Okay. Good morning, everyone. Welcome to Cloetta conference call. My name is Jacob Broberg. I'm Head of Investor Relations, and as previous quarters, I have David Nuutinen, our CEO here, and also Danko Maras, our CFO. So please go ahead, David.
Thank you, Jacob, and good morning, everyone. I will start with the Q1 highlights and an overall view on the market and sales development. For the quarter, we can see a positive performance with higher operating profit, a higher operating margin, and a lower net debt with a sustained strong cash flow. Our top line growth was 3.4%, amounting to SEK 1.358 billion. On the overall market and sales development, on the market, we could see positive market developments, except in Italy. In the Italian market, we can see that the conditions have remained tough with the market declining, and this has, of course, affected us. However, we are constantly working to improve our performance in Italy.
On the organic growth, the decline is something we are not happy with, despite the strong comparator, we keep on working hard on our day-to-day execution on our sales and marketing activities, and we see no change to our target to grow at least in line with the market, which is then 1%-2%. On the particularly the two markets, we have also seen some sales decline, in Denmark and Norway. In Denmark, it is related to a loss of one particular customer in the sector of sales of sweets. And in Norway, we have particularly a strong comparator with this very strong launch, a year ago. And as you know, some every now and then, we will see some changes in the quarterly sales related to launches and promotions.
With this quick overview, I will hand over to Danko.
Thank you very much, David. Good morning, everyone. If I go into page four, we've added a couple of lines on the profit part. So if I leave the net sales for a moment, you see the 3.4%, you can see that our gross profit in the quarter was 37.3%, sort of flattish towards last year, which was 37.4%. It's a slight decline, but in absolute terms, you can see an increase to SEK 506 million versus SEK 491 million. There are two offsetting components here, and clearly, as you know, the acquisition of Lonka continues to be dilutive to the overall, group gross margin, but that has actually been offset by supply chain efficiencies that we are, realizing more and more now when we're running on a full run rate in our supply chain.
So the impact here you're seeing is 100 basis points, negative impact for the group on Lonka, and we keep working on implementing and integrating Lonka and improving the margin. But that is not for this year, and therefore, we have this dilutive effect, which is actually offset by a really good job in our supply chain performance. That SEK 15 million difference you see is actually flowing through quite steadily down to the operating profit. Adjusted, the SEK 126 million is about SEK 18 million better than last year. The decline on sales gives the margin even a bigger boost, so you can see that the 9.3% EBIT margin is 110 percentage units better than last year or 16% improvement of EBIT.
So we feel, there's been a good delivery on the profit contribution in the quarter, and the overarching structural improvement comes from our supply chain efficiencies. Operating profit is slightly down to the adjusted one, SEK 108 million, but holding the difference towards last year. Please remember, last year, we did a restructuring in Italy that affected our, selling expenses. This year, we are making, an adjustment in the earn-out considerations. We are, about to finalize the, one of the two remaining ones, and after Q2 this year, we will then be only having one more earn-out that we need to assess. And the probability of major changes of the earn-out is diminishing as we are getting less and less of those.
But the majority of this charge between the adjusted and operating profit relates to the earn-out considerations that we are now finalizing. It's still outstanding, some questions on it, but on a very residual amount, so therefore, we don't see any material movement in that respect. So if we then move down from the operating profit, you can see that the net financial items was SEK 46 million versus SEK 48 million last year. The positive news for us is that we continue to improve our other financial expenses, where we actually have our third-party borrowing and interest costs. We're down to SEK 40 million versus SEK 54 million last year. However, we do have a swing in our exchange rate differences, and they are revaluations that we are doing on monetary assets.
You can see that we had a charge of SEK 8 million, and yet last year, we had a benefit of SEK 6 million. These are unrealized valuations that are not affecting the cash, but something we have to do in our income statement. If we look at it on a full year basis, the impact last year was just SEK 1 million, but we will have these swings coming and going, and one item that we are looking at is the British pound and making sure that we are acting rightly on that item, considering the volatility that the pound is causing us. We don't have a material exposure, but we need to be considerate about what's happening with the British pound. Then moving down to the profit before tax, you see a SEK 20 million improvement to SEK 62 million versus last year.
It's a nice improvement, but that is not coming through when you look at the profit for the period. We have a tax of SEK 18 million in the quarter that represents 29%. It's quite a high tax rate. It's easily explained with that the earn-out consideration is not tax deductible, it's considered being part of the purchase price, and that is actually why we're having a higher tax. If we are taking that out and do a like-for-like comparators, we are down to the corporate tax rate of about 23%, without it. So that was a lot of numbers on the income statement, but if I then move over to the sales part, again, on page five, as David was alluding to, not happy with a slight negative growth despite the strong comparators.
And the contribution on the top-line sales that we see in the quarter is actually coming from Lonka, and that is the Lonka acquisition delivering 4.9% incremental growth in our top-line number. The changes in exchange rate is also notable. It's the first time in many quarters where you can actually see a negative development. What that means is that the euro is not continuously strengthening, which it has been doing for many consecutive quarters. It seems like it has steadied a bit and that the Swedish krona is strengthening, but I'm sure you analysts knows everything about the development of euro and SEK better than I do. But that is the first notable change that we are seeing, so please remember that going forward.
Here on page six, you can see a visual which strongly indicates, both, on absolute terms, the increase quarter by quarter on sales, operating profit, and adjusted operating profit. Clearly here on, the indications of the phasing of our profit, you are getting a good understanding of looking at the historical delivery. It is a very nice operating profit delivery on the first quarter if we start comparing it to the two previous years. And if I just simply replace last year's quarter and add another quarter, and we look at the rolling 12 months, the adjusted operating profit is moving from 12.2% to 12.4%, and our clean operating profit is actually moving up to 12%.
If we then talk about rolling 12 months going into the cash flow generation, you can then see on page seven, we introduced a new chart for this session specifically, where you can see the cash flow generation from the business from 2012 to 2016 first quarter, and the red line there is the rolling 12 months. Clearly, in the last two years, you can see how we are stepping up in the cash generation delivery, and then in 2014, delivering about SEK 500 million of cash flow, and then SEK 927 million in 2015.
And then on top of that, with a very good delivery also in Q1, where the cash flow was SEK 253 million, if we then replace that with the first quarter last year with the new one, we are now topping SEK 957 million of cash generation. So very strong and good cash flow delivery. One or two of you have asked me, when is that going to be a round number? I just want to be mindful about working capital movements. We are very happy with structural improvements. Working capital as a percent of NSV is below 10%, but they can swing unexpectedly, so please be aware of that as well.
If we just break that down a little bit more, you can see that the cash flow from operating activities on page eight is SEK 121 million versus the SEK 66 million last year. That is also coming through in the actual finance net. It's only the third party borrowing, which we are having as a cash out, and that is SEK 13 million better than last year. But also the tax, the tax calculations we are doing, there is actually no tax paid in the quarter, and that's about SEK 17 million better, and that gives this incremental good cash delivery in the quarter on top of the EBIT contribution. Positive working capital movement now also gives the SEK 253 million.
As you can see, if I go further down there, we don't acquire any companies at the moment, and then we are amortizing our debt with SEK 90 million. For some of you, you might ask, why do you have such a large cash position at the end of first quarter? It's because we paid dividend, so we held the position instead of sweeping it back, and that has now been paid in Q2. This cash flow delivery then results in a continuous improvement of our net debt/EBITDA ratio. So even if we manage to come down to 3.03 in 2015, it further reduced to 2.78, indicating the strong capability of driving our cash flow generation towards our long-term target of 2.5x net debt/EBITDA.
With that, I leave the cash part and give the word back to David.
Thank you, Danko. On the integration of Lonka, it is moving according to plan. We have now completed the integration of the sales, marketing, and purchasing activities into Cloetta. The next step is then continuing the work on the supply chain side, namely on integrating the Roosendaal factory into the Cloetta ERP system, and then also the planned closure of the factory in Dieren, which is then planned, the production is planned to cease at the end of this year, and the production will be transferred to Levice in Slovakia. And in Levice, the factory building, the extension has been started during the quarter. Going forward, focus areas, as we said, on top line development, the slight decline in organic growth, we're not happy about it, so we keep on focusing on profitable growth.
We plan for growth, and as I stated, despite the sales decline in quarter one on organic sales, there's no change to our target to grow, at least in line with the market. We will continue focusing on implementing and driving our initiatives within the Pick & Mix area. As you are aware of, that in quarter one, we have completed the execution and implementation of the two new contracts in Sweden, and we keep, we focus on continuing the keeping the positive momentum going on. I just mentioned Lonka as to where we are, so that focus is very much now on the supply side, and then on the operational excellence of supply chain through our Lean 2020 initiative, delivering efficiencies. These are the core focus areas going forward.
Then on the past, last slide, we see a selection of some of our product launches. We are all about consumer goods, brands, products that consumers love. We have a sample of some of the launches where you can see, particularly here in Sweden, Norway, and Finland, where we have some launches on, in, in Better for You products, particularly the Crispy Bite, which is a whole grain wafer with berries. And then in Finland, Better for You products, where the launch of Jenkki pastilles with 100% xylitol, with the dental benefits. We also see some examples of how we take successful products from other markets, namely in Italy, under the Sperlari brand, taking products from the Dutch market and introducing them into the Italian consumers.
And you can see also the rollout of new nut products in various markets. So all in all, also continuing the activities on new product launches and bringing news to the consumers.
Okay, thank you, David. That was all from us as an introduction, so, we will then open up for questions.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press zero one on your telephone keypad now. Please hold on till we have the first question. We have a question from Erik Sandstedt of Handelsbanken. Please go ahead, sir.
Hi, thank you. It's Erik here. I have a few questions. Firstly, on SG&A costs, those are basically flat or actually even slightly down versus the same period last year. I know you touched a little bit on it in the presentation, but is that something we can expect also going forward, or should we expect a sort of normal inflation on that line?
Good morning, Erik. Do you want to ask all your questions, or should we go ahead and just-
Maybe we can take one at a time, if that's easier for you.
Yes. So on the... Well, good morning. On the effect that you're seeing, we have to be mindful about two things when we look at selling expenses and G&A in the quarter. The adjustment that we do in the earn-out that makes an adjusted operating profit, you will see in G&A in the quarter. So there is a higher spend versus last year, mostly related to the fact that we are having an additional charge booked as earn-out consideration in G&A. On selling expenses, we also have to remember that last year, we made a one-time adjustment for the sales force and the commercial organization in Italy, and therefore, you see a higher charge last year, which was also adjusted for last year. So that's why you see it falling through in the P&L.
So I would actually relate the two items that I just referred to-
Yeah.
- as one-time items and not running costs that you would expect going forward.
Yeah.
I hope I explained that well enough for you.
No, that's, that's perfect. That actually leads me on to my second question, 'cause I just wanted to get a feel for where the extraordinary costs are booked in the income statement, but I suppose you touched on the SG&A one already. But the Lonka restructuring, is that part of COGS or is it SG&A?
It has been booked in SG&A last year because of the commercial integration. When David was talking about the supply chain restructuring, that is actually coming now, it's going to be booked in COGS, and there we have not yet incurred any material costs. Once upon a time, we had a table that explained exactly where that would be. If that would help the analytics of it, we might consider introducing it again, but it is not a material restructuring in that sense, so I feel that might not be necessary. It's better to explain it for you.
Yeah. So just to conclude on that, the whole non-recurring cost in the quarter actually relates to the earn-out, and it's booked in general and admin expenses?
80% of it, 85% of it. Then we have a few costs, which relates to a slight impairment of a building in Zola Predosa, in Italy, which is very small, and then also a very minor charge on the restructuring.
Yeah.
So the majority is the earn-out, absolutely.
Yeah, perfect. Thanks. Then moving on to organic growth. I mean, you're now meeting basically the comparison figures from when you ramped up Pick & Mix with Coop last year. So I suppose that inflates your comparable figure quite a lot. But I know this is a bit hypothetical, but if you try to adjust for that and perhaps look at organic growth more in your branded business, would that be positive in the quarter, or would that be negative as well?
Okay, Erik, David here. Yes, I think you're absolutely right. When you look at the comparator where we did have the ramp-up of the Coop Pick & Mix, and as stated, there are always variations in product launches and promotions. But looking at particularly this quarter and the comparator, yes, we said that we're not happy with it. Don't want to go into any explaining mode, but when we do look at this quarter, we do see also some slight changes in trading days. So all in all, if you take all of that into account, we are still confident that we can state that there are no change in our forward -going sort of strategy of delivering 1%-2% growth.
Yeah, perfect. And actually on that topic, coming back to the Pick & Mix business, if we look specifically at Coop, are you growing that business organically now? Obviously you had the big ramping up effect last year, but do you have growth on top of that now?
Well, well, of course, we have to look at. When, when you speak about ramping up, it's our sales to our customers. I think the most relevant topic is always what is going out to consumers. In this quarter, we had the ramp-up of ÖoB and Bergendahls. I think overall, the ramp-up of Bergendahls and ÖoB has been going according to plan, and some of the initial selling out indications are also positive. Still early days. With the Coop development, now, once we've been there already for a full year, I would also say that we are seeing positive development.
Okay, perfect. Thanks. And then just finally from me, in terms of the Italian business, you've obviously had some, some problems there for years. Is that a business you're still committed to retaining, or could we see some, some significant restructuring there going forward?
As I said, and you've also heard it several times, that the Italian market conditions have been tough, and it has also affected us. We are continuously working to improve our performance in the Italian market. Italy is one of our main markets, and it is, t hat's clear.
But is it primarily market dynamics, or is there anything company specific that you could do better?
There's always opportunities to work hard and improve performance. Naturally, the market condition, when it is in decline, it does have an effect to us. And then when we look at our various brands, we can see some brands are up, some are down, but overall, we just keep on working hard to improve the performance.
Perfect. Thank you very much, and, and well done on a good quarter.
Thank you.
Thank you.
Thank you. Our next question comes from Mikael Holm of Danske Bank. Go ahead, your line is open.
Yes, my first question relates to the gross margin. You talk about the dilution for Lonka, offset by efficiencies. But in recent, basically the recent two years, you've been talking about headwind from FX and raw material cost, and you've had a lag before you've been able to push price increases to your customers. I guess we have seen a bit of a more stable situation on both the raw material and FX side for some time now. Shouldn't we see a positive impact from pricing? Why didn't we see that, and should we expect that going forward?
Hi, Mikael. Yes, on the gross profit, of course, when I talk about supply chain improvement, I incorporate anything that relates to procurement, conversion cost improvement, efficiencies with volume, getting the best out of the coverage, and so forth. So it's a combined picture. And clearly, we do have seen some key raw materials coming down. At the same time, as you are fully aware of, we also had some key raw materials going up significantly. And in the nut segment, we were very severely hit by that and tried to do pricing, which we did in the fourth quarter, but having an effect on volume. And now you can see world market prices is actually coming down on nuts, and we are very happy to see that.
The demand for almonds has gone down significantly because of the high pricing, actually resulting in that there is a reduction of pricing for almonds. So that gives a good prospect for us. However, if you ask what is the composition of price and volume on the growth numbers for the quarter or structurally, we have specific areas where we're doing pricing, where you have effects on currency, predominantly, and that has been in Sweden and Norway, where we have had to do pricing in the most recent period. The same goes for decisions that needs to be made on the development in the U.K. So if we look at the blended picture of our company in total, as you know, we don't disclose exactly how much is price, how much is volume.
It is not a significant component in total going on price, but in some individual markets, we are doing price increases to mitigate both forex and commodities, as you know.
Okay, and also a follow-up on the Lonka dilution. You said it was roughly 1% in the quarter.
Yeah.
Is that a fair assumption for the first 12 months, that that Lonka is included in your numbers?
Without making any forward-looking statement, Mikael, but we are gradually improving and working on the restructuring of Lonka, and we have said that we would realize full run rate of the savings in 2017, and it won't come overnight. So, but it will gradually then be an effect of it, but I cannot give you an indication of which quarter will have how many basis points. That would be tying ourselves to our own back in doing that, in committing.
But you don't expect, Lonka to be able to reach the kind of gross margins you have on the group? That's, I mean, even in the long term.
In the long term, absolutely. Well, the contribution that, that we have specifically said is not gross profit, is the EBIT margin. So we have to look at the combination of integrating the sales forces that we started to do last year, which gives us an SG&A benefit. But then also, lion's share of, of our components lies in the restructuring part of the supply chain, and that will be fully realized. So, our, our commitment to the, investor community is to deliver a restructuring savings that contributes to the 14% EBIT margin.
Okay, and my final question, I guess you touched upon it earlier, but did you have any impact on, from Easter being in this quarter, in Q1 this year?
Mikael, David here. Actually, when you look at our sales, whether Easter is in March or it is early April, our deliveries mainly take place in quarter one. Of course, in consumer sales, whether it's in March or April, it can have an impact on how we view the market development. Naturally, with Easter being this year in quarter one, that has also contributed to the positive market development in the quarter.
But I was also thinking of the cost side in terms of marketing activities.
No, there's, I mean, we wouldn't say that we have notable fluctuations in our marketing. It is just quarterly phasing issues in that respect, and I wouldn't highlight those as something exceptional in our case.
Okay. Thank you.
Thank you. Our next question comes from, Fredrik Villard of Carnegie. Go ahead, your line is open.
Thanks. Good morning. I've got some questions, follow-up questions on the cash flow and what are your thoughts on cash allocation? I mean, you're rather quickly coming down towards your target, as you mentioned, even despite adding back the dividend to be paid in Q2 or have been paying now. I mean, what are your thoughts on cash allocation? Even if I run the math here, you're gonna have some leftover cash if you continue with this cash flow sort of position that you're improvement that you have.
Good morning, Fredrik, it's Danko here. So on the cash flow generation, the fact that we're coming down to our target level is just, very positive news, and now you can actually see that coming through. Please remember that the earn -out needs to be paid as well, which is a 25% share that needs to go out as a postponed acquisition price. So we will have cash outflows that will come here in the immediate future that we need to consider and cater for. But as we have said before, we want to make sure that we have the flexibility to do tactical acquisitions. In case our board would agree with us, we would go ahead.
If we will have surplus cash at the end of the day, we would amortize the debt level, and if there is a desire for a special dividend, that would be raised when that is of any interest. But we are not there yet at all. Please remember, we are SEK 2.6 billion net debt, and we need to come down to about 2.5x . So still there's some room to get to that target level. If we find interesting target for us on the M&A field, we don't want to have a restriction from a financial flexibility point of view. So that we need to cater for as well.
All right. Perfect. Then touching upon that, I mean, just speaking in general, you've been very active in, you know, despite the restructuring of the facilities, and now you're doing another restructuring in the Netherlands. I mean, prices on M&A generally, are they going up, down, or flat in this market? And obviously, I know you don't want to comment on specifics, but generally for confectionery companies that we can't sort of monitor the price on, are they—what is the sort of the movement of the market?
Well, I would say when we look at it, I think we have seen some ease of the multiples, not a lot, some ease of looking at what the valuation of companies are, but I think there is a correlation on the access to cash or, you know, the cost of borrowing is certainly influencing it. There is a steady stream of interesting opportunities, so there's no lack of opportunities. We just need to find something that we believe fits our Munchy Moment strategy and can yield the right kind of synergies for the Cloetta group. So it becomes a case-by-case basis. There are family-owned businesses still out there. There are other interesting opportunities.
But until we have something more tangible, we will look at them with, you know, our financial hat on, and then does it make sense from a strategy point of view as well, that it fits the Munchy Moment? That's what I could say.
All right, so, sorry, final question for me. Danko, I know you said several times 3% of NSV is CapEx to sales. I think I've asked this every quarter.
Yeah.
Is it still 3% of NSV, you're aiming for in CapEx?
It's actually 2.5% in the, in the quarter, which-
That's why I asked.
I keep the 3%. You know, please, please remember that we are expanding our building in Slovakia, and all of this is timing issues. So let's think about the long-term strategy, 3% of NSV is CapEx, and 10%+ of NSV is working capital.
Thank you.
Thank you. Our next question comes from Anna Patrice of Berenberg. Go ahead, your line is open.
Yes, hello. Thank you for the answers already provided. Couple questions from my side. Could you please provide more details on the one-offs? So why exactly did you have to... Why the earn-out, the extraordinary expenses? What has happened here? What was the exact amount of earn-out in the extraordinary expenses? And what is the full year that you think the one-offs will be? So one-offs at the end of the year, how much it will be, and how much in Q1 was due to the Lonka restructuring. Another question on the organic growth. So it was slightly down in Q1.
In Q2, you have easy comps, so can you comment on the current trading, maybe, how the month of April was for you, and what kind of organic growth would you expect in the first half of the year? So should we expect some acceleration in Q2, and what are the drivers behind expected acceleration for the rest of the year? And then, I think from the analyst perspective, I think it would be very, very useful if you could provide more details on the way you book the one-offs. Because when you look at the quarterly reports, you will see in the SG&A, in the selling expenses, et cetera, in the gross profit. For us, it will be very useful to see the underlying development, another time to see, oh, actually, in Q1 last year, the one-offs were in this year.
That's why, you know, in this item, that's why this year, this item was kind of flat or decreasing or something. So from analyst point of view, it will be very, very useful. So maybe you could consider it. Thank you.
Anna Patrice, it's Danko here, so I will take two of your questions, the first and the last, and then David will take the one in the middle. And if I start with the last one, in the introduction of our company in 2012, we had significant one-off costs, and we had a table that showed exactly what they, their items related to, because we said we would spend approximately SEK 450 million. Since then, we have converged more and more towards a very strong similarity between our adjusted operating profit and our operating profit. And the announcement of the Lonka acquisition, with the subsequent closure of the Dieren factory, we did announce SEK 120 million of cost and SEK 35 million of savings.
But in context, versus the overall big scheme that we had, which was very detailed, we have converged so that the difference between the operating profit and the adjusted one is small. We're happy to look at this again, if this is a need to go in and actually itemize it. We have no problems doing that, should we see that that will actually help you. In our way of looking at it, it's just not really on the same kind of level that it used to be in the past. And that brings me to the first question of the earn-out consideration. And with all of these things, when you have a family-owned business, the calculations of earn-outs are a negotiation and determination by independent parties so that both parties feel that the calculations are correct.
Out of the difference you see in the operating profit, adjusted and operating profit, a majority of that is the earn-out adjustment. That is still not final. So we are in the closing arguments and negotiations, and we are doing it in a very good way, but these things do take a little bit of time when you are defining the terminology of what the earn-out should compose of. So because 85% of our total cost in the quarter relates to the earn-out, we chose not to itemize it. We could say, though, that the impairment that you've seen, or that I mentioned on the building that we had in Italy is approximately SEK 2 million, and the Dieren restructuring that we also booked was approximately SEK 1 million.
The rest is just the earn-out consideration. We're giving that total to you, and let us come back and have a little discussion internally on how to do the itemization a bit more, and we'll come back to you on that one.
Okay, and I'll take the your third question on the organic growth. As you know, we do not go into any forward-looking statements on specific quarters, but on the organic growth, I'll just reiterate my statement on that we see no change in our target setting of achieving market organic growth, at least in line with market development. That is historically being around between 1%-2%, and then we look at that on a full year level.
Okay, but then what are the, what, what makes you so confident that they can accelerate your organic growth development for the rest of the year?
We of course understand where the decline came from in Q1, and we do believe and strongly have confidence in our activities going forward. And we will stick to that target setting.
What was the current trading? So what is the current go like, what was the few weeks in April, how the few weeks in April are developing?
Anna Patrice, as you know, we refrain from making any sort of forward-looking statements on current trading.
Okay, understood. And sorry, for the one-offs for the full year, what is the total expected amount?
The composition of the one-offs we said would be SEK 120 million in total for the factory closure in the year. SEK 35 million is the full run rate savings that we will start seeing coming through in 2017. We have taken some charges in Q4, about SEK 16 million of that. The earn-out adjustment is, I want to be a bit careful, but we do not see any material movements in our income statement. With a safe harbor statement, that there might be some slight changes, but not material. The only part remaining will be the announced restructuring that we have done for the year, of which approximately 50% of the remaining SEK 100 million will come through.
Okay. And when there was a conference call with the full year results, have you already expected that will be one-offs with the earn-out?
Yeah, as it works, you make provisions for these earn-outs. So when we did the full year results and disclosed it, it was based on a computation that we had as we’ve seen it. And then, of course, we go in and we finalize it. And this is a negotiation which is still ongoing. So we are in an amicable way resolving the earn-out consideration. But perhaps we should look at it in a different way. We are very happy in Cloetta because it is an earn-out that is a result of a very successful acquisition. So on both parties, we are extremely pleased with the acquisition per se, and the contribution to both top line and bottom line for the acquisitions that we have done in this specific case.
So paying a high earn-out for us is great news, because we get a large share of that profit contribution. The point is just that you need to finalize that, and that is taking a little bit of time for us, and that is why we have also booked the final cost in Q1.
Sorry, I probably missed this part, but to which company this earn-out is linked to? And when are you going to pay the earn-out, what will be the exact amount that you are going to pay this year?
Yes. You're very detailed in your questions, and I appreciate that. And I will tell you, it's The Jelly Bean Factory. And when I'm going to pay it, I cannot tell you, because we are still negotiating. But in the next coming months, there is an actual payout that would come, as soon as we have finalized it. The residual items that we are negotiating, I would appreciate not to disclose that now because we are in a bilateral discussion with the seller.
Okay, understood. But basically it was planned that you will pay something this year, and then this additional amount that you have in one-off that you put through the P&L now to be paid out at some point also this year.
Yeah. So there is a measuring period until the December 31st 2015, and then you do your calculations on the earn-out. The actual cash out for us has not been paid yet because we are still finalizing the negotiations, but it will happen in the next coming period. I think I will stop there on this specific item.
Okay. So, before all those negotiations, I expect roughly SEK 50 million as earn-out to be paid this year. Sorry, next in 2017 and roughly SEK 75 million to be paid this year, before all those negotiations. Is that pretty much in line with what your expectations? Again, as I said, before all those adjustments for the earn-out.
We will, we will fully disclose that when we are done with the negotiation. You will get access to it. It's a little bit more than that, but-
Okay.
-that's all I can say for now.
Okay, understood. Thank you.
Thank you. I remind you, if you wish to ask a question, you'll need to dial zero one on your telephone keypad. There are no further questions at this time. Please go ahead, speakers.
Okay, thank you very much for listening and asking questions. Speak to you next day, and have a next time, and have a good day. Thank you and goodbye.
This concludes the call. Thank you all very much for attending. You may now disconnect your lines.