Earnings Call: Q1 2021

Apr 23, 2021

So good morning and thank you for joining us on the Q1 conference call for Clouesta. My name is Natalia Liriadmo and I'm Head of Investor Relations. With me here today are CEO, Henri de Sauvage and Frans Houdienne, CFO. Henri and Frans will take you through our first for the results, and we will then move on to a Q and A session. And I will now hand over to you, Henri. Good. Thank you, Nathalie, and welcome, everybody. A few key messages on what we did see in the business in Q1. So it was very pleasing to see that the branded business came back to growth Whilst we still have quite some out of home channels with a lot less shoppers, Pick and mix was still negatively impacted by COVID, although March was a good month, which we'll show you later. That, of course, has To do both with the comparator and also that Easter was in March, difficult To calculate exactly the effects of the 2, also very pleasing to see is the progress we're making on the roadmap to profitability For Pick and Mix, a lot of pricing and premiumization was done in the last couple of months, and that also starts To show in particular on the gross margin in that underlying business, then I'm also very pleased to say that Although we are still managing the pandemic, there's a lot of progress on the strategic agenda. And today we'll Talk a little bit more about e commerce and sustainability, which are gaining traction. A few quarters ago, we talked about our Innovation 2.0 setup, so fewer innovations, but bigger ones. This quarter, we're actually launching quite some disruptive innovations, which we'll disclose a little bit more about and then going forward, we can tell you a little bit about the success. Still very good focus on the VIP plus the savings program delivering also on the indirect Moving towards a global shared service center in the Netherlands and in Snow Lake, yes, also very good progress over there. Frans will talk a little bit about the refinancing of the group, which we have done and we also approved a Investment into new packaging technology for carton boxes. So with that Seth, we can have a look at the sales. Of course, I don't like the first bubble, the minus 4.2, that's still negative, which is not success In my books, but if you then appeal it, of course, it is very good to see that we are growing the branded business again, Which is of course a very important part of our total business and something we were consistently doing Before the pandemic and now we're back to growth, so very good. And then on pick and mix, you can see that we're still Heavily impacted by the pandemic both in sales channels, in activation, but also in consumer behavior, But that March looked a little bit better. And just to remind you, of course, last year in March, in the second half of March, the pandemic Well, actually it was called out as a pandemic and consumers and customers started to react to also the comparator versus last year It becomes a lot lower and hence we will see like this a positive We internally are constantly looking also at 2019 figures and how we get back to those levels. So next one please. Important for us and maybe also for you in a highlight just to see what It's happening with consumers across some of our main geographies and you can see that Depending a bit on the markets, there's a lot less traffic in areas like retail and Recreation and look at the UK, I mean minus 60, but also the Netherlands when there is a full lockdown, people are not allowed on the streets after 9 o'clock In the evening, so let's not only take the Sweden perspective, where of course we are having a very mild Set of measures compared to let's say the Netherlands and the UK. These are markets where we also operate. So you can see that a little bit over here also transit station, So there's very much people moving around going to work. And again, that's where Cloweta is selling products, looking With the same pattern that the U. K. Is worst in that sense, but also the Netherlands quite bad. And then workplaces, so Where people are working again, UK very low and the rest more or less in line. As we're tracking this, it's also fair to say that now in the UK since mid April, As things are going so well, the society starts to open up, so we get a biweekly report within Cloveta with many more details because this is Something we can learn from to see how our consumers and hence customers behaving when things start to open up again. So we Take those lessons and implement them into our other markets. So we're looking at the branded business. First of all, we have made the estimation of the split between the two channels. Why is an estimation? Because some of Customers are serving both channels and then we have to determine the exact split, which we will not always get from them. But you can see between the brackets What it was a year before and now in 2020, we can see it went down to 75.25. Last 3 months market data, very important for the mix element, we can see that pastels and gum markets are still down minus 13%. In Q3, they came up a bit and then they started to go down again. Here we also have above average profitability, which Impacts our mix within the branded. And Candy Bag still being very positive in the in home channel, Right. So this doesn't say anything about the loss we see of course of sales in the 20 5% other channels. Yes, so the increased candy and chocolate demand is still there And I would say less impulse sales is also still a trend, so not so much change here versus the previous Quarter, I mean we're doing a lot of things. So the step up in brand investments in the top 25 brands is happening. Also In Q1, we spent more in absolute sense. Also, the next quarter, of course, will continue where we had a very low Spent last year when the pandemic started, I talked about the Innovation 2.0. We'll talk a little bit further on the e commerce. The valorization very important is that all the products we're now or all the innovations we're bringing to the market Under the Innovation 2.0, they should have a gross margin, which is higher than the category average of That category in the country where we're operating so that over time we're also in that way lifting the gross margin of the group and the same of course with the It can mix with a lot of pricing quarter after quarter coming into play and starting to show in the results. For pastels and gum, we are working on a strong point of sales program both in the out of home market, but also in the Retail to bring those consumers back into the category. And then for pick and mix, Same overview as last time. I mean, what has changed in UK, I would say, we see at the end of March, Early April, we see some of the channels opening up again. Consumer activation largely unchanged, Less price promotions than normal, and consumer demand also still very much following what we have been Seeing. But there's positive news as well. In April, we do see that the UK As starts to get into a better place on these traffic lights. If you look at the actions we're taking, I mean, we have higher merchandising per kilo if the volume is less. So we are Costing that out towards our customers, which we have been doing, we have some very good activations through cup Promotions, that's an idea we have from the U. K. Where they're selling not in bags but in cups and we're doing those activations now as well in all the Nordic markets where the first one's Really good. The premium Candy King 2.0 rollout is progressing. And then I would say also some really nice barter deals with other companies for the Candy King brands where we are then Bartering, so we then put those brands onto our fixtures, our bags and then we get in return we get Media on the kind of channels they have. So that is also a very effective way for us with limited budgets Had to get the new Candy King 2.0 concept communicated. Yes, France. Good. Thank you. So as usual, I will start with net sales. In the quarter, our organic sales declined by 4.2% versus last year And then almost the same on account of currencies. Now it is important to recall that in Q1, we are still comparing ourselves largely against pre COVID Sales. So January February is pre COVID and March is partially pre COVID as the impact was only really starting to be felt towards the end of March. Actually, the World Health Organization only declared COVID a pandemic on March 11 last year. It feels like it's been going on for longer, That's what it is. With that said, we are very pleased to report 2.5% growth on the branded package sales for the quarter And I'm going to add some perspective to that on the next slide. But also for pick and mix, sales are down almost 23%. This is significant and we certainly have our work cut out for us to get that business back to a good place. Henry spoke about a number of things we're doing, but I also want to put that in perspective on the next slide. So here, looking at the sales by quarter, top row starting with a 2.5% growth in our branded package business. So if you exclude the last two quarters leading up to the pandemic, then 2.5% growth is The highest growth that we have delivered for branded packet sales for several years. Now it's fair to say that there is some cannibalization on pick and mix. Q1 2020 was also not a very strong growth quarter, including due to COVID, but we are on par This quarter with Q1 2019, which was arguably our best Q1 for branded package sales for several years. And this is despite that as Henry laid out outlets in our markets are still experiencing significantly reduced footfall. Then looking at the lower half of the slide and the pick and mix business, 23% decline that is And I'm reluctant to use the word, but that is the best quarter we've seen since COVID-nineteen began. And if you look on the very right, You can clearly see the impact of COVID. With January February is down significantly, very similar to the prior quarters, We're as in March, we grew. Easter do come a bit earlier this year, but clearly society deals with COVID better now And during the start of the pandemic last year and so do we. And it is very encouraging to see this partial recovery. So with those, let's call them green shoots, let's look closer at the profitability. Starting with Q1 this year, we are providing increased transparency on our results by reporting the operating profit for the branded package business And the Pick and Mix business separately. We believe this will help you as stakeholders in the success of Fluenta To better understand our results, our opportunities and challenges. And in a way, Henry Thist is already in his CEO world in Q4, And I'm happy to also confirm that we're going to do this consistently going forward, not just during the pandemic. Before that deeper dive, let's look at operating profit drivers for the total business. And as you can see in the graph, We declined versus last year and that's driven both by the volume loss with associated under absorption of cost in supply chain And then an unfavorable mix within the branded package portfolio that Henry also spoke about with refreshment category being harder hit by the reduced mobility of people and the social distancing. Operating profit further declined on account of increased cost of raw material After Q1 last year as well as we have continued to invest behind our brands. It is difficult to underscore enough how important this is for us. We are a consumer focused company and after safety and quality, there is no more important spend than communicating with our consumers. And we have some incredibly new products and we will have some slides on this, but looking at Kexo Cloud vegan, food based candy, Building on from prior innovations such as plant based packaging and the 30% less sugar, we're going to further step up in the area of Promoting our products to let the consumer know that, hey, we are actually here. Now finally, you don't see Too much of those increased costs come into the quarter, only $6,000,000 as you see there and that's because of the continued efforts in our VIP plus program And I'll come back to that on a separate slide. Of course, pricing and the margin enhancing initiatives that we've taken. So let's then move to the split Between the two segments. You can see here that the profit from the branded package business declined by SEK 40,000,000 despite the growth. This is driven by several contributing factors. There's the higher investment in marketing that I mentioned. There's also the impact of higher material cost I mentioned, But it's also allocation of its share of the supply chain under absorption due to the overall volume drop. We're obviously using our plants to produce both packaged and the pick and mix products. So that is also impacting us in this segment. I'm also highlighting here that we have taken cost in Q1 Related to the recall of Easter products made for us by a third party, it does have a significantly Yes. Sort of sufficiently significant impact on the quarter to mention, but as this is work in progress, I'm not going to go into the details on the And for the underlying risk and looking forward, I think the most important aspect is the negative impact of mix that I mentioned With the reduced sales of refreshment products. Then looking at pick and mix below, you can see that we made a loss in this business of 24,000,000 Swedish kroners and let's triangulate that number a little bit. Firstly, in Q4, we shared that the volume loss due to COVID Had pushed Pick n' Mix to a loss of $135,000,000 or as we now report with inclusion of headquarter allocation, It's a loss in 2020 of €154,000,000 Now you can see in the report that while Q1 last year was already impacted by COVID. Most of the 2020 loss came after Q1. Now that makes for an average quarterly loss for the last three quarters of 2020 of EUR 44,000,000 And you sort of have to compare those EUR 44,000,000 to the EUR 24,000,000 loss in Q1 now. So that is arguably already an improvement. The loss is on par with last year despite the volume loss, although as I mentioned, the supply chain under absorption is shared between pick and mix and branded packaged products. But I think it speaks strongly for the various margin enhancing initiatives that we have shared that we would do and then we have also done. Fair pricing, Exiting unprofitable contracts, reducing costs, we'll be for warehousing or distribution or merchandising or in support functions. Some of the action helped soften the damage in last year, but the full year effect you can only see now in Q1. And then we have taken additional steps during Q1, including further fare pricing initiatives. Ultimately though, we need the consumers to be picking and mixing, Driving scale and efficiency to get back to full profitability. We can then move to the sales, general and admin cost And the continued delivery from the VIP plus program, it's also evident here in the reported financials. Here you can see that in the quarter, Excluding items affecting comparability and ForEx, costs were down $18,000,000 and I also want to put that into perspective. First, I already mentioned that we increased investment in marketing during the quarter. So this reduction, of course, is net of that increase. It's of course also net of the annual salary increases across the markets. But secondly, this is a reduction on top of the VIP plus savings we Ordered reported in Q1 2020. And at that time, we could report a reduction of €19,000,000 So on top of that, €19,000,000 So this comes, of course, partly from one time activities like travel restrictions or lower merchandising costs due to lower volumes, But most of these are sustainable VIP plus savings delivered over the last 2 years and also continuing now in 2021. For example, and Henry mentioned that, I'm really pleased to say that this month, actually from April 1, we went live with our new shared service center for accounts payables, Which we co located with our manufacturing in Levitsi, Slovakia, which will help improve how we work on things and enable further Harmonization and Automation. Now for the non sustainable savings, some of that will come back into the business as society returns to normal And most importantly, because of merchandising. But then those merchandising costs will also come with higher merchandising sales And the profit from those sales, so that is going to be a good thing when that happens. Looking then at cash, we had a healthy cash flow for the quarter And I think there's two reasons why I can say that. First, as you know, with the seasonality of our business, we tend to generate our cash in the second half of the year. At the same time, we did deliver a positive free cash flow already now in Q1 at the middle of the top graph of SEK 11,000,000. And that free cash flow is also an improvement compared to last year when we had a loss of SEK 20,000,000. Secondly, the improvement in free cash flow comes from improved working capital management as well as lower CapEx spend As the installation of the new drying chambers is near completion, which more than fully offset the lower operating profit we had in Q1 2021. As shared earlier this year, we have put in place a Cloueta cash committee to get more focus on cash in a challenging environment, and I'm pleased to see a continued good return on that effort. Now the improved working capital is driven Obviously, by the absence of last year's buildup of inventories as we were safeguarding our supply chain from disruption due to the pandemic, But that's partially offset by lower tables with that corresponded to that inventory buildup and also higher receivables As we finished Q1 sales, much stronger this year than what we did last year. Now the working capital is nonetheless increased In the quarter compared to where we ended last year, and that's because of higher receivables, which is completely normal because the end of Q1, we have Easter sales, Whereas end of Q4 post Christmas, there is very, very little activity. Then as for my last slide, As you know, leverage is one of our key financial targets alongside sales, EBIT and dividend, and this slide seeks To capture that and our debt position, you can see from the bar chart on the left that our utilized credit facilities and commercial papers Total SEK 2,300,000,000 and then on the right that we have additional unutilized credit facilities, commercial papers not set on the market For almost SEK 2,000,000,000 In addition, we held SEK 444,000,000 in cash at the end of Q1, Which was a lot, but then we also readied ourselves for the dividend that was paid on April 13. Now that said, as we hold this call, we have finalized the refinancing of our group through our existing club of banks. I had shared at the Q4 earnings call that we expected to have this completed before the middle of the year and I'm very pleased to share that it has been done So already now and that we've had very good progress with strong interest from our full banking group to continue to partner with us. For the leverage, our net debt is 2.5x EBITDA, given that the lower profit has pushed us up Above our target to be around 2.5, but it's well below the covenant of 4.0. Now coming back to the financing. It consists of 2 loans and a revolving credit facility. It will be repayable in June 2023, 2020 4 and 2025 and each with the possibility of extending for an additional 2 years. This secures our financing and gives us flexibility for the coming years. And in addition, we will continue our existing commercial paper program. We are, as part of that, also reducing the revolving credit facility with $60,000,000 which provides us some nice savings. And on that positive note, that concludes my part and I hand back to Henry. Thank you, Frans. So a few More flavors on the execution of the strategy. So 14% EBIT, really important to start Generating also more gross margin. So the Innovation 2.0, which we started 2 years ago, now starts to Deliver, I would say these are three examples. There's many more of them. The first one very much linked to the sustainability strategy into action It's a program where we are introducing plant pack across our ranges and plant pack are Plastic materials either made totally or partly from plant based material, so not fossil Fuel and that's has good traction with consumers who yes, who see that as a positive And also gives us a reason to increase prices. The second one is that we are the first one to launch a vegan Kex Noklebar into Sweden, but also in some other markets. And that's very nice to see that we're so fast. I mean, More or less the same time, we were announcing a global major competitor of ours was launching their intention to launch this as a big piece of news and we are Orianna already on the market and really plays well into a growing interest among consumers for vegan Products and of course again at a premium price. And then the other one, the last one I'll mention out of the multiple examples we have is Fruit based candy, this is candy made from 50% fruit. Again, we're the first ones here in our markets to do this and also The first one we think globally with such a high percentage of fruit in the candy, very much linked to Several consumer trends of more naturalness, more products made from ingredients people recognize And also tasting really, really well, I must say, a fantastic effort by the, yes, innovation and Slide sharing and marketing team to bring this to the market. And again, you now see here, Gottemblanda, but we're launching this across markets Under the different brands we have in those markets. So I would say quite nice examples of how to increase Margin through innovation. Yes, the second one is e commerce. We already had this as part of our New strategy within Cloueta before the pandemic, which was very because we have pockets of excellence, but not one approach. So we put this together into one execution strategy for all the markets with a small team Of experts helping the different markets to get going. And on the left, you can see the kind of growth levels We are seeing of course the markets are in different stages of development where the Netherlands is more advanced Because you already have e commerce there for the last 15 years and the markets like Sweden or even Denmark Being a bit behind, but it's very pleasing to see that we see some really good growth numbers and also that we are in most markets. We're outgrowing The market development and our focus is very much on the omni channel and pure players in each market to really understand the Kind of activation, but also to optimize ourselves. So that's both the digital self pack shots which need to be different, but also An artificial intelligence tool to see how we are being shopped or how our products are being presented in all those e shops From different KPIs, so really a step up, I would say. And then also Specific activations and in the future we're also looking at products. It's very interesting to see the kind of dynamics in this channel also the kind of Packsizes, for example, we are selling. And next to that, we have a strong focus on marketplaces, Amazon across Europe also bolt and com, which is the Dutch Ahold owned Amazon, you could say. And a lot of traction over there and here it really shows that if we do things together, we only have to invent the wheel once Rather than each market with limited resources trying to do this themselves and if you look at the example over here, the The shop in shop of jelly bean, which is doing phenomenally well in both the UK and Germany, Relatively small markets for Cloueta and not with a lot of resources and then being able to do this with the group and then we can leverage that Into other markets later on, maybe not even only in Europe. So very positive to see. Yes. Also the sustainability strategy, we will organize something in May to communicate more clearly our total program. I think We talked about the first column in the second one, a very interesting Pilot project on the living income module together with some key partners, big global companies and then the Rainforest Alliance to really work on Coco and the farmers in a more direct way using blockchain. We're also starting to look at a feasibility study For a partnership on Gama Arabic, which is coming from the sub Saharan area, where there's both social, economic, but also Planting of trees and keeping trees in that area as both deforestation or Decertification countermeasure and of course giving income to people living there. And then On the footprint, we have subscribed to the climate based scientific targets. So we're Calculating our baseline on that when that is ready, we will set ourselves that target. And we're also very clearly now linking all the 20 supported brands to the sustainability agenda. I mean, what kind of sustainability Parts, are we going to lift into those into the brand a lot of enthusiasm in the marketing and commercial units for that? Yes. And then the key business priorities that remain unchanged. I mean, it is to get back the growth of the profitable segments of the branded Good. And we talked about all the actions we're doing over there. The pick and mix business, we need to get back To profit and all the actions we are having are Focused on either improving the gross margins of the product or to look at the cost, which is mainly the fixtures and the merchandising. So Very good to see the progress of that coming through. And then cost and efficiency, we talked about the shared service center There's more in sourcing we're doing even though it's not that easy with travel restrictions in Slovakia, for example. And then we also decided this investment in carton packaging technology to be ready for the future And that's also an important part of our perfect factory program to move towards a Future, which is built on modern equipment and digitalization. So I think that was the last All right. We wanted to share and then we're open for questions. Thank You may do so by pressing 1 on your telephone keypad. If you wish to withdraw from your question, you may do so by pressing 2 to cancel from the There'll be a brief pause as we wait for questions to be registered. Our first question comes from Andreas Lundberg from SEB. Please go ahead. Yes, good morning and thank you. And just on your branded profits or branded package profits, could you shed some light on the effect from mix Under absorption on the earnings decline there. Thank you, Andreas. So We're not splitting it up per se, but I would say that number 1, We've shared before that our refreshments segment is a very profitable one. And that's, of course, Very much hit by the continued COVID restrictions and people's mobility patterns. On the under absorption, yes, The key point there is that because how we're manufacturing our product and we're sharing production resources between the two segments and sometimes Even shipping between plants for further packaging, the volume drop that we're seeing in pick and mix is also impacting our branded package portfolio. I guess it's fair to assume that earnings would have been down also without any under absorption effects, Is that correct? You're referring to that branded package business on its own, you mean? Yes. Yes. So I mean, yes, there's a couple of things that are impacting that. I think one is when you're comparing to last year, the other one if you're just thinking about sort of Where we're coming off from when we exited last year. So we have also, well, arguably a one time event here with the Easter egg recall. That's, of course, impacting us. We have stepped up the A and P, but that's there's more to come. And as you see, there's a lot of Activities that we've launched now, so into Q4. We would have dropped even without that under absorption because of the mix And because of the Easter egg recall, that's correct. Okay. Got you. And also, I think you touched upon a little bit, but on markets So have opened up recently. What do you see when it comes to both consumer activation and consumer demand? Thank you. Yes. So that's it is early days because that has happened, I think last week in the U. K. Opening and UK for us is of course a market which is well, I don't want to say different, but our business is different. We have A lot of pick and mix over there and much less branded sales and no candy bags In that sense, but what we have seen in the UK is that people are really coming back to the high streets And that is very important because we have a few very big customers like Wilco's and Poundland who saw very low footfall. They were open, but very low And of course, when people are back in the street shopping in those kind of places, we can see that sales also are coming back Over there. So that is something of course to translate then into other markets that we will see the out of home channels Coming back, so for us in the Nordics and analysis and more kiosks and those kind of places. Then cinemas in the U. K, which is also very Important channel, Cinema and Leisure is not open yet. That's going to happen in May, but I would expect a similar kind Of effect. And then it's too early yet to conclude on what is happening in the supermarket channel. And I also do not expect that that will go very fast. So I mean that We can mix sales within the supermarket channel when restrictions are being lifted and will not immediately explode, I would say, back to the 2019 level as communicated earlier that will take several quarters before we'll be able to get people completely back into stick and mix. But we're following this to get a detailed Report with all the consumer insights on a biweekly basis and are then growing our learnings from that For the other markets, we're of course happy to share that next quarter. Thank you. And 1 on the online channel, does it differ? I mean, does your profitability differ Versus your traditional channels. So how does it work? Or what's the differences between when it comes to marketing, merchandising? Do you share that more or less with your sales channels versus the traditional model, for instance? Of course, we don't have any merchandising in these e commerce channels. And then the marketing, I would argue, I mean, you do that for the brands no matter where it is being sold. So we're not allocating our marketing costs The Waste Supermarket or a kiosk or a swimming pool or an e commerce channels, I would say That's the same for all of them. And then some of the omni players, of course, are regular customers like So most like Ika or Albert Heijn, who have both retail stores and e commerce. And then there are pure players like, Let's say Amazon or sorry or Malte and then the marketplaces with Amazon. Yes. And it's a mix of everything. I think it's too early to say, is it above or below or at par in marketing. We also are learning. We're seeing that we're Selling different kind of packs in these places. I mean like in Jellybean, we're selling actually our biggest selling SKU is The big pot, so that is the, let's say, 1.5 kilo pot. So There's also a mix difference very clearly in that channel, which also impact profitability. Okay. Thank you. And then lastly for me, at least, on this new investment plans in the carton Packaging Technology, what do you expect to get out of that? Thank you. Well, a few things. I mean, Model lines with higher efficiencies, so we're able to produce more, but also lower cost due to the fact that we'll have Higher output with the same number or even lower number of operators. It's also making us future proof that we are Able to keep on supporting this packaging technology, which actually is quite important because we can see that there's more and more discussion about Plastics, so we are able to sell candy products in carton, like we have lacquerol or zoo or tutti frutti In expanding markets in Eastern Europe and Asia, that's also an important future growth model and it will support our perfect factory Program, because we are also replacing in this with this investment a number of very old lines With modern technology, which is able to perform at a much higher level with less waste, more flexibility, In this case, we're also going to do a portfolio harmonization where we're going from something like 24 different boxes to Well, something like 4 boxes in total. So harmonization, which will then bring us Further improvements on the buying of the cartons, less complexity, less change over time. So there's A lot of benefits actually coming from modernization of these packing lines. Thank you so much. Thank you. Our next question comes from Niklas Gokhman from Handelsbanken. Please go ahead. Yes, good morning. So I have a couple of questions. The first one is, What is the reason that you allocate an under absorption costs to the package business? Is it because it's just too difficult to sort of split out? I mean that's part of it. I think it's also a fair way of doing it. So if you imagine that we have a production line, Which is producing products that may both be sold in pick and mix and in branded packaged. So obviously, when the volume goes down, it makes the whole line less efficient, so it impacts the volume across. And in terms of the difficulty and you spot on there because you might even have an instance where these products are then shipped to another plant Where they may be packaged. So at the production line, it might not even be clear exactly if this product will land in pick and mix or in a bag later on. So it wouldn't be possible to do it. But I think the simple thing is it's because of the shared technology and shared use of resources, It is fair to allocate it based on the volume. Okay. Good. And then was there any negative impact from input costs in the quarter? And how do you see this developing going forward? Yes. So basically, we had yes, there's an impact, if you will, on but maybe it's more of a phasing impact Where commodity cost went up last year and we saw less of that in Q1. But against that, I think where What we're seeing now in Q1 is that's fair going forward because that's more of comparison to last year and not the run rate. So I think we are in a pretty good place now. Okay. So if we look at the factors impacting the packaged business in Q1, you have the under absorption, the Pastel chewing gum, negative mix effect, they should all be in the comparables in the coming quarters, right? Well, so I mean, so again, it depends, of course, what happens now in Q2. If we continue to see an opening of society and higher sales, then there's under absorption, of course, will come down. The mix Should be improving. Input costs will, of course, be as they are. Yes. I just mean in Q2, Q3, Q4, you already had the under absorption and the negative mix in packaged, right, last year? Yes. Yes, of course, yes. I mean, the answer is that looking at this just Nicolas, just bear in mind that When you do it by quarter, recall that we were very clear last year as well about the shift of some of These costs between Q2 and Q3, so you just have to bear that in mind when you think about quarter versus quarter results. Yes. I will do that. And then the product recall That impacted this quarter. Will there be any costs related to that also in Q2 as well? No. We believe that we're fully and appropriately provided for that. Okay. So it's net Positive sequentially then might this might take. Anyway, finally, I'm not an expert on this field yet, but Your vegan texture cloud, could that be considered a plant based product? It should, right. Well, it's vegan, right? So that means no dairy And vegan based, I mean Yes. Okay. Good. You have some other vegan products already, don't you? Yes, we do. We do. And it's a growing interest. So this is not going to be the last And we're working as well in different markets on different brands towards vegan. So that is also Do you mind sharing how much of your sales are big and maybe in 2020? Yes. Well, if we can, we would, but I don't have that figure here In my head, but it's certainly something we are on that Trends, but it also of course has to yes, it has to fit the consumer and the consumer is our boss. That's at least How we say and how we think and how we act, and it cannot go at the expense of quality and Because it is in the end the second moment of truth is when you put the product into your mouth after you bought it and then it also need to taste Really well. So I would say it's important, but it's not the Holy Grail. It's not that if we move everything into vegan that it will suddenly sell You know twice as much. It's like proper marketing. We look at consumer trends at segments, how big they are, where the consumers are interested. And in Kex, for example, this is a, of course, article which is very big in Sweden with a lot of different Targets Group, so then it makes a lot of sense to do this and we can do it as well with a fantastic taste. So that all fits together. Sounds good. One final question now I remember. You talked about the lower cost for merchandising and pick and mix. I seem to remember that in previous quarters, you have Sort of said that it's been difficult to adjust that cost base Considering the drop in pick and mix, has that changed or No, I don't think it has changed. We have reduced it, but what we said in the previous quarter is that it is difficult to right size the merchandising cost When we do not know yet how the volumes are going to be post, let's say, society opening up, We can see that we talked a little bit about the UK and how things are bouncing back. I mean, would we have taken the decision to Right size our merchandising in the UK with the kind of loss we had over there And you can see the kind of impacts of the mobility in the UK and also understand that's probably one of the markets where pick and mix has been most If we would have done that last year, we would not have been able to grow that business now in March and we certainly would not have been able to do that In April when society is going back. So what we said is we need a little bit more of a stable situation to right size the merchandising In each of the markets. Well, having said that, we have just concluded a big benchmarking across all the markets on the merchandising Of course to see and learn from each other, I mean, who has best practice in merchandising, be it route planning, be it Efficiency of filling, efficiency of cleaning, efficiency of ordering, etcetera, etcetera, and then trying to bring all those lessons across the group Had to lift everybody to a higher level and there are interesting differences, let's call it like that and opportunities to further streamline the ways of working in In merchandising, how we work with merchandising. So that is certainly not the last time we talk about merchandising Cost in this call, I would say. All right. Thank you very much. Thank We have a few questions here On the screen, the first one I would ask Frans from Stefan. Yes. So Stefan had two questions here. 1 was On the gross margin last year and how to think about that impact this year, I think probably this question came at the same time as Nicholas. But just to be So basically so last year, we had SEK 35,000,000 in cost that sort of that spilled over into Q3. So when you think about the comparator that you have to keep that in mind. This year, we're not going to have Any movements like that? I mean, there's always a little bit of phasing between quarters, but there's nothing significant impacting from Q4 Going into Q1 nor is there between Q1 going into Q2. So that's one piece. The other question from Stefan was about the Easter Sales. And Henry touched on it very briefly. So basically, there's 2 pieces here. One is that Easter has moved by 8 days, But the other aspect of this, which makes it very difficult to really untangle, is that at the end of Q1 last year, At the end of March, sales really dropped incredibly because of COVID Because that was really the first time it really hit us. And untangling what is because of the phasing and what is because of COVID is difficult. I mean, we've looked at this by week, almost by day. But I think a fair way of looking at it would be to say that In 2019, when we had a similar shift of Easter, we estimate that, that was roughly SEK 30,000,000 to SEK 40,000,000 that we're shifting, and I would say that we're talking about roughly half of that now. So somewhere SEK 15,000,000 SEK 20,000,000 is probably the benefit of the phasing of Easter in Q1 this year. Good. Then I'll I can confirm to Niklas that it is plant based, so you And now tell all your friends to buy Kegsvigan because it's plant based, so just to confirm that fact. Then we have a question from Trojan Trading, yes, the opening of SiniWorld in the UK will have a positive effect on pick and mix. Yes. We are in dialogue, of course, with all our customers. So together with them, we also said, we'll wait 1 week After the opening to see what kind of footfall they are getting into the cinema because pick and mix is, of course, also something you want to have fresh, And it needs to have a certain rotation for the concept to be fresh, but that's a big segment. Cinema and leisure Yes, are one of the 3 pillars on which the UK business is built. 1 is High Street, second one is Cinema and Leisure, 3rd one is, let's say, the more traditional supermarkets the way we know it here in the Nordic. So that's absolutely a fair observation that that is a Very important step forward for the UK. Can I comment on Cartis buying Shares in Cloweta, no, I can't really I mean, they are a competitor on one hand? On your end, they are a 3rd party producer, remember that we sold our Italian business to them, and They seem to have an investment strategy where they are purchasing Shares in companies, they know very well, but I mean, there are real underlying reasons, I would say, you need to ask them. Then yes, that was the last one, I think, from the screen. Any other ones on the audio? There appears to be no further registered questions from the audio. Good. Well, then I would like to thank everybody for their attention and wish you a good day.