Ladies and gentlemen, welcome to the Cloetta Interim Report Q1 2024 conference call. I am George, the conference operator. I would like to remind you that all participants will be in listen-only mode and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, you will be joined into the conference room.
Please note, anyone who wishes to ask a question during the conference, may press star and one on the touchtone telephone. You will hear a tone to confirm that you entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. Please hold the line. The conference will begin shortly. Thank you. ... Thank you for joining. My name is Laura Lindholm, and I'm the Director of Investor Relations and Communications. Our CEO, Henri, and CFO, Frans, will first run you through our Q1 results, after which we will move into the Q&A. You will there have the option to either dial in and ask your question live, or you can also choose to post your question in the chat.
We will first then take the questions from the telephone line, and then we will move ahead to the chat. Over to you, gentlemen.
Thank you, Laura. So, we had a good quarter, and in particular, I think I'm very pleased that we were able to protect our profits on an absolute level of 192 million SEK, despite the historic high cocoa prices and food inflation. If we take one second for the people who are new to the call, I mean, this is an overview of Cloetta. Very nice to see. Last year, we reached the 8 billion SEK mark in turnover. Never been so big. And another maybe interesting fact, we're not a Sweden-only company.
Towards the right, you can see the kind of distribution of the sales in the different countries and, in particularly, you can see that we are starting to get really some nice base sales and presence in countries like Norway, Germany, U.K., and also international markets, which is a big growth motor for us. It's historic positions which we're strengthening and growing step by step. So that's really good to see because the mix of this totality also helps us to achieve our organic growth journey in the future. If we then zoom in on the quarter, as I said, we protected our profits. Very good to see, because the operating environment for us is still very much affected by food price inflation in our raw materials.
Although some things have come down, we can see that sugar prices are still on historic high level. Of course, anybody looking at the chocolate, raw material prices, you can see that it's only going up. Of course, we always react on that in the same way as we have done so far by increasing our prices at the same absolute level as the, raw materials are going up towards our, our customers. So that will continue, but that always takes a few months before we are able to do that. Another very important message, and something I'm really proud of, is that despite the organic growth, which is all price related, and it is price on price, because we had a lot of pricing in the first quarter last year as well, we can see that our volumes are stable.
Yeah, and what does that mean, and why is that so important? It actually means that through all the work we've done in the last couple of years to strengthen our brands and to also invest more in our brands, that consumers across our markets are keeping buying our products, even though they're now a lot more expensive due to the input inflation than before. And this is something which you could say it really shows and proves the resilience of this business and our strategy of the last couple of years. And this is something special. There's not that many businesses in FMCG who are able to keep their volumes flat in Europe, given the economic situation.
Our profit hence has been impacted by higher gross profits, but we also are still investing more in our brands, like we told you in the previous quarter, and that continues, and Frans will unpack that a little bit more. We're also looking all the time for cost savings and efficiency savings is one of our four pillars, and we continued also this quarter to streamline the product portfolio, but also the brand portfolio, and looking over, you know, which brands are the important ones going forward for the future. Then we also, as you will see later on, had a good quarter cash-wise, and like last quarter, the net debt over EBITDA is at an all-time low of 1.6. Why is that important?
Well, money is more expensive, but this is also very good, I think, for the Greenfield investment, which we'll be doing later in the future, that we're able to generate the cash and have this buffer when we go into that period of construction. So those are the highlights. Protected profits, volume stable, and I hand over to Frans to unpack that a little bit more.
Okay, thank you, Henri. So for quarter one, we continued to report further growth with net sales of SEK 2.1 billion. That's a growth of 6.1%, of which 5.7% is organic. This is also the third consecutive quarter where we have over SEK 2 billion in sales. And this growth is driven, as Henri mentioned, primarily by the successful fair pricing to offset cost inflation, with the stable volumes mentioned. Now, compared to the last number of quarters, double-digit growth at around 6% may appear a little bit less impressive, but then you have to note, and Henri alluded to this as well, that that's on top of a lot of pricing that we had in quarter one last year. So now we're meeting a tougher comparative set of figures, and we will for the rest of this year.
Now, the long view on this is that 6% growth is, of course, still a lot higher than our ambition to grow in line with or better than the markets, which we have tagged that around 1%-2% in the long term. And if you compare to quarter one, 2019, so the last year before the pandemic hit, our sales are up 34%, and that calculates to a five-year CAGR of 6%. And actually, if you look into really detailed, it's actually 6.1% five-year CAGR, which is exactly the same as the 6.1% growth that we have this quarter. So it's a bit of a, I thought, a funny coincidence, maybe mostly for finance people. Now, moving on to the net sales by segment.
Branded packaged sales grew organically by 3.6%, and you can see here that growth comes on top of 20.5% growth we had in Q1 2023. Now, that 20.5 was also the highest growth we've ever had since we started segment reporting and, probably also before then. The Pick & Mix segment on the lower half of the slide grew organically 11.5--11.7%, and that's on top of the over 30% we grew in Q1 2023. And this is also despite the loss of the Wilko customer in the U.K. last year when they went bankrupt. So there's Wilko sales in the comparator here, and 11.7% makes this also the 12th consecutive quarter with double-digit growth for Pick & Mix.
And I think that shows that our plans for Pick & Mix are generating some really good results. For both segments, pricing is the main driver of the growth, and for both segments, the volume is stable, and again, despite the loss of Wilko. We have mentioned it before, FMCG and many retail chains have experienced a lot of pressure on volumes as consumers navigate the inflation. We do, too, and we will continue to face the same, so we're really, really proud of stable volumes. The volumes show that the strategy is working. We are investing in the long-term health of our brands, especially our core brands. That makes us, as a supplier, attractive. Also, with the fair, higher pricing we've been taking.
So our customers know that they can, in turn, sell our Cloetta products to their shoppers, and to do so at a price that helps their businesses. Now, on the theme of investing in core brands, we can move to the next slide. I flagged in the Q4 earnings call that we were going to step up the spend on marketing in quarter one compared to last year by about SEK 10 million-SEK 20 million. We did that, but given how strong the volumes came in during the quarter, we held the step up to about SEK 10 million, so at the lower end of that range. So with an operating profit adjusted of SEK 192 million, or about SEK 200 million without the extra marketing spend, we have been able to protect our profit despite the steep increase in input costs since last year.
Of course, the most talked about increase in media recently has been the price of cocoa. So at the highest level, for total Cloetta, you could kind of stop there to explain the operating profit adjusted by saying that we have protected it through fair pricing and with stable volumes. Now, going further down in the analysis, and you have the graph on the right, you can see that our mix is favorable. Remember, the volume is stable, so this is mix, and the favorable mix is driven by increased focus on optimizing the portfolio and on net revenue management. Then on the cost, in the middle of that graph, in addition to the higher marketing spend, there is also a one-time effect of the recognition of the provision relating to finished goods inventories that we have blocked from sales.
That, as many of you know, are because of traces of a component that doesn't meet our quality standards, that was found in a raw material used when making chocolate products. We're, of course, keeping the products blocked until they've been cleared by our quality team and the relevant health authorities, and we're currently in a discussion with the supplier about these materials provided to us. This is a company with which we have worked for decades, and as such, we will not quantify the provision at this time. We expect that this will be resolved in a good manner. It is an isolated case, and we don't expect any material negative effect going forward.
That said, based on the lower profit this quarter, despite the favorable mix, mix, it's not something that should pay for higher input costs, and as costs are continuing to go up, again, I'm thinking primarily about chocolate, we intend to stay on course with our strategy to take fair pricing for our increased costs, and we will also continue to support such great pricing. And in Q2, we will again increase the spend on marketing versus last year, and that again, would be in the range of SEK 10-20 million. Now, while total Cloetta profit is stable, there are very important differences in how the profit developed versus last year when looking at the Branded Packaged Products segment, separate from the Pick & Mix segment. So let us look at that. So starting with the Branded Packaged Products on the top.
So the segment is down SEK 32 million, despite the stable volumes. The stable mix I mentioned is, is, of course, also in this segment, but so does most of the provision. And of course, all the extra spend on core brands sits here. So as I mentioned, though, mix shouldn't pay for higher cost, and as the costs are continuing to go up, we will stay with the strategy to take pricing. Nonetheless, our underlying profit, if I would exclude the provision, is of course better than what you can see here, and I will revert more on that topic as we learn more on the matter with our supplier. For Pick & Mix, the quarter looks very different and also requires a bit of an explanation, maybe not to get ahead of ourselves.
The profit increased by SEK 24 million, which is a doubling versus last year, and we have said in the past that our midterm ambition is to reach an operating profit adjusted of between 5% and 7%. Now in this quarter, we are reporting 6.9%. What you see is a lot of work over a long time that is really coming to fruition. Pricing has been caught up largely, and despite higher prices, a healthy volume and higher efficiencies relating to merchandising in assortment, fixtures, et cetera. I must add, though, that the profit is clearly boosted by the Easter sales, not just with respect to gross profit, but also scale benefit, as higher volumes were managed much more efficiently per kilo.
And I'd said you should probably knock off about 3% of profit as a percent of sales to get to the profit excluding the Easter gains. But even at that lower profitability, the quarter would be a clear improvement and would be approaching the range of 5%-7% that we've set for ourselves in the midterm. That is really great and encouraging, and it's not that often I get to present these type of numbers for Pick & Mix. So then moving on, to an overview of the road to 14%. So without making a detailed update on the efforts to drive bottom-line profitability, I did take the bridge that we presented also in the annual report recently, and I updated the first light green arrow for Pick & Mix to a shade darker, given the strong results.
The branded light green to the right of that is obviously ongoing, and while margin is down, there are, as said, some distorting factors in this quarter, and those are not related to the long-term outlook. Of course, we did see good benefits from net revenue management in the quarter in the form of the mix, and we will continue that alongside driving for efficiency in supply chain through the Perfect Factory program. With respect to the Greenfield delivery, based on what we have previously presented, it will secure and improve on our ability to deliver the targeted margin. In Q3/2023, we reconfirmed that despite the higher interest rates, the net investment remains in line with what we've communicated.
I, I can again stress that we had shared previously, and we said that we had taken headroom at the time of the original announcement for the uncertainty. We also confirmed in Q3/2023 that we would generate higher up in the range of SEK 220-260 million EBIT upside per annum from the project, given that part of the upside comes from savings on payroll costs, and those costs has increased a lot with inflation since 2022. We will be able to provide a more detailed update on both investments and savings when we have sufficiently progressed or even closed ongoing tendering and contracting process, and that, in turn, depends on the complete finalization of the required permits. We will revert to this in the future. Now, going back to the quarter.
So sales, general and admin in the quarter is pretty straightforward here, where the cost, excluding currency, is higher, driven by the higher spend on marketing. I think we might move one slide too much here. There. That said, there has, of course, been salary inflation relating to our own workforce since last year and the same effect for suppliers, and often there are contracts that are indexed. Yet again, however, we've been able to offset those increases, and with SG&A at 21.6% of net sales, that is the lowest we've ever reported for a quarter one. So we're very happy with that, but it's not the end of the good news. So let's move to cash.
So there is a seasonality to our cash flow, and I've spoken about this in the past, and most of the cash generated is generated in the back half of the year, and quarter one is normally not very strong because the quarter starts with low working capital, as the receivables from the sell into Christmas has largely been collected, but we haven't sold a lot immediately before Christmas and after Christmas. Now, despite that, we generated a healthy free cash flow of SEK 99 million in Q1, and that's SEK 122 million better than what we did in Q1 last year. Part of the improvement is due to the efforts to increase the focus on cash across our organization, and part is due to the inflation having slowed down somewhat. Not to the point that we are in a deflationary environment.
Our working capital did increase in Q1, but it didn't increase as much as it did last year. Now, SEK 99 million is also not just better than Q1 2023, it's also the best Q1 free cash flow delivery we've had in the last 5 years. Which brings me to my final slide, and that I'm really pleased to share, that on account of the strong cash flow, we closed the quarter with a net debt EBITDA of 1.6 times. That is lowest, not just for a Q1, but it's the lowest we've had in any quarter since, well, technically, anyone can remember.
Naturally, as quarter two will have a set of dividends being paid out, as is normal, the leverage will go up in quarter two, but then again, based on the seasonal trends, the leverage will start to improve again in the back half of the year, and you can see that on the graph here that that is our normal pattern. Now, if you look long term, however, our financial position has consistently been improving over the last years. Now, this was expected, but I think it's worth to emphasize. This also means that we are consistently, quarter by quarter, positioning us better with respect to the upcoming investments for the Greenfield.
Similarly, on that note, we currently have access to additional unused credit facilities, commercial papers, and cash on hand for SEK 4.1 billion, which is well over double the need for the Greenfield based on what we have previously communicated. So I feel I can conclude that our financial position remains strong. With that, back to Henri.
Thank you, Frans. So, we're getting into strategic updates. This is not new for the people being on the call before. We basically have four strategic areas. The first one is covering our branded business and the expansion of margin and growth over there. The second one, Frans alluded to that, is how do we get more value out of the Pick & Mix business? Happy to see the 7%. And then, of course, there is cost and efficiency, which we want to bring down, and it all is being underpinned by sustainability. Over the last couple of quarters, we've been talking about these things, but we want to give you a bit more of a structure behind this so that you also see what initiatives we are driving and putting the updates also into a strategic framework.
So I'll do all four of them, some of them with some examples, and if we can go to the first one, Laura, on the branded. So, what do we want to do? Yeah, is in the first one, of course, is very much focused on consumer brands and strengthening our position over there. Yeah, so there is a profitable growth through product mix. Of course, the recovery of mix after Corona on mainly pastilles, but also gum. There is market share targets in our core markets, and that we do by supporting more our key brand position, so whatever Gott & Blandat in Sweden, Red Band in the Netherlands. Then as I showed you, we have two big markets where we have our own organization.
We have a few brands which are in good positions, challenging the market leaders, and that's UK and Germany, 64 and 80 million-plus people, so really ability for us to grow over there. And then we have the international market, 7% of Cloetta historic positions, getting stronger and stronger and really showing good growth and also contributing to our EBIT, so also very important for us. And then, and we're also focusing more, making use of our scale, so focusing on fewer but bigger innovations, which are going across markets, maybe not all under the same brand, but the like innovation technology platforms are then being implemented across brands in our markets, and we are really looking at valorization. So selling higher value products because they have an added benefit for the consumer and also giving us a competitive edge.
And then, of course, new channels, and that is everything outside of the regular supermarket channel can be a lot, but of course, e-commerce and Q-commerce are really growing. I'll show you one or two examples. So, this is the first one. This is the mix, so Läkerol strawberry launch doing really well in the Nordic markets. I have an example here of Sweden. Why is this important? Well, through the fruity flavors, we are able to reach younger consumers, which is something which we need in Läkerol, and it's very pleasing to see that we understand those consumers, then we launch something, and we also get success. Really great execution.
We call this three sixty, so you both are in the media but also in store, and a nice example on the right top is an activation we did together with Foodora, where all the people buying Foodora products are getting them delivered in a paper Läkerol bag with a new product. So you can see yourself that it really adds 10% to the volume, but more important is that we are getting younger consumers into the brand. Then the next, also on area one, is innovation and valorization. This product, Sour Bites, is something which we launched one and a half years ago with a lot of success in the U.K. and then later on in international markets under the Chewits brand.
Now, we brought exactly the same product under Red Band in the Netherlands, and it really did well sales-wise, but also last week, we were awarded the best product launch in the confectionery category by the most renowned institute, who is measuring and also asking our customers about what are the best launches of the year. So you can see our team in front of the office building, receiving the Wheel of Retail award, as it is being called, and that, of course, is also so saying something. It's not only the consumer, but also our customers, really happy with the innovation power we have in this company. And then I think the last example in this area is then e-commerce. So you know that we have the brand, the Jelly Bean Factory.
In the U.S., we had to name it, Jelly Bean Planet. And that brand we are now launching through e-commerce with Amazon, based on the very good cooperation we have with Amazon in our core markets here in Europe. They are 100% or more than that, supporting us in the U.S. to launch this brand. And that is very interesting because you are launching it in a sales channel, but a sales channel also is a communication channel, so you can be very targeted in your communication and how to build that brand. And pleasing to see, you know, $200,000 in a month of sales. That, in the biggest jelly bean market in the world, of course, is foreboding to more success later on. But we'll build this step by step. But really good to see.
Then, just to give you a feeling for the other areas, I mean, what are we doing without having examples everywhere to, for the sake of time, but of course, Pick & Mix, we want to get to 5%-7% EBIT. Again, that is including all the allocated costs into the Pick & Mix, because it's like a full allocation model, of supply chain and, and office and indirect cost into Pick & Mix. Four trends or four important areas. One, of course, are the consumer trends of individualism, but also sustainable packaging, because people are not buying this in plastic, they're buying this into carton or a paper bag. That's really growing.
The second thing that we see that our customers are really looking at, how do we transform our stores from something which looks like a nice warehouse into something where you can get inspiration? Then Pick & Mix is one of the categories where consumers are standing willingly, nicely, 3-4 minutes to pick their individual products, and that is something they're really looking for. A lot of in-depth cooperation with our customers who see this as an important addition to their concept. We also want to earn money on that and not just compete on price. We're really driving premiumization in Pick & Mix by adding features or adding good products and consumer activation, which is also relatively new in this category, and we're gaining good traction on that.
And then, of course, last but not least, you know, we're constantly looking at how can we optimize our cost in here, either by using our scale, but also the whole merchandising cost, routing, and also how we act as a retailer towards the companies who are delivering their products to us. And that is also quite an important one for the 5%-7%, going forward. So that Pick & Mix in the future, we'll come back, on examples over here. And then the third business one is the lower cost and greater efficiency, because as you saw in Frans', part, that is also contributing in the road to 14%. Yeah, so it's the Perfect Factory where we increase the efficiency of the production line.
We talked about the fact that we have volume, and that means also the volume is stable, that some volumes are really growing and our factories are quite full, as we discussed before, so we need more efficiency on the lines to produce more, so that we can also sell that. That's really working, also reducing waste and also energy, of course, in our plants. We have the Greenfield. We'll come back to that. The ZBB methodology for the indirect costs alluded to the fact that we were able to keep our indirects within the SG&A flat with the savings, even despite the fact that we have, in all the markets, salary inflation, so that remains an important one. The Net Revenue Management, that is all the money between the list price towards the customer and the net price we are receiving.
Does that money work for us in a good way, and what can we improve? That is quite exciting. We're rolling that out together with a IT tool for our category and sales and finance people to constantly evaluate where do we get the bang for our buck, and that is something going forward where we'll get more efficiency out. The whole media thing, we talked about it. How do we get also over there really good uplift on our media spend? That, of course, starts with the whole preparation in clear brand positioning, slogans, but then also the media buying, and more important, that the working media is now reaching the 70%. So out of every 100 SEK we spent, the 70 SEK-...
which is being seen by you and me and all the other consumers on Google, on TV, on outdoor, et cetera. And then 70% of that is pure media, which is really the, the communication, media part. So one of the big components in why people continue to buy our brands in the same amounts, even though the price levels are higher. And then also over here, of course, the cash generation. Frans talked about that. That's now really well embedded, and we can do more over here to get the cash even, even up. Yeah, then, and a quick update on the greenfield. Just one more time, why do we do this?
Well, it's a big cost saving, and the cost saving goes directly into the EBIT, so we're talking an EBIT effect of SEK 220 million-SEK 260 million. It's a big investment. Net is SEK 1.9 billion, and we'll come with an update on that to show everybody that we're progressing nicely in that way. It is also 15,000 tons of extra capacity, and given the fact that in particular, our candy factories are quite full, and we will need more capacity if we want to keep on growing our volumes. And then last but not least, it's full electric, so a really important step in our sustainability journey and the climate goals we have underwritten. What has happened during the quarter, the municipal government has decided to grant us the permit.
Yeah, so that is, let's say, the coalition government, majority government in the city of Roosendaal. They have decided that they will grant us the permit, and then in May, let's say, the parliament, so the whole, city council will have to vote on this, and then that is the first big step in the, in the permitting, process. And all the internal project work streams are going on as, as planned, which is mainly all the preparation to get the bidding process up and running, like Frans, alluded to, that when we have the permit, that we can start to negotiate contracts, in, in a final stage. And that's probably then also the moment where we can do a good update on the, process.
Then, as you know, we're closing three factories, and given the delay of the project, we have been looking at, you know, are there other ways we can speed that up so that we also bring down the complexity? And what we have decided, and I think we talked about that before, is that the second factory we have in Roosendaal, it's called Roosendaal Borchwerf. It's the Lonka factory, fudge, and nougat, and soft bites. That plant we are closing now in quarter 2, 2024, so we bring that forward. Part of the products are being outsourced into third party and another part is being insourced. Those are the products which we just showed you in the Netherlands on the soft bites into the Sneek factory, which is good.
We have an agreement with the labor union on the effects of the people who cannot transfer into the new factory, because, of course, that is the first thing we are looking at as a responsible employer. We also have an agreement with the facility owner, so this was an acquisition. We were renting the building year on year, and we agreed with the owner in this on the state of the building to come back, and that's actually quite well done by the team. And then all the equipment, which we are not going to use or want to use, we have sold to a third party, who will also be responsible for taking out all that equipment from the building.
Yeah, and that means that over the next quarter, so already this quarter, we transferred part of it, then during quarter two, another big chunk will go to the third party, and then the soft bites will go into our own factory, meaning that by the end of June, we will have the last production. Then, of course, dismantling, cleaning, and handing the building over to the owner will start. So savings will start to come in as from quarter four 2024, but we will update you on the exact effects on that when we also do the Greenfield business case update, because this was part of that. Yeah, and then number four, last but not least, is the sustainability agenda for you, for people, and for the planet.
I will not go through all the initiatives, but maybe important to say, on the, for people is we just had a Cloetta engagement survey. So this is about how happy and engaged our employees are. Very nice to see a big step up, versus the last time that we measured this, which is now, like, two and a half years, ago, among, across all the countries, but also all the supply chain and all the factories have really step up. And of course, there's a lot of hard work we put in here, both from communication, but also our leadership academy on different levels is really starting to pay off over here. And scientific, it is proven that, you know, people who are more motivated also deliver better results.
So for sure, this is also helping us on our road to 14%. I think I'll stop over there because otherwise we run a bit over time. I would like to open this now up for questions.
Operator, please go ahead.
We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question.
... Anyone who has a question may press star and one at this time. Our first question comes from Niklas Skogman with Handelsbanken. Please go ahead.
Thank you. Good morning, everyone. I have a couple of questions. The first one is on the comment or the explanation that mix effect was positive, but I find it a little bit strange given how much faster Pick & Mix was growing in the quarter compared to packaged.
Yeah.
That's the first one.
Yes. No, no, no, it's true, and I, and we've said before, you know, when Pick & Mix grows faster, there is an unfortunate, you know, if you will, effect on the profitability as a result of that. But, but, the way to think about this is that there's other mixes than just between the two segments. So we also have mix within the packaged portfolio, which can be between the brands, it can be between markets, it can be between channels or customers, et cetera. So the big difference versus before is that we're seeing some really good effects, both on the portfolio optimization, you know, where we take out SKUs to have less profitability, so that's the favorable mix.
What you saw from the Net Revenue Management house, it's not only about promotion and trade spend, it's also about channels and products. Really to go deeply in and make sure that we direct, you know, our sales in the most profitable manner. That's, that is really coming to fruition in this quarter, and it's, it's offsetting what you otherwise would have had as a negative mix with the Pick & Mix segment growing faster.
Okay, so it's a bit of channel mix as well then. Okay, second question is on the provision. So what... You haven't mentioned the number, but I guess I can roughly guess based on the declining profits in branded packaged and also considering the step up in marketing there. But does that encompass damage, expected damages received from your supplier, and or is this sort of a gross provision?
Yeah, I mean, yeah, the short answer is a gross provision. So the way we do this is obviously that, we're holding back on these inventories until, you know, it's fully cleared. And based on what we have there in the conversation with authorities, we have taken a provision for the value of inventories, if we would have to destroy that. Now, we're not quantifying this because, I mean, again, this is a supplier we've had for decades, and we are in conversation with them. I would assume that this will be resolved in a good way. And if we, you know, then would have money coming back, let's call it that, that is something that we have not factored into the Q1 results.
That will be resulting in a net effect later on.
Okay, very good. It sounded like you didn't expect withholding these products from the market to impact sales?
Yeah, I mean, we're still shipping. So, it's... I mean, we're talking about several hundred tons, which, you know, is a lot, and for maybe a consumer or someone, it sounds like enormous, but we're selling several thousand tons of products a week. So, we are continuing shipments. We don't expect any material negative effect in the quarter, now, quarter two.
Okay, very good. Then a question on the SG&A costs in the quarter. So if I look at the adjusted year-on-year increase, it's SEK 12 million. Then we know you spent SEK 10 million more on marketing, which takes us to sort of SEK 2 million increase. I also note probably mostly in the COGS. So I was thinking SEK 2 million growth, that's basically flat SG&A costs year-on-year. So, and given salary inflation and so on, what is driving this, and then what should we expect in the coming couple of quarters?
Yes, and just, we lost you just when you said something about COGS.
Yeah, I said most depreciation is up year-over-year, but I guess most of that depreciation is in the COGS.
Yeah.
Maybe that's not very relevant.
Yeah. So I mean, the short answer is, of course, that we're super happy with this. There is the increased spend on marketing, and of course, we have inflation, et cetera, but we have also had, you know, a lot of focus on the indirect spend now for several years. And what's really coming through strong in this quarter, and which you see also in the profitability of the Pick & Mix, is that the merchandising costs are basically held below inflationary rates despite the increase. So there is some savings, and the other part is just basically holding back. So that is very strong. Can we continue to do that throughout the whole year?
You know, I wouldn't promise that, but I can tell you that, our focus on cost is not going to let up.
Okay, very good. Last question on Cocoa. Price is going up. You said you're gonna take, make, you know, carry out price hikes to compensate for that. But do we expect to... Should we expect to see any lag effects, in regards to your input costs versus price hikes to customers?
... I mean, yes, I mean, the and you know this, and it's probably helpful maybe for others. Of course, there's always a bit of a lag where we see that cost has moved, and then we can have a conversation with our customers about how we should change our pricing, and then there's a dialogue, and then there is a period to implement that. So there's always a lag, but there is also a lag when cost starts to come down. So it depends also very much on what's going to happen with cocoa for the rest of the year. But yeah, there's always a lag.
In this quarter, of course, we are offsetting, you know, a lot of this lag or all of it, you could argue, through the mix effect here. But the mix effect is not something that should be used to pay for the higher cost, because, of course, that would be deviating from the strategy. So with time, we should catch up on the pricing, and the mix effect should then drive further profitability.
All right. Excellent. Thank you very much.
Thank you, Nicklas.
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Good. Well, then I think, quarter to eleven, nearly, we will finish this quarter one update. Important messages, good organic growth of 6%. Our volumes are stable, and really being proud of, and then an EBIT of SEK 192 million, despite the big hike in cocoa prices, is also showing the resilience of the business, and that we're, I think at least having the right strategy to deliver not only the quarterly results, but also that we're on the way towards the EBIT targets we have set ourselves, and which is the biggest thing to achieve for us. So with having said that, I thank you for the call, and we'll talk in one quarter. Thank you. Thank you.