Okay, it's 11:00 A.M., so let's get started. Good morning, and a warm welcome to this presentation of Anora's Q2 results. My name is Milena Häggström. I'm the Head of Investor Relations here at Anora. Our presenters today are our CEO, Jacek Pastuszka, and our new CFO, Stein Eriksen. Please join us in welcoming Stein to Anora. After these presentations, we will start with the Q&A session, and you can also post your questions through the chat throughout the call. Please remember that this call will be recorded and published later today on our website, anora.com. Now, Jacek, please go ahead.
Thank you very much. Thank you. Thank you, Milena. Warm welcome to everybody on the call. I hope you had a good vacation period, and obviously, also warm welcome to Stein, our new CFO. The flow of the call will be exactly the same as we have had before. I will start with some general update on the business, also going through some of the key numbers, especially on the P&L side of the business. And then Stein will take over for more details, and also a deeper dive into the balance sheet and cash elements. And obviously, we'll conclude the call with questions. Let me start with the general business overview then.
I believe the company is staying firmly on the course of the value-enhancing agenda that we have communicated around three quarters ago. To a large extent, in reaction to our poor performance in 2023 and the hard landing after COVID windfall, this value-enhancing agenda has two major elements. I will remind us. I will mention again these two elements, and then we will get to specifically how we perform on these items in the flow of the discussion, so the first element is improving overall profitability of the business, and the big part of it is improving the marginality of our wine and spirits beverage business.
The second element is strengthening our balance sheet, so all the elements related to it, like improving our cash position, reducing net working capital, reducing our debt. These are the two building blocks of the agenda that is guiding us so far this year, and will continue guiding us for the balance of the year. We are still talking small quarters. Q2 is a little bit larger for us, obviously, than Q1, but you are well aware that the big quarters are still ahead of us. If I were to compare Q2 versus Q1, there are a few positives or the things that we have managed to maintain, and one thing on the less positive side that we didn't manage to turn around or to address so far.
On the positive side, now, first and foremost, we have managed to sustain double-digit EBITDA growth versus previous period. We are now, or in Q2, we were plus 17% versus Q2 of 2023. What we have also managed to sustain is the gross margins on our beverage, wine, and spirits business. For the total company, gross margin, as you can see, is 42.3%. A very significant 350 basis points improvement versus the same quarter of last year, and this is very much driven by the margin improvement, margin enhancement on the wine and spirits beverage business. The third important element for us is that we have managed to reduce the net revenue gap to last year.
This net revenue gap versus previous period was quite sizable in the first quarter. We spent quite a lot of time in our previous call discussing it. If I recall right, it was minus 8%. Now it is reduced. For Q2, this gap was minus 3%, to be specific. But even more importantly, all of this decline versus previous period came from the industrial segment net sales. The combined wine and spirit segment was slightly up or maybe firmly flat versus Q2 of 2023. I will talk about the details behind this net revenue development later in the presentation.
And then the fourth thing that I think we have successfully managed to extend into this quarter from the first quarter is the continuing improvement in our net debt leverage ratio. Our cash position continues to be very solid, and our debt continues to go down, so that's on the positive side. On not so positive side, what we did not manage to do in this short period of time is to fully address the industrial underperformance. It is a drag on our financial performance so far this year. I will talk both about the reasons and the plans for the future later in the call. So that. Sorry for that. So that much for the description of Q2 in comparison to Q1.
There is one big commercial event that took place in the quarter, and I will be talking more about this event later in the call, and it's obviously the 8% wine introduction in Finland. It's this event is still at the early stage, so it's quite inconclusive in terms of its long-term impact on the monopoly market, generally, the alcohol and wine market in Finland. It is also from the financial point of view and underlying impact on performance, it is of a bit of a double-edged sword. On the one hand, it provides us with the opportunity to drive net revenue at admittedly lower marginality, but net revenue in a new channel for us.
On the other hand, the impact it has on the reduced footfall in the alcohol monopoly in Finland is still to be seen. But we are expecting that it may have some impact down the road. I will talk about it more in a second. So to again, to summarize the key numbers for the quarter: net revenue down 3% versus the same quarter last year, solely only due to the industrial segment dropping quite significantly versus this period. And the combined wine and spirits beverage business was slightly up. To be precise, it was up by 0.4 percentage point. Gross margin at 42.3%, plus 350 basis points versus Q2 2023. One-third of this improvement comes from lower raw material prices.
Two-thirds come from our efforts to drive pricing and improve mix of our portfolio. EBITDA margin at 8.6%, so plus 150 basis points versus Q2. So we retain almost half of the gross margin gains in the bottom line, which I believe is a good conversion. And then comparable EBITDA plus 17% with strong contribution from both wine and spirits. What is important for us is that both cylinders of this beverage engine are performing well right now, which was not the case in 2023. Which takes us to the first of this engine, wine. Let's provide some more detail about our wine business. It was a strong, maybe even excellent quarter for wine.
Obviously, we all keep in mind that the comparable numbers were very weak. The second and third quarter of last year were weak in the company in general, but wine specifically. But it doesn't take away anything from the fact that in the first half of last year, the EBITDA from this whole wine segment was at zero. Today we are at around EUR 7 million in EBITDA for the first half of the year. As you can see, we see slight growth, almost 1% growth in net revenue. There are many factors to it, however, I would like to again mention this 8% wine introduction in Finland, which obviously created a bit of a pipeline filling before the actual sales started.
I would not go into detail of how much of this pipeline filling how much it accounts for, specifically, but we would not be able to deliver this small slight growth in net revenue if it wasn't for the contribution from this from this 8% initiative in grocery. Also, I need to mention that in the beginning of the quarter, there was some disturbances on the logistics side in Sweden. Luckily, we were both in stock and able to deliver, which obviously also provided a bit of a windfall at the beginning of the quarter for us, specifically in Sweden. All in all, a very favorable months for wine, including the net revenue.
We just need to keep in mind this bit extraordinary circumstances in which it was delivered. What is remarkable also for wine is the significant margin enhancement, plus 490 basis points, leading to a 21% swing or growth in gross profit in absolute terms, and EUR 4.4 million in EBITDA. Last year, we were losing money in the wine segment. This year, we earned at EBITDA level EUR 4.4 million. There are four big factors that led to it. The first one is obviously price increases. Secondly, mix management.
As I said many times, in these calls, we are actively working to increase share of, margin accretive businesses in our portfolio, which obviously puts some pressure on the, on the top line and the volume especially, but bring positive results for the bottom line. Then the third factor that helped the wine profitability is, obviously the synergies, the wine sourcing synergies, that started materializing after Globus Wine acquisition in Denmark, and consolidating our purchases for the total wine business. And then also the commercial vigilance that I believe the company has demonstrated in taking advantage of the emerging opportunities, like the 8% wine in Finland.
Those of you who followed these discussions, you know that it took a little bit more time to get enacted than we originally expected, but we kept our preparations at a high level, and we benefited from it. I believe we captured more than 40% of the market share. That's the initial sales, as reported by the two big retailers in Finland.
We also managed to largely avoid out-of-stocks, or we managed to avoid them better than our competitors in the first weeks and months of this initiative, which was challenging given the fact that the implementation of this new law was a bit delayed, but also because the initial sales were slightly higher than the original forecasts by the retailers, and also what is important for us is that the quality of the 8% wines that we provided to the Finnish grocery was assessed highly by independent wine experts. So all in all, a good quarter for wine. Let's talk about spirits then.
It's also a strong quarter from spirits, which we may be taking for granted, because it's not the first good quarter that the team delivers. However, we need to keep in mind that this is delivered against heavy headwinds, and headwinds, especially in the form of maintaining volume trends, are rather intensifying than subsiding. So, it's a tough environment, challenging environment from the top-line point of view, requiring lots of skill on the pricing and mix management side. This decline of volumes in monopolies accelerated in the second quarter. It's especially visible in Finland and Norway.
Sweden is a bit more resilient, whereas in Denmark, which is also an important spirits market for us, we see a little bit more down trading than in other places. So it's not only about volume decreasing, but also consumers choosing less expensive trade channels or products. Still, in this environment, as you can see in this chart, we have delivered flat net revenue, overcoming this volume challenges. A combination of pricing, mix management in the same fashion as for wine, so increasing the share of businesses or brands that are margin accretive to our overall result, and then, obviously, new launches, including RTDs, because we are also active on this front, and listing wins on our large brands.
On spirits, we have a very broad portfolio of own brands and our NPD pipeline and innovation pipeline on these brands is broad and is successful. The gross margin plus four hundred and twenty basis points, so a very nice improvement of marginality. On a year-to-date basis is three hundred and forty. EBITDA plus 17% and EBITDA margin plus two hundred and twenty basis points. So very very strong set of numbers from spirits in a very challenging market environment. To talk a little bit about the challenges that we are facing in the outside world.
In Sweden and Norway, we hold shares in declining volumes but grow market share but grow net revenue, so this is a healthy combination. The situation has become a little bit more complicated in Finland recently, as the drop in volume has been more pronounced after the 8% wine introduction in groceries. How permanent this trend will be, it remains to be seen. I would not be too conclusive about this at this stage. And also, it's worth mentioning that the outlook for travel retail is also quite bleak, and we are facing also a change in distributor in Germany, which usually creates some changes in the shipment patterns.
And also we have seen excise duty and VAT increases in the Baltics that seem to have depressed the consumer demand in these markets slightly more than we expected. Again, lots of headwinds in spirits managed bravely and effectively, I believe, and delivering a strong quarter in financial terms. The last point I would like to cover is industrial. You can switch the slide. Thank you very much. Now, as I indicated before, the numbers are not any better in Q2, maybe only slightly better than in Q1.
Profitability is roughly half of where we were last year, which is obviously having some impact on our overall performance, which we did not fully predict at this stage. We know the reasons for this obviously. There is generally less volume in the system, and it's both from own products and some of this volume we rid of intentionally because of low profitability, but also it's lower volumes in contract manufacturing and in side products, where depressed pricing is providing very little incentive to us to drive volume or drive top line.
So all of this creates an environment in which, while we are able to deliver solid gross profit and marginality of this business has also improved, we are not able to deliver the profitability at last year's level simply because our ability to take cost out of the system on a quick time frame is limited. Some of the challenges that we are facing in industrial, which is obviously getting lots of scrutiny recently because of this rather weak performance in the first half of the year. So some of these challenges are either systemic or structural.
First and foremost, we have limited pricing power in relation to most of the side products, or we are limited by the contract stipulations in relation to pricing, also the ones that are linked directly to the barley price. So this one is a double-edged sword as well. And also, as I mentioned before, we have limited potential to take cost out of the system, and under absorption behind the volume decline is quite significant. That much for our financial performance. So to summarize, if we can, or we have Stein now. Yes. So, yes, one more thing that I would like to mention, thank you for reminding me. As you have seen in a separate announcement that we have made, we have change in the leadership of the industrial segment.
Risto Gaggl, who was performing this role since the beginning of the year, decided to step down for personal reasons and continue only till the end of the year. We have appointed an able successor from the internal succession pool for key positions in the company. Hannu Tuominen is taking responsibility for this segment, and as you can see from his resume, he has broad experience, especially on the side of industrial product, contract manufacturing, and generally, fourteen years of history with Anora and with Altia before. So we are welcoming warmly, Hannu. He will take over from the beginning of January in this position. I think that's it that I have prepared.
Obviously, we'll be back to comments, yes, when time comes, and now I would like to hand it over to Stein.
Yes, thank you, Jacek and Milena, for the warm welcome. I'm really glad and excited to be on board and be a part of the future in this great company with such a strong history and heritage. So then let's look at the financials for the second quarter of 2024. And Jacek already mentioned some of it, but just try to repeat. Anora sales in the second quarter declined by 3.1% to EUR 177 million. And as already mentioned, solely due to the decrease then in the industrial net sales, as the combined wine and spirit segment was slightly up. Please also be aware that the impact of exchange rate fluctuations and the estimated Easter effects were not significant on the net sales.
Let's now have a closer look on the composition of the Q2 revenue. If we change the slide, please. If we start with wine, where the net sales increased by 0.8%. The launch of our 8% ABV wine started off very well in Finnish grocery, and resulted in, into leadership, in market leadership in June, like Jacek already mentioned. In spirits, sales was flat. Sweden and Norway delivered sales growth, where net sales, especially in Finland, Baltics, and global travel retail, were down, and as already mentioned, the industrial segment net sales was negatively impacted by lower contract manufacturing volumes, combined with a lower sales price, and please also note that the divestment of Larsen was completed at the end of Q3 last year, and somewhat affecting net sales comparability in Q2 this year versus last year.
If we move on, looking then at the EBITDA, comparable EBITDA was higher than last year and amounted to EUR 15.2 million , compared to EUR 13 million last year, and as you can see from the slide, both wine and spirits improved their profitability in Q2, partly offset by lower results in industrial. The increased profitability was mainly explained by the higher gross margin of 3.5 percentage points related to lower raw material prices, stabilized currencies, as well as price increases, and gross profit increased by 5.5% to EUR 74.8 million . Then also, once again, just highlight the performance of the industrial segment was negatively impacted by lower volume, combined with price erosion.
Moving over to the development of barley prices, that has, during the last couple of years, really and truly affected Anora's result, until it was compensated with the price management and price increases. The barley prices in June was 4% below previous years, previous year's level. However, as you know, the market price of barley significantly fluctuates year by year based on supply and demand, and is considered a major risk as no hedging is used. That being said, price for the rest of the year is forecasted to be stable. Then moving over to cash flow and the balance sheet. The net cash flow from operations ended at EUR -49 million in the first half, and it's very much related then to a normal seasonal increase of working capital.
Last year, Anora significantly expanded its sales of receivables program, and this is the main explanation then for the deviation compared to last year. However, if you look at the seasonal increase of working capital compared to Q4 2023. This was mitigated by further progress on reducing inventories on comparable basis, which in addition to the impact of the Larsen divestiture, resulted in working capital being lower than last year. Also, please note that the receivables sold amounted to EUR 155 million at the end of the reporting period, compared to EUR 126 million last year. OpEx ended at 2.1% of net sales, then allocated mainly to replacement investments and to improve work safety and energy efficiencies. Let's deep dive a little bit more into net working capital.
Despite net working capital at the end of Q2 2024 being at higher level than Q4, due to the seasonal buildup that I already mentioned, you can see that Anora has significantly reduced working capital during the last quarter, both in absolute numbers and in percent of turnover. And compared to Q2 last year, the main explanation for the reduction is the lower inventory, partly related to the Larsen divestiture, but also underlying improvement in the other segments. And net working capital ended at, in Q2, at -EUR 21 million and at -3% of turnover. Then looking at the leverage, the measures then taken on working capital, as well as the EBITDA improvement, has given really good effects on the reduction of leverage ratio that ended at 2.8, significantly below last year of 3.9.
At the end of the quarter, Anora's cash balance was high, and cash and cash equivalents was EUR 141 million, and net debt increased... No, sorry, decreased to EUR 201 million compared to EUR 253 million last year, primarily due to the sale of the Larsen business. We believe that our refinancing facilities more than well cover up our current needs. At the bottom here, you see the maturity structure, excluding lease liability, with EUR 212 million of senior debt and an undrawn revolving credit facility of EUR 150 million, both maturing in December 2026. Moving on to the last slide before giving back the floor to Jacek.
Here are the financial targets until 2030, compared to our recent performance over the past two years on the right-hand side. We are progressing very well on delivering the reduced net debt, and we have delivered EBITDA growth three consecutive quarters in a row. While net sales, as Jacek already mentioned, still somewhat soft, partly related to the weak market growth all over the Nordics. With this, I'm handing back to you, Jacek, for some summary and outlook.
Thank you very much, Stein. Very well done. So very quick summary. I personally believe that this quarter demonstrates consistency in the execution of the midterm agenda to improve the profitability of our business and strengthen the balance sheet that we have communicated at the end of last year. Our comparable EBITDA continues to progress in the right fashion at a double digit speed. Then net sales were strong or solid on the beverage side of the business, wine and spirits. The only reason that we see a 3% decline versus last year is the continued underperformance of the industrial segment.
And, as also outlined by Stein, our efforts to reduce our net debt leverage progressed according to plan, and our balance sheet continues to strengthen. With this, we are both open to questions.
Thank you, Jacek and Stein, and let's open up for questions. You can send them through the chat or raise your hand to ask a question. I can see that we have one question from Maria Wikström. Please go ahead.
Yes, thank you. This is Maria Wikström from SEB. I have a few questions, and mainly relating to this new alcohol legislation in Finland, allowing the 8% in the grocery retail. So can you discuss a bit about the competitive situation in the grocery retail when we talk about this 8% alcohol content wine segment, please?
Yes, thank you, Maria, for the question. I think all the large wine players in the industry responded positively to this. They made their proposals to the retail. They established their presence on the shelves, and they have also tried hard to maintain availability at the time when the category was challenged by a relatively high level of out of stocks. So, I would say that all expected players in this category are giving it their best given this opportunity. The dust needs to settle, obviously. A lot depends on two things. First is the consumer reaction, yes, to this, to these products.
There were initially some concerns about the quality, the perceived quality of the 8% wine, for consumers. Luckily, looks like, based also on the external reports. The quality that we have provided was good enough, which is also driving our sales and shares. So but that's the first question, yes? I believe there will be quite a few consumers that will give it a try. How many of them will come back very much depends on their experience with the product. Then the second important factor here is the retailers' stance on it, whether they see it as an opportunity that they want to invest behind and to develop the category, or it is something that is not meeting their expectations.
Both of these questions cannot be answered, I think, at this stage. We need a little bit more time and back to your question also, we need to see which of the key players in the market will gain strongest position. We definitely believe that we have a good starting point for taking advantage of this opportunity.
If I may continue here, being a bit surprised, I thought especially Kesko would bring, I mean, some of the private labels in this segment, which at least I haven't seen Pirkka wines entering this 8% segment. What do you see- I mean, or do you expect the grocery retail to bring their own private label in the 8% category, or do they first want to see how big this will be, I mean, for the consumers, before entering with their own brands?
Yeah. Yeah, I think we would for this one. They will try first to clearly have a clear view on whether it's an opportunity or not, and then this will have impact on how seriously they will approach the next steps in this journey. I would generally say that my personal belief is that the portfolio that we are seeing today in the stores, especially if things go well from the retailer points of view, meaning that the category is developing and the consumer is coming back, so the portfolio that we see today will not be necessarily the same portfolio that we see in a year, two years, or three years. There is quite a lot of movement right now already in on the shelves, trying different brands.
I would expect lots of innovation also taking place in this category if everything goes well. So I wouldn't be too attached to the choices, brand choices especially, that were made by retailers in this early stage. Exactly as you say, Maria, they need to first decide whether it is a good opportunity or not. I believe the first indications are not bad, but it will take a bit more time for them to conclude.
One more on this subject, relating then, I think you talked a bit that you expect the foot traffic to decline in the Finnish monopoly. As I guess, especially people living outside the central Helsinki area might not then travel further out to the monopoly outlet, just rather buy the wine in the grocery store. How do you see this impacting your spirits sales in Finland?
It's more of a threat than reality at this stage. That's obviously the primary concern that comes to everybody's mind, that the footfall in Alko will decrease, especially, as you say, in more remote areas in northern part of Finland. This risk is there. We are looking at it very carefully. So far, there are no dramatic indications that this is the case, but just like with your other two questions, I really believe we need to give it more time.
Perfect. And then finally, I wanted to touch upon the, the sales as well as profitability development in the industrial segment. I mean, you, you kind of very nicely pointed out, what do you see currently are the problems in the segment. I'm just thinking about the timeline here, given that, I mean, some of, of the issues are more, structural in nature. That, is there a way to get out of the unfavorable contract structure, or what needs to be happened that we see the industrial segment to delivering a profitability on a different level than today?
As I mentioned before, I think we understand the reasons very well. There are no quick fixes here. Getting out of the contracts is either not advisable or not easy or takes time. Plus, some of the contracts we are very satisfied with, so we have no reason to uproot them. If there is one thing that we believe may bring a bit of relief in the second half of the year, is stabilization of Finlandia volumes. As you may recall, there was a change of ownership of Finlandia brand, and it's a big part of our industrial operation, the contract manufacturing of Finlandia brand. The ownership moved from Brown-Forman to Hellenic to Coca-Cola Hellenic.
As in any transition, it requires a bit of time for the new owner to look at their inventories, to look at the distributor setup in different markets, so our expectation is that the second half of the year should bring a little bit more stability and maybe a slight increase also in the volumes on contract manufacturing from Finlandia. All other elements that I have mentioned, like for example, the pricing, depressed pricing, which does not incentivize us in any way to drive starch or animal feed production beyond or ethanol, for that matter, beyond what we are contractually obliged to, or our own volumes, for that matter, these things will not change dramatically in the second half of the year.
Thank you. That's all from me for now.
Thank you, Maria.
Thank you. And then we have a raised hand from Rauli Juva. Please go ahead.
Yes, thanks. Rauli from Inderes. One question from me. I was wondering on the wine segment, you pointed out, Jacek, some of the drivers for the earnings improvement, but can you talk a bit about how is your earnings level or the development in Denmark, in Globus Wine, which we know has had quite weak times, at least before?
Oh, yes, sorry. Yes. Yes, so to answer your question, Rauli, about the Danish operation, obviously, I will not go into detail of financial performance specifically from Denmark. What I would generally say is that the Danish business is on track versus the expectations that were established for this year, financially. Also from the share perspective, we are either growing share or maintaining the high levels that were established in the past, so we are satisfied on this front. Where I would personally like to see a bit of improvement going forward is the marginality of this business, especially as the environment, as I mentioned before, in Denmark, is not very favorable in this respect, as the consumer seems to be down trading and also moving to discounter channels.
So managing the mix, rather than gaining even more share in the Danish market, is what we are after right now, while the financial performance seems to be on track of what we expected for this year.
Okay, great. Thank you. That's all for me.
Thank you, Rauli. Please be reminded that you can raise your hand to ask a question. Also, we have a question here in the chat from Juho Saarinen, and it is that: "What factors caused the increase in group and allocation costs?
Stein, will you give it a try?
Yes, I can answer that question. It's Anora has changed allocation keys regarding allocation of group costs. As you can see, it was quite consistent in Q1 and Q2, about EUR 1.5 million , and that's also what you can expect going forward, both in Q3 and Q4. But as you can see, also in Q3 last year, we had a positive deviation on group allocation cost. As I said, you can expect around EUR 1.5 million negative, also in Q3 and also in Q4, due to change of allocation costs.
Thank you, Stein. Do we have any more questions? You can type them on the chat or raise a hand to Mark. I don't see any raised hands or any comments in the chat, and then we have some phone line callers as well. I will open the lines for you just in case you have a question. Don't seem to have any questions there either, so I think this concludes our call for today. Thank you all for participating, and see you in our next call on the 7th of November for the Q3 report. Thank you so much.
Thank you very much.
Thank you.