business that have shown resilience to both crisis but also recession. Can there be an impact? Yes.
We do believe that we have a strong resilience. On the ERP system, yes, this is new information. We have been working hard during 2021, and especially in the Q4, on clarifying how will we become most successful in this implementation. Here we have realized that both to realize the benefit case, but also to become successful, we needed to expand the scope, but also we needed more FTEs and more skilled FTEs to work on this. I can come back to more details if needed later. On the excise tax directive, I will turn that back to Niels.
Yeah.
Just before that, just Niklas, for your attention, we have put this into both the Q4 document on page five and also in the annual report on page 12. There you will find these numbers that Marianne has talked about.
Perfect. Thank you.
Yes. On the Excise Tax Directive, you know, the main subject that we follow is the tax differential across the categories, which is the most important thing to us. Based on what we know of what is likely to come forward, and of course, we don't know the exact wording of what will come out, we are not expecting this to have any material impact. Again, let me emphasize, we of course do not know the final proposal, but that's how we look at it today.
Fair enough. Thank you so much for taking my questions.
You're welcome.
Thank you. Our next question comes from Gaurav Jain from Barclays. Please ask your question.
Hi. Good morning. Thank you. You know, clearly macro is very uncertain, so I just wanted to get your thoughts on, you know, what has been your experience in prior cycles. Number one, if there is a recession, let's say in Q, like, what was your experience in the last cycle? And second, if there is a high inflation environment in the U.S., then do you think you can increase prices at a rate which is higher than headline inflation figures, which I think it, y our pricing has been running at 2%-3% in handmade cigar, so can it go up to like 7%-8%?
Let me say it was very difficult to hear your question, but my understanding is that your question is primarily again around the, let's call it cost pressure and the inflation pressure also in with respect to the U.S. Again, I would say that, you know, we are of course monitoring the various sources of cost and inflation pressure. We are trying to be on the forefront when it comes to price increases. Now, as Marianne said, our industry has proven quite resilient, both because our consumers are used to regular price increases, either driven by the manufacturers like ourselves or by excises.
What we see is that this seldom leads to total market changes, but it could potentially lead to up or down trading depending on whether we are in a positive or negative cycle. That is one of the things that we are monitoring.
Sure. My first question was just on like, let's say if we have a minor recession in the EU because of all the oil and gas price increases, what was your experience last time? Like, do your cigar volumes, cigarillo volumes, do they weaken a lot or a little bit?
Yes. We are, as Marianne said, in many ways, recession resilient. We are way more sensitive to dramatic changes to regulation or dramatic changes to excises. Again, you can say recession is not good for anyone, but it generally does not impact our category too much. It is mostly in the, let's say, decisions consumers make between, you know, the price of what they consume, or switching to another category, like between a cigarette down to a fine cut product, for example.
Sure. Okay. That's very helpful. My second question is on the EPS guidance. That greater than 5% EPS growth number, that is at a 0% EBITDA growth. Is that the way to read it? If you are coming at a 6% EBITDA growth, then your EPS will then be more than 10%.
Let me answer that.
Yeah, I think that's.
Oh, you go, Torben. You go.
No, I think that's absolutely correct. Of course, due to the dynamics of the P&L, a 6% EBITDA growth for sure will get us into the higher and double-digit level of earnings per share growth. I don't know if you would add more, Marianne, to that.
No, you're absolutely right.
If I were to then look at, let's say, next two-three-year view. This year, I could argue that all of the EBITDA growth is coming from the synergies which are left from the Agio integration . Once that has run the course, you know, this year, what will drive the growth in EBITDA post FY 2022?
Let me start by saying that, you know, I actually consider 2022 as a year where we are significantly increasing our investment in the future. You know, we are putting more than DKK 100 million into retail stores in the U.S. We are investing a significant amount of money in One Process which will help us drive efficiency over time. We are very active on the digitalization agenda with both new initiatives in B2B and B2C. The investments also go into sustainability and into the growth incubator. Last year, we launched, let's call it our first test product out of the growth incubator in the form of this hemp product in the U.S. In 2022, I'm very confident that you will see more things coming from the growth incubator.
These are also things that will support both the top line and eventually the bottom line. From a perspective of investments, this is a significant year for us. If you then take a step back and look at where will growth come from, I think that as we highlighted also on the Capital Markets Day, the divisions play different roles. We see more growth opportunities coming out of North America Online and Retail and more out of North America Branded, especially the handmade side. We see Europe Branded contributing primarily on the earnings side.
Maybe also, Gaurav Jain, you should remember to look at least for the underlying comparison, this refund of duty and excise taxes that we had as a positive in 2021. Basically we are starting DKK 31 million behind the 0% curve. That at least is also a consideration to look into.
Thanks a lot for that. All the best.
Thank you. Next is follow-up question from the line of Niklas Ekman from Carnegie. Please go ahead.
Thank you. Just a quick follow-up. Just noting that your dividend and buybacks in total are equivalent to the very upper end of your cash flow guidance. Does that mean that you, I mean, I recognize that your net debt is at a relatively low level now, but does that mean that you're not expecting to make any material M&A during 2022? Or how do you look at M&A short term?
We think that we carry with the current, let's say, capital return policy and the earnings level we have today, we carry significant M&A capacity still. Remember that most of the transactions in our industry is not going to be super expensive compared to our earnings levels today. Also, with the share buyback, we always have the opportunity to pause it if we end up in a situation where we need more capital. I feel that we are in a strong position from a balance sheet perspective on M&As.
I think it's also important to remember how fast we deleveraged after the acquisition of Agio Cigars.
Very good point. Thank you. Thank you so much.
Thank you. Just a reminder, if you wish to ask a question, please press dial one on your telephone. Once again, if you wish to ask a question, please press dial one now. There are no further questions. I'll turn the call back to the presenters for closing remarks.
Yes. Well, from my side, thank you for participating and thank you for the questions that were being asked. I'll just wish everyone a continued good day.
Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.