Ladies and gentlemen, welcome to the Cloetta quarterly report Q2 2018. I will now hand over to Jacob Broberg, SVP Corporate Communications and Investor Relations. Please begin.
Thank you very much. Welcome to a warm and sunny Stockholm day and Cloetta Q2 report. As usual, I have Henri de Sauvage Nolting, our CEO, with me and also Danko Maras, the CFO. Henri, you will start. Please go ahead.
Yes. So Q2 highlights are the EBIT improvement and also the branded growth, offset with the negative development in Pick & Mix. When we peel that down, we see that the net sales grew. That's the Candyking inclusion effect, and the organic growth amounted to -4.9%, and we'll unpeel that a little bit further on. If we look at the operating profit adjusted, pleased to see that that is up to SEK 145 million, and also the operating profit in total at SEK 155 million is better than last year. If we then look at the profit for the period, you can see that we end at SEK 97 million. Also in last year, we had a one-off, which makes the comparator, of course, quite large.
Cash flow, more or less, stable at SEK 119 million, and the net debt EBITDA at 2.77, and that was after the payouts of the special dividend and the regular dividend. If we then go to the markets, big thing was that we saw market decline in all of our markets and also more than we anticipated. Of course, there decline in Sweden, was an expected Easter effect that we've seen this in all markets. We can measure that in Nielsen. That's only the packaged goods, but if we look at the POS data on the Pick & Mix, we can see that the Pick & Mix market declined substantially again Easter, but probably also some other factors. If we then look at the organic growth, we came at -4.9%, all coming from Pick & Mix. Not good, of course.
I'll go a bit more into detail, into more slides. The positive news is that all the focus on our brands and the packaged goods starts to pay off. So even with Easter impacting the biggest market in Sweden, in total, we were able to grow with 0.6%. Not where we wanted to be, but given the market decline in all the markets, this was really positive, also leading to share growth in most of the markets and categories. If we then look at Pick & Mix, it declined 19.4%, of which Candyking accounted for 1/3, mainly driven by the Norway sugar tax and the Easter effect in Sweden. Again, we have some more information on that.
If I then go to the next slide, Jacob, looking at the changes in net sales, you can see organic growth at -4.9%, structural changes at the inclusion of Candyking, that has now come into our numbers. So this is the last quarter that that will be reported like this because now it's one year ago since we included this business into the Cloetta business. Exchange rate at 3.6%, leading to a total of 4.1% growth. Most important is to fix the organic growth, of course. And then also after the previous call, we tried to unpeel a little bit more the Pick & Mix sales development. So if we break it down, you can see in total Pick & Mix, you can see the -19.4%. Yeah? So that is the total Pick & Mix business in the quarter, -19.4%.
If we then break that down, you can see the Candyking parts at - 12.1%. And that is largely due to two things. One is the Norway effect, and the other one is the phasing of the Easter sales, mainly in Sweden. And if we then take the Pick & Mix excluding Candyking, so you could say that's the old Cloetta Pick & Mix business, you can see - 29.3%, so a much larger decline. Okay. Where is it coming from? Of course, that is where the Coop contract plays in. So then below the lowest row, you can see excluding Candyking and lost contracts in Sweden. So that's basically the old Cloetta business without Coop. You can see that the Easter effect over there was - 7%.
And so that gives you a little bit of a feeling where the organic growth problems in Pick & Mix are coming from. So it's very it's very transparent. It's also very centered around two areas. So one is Sweden with the lost Coop contract, and the other one is the Candyking business or the old Candyking business in Norway with the sugar tax, and promo impact we can see over there. And then for this quarter, we have the Easter Easter effect, which is something which will normalize out now for the rest of the year. Then, how we're doing with the integration, we had a big milestone on the 1st of May. All four Nordic countries went into the Cloetta ERP system. So these were the four Candyking businesses which were previously on a different platform.
They now go in, they've now gone into the Cloetta platform, which is really important to get even more transparency and synergies and ability to steer the business in the right way. So that was quite a big task for us to get that all in. And like with any go-live, there are always some unexpected things we need to sort out. But that's now in. That means that things like route planning and merchandising optimization, that all can be done now much more integrated, rather than having to get into different systems. And we're not completely ready because the UK, which is also a good running Candyk ing business, that is still on a different platform.
In due course, we will start the project over there as well to start working on the integration and then many other things which are lying outside of the ERP system go-live, which we are working on, like other systems which are supporting, in particular in the merchandising and field sales area. It's good to see that the insourcing is completely on plan and also contributing to the coverage and the lower cost in supply chain. And the SEK 100 million is still standing very, very strong. So with having that said, I hand over to Danko.
Thank you. Before I start, I just want to take the opportunity to let you all know this is my last day. It's been a great journey working for Cloetta. Those six years I've been working with you, I wanna thank you for the good cooperation. For those of you analysts who've been or are on the call, it's been really, really nice working with you. Cloetta is a fantastic company, fantastic brands. I'm not going away too far. On Monday, I start at Intrum, and some of you guys are following Intrum as well, so I look forward to working with you, but from another company. So with that, moving into the profit for the period, which was an improvement, significant improvement in almost all aspects. You can see the gross profit, on page seven, SEK 559 million, SEK 40 million more.
Obviously, the inclusion of Candyking has an impact, but this is also now when we start to see good production coming through with the event that we had last year with Turnhout. We are now coming up to a better delivery on the supply chain part, and production is good, yielding good coverage or fixed cost leverage for us. So a benefit is coming through there. In addition, this is the first time you start seeing it. You also see a gross margin improving 130 points versus last year. The inclusion of Candyking has been dilutive ever since we acquired it. But since we now only have one month of non-comparators, you now start comparing like for likes. Obviously, we want to improve that gross margin going forward with the synergy realization.
In this particular quarter, we are now starting to see a good impact of the insourcing of our Candyking product. So a good delivery in gross profit and gross margin. That is trickling down to the operating profit adjusted, which you see is SEK 145 million versus SEK 115 million last year. So SEK 30 million improvement. So on top of the improvement you see on production, you also see good cost control where indirect and overheads are below last year. And on top of that, we're also getting some synergies from the Candyking integration and overheads. So a good delivery overall on the adjusted operating profit. The peculiarity we had in Q1, where operating profit is higher than the adjusted one, continues. And this is because of the impact that was highlighted about Pick & Mix.
The earnout adjustment that we need to do, we have an earnout liability that will be paid based on the combined volume in December this year. It's coming down, as an effect of the, reduction of, of volume. We also then will pay less on the earnout. That's the adjustment you see. It's both good and bad news. Of course, we wanna grow Pick & Mix, but the actual payout adjustment has resulted in a credit of SEK 10 million in total. There were some costs as well, but the net impact is plus SEK 10 million. Last year was the acquisition, and then we had a lot of one-off costs of about SEK 25 million. The swing you see between last year and this year is SEK 35 million, improving operating profit in total then with SEK 65 million. Really a very high delivery compared to last year.
But the swing in exceptional items is explaining that. A good margin on 10.5%, on operating profit, 9.9% operating profit margin adjusted. Net financial items is a little bit higher. I'll come back to that, in the next chart. Profit before tax SEK 128 million. You got a 24% tax rate. No surprises on the tax in particular. And then profit and loss for the period, SEK 97 million, is because we did a significant write-down on the discontinued business in Italy last year. You have this swing of almost SEK 420 million. So from a good EBIT to a cash flow, I would say a good cash flow, as you can see from operating activities, SEK 165 million versus SEK 84 million last year.
That is an effect of the good EBITDA or the good income statement, not having any major surprises on interest on tax, delivering SEK 165 million.
On the interest part, as you might be aware, we have refinanced our facility agreement, and we sent out a press release earlier about that. The way it works is that when you have transaction costs associated with those facility agreements, you have to capitalize that cost and amortize it over the lifetime of the duration of that contract. Because we refinance, we have to release it, and that's the only reason why you are seeing a higher finance net, essentially than last year. It's about SEK 7 million. On the other hand, we are now in the market with a commercial paper program, and we have borrowed up to about SEK 500 million.
The indications that we are getting is somewhere around 20-22 basis points of borrowing cost incrementally, which we think is good for Cloetta, but we will, of course, try to get that even lower. So very happy with that. And therefore, the net debt EBITDA that you are seeing in the quarter, 2.77, is equal to last year. And we continue to be a good cash generator. The only little watch-out that we had for the quarter was the working capital movement. And here we do see net impact of between receivables and payables, which are zero. And essentially, what we are seeing as an increase is our inventory. And that is an effect also of us building up more production for safety stock levels and so forth. So we can do more on working capital, absolutely.
I'm not very worried about the particularities of the, the quarter coming. Please remember that in the comparators, you have Italy included. So that was about SEK 200 million positive cash flow in the first half year, which will not be consuming cash in the second half of the year as we are no longer including Italy in our numbers. Nothing more particular for the cash flow. We spend a little bit more on CapEx, but that's because we capitalized the ERP costs, and they were a bit higher than what we had in the past because of the implementation of Candyking. But all our benchmark numbers from the balance sheet are below target levels. So really a good delivery in that respect. So with that, over to the CEO.
Yes. So what is the focus, overall? You could say it's getting the business fundamentals right, building the platform for sustainable growth. A lot of focus on growing the base, to mitigate the particular lost Pick & Mix contract in Sweden, the tax impact. We're getting more traction, more structure. A new CMO has started, also much more cooperation across the countries to try to leverage scale in marketing mix development. So, a lot going on over there. Then, as you can see from this quarter as well, it's a lot on cost and growth margin. Price increase in Sweden has been announced to the trade. So that's public information. And also the cost program, of course, is really important, and getting traction. And that's not the one-off. We'll continue with that for next year.
Candyking integration, of course, it's a big business for us. It's across multiple geographies, and in each country, we need to integrate and now streamline the operations in a good way after we now have the go-live on the ERP system. And UK as a next step. And of course, the insourcing. And there's still a lot of volume we can bring in. And that is quarter after quarter executing the plans. And then Lean as a way to improve the efficiencies. Danko already mentioned the issues we had exactly more or less a year ago in the Turnhout factory. So it's good to see that supply chain is running in a stable, controlled way, improving efficiencies. And also the Turnhout line is coming towards the end of the ramp-up phase.
The manufacturer of the machine is still there with us to iron out the last smaller technical improvements we are requesting from that line. So that's also good to see that that is coming on stream. And like always, in the end, we're selling products to consumers, so also our investors should be interested in that. So we're stepping up the Choice For You program by offering more lower and no-sugar products. So we tested that last year in the Netherlands. We have a lot of success with that. So that's now being rolled out into the four Nordic main markets. You can see the Gott & Blandat. That is the main brand we have here in the Nordics, but also in Finland, we're doing this.
And you can see that we copy basically what we did in the Netherlands, with a 30% less sugar offering and also a no-sugar variant. And then in the Netherlands, we have next to the Red Band candy brand, we have a licorice brand, called Venco. And also over there, we're now doing sugar-free launches to capture that trend. So we think it's good business, but it is also good to offer consumers and also other stakeholders alternatives in this category. And that is something we will continue to expand on. Yeah. And last but not least, we bring a smile to people's Munchy Moments. This is where the money is being made. These are the brands we are selling.
It's getting more consumers standing in front of a shelf to choose a Cloetta product, paying our customers, customers being happy for the good service, but also what we can add to the to the category. And they are paying us. And that's where the money in this business is coming in. And that's where the prime focus of this business is, is on. So with having that said, we can open up for questions.
Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad. Please hold until we have the first question. Our first question comes from the line of Nicklas Skogman from Handelsbanken. Please go ahead. Your line is now open.
Yes. Hi. I have a couple of questions, please. The first one is on the, your, your production volumes and how that benefit the, the gross margin because you, you highlight the, the higher production levels as, as, as beneficial to gross margins in, in the quarter. But in the cash flow, part, you said that you have been building inventory, ahead. So I was just thinking, how, how should we think about 'cause, with higher production, of course, you, you get a lower unit costs, but you've been building inventory. So how should we think about this going forward? Have you has there been sort of overproduction in the quarter?
Nicklas, I take that directly. So the, the delivery of fixed cost leverage is disproportionately high relative to the inventory build in the quarter. So there are no, one-to-one relation between the two. What you are seeing is a good throughput of produced volume compared to last year. And if, if you were around last year, you might remember we had a very low absorption in that quarter. So the impact of the inventory level is not going to increase every quarter with the delivery in the income statement from a fixed cost leverage. So you, you saw a one-time movement of inventory. We are not excessive in inventory. We are not below. We are having a good level of inventory. So I would say that's more of a one-off effect.
The production volume is the fixed cost leverage that you will see a benefit from in gross profit ongoing. As we have announced with the Candyking merger, that we will get a bigger fixed cost leverage. There's a lot of volume that continues to come in for supply chain to produce that will lower the fixed cost.
Okay. Thank you. And then secondly, on the marketing spend, which you said was lower in the quarter, I was thinking how much lower was that? And do you have any guidance for the increased spend in H2?
Yeah. I mean, what we do, which we plan our activities when it makes most sense to do them. And this year, we see a few big activities coming up in quarter three, like a few which I just mentioned, the low sugar variants and ever. We also moved the marketing spend, a bit of that from Q2 to Q3. I mean, it's not major. We're not talking big impacts, but it is, I would say, 4%-5% of the total marketing spend, which we have moved from Q2 to Q3. So on total year, marketing spend should be slightly up in line with what we have communicated before that we are starting to slowly increase the marketing spend in order to be more competitive in the different markets.
Okay. Thank you. And then lastly, on the new lower sugar products, do you see yourself getting new customers with this offering, or is it just current customers switching to a lower sugar alternative?
Yeah. So what we see, I mean, we have now very good experience from the Netherlands because we have been in the Netherlands now for three quarters of a year. And we see both. So we see both people who are, let's say, light users or people who are buying the brand but not very often, that they are becoming like medium heavy users. But we also see new people coming back into the brand. And the split is about 50/50. So that's quite positive. And that's why we also believe that this is really interesting from a business point of view. Next to that, of course, we have our customers who are very interested in these kind of offerings.
but also if you think about broader stakeholders like governments, we just, of course, seen the sugar tax discussion in Norway. It is important that we have these kind of offerings in our portfolio.
All right. Thank you very much.
The next question comes from the line of Nicklas Fhärm from SEB Equities. Please go ahead. Your line is now open.
Thanks, operator. And good morning, everybody. My first question goes to the issue with the Coop contract. I believe initially, you estimated the impact on a full-year basis this year between SEK 130 million-SEK 150 million. And I think, most recently, you said, basically, SEK 110 million-SEK 115 million in that magnitude. Is this still the case now that we're halfway through 2018?
I think what we can say is that the original estimate of between 140-160 still holds. But what we also can say, what we also communicated in Q1, that we expected the Coop own concept to be up and running on the 1st of January, but that took more time. So they were ramping down from December. But yeah, the last stores they converted were done within Q1. So therefore, we did not have the full effect yet in the first quarter. But the full how do you call it? The full run rate or the full effect is still 140-160.
and of course, a lot of that depends as well on how good the Coop concept is going to perform in the market because we are supplying our bulk items to Coop, which they then sell in store.
And how do you expect the second half sales to impact between Q3 and Q4? And what was the actual estimated impact in this quarter, please?
Yeah. If we say, it's around 1,150 on a full-year basis, you could expect something like SEK 30 million-40 million a quarter of impact. Of course, there are some variances with Easter Q1, Q2, a little bit of Halloween in Q3, Q4. But I would say that's a good average to estimate.
Perfect. Thank you very much. What is your own estimate for organic growth in Q2 if you adjust for the shift in sales due to Easter as well as the lost Coop contract? What will be the sort of underlying organic growth rate according to your own calculations?
Yeah. I think what you could, and we just talked about Coop being around SEK 40 million effect. I would, it's a bit tricky because the Easter effect is different in different markets. And I would say probably the effect on Q2 was about 50/50 between Coop and Easter. So. And I would say that's more or less the effect. But you can or you can also see it yeah.
Yeah. But that probably means that your, your sort of true organic growth rate in, in the quarter was probably slightly positive, actually. Can I?
Yeah. I don't like all these excuses. I mean, you know, we just lost a Coop contract, which is not good.
Of course.
Yeah. The customers should be happy with our business, and what the service we provide. So, you know, all companies correcting organic growth for this and for that and lost things here and there. No, we have just not done a good service to our customers. And, of course, with Pick & Mix, it is a bit different because there's a lot of other different elements, and it's a bit more binary that you gain one or you lose one. But, you know, we just have an organic growth of -4.9%. And then we can say, "Okay. Well, if you unpeel it," like we said, "it's two divisions.
We have a packed division with much higher margins that it is so crucial to make that growing because that's where we will make margins which are improvement for the 14%. And on the Pick & Mix business, you know, we're integrating. I just explained that. But we just need to become better as a provider of concept that customers are knocking on our door because they want to do business with us and not try to do it themselves or going to a competitor. And that's clear if you look at these numbers with the lost Coop contract. And we're not there yet. But it's my firm belief that we will be there. And we are getting the right people in place, supporting also the different countries, people with retail experience. So we will get that.
This is a big thing for Cloetta.
Absolutely. Final question, and then maybe I come back later in the call. But, I was just wondering, when you lose 12% of top line in Candyking, what's the leverage there? Would it be a fair assumption to say that you're probably loss-making, in this quarter if you look at Candyking isolated? Or is there any particular reason for why you would be able to sort of shift out costs, sort of bearable with that sales development?
We're not, we're not. We're making profit on Candyking. But you can also, of course, see from when we acquired it, it was not very high. But of course, on the other hand, we are improving with the insourcing. We're improving the transfer prices because we are better producing that ourselves than buying it from third party. I mean, as I already explained, the big impact for the Candyking business is the Norwegian business where the sugar tax led to a sugar debate, which has led to all customers in Norway not promoting Pick & Mix, yeah? And promotions are really important, not only during Easter but also in the other months. That is the main reason for the Candyking loss.
There's one other smaller reason, which is that we decided already when we acquired Candyking that we would step out of a loss-making Polish business. It was heavily loss-making, but it was loss-making. We looked at it. We could not see a way on how to make it profitable looking at the market conditions and pricing. So we decided to step out of that and informed the customers that over 2017, we would unwind that business. That actually is helping us in the profitability. Those are the two reasons for the Candyking business to be down. Where, you know, we initiated the Polish thing. Good decision. But of course, in Norway, we need to work hard to compensate for that.
We have one major customer in Norway. Of course, we're in constant dialogue with them on how to cope with this less volume, both from a consumer but also from a cost perspective.
Of course. Thank you so much for taking all these questions.
Good.
The next question comes from the line of Mikael Laséen from Carnegie Investment Bank. Please go ahead. Your line is now open.
Yes. Thanks. So, first of all, could you say something about Norway and the current trading in Q3? I guess the sugar tax could go away as consumers come back, and marketing spend perhaps increases in the retail chains and so on. But how has the Q3 started?
Now, we're not going into forward-looking statements, but what we can say is that we have seen in Norway a positive growth in our packed business. So our branded business in Norway is growing. So that is very pleased to see. That also means that we've been able to adjust to new price points with the sugar tax. Yeah. And I'll tell you again. I mean, it is really a fiscal measure. I mean, you don't pay any sugar tax on a kilo of sugar. You don't pay it on ice cream. But if you buy Läkerol, which is not containing any sugar, you pay this sugar tax. So that is a good sign, I would say. That's, of course, not only the sugar tax.
That's also the yeah, the things we're doing in the sales fundamentals in particular and also with the branding. Yeah. And then if you look at the pick and mix business, of course also in Norway, the biggest quarter or the biggest month is the Easter sales, yeah? And that effect you have seen. Now it is time to work with the customer and see, "Okay. Yeah. The next big one is Halloween." That's not by far as big as Easter. But how are we going to operate?
Now, one thing which we can see in Norway and what we also hear is that there is a lot of discussion in the Norwegian market, particularly between retail and the Norwegian government because the Norwegian market is quite impacted even though it is like 1%-1.5% because there's a lot of Norwegians who are actually going now across the border to do shopping in Sweden. And I think from top of my head, that's something like 60% of the Norwegian population is living in places with only one hour or less drive to the border, yeah? And we're not talking here about candy. But we're talking about, yeah, a lot of other categories which are cheaper in Sweden. Of course, that is hurting the Norwegian trade, yeah?
So they're also lobbying hard to get rid of some of these measures, yeah, like other governments in the Nordic have tried and left. You had in Denmark the famous fat tax, which led to the same kind of behavior of Danish consumers then shopping in Germany. Then the government decided after two years to abolish it. So there's certainly a lot of discussions going on to see, you know, what is the real purpose of the sugar tax because, as I just said, it's also something which doesn't really prevent people from eating less sugar because it is the same tax on all products in the category.
Yeah. Okay. Further on, on Candyking, you do provide a lot of growth numbers here for us to try to figure out underlying growth and so on. But Candyking, I mean, it was consolidated at the end of April last year. So it was not part of the group in April. And this year, April was the Easter month. So, could you say something about Candyking's organic growth during the whole quarter of Q2, this year, year on year?
But that's the table we showed. So the Candyking organic growth, yeah? So this is nothing to do with Cloetta, organic, non-organic. So Candyking declined -12.1% in the quarter. That's largely large.
So that's FX adjusted as well then? Yeah.
yes.
Yes. So just to come back to that point, it's Danko here, Richard. Yeah. We had this discussion in the previous quarter. And we said we would consider for this particular quarter to show you the organic growth for Candyking in isolation. And that was a bit unusual because two months are organic. One month, the month of April, is what we call structural growth through acquisitions. Mm-hmm. So the table that you see, we've actually taken away that and said that's the organic underlying, like-for-like comparator on Candyking. It's the only time we will do that.
Okay. Yeah.
So and the problem disappears because from Q3 onwards, you will have a comparator by quarter. Mm-hmm. So. All right. So you have that number. Thanks. Fine.
On the gross margin then, you, I guess, the mix in this quarter is positive also for the gross margin as Pick & Mix decreases in proportion. Could you say something about the gross margin development within packaged, if that has improved or is it only the mix?
No. It's, I would say, if you look at it, you're absolutely right. So we have a negative volume and a positive mix. And the effect of it is basically neutral. And then you have the production benefits coming through, which is the fixed cost leverage that we are seeing as an enhancement. And to that, you also have a somewhat tricky price implication. But if I look at it overall, then the packaged business is holding its margin from a commercial point of view.
You're getting a boost from restoring, let's say, the supply chain, production. So it's a recovery from a somewhat negative comparator, I would say. But you don't see a significant improvement in the profitability from Pick & Mix. It's holding its course. That's what I would say.
Okay. You touched on pricing. You said in connection with Q1 that you would implement price increases to mitigate the currency movements, not the least. At that point, I think you mentioned the price increases would probably start to come through in August, September or so, and gradually impacting the margins. Is that still the case?
Yeah. Okay.
So like we said last time, when Forex or raw materials start to move aversely, yeah, we cannot act on a spot price difference. So it needs to be in the market for a while. And then there is a three-month notice, yeah? So we need to inform customers that three months later the prices are going up. So that we have done. And that means indeed that as from quarter two, August-ish, these prices will go up.
Okay. On another thing on the gross margin. The effects from last year's fire in Turnhout and now that the production is more or less up and running, did we see any gross margin improvement quarter on quarter from taking back production, perhaps from some third party, or will that come in Q3? Could you say something about that?
It's Danko here. So, you are starting to see synergy realization from the Candyking insourcing. It was much smaller in Q1. So now, as we have said, the generation of the benefits from this Candyking acquisition, it's coming through more in the second half of the year than in the first half of the year. So that you will start seeing coming through as a positive.
And please bear in mind also that we did not have a financial impact because of the fire in Q2 last year. What we did have, though, was a very low production volume in Q2 for many different reasons. So I'm not going to go into those and bore you with those. But now, we are restoring that level. So you get first, fixed cost leverage benefit. And now, we are then increasing volume. The fact that we are having Candyking insourcing, we also have volumes from Italy that we are moving in. And the third-party production that we've had is going to be insourced as well. So there is volume for supply chain to produce. And the task for supply chain is to do that at a low cost as possible.
That is progressing now in a positive way also with the new machine coming in. So more in the second half than what you've seen in the first half will come from that.
Just to add on that, the fire at the Turnhout machine we had. It was last year in June. Right? It was one of the last days in June. So the comparator with last year is not in any way.
No.
Affected by the Turnhout.
It's just lower production.
Yeah.
Volume for other reasons. Yeah.
Yeah. I was just thinking quarter on quarter if there were any positive effects in Q2 versus Q1 from Turnhout up and producing again.
No. No. No. You're not seeing it. Mm-hmm. You will start seeing it in the second half of the year because then the implications of the fire had a negative effect both in Q3 and Q4, not only in Turnhout but for the whole network. Yeah. It became a bit of an issue.
Okay. Good. Final question just if it's possible. You're mentioning in the second half more synergies coming through from Candyking. But is it possible to quantify anything? How much did you see already in Q2 and what is the delta moving into the second half?
And perhaps also, I mean, you have the target what you are going to reach in 2020. But the work in terms of insourcing of production is that moving faster? Yeah. Or in line, or and sort of, when will it be material?
I realize and I appreciate that we can be a bit more detailed. But as with everything when we are doing these activities, I think it's more important to go back to the headline of the SEK 100 million that we said we would do. Is it going faster or slower? We said that it would come more in the second half of the year. What makes me very encouraged is to see that we are delivering synergy realization as we have planned internally, a little bit ahead of schedule.
And that's great to see because sometimes, acquisitions don't go your way. But this time, we are seeing it coming through. And we know that there's enough in the pipeline. So if everything works well in supply chain, you never know if there are something happening. But if things go as we have planned, it will come in the second half of the year in 2019 and with fairly high comfort level, I have to say. Even though that might be the last thing I'm saying here. But it is, I'm very encouraged with the integration work and the realization that we are seeing coming through now.
Of course, there are two big underpinning factors. One is the Turnhout line getting up to speed, which gives us also the capacity to execute those plans. And the second.
Yeah.
One is the go-live on the ERP system on the 1st of May, yeah? So after we work ourselves through the smaller issues which you always have with an ERP go-live, we also will start to see back-office synergies coming through in quarter two because of that. So of course, those two big events are pointing to what Danko is underlying, that most of it will then come into the second half.
Okay. Thank you very much.
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