Very warm welcome to the Q4 presentation of Viva Wine Group. Presenting today is myself, Emil Sallnäs , together with our excellent CFO, Elin Jävert. As always, we'll go through our usual agenda. Short introduction to the group. We'll make the quarterly update in terms of words, then we'll follow up with the financial overview. We'll talk a little bit about sustainability, and then we will have some final comments and talk a little bit about our agenda ahead. As always, we will finish off with a Q&A, where you are very welcome to ask questions. Viva Wine Group. We are a group selling wine. We are based in the Nordics and in Germany, with the countries around Germany as our market.
We work with three strong segments, Sweden and Nordics, which together are about 80% of the total business, which is wine sales to the monopolies in these three countries. We have 20%, which is in the e-com sector based in Germany. In the Nordic sector, we are the market leader in the monopoly market, the clear market leader, so we are number one in all the markets together. The big reason for that is our strong portfolio of own brands, partner brands, and exclusive brands. Depending on the market and then depending on the channels, the mix of these brands will be different. The last pillar of our success is our work with sustainability, where we have always been a pioneer working with sustainability since the early 2000s.
We are a member of various organizations in the sustainability field, and we do put everything together in a GRI, a short report as well, which is very unusual in our business. In total, we have 10 operative companies, six in Sweden, where we started, that's where we have more companies. one in Finland, Cisa, one in Norway, Norwegian Beverage Group, we have two companies and three platforms in Germany. That means that Vicampo and Weinfürst are actually the same company, but two different platforms catering to different customers, Wine in Black. Over to the quarterly update. Well, 2022 was a very challenging year.
Despite this, we are very happy to stand here today and have reached market shares that are on record high levels in all of our monopoly markets: Sweden, Finland, and Norway. Our net sales increased by 2.1% in Q4. This is despite the fact that the overall market slowed down compared to Q4, 2021. The reasons for this are the ones that are common for most companies nowadays. There are post-pandemic effects, there are consumer sentiments, and of course, the war in the Ukraine has not been very positive for the supply chain. Again, despite this, we have reached a very good result. On the EBITDA margin, we have some negative FX effects, especially in Sweden, and those are difficult to mitigate immediately.
In addition to that, we have had some increased freight distribution and material costs, but less and less on that side. We are also happy to report that before the AGM later this year, we will propose an increased dividend of SEK 1.55 per share. Looking ahead for 2023, we are again happy to start the year with record high market shares, so that means that we feel that we are in a very good position once we get a little bit of tailwind. We have in the Nordics a very lean organization. We have a strong product pipeline. We'll talk a little bit more about that later on. We are working with the synergies across the Nordics. Again, we feel that we are very well prepared in the Nordics for the coming year. In the e-com, we are equally well prepared.
We have a very efficient e-com business now. We are, as you will see, still a very profitable business. We have increased our possibilities for profitability in the future, thanks to working with the synergies in the e-com field. That means that we will have one warehouse catering to all of our business from the middle of this year. We will have one team serving all the three platforms. Of course, having one of everything is a great efficiency in the e-com field. We are also happy that the Weinfürst concept is working very well, and this is something that we expect to expand into further markets in the near future. For the financial overview, to you, Elin.
Starting with the group view on net sales, gross margin, and the EBITDA margin, we have an increase in the quarter in net sales of 2.1 percentage points. The increase comes both from segment Sweden and from the Nordic segments. We have a slightly negative organic growth, although it is the strongest quarter during the year. Our gross margins have been pressured during the quarter, mainly by negative FX effects, but also, as Emil mentioned, we have increased freight distribution and material costs. One important factor here is that the price increases to end consumer in the Nordic markets are controlled by price windows, so you can only change the price twice in the Swedish and Finland, and three times a year in Norway.
We're happy to report that our gross margins, both in the quarter and year-to-date in segment E-com, are actually higher compared to last year. Going over to the Adjusted EBITDA, it decreased in the quarter compared to last year, mainly that is explained by the negative FX effects in segment Sweden. Viva Wine Group do hedge currency, we have substantial positive hedge effects in the quarter and year-to-date, they are recorded below the EBITDA level. Year-to-date, our Adjusted EBITDA margin is slightly below the medium target level of 10%-12%, if we were to account for the positive hedge effects, we would be well in line. Here, getting a view of the net sales development in the quarter, we can see that we have positive contribution from Sweden, we will come back to that later.
We also have positive effects from Nordic market, where the acquisition of Norwegian Beverage Group contribute one more month this year. Over to the EBITDA margin. Here it's very obvious that the negative effects is mainly in segment Sweden, where we have this negative FX effects. We sell in Swedish krona, we buy in mostly in euro. Over to the net working capital. It is lower than last year, so that's very good, working with synergies within that area, and we have a stable trend towards net sales. Our net debt situation is very strong. The net debt is lower than last year, and the net debt to EBITDA slightly higher. Once again, it's important to mention that we had one-time effects of about SEK 213 million in last year coming from this revaluation of the Norwegian Beverage Group.
Very strong position for the future. Our cash flow has had a very nice development. We had a strong cash flow in the quarter from operating activities, mainly from profit after financial items. The other factors during the year we have mentioned at the previous presentation, but we have made strategic divestments and one business combinations. We have repaid our loans according to plan, and we have made dividend. As Emil mentioned, we will also have a dividend if the AGM accepts during this year. Taking a look at the segment. We have in segment Sweden a net sales increase in the quarter, and we have had a lot of successful launches, but we also made price increases from first of September, this contributes to the positive development in the quarter.
Our volume, again, developed stronger than the market in Q4. It's down compared to last year. However, it's less than the market development, so that was down 2.8%. Our market share increased. We have now 26%, so that's very good, and we're very proud of that. Our Adjusted EBITDA margin, once again, it is lower compared to last year, mainly due to the negative FX effects. We also have worked a lot with our OPEXs, in total, we have lower OPEX than previous year. Our Adjusted EBITDA margin landed on 8.4%, so lower than our targets. However, we have again the substantial positive effects from the hedges. If you were to take those into account, we would be in line. Over to you, Emil.
Yes. As has been the tradition, we talk a little bit about all the products that we have been launching in the quarter, and this is just a small selection of the quite big number of products that we are launching every quarter, and which of course contributes to our sales development. The first product on the top left side is Anciano Rioja Gran Reserva, which is one of the most successful launches in the December launch in the fixed assortment, meaning that this is a tender win where we competed with other wines to get into the assortment. Very nice entry start of that product. In the middle, you have Falu Rödvin, which is a very qualitative French wine, but with a very Swedish touch that has been extremely well-received in the market.
On the right-hand side, you have Palacio Caterina, which is our twist on the one liter concept. Here we combine the 1 liter, which is a bottle size which has become more and more popular, and we suspect that it will be quite popular also in these more lean times. In this case, we are combining that with the traditional net of Spanish wines. Very good wine as well. On the bottom side, you have Pitch, which is a little bit of a flirt with golf. It's an Algarve wine as well, which for you, those of you playing golf, then make the connection even better. Very qualitative wine from Casa Santos Lima, one of our key partners that we work with in all Nordic markets. We have done quite a few products in the, in the high assortments.
Just to mention a few, we have the one with a small gnome or tomte in Swedish, which is Josetta Saffirio Barolo, which is one of the most popular Barolos that every year for the end of the year is selling very well at the monopoly. Finally, we have Tocastella, which is a very nice Chianti Classico in the traditional style. This shows that of the product launches we have, we have everything from very good value for money to the top wines of the assortment.
Taking a look at our Nordic segments. In the Nordic segments, we have Finland's monopoly market and we have Norway's monopoly market. Here we have a strong increase in the quarter of 25.7% compared to last year, and this is due to the acquisition of Norwegian Beverage Group that contributes one more month in Q4 this year. Both Finland and Norway outperformed the market in volume. Finland increased by 2.4%, while the market actually declined 8.6% in the quarter. Norway decreased volume of 10%, but it was less than the market of 11.8%. Year to date, Norway actually increased its volume. We end up here with record high market shares in both Finland, reaching 18.8%, and in Norway, 5.6% in the quarter.
Very happy about that as well. Our EBITDA margin increased during the quarter, so it was 14.9% higher than last year. Here Norway contributes with a strong EBITDA margin. Looking at the margin, it is actually a bit lower than last year, but that's mainly due to price increases, purchase price increases, higher costs for freight and distribution. Also the Norwegian business is somewhat affected by the negative effects. All in all, a strong EBITDA margin, well above the targets.
On the launch side, those of you that participated in the last call will recognize Buconero, which is our Argentinian Malbec wine that was launched in Sweden in the last quarter. Now in Q4, we have also launched that in Finland, and it has been very well received also in Finland. This shows a little bit how we are working. We are creating products, we are finding products, and developing products is the word I'm looking for, in Sweden, in the different markets, and then we take them into the other Nordic markets as soon as we can afterwards.
In the middle, you have Rota Sur, which is a Sauvignon Blanc from Aresti, a key partner in Finland, this is a tender win, we also win tenders in Finland, although we are extremely good at also launching our own products in Finland. Finally, on the right-hand side, you have Viva Valentina Riesling, which is an Italian Riesling in the Viva Valentina series, which is a series created in Sweden, now it has been growing and becoming even bigger in Finland. That's, of course, also something that can happen with our product launches that even though it's created in one country, it becomes bigger in another, in one of the other markets. In Norway, we launched a pouch, which is one of the most climate-friendly packagings you can imagine.
From the bag and box, you take away the box, and you have only the bag left. In this case, it's a fair trade wine from some vineyards. It's a Pinotage. Very well-received in the market, and it was also launched together with a bottle product as well. Also in Norway, we sell a little bit more expensive wines from time to time. We have Domaine des Mères Jura, which is a very interesting wine style that has become more and more popular the last few years. It's been introduced now in Norway in the ordering assortment. We have also done a line extension with our champagne Montaubrais, which is a producer that we've been working with for a very long time. Now they, thanks to the ordering assortment, also have a rosé wine in the assortment.
Taking a look at our segment, Viva E-com, we have a decrease in the quarter, and it is due to the negative market sentiment that has been mentioned by Emil. Energy crisis and inflation has hit Europe hard on that level. Our organic growth is negative in the quarter with 13.9%, but here we have also high comparative figures from the pandemic year. Our gross margins are strong and according to plan. Despite cost pressures, we have been able to work with improvements in this area with product mix and pricing strategies. Our Adjusted EBITDA decreased. However, the margin reached 11.6%, so well in line with the medium target of 10%-12%.
In the E-com segment, we would like to highlight, of course, the strong gross margins already mentioned. These are a very important pillar for our future development. Of the concepts, of course, of the platforms, of course, Weinfürst, which for those of you who do not have the details, is our shop aimed at a low-priced market segment, has been developing very well in the existing markets. Meanwhile, we have been also focusing a lot on our lean structure. We have been restructuring according to plan. We have the same technology environment on all platforms. We have the same team running the platforms. We have one warehouse solution that is finalized during, actually this year, I should say.
We have been also working a lot with our CRM capability, how to take care of our customers, how to retain them, how to acquire them. We have also invested a lot in that. We're well prepared for the coming year. Over to sustainability. Here we have already spoken a little bit about how we are developing. We, of course, started in Sweden with our sustainability work. Now we have rolled that out in the Nordic business. The next step is to also include the E-com business in our sustainability platform. Quite big step internally.
We have also implemented an upgraded software solution because of course, sustainability is nice to talk about, but it's extreme amount of data that you need to collect in order to be able to talk about it in a proper way. This means that we are quite well prepared for the CSRD, the new directive on corporate social reporting that has now been decided that it will come into play in the coming years. There we are also starting some preparations for that. On the light, lighter side, we and this is the truck that you see on the picture. We have with the brand Hope that Iconic Wines here in Sweden, owns, created together with the producers in the Cape area, a mobile library that improves the access to books and hence education in the Western Cape.
One of many social initiatives that we are taking in order to give something back to the community in the producing countries. On the final comments, we usually go through the financial targets a little bit. We are very comfortable with our targets in the medium term. Of course, I think everyone realizes that it has to be in the medium term when it comes to the growth, where we do need some help from the general financial economy and the macroeconomic environment in the coming months. Once we get there, as mentioned, we are very well prepared. On the profitability, it is the EUR/SEK, which is the main hurdle for us to reach our target in terms of profitability.
Linn has already mentioned that the net debt is under control. As for the dividend, we will suggest a dividend which is slightly above the 50% threshold in our dividend policy, around 54%, I believe. I mentioned already that we feel very strong for the coming year. We do feel very strong. I mean, we have a very strong product pipeline in the Nordics, which we have already adapted to the current market situation, meaning that we have many products in the lower price segments. We have quite a lot of products in the bag-in-box segment as well that we see increase. This really should come to our advantage, even in a market which is a little bit soft. Our very quick product development should pay off very well.
We have been focusing on pricing and margins. Again, in our 1st of March, we will do some slight price increases. We did the heavy price increases in September. Now we will adjust during the spring a little bit more the pricing for the coming years. We also have in Sweden a tax change that we have to take into account, which affects the pricing a little bit. I keep going about this one warehouse solution for the e-com. It is very important. It also creates very good opportunities for coming M&A activities that once we have our own warehouse solution in one place, we should be able to acquire companies in a very good way and to create even further synergies.
We also mentioned already the expansion of Weinfürst, which we expect to be happening very, very soon into new markets. On the M&A agenda, for those of you who have been listening to us in the last year or so or even through the IPO process, know that we said that 2022 was going to be maybe for the e-com M&A a little bit of a slower year because there is, there was a gap between sellers and buyers in terms of expectations on valuations. Now we do see that the market normalizing and sellers and buyers coming much closer together. We are actively looking at the M&A part of the market as we speak. That concludes our agenda. Please, if there are any questions, do not hesitate.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. The next question comes from Fredrik Ivarsson from ABG Sundal Collier. Please go ahead.
Thank you very much. Good morning, Jens and Elin. I've got four questions. Maybe take them one by one. First one on product launches, and also some upcoming product launches for 2023, I suppose. Considering the weak Swedish krona and I guess general cost inflation, are you able to also reduce the input cost in order to defend the gross margin in some way, if you get my question?
Yeah. I mean, that's correct. I think this is also the advantage of very, very quick product development. It means that of course, if we develop a new product in, let's say Q4 last year to be launched in the beginning of this year, we will adapt to the price situation and we will find sourcing of wine and packaging and so on, which gives us our ideal margin, the one that for, let's say, older launches has been eaten up by the FX effect. We do adapt to the current FX scenario and these products have good margin once they are in play. As you remember, Fredrik, in the beginning of course, they come with quite heavy marketing, once they are established in the market, they do come with our ideal margins.
Perfect. Thanks. Next question on the e-com market. If we look at it's been normalizing for quite some time now and the comparable is definitely starting to look easy. Just curious to hear your expectation of the market growth in general in 2023, if possible.
I think what we're seeing in the e-com market is that we as in many other markets, I think the especially the German consumers, they need some kind of little bit of a nudge to start behaving in a more normal way. We do see some very small tendencies in the market that this is happening as we speak. I would say that we should expect the first quarters to be somewhat soft in line with the numbers that you now see in Q4, and then things to start pick up towards the end of the year. As you remember, for the e-com, the summer is not a perfect period. That's a quite weak quarter in general. I would say September and onwards, we should be back on track.
Okay, good. On the synergies between Sweden, Norway, and Finland, you mentioned, Emil, do you mainly refer to sales synergies, or do you also see some potential to cut costs here?
No. It's basically on the marketing and sales side that we use the same product development and so on. It is still. We have been looking at it. It's still tricky to find synergies on. It would be the logistics, I guess, would be the key area. We need to deliver quite quickly to the various markets. Norway in addition has a border with the EU, so it makes it difficult. It is on the sales side, yes.
Yeah. That makes sense. Last question on cash flow. Just curious to hear how you guys view work capital projections throughout the year and also CapEx as you look into, 2023, please.
With the CapEx, it's worth mentioning that we had extra one-time effects now in Q4 and also for the whole year 2022. Those will not be expected during 2023. Looking at Q2 would be the normal going forward.
Okay. Very clear. Thanks.
The next question comes from Johan Dahl from SEB. Please go ahead.
Hi. Thank you for taking my questions. Just a few follow-ups from me. Could you start by providing some color on what you see in terms of consumer behavior thus far into 2023, and especially relating to restaurant visits and spend both in the Nordics and the rest of Europe? Thanks.
Yeah. I think it's a bit tricky to say because we have been looking for clear evidence that there is a trade from restaurants to home consumption. I think under normal circumstances, without the COVID, we would probably have seen that already. I think that we are about to see that now in Q1, but I would. That's more my gut feeling analysis than any solid numbers on the restaurant side. If you look at the consumer behavior, we see already in the beginning of year in the public numbers of the monopolies that bag and boxes are increasing their share of the market. That's a quite clear indication, of course, that per liter, the bag and box would normally be the product which is the cheapest.
There is a downtrading in that respect, which we see quite clearly. Then of course, you will have to look at the sort of general macroeconomics in the different countries. In the Nordics, they are behaving a little bit different. Finland is maybe the one which is the quickest to be a little bit more negative sentiments in. I think Sweden has been quite slow. Norway, we expect the Norwegian market as a whole to go down, for example, while the Swedish and Finnish are expected to be more or less in line, although I think that the Finnish one might also go down. We talk about the whole market and based on combination of publicly known numbers and quotes from the various monopolies.
Norway and Finland, you could expect the markets to go down somewhat. In Finland, due to macroeconomic effects. In Norway, maybe more due to late pandemic adjustments because they have been a bit late on that curve. While in Sweden, we expect the market to be slightly negative or around zero as a whole. I don't know if that gives you a bit more color on the whole picture for the Nordics. For the e-com, as mentioned on the previous question, it's gonna be a soft start of the year, but we do see signs that it's picking up. Again, the Weinfürst concept is going very well. That is of course contributing new sales as well to the overall numbers.
No, great. Thank you. Very, very clear. Do you think that's a result of consumer behavior mostly, or is it due to the tax increase in Sweden as well?
I think it's consumer behavior. I mean, the tax increase is just a few krona. Of course, I mean, the tax increase together with other price increases due to all the other factors that have been mentioned previously means that products are becoming more expensive regardless of the tax. I think it's more of a consumer change, both due to the consumer's own economy and the pricing of the product. It's not an ideal situation to have increased prices in the market in general, because of course, the consumer is maybe going the other direction. For us as a group, we do have everything in the whole assortment, and we are launching more products in the affordable assortment now.
As a group, we should be fine, although individual SKUs are behaving quite big changes on some individual SKUs.
Fair enough. Makes sense. Just to touch upon the dynamics between pricing and increased costs of inputs and relating to the pricing window, so to say, could you just remind us when you submit your pricing tender to the monopolies? We've seen input costs and energy costs rolling over and decreasing quite a bit thus far into 2023. How would that affect your gross margin? Do you absorb most of the cost, or are there any clauses or anything that the monopolies have against you?
The monopoly, thus, first of all, the first part of the question, I think in Sweden, we have a 10-week delay before a 10-week period where we have to submit the prices. In Norway and Finland, it's somewhat shorter, around six weeks, I believe so. There is a significant time before the price increase. When it comes to the pricing and the margins, the monopolies, they do, we would not have any opportunity to change things with the monopolies, that they are fixed for good and bad. I mean, it goes both ways.
Yeah, they don't negotiate, so we set the prices.
Exactly. In the end, it's the consumer that decides if they want to keep selling the prices. I think also part of the question was regarding pricing coming down somewhat and so on. We do see that for freight, we are seeing a positive effect. We are not seeing that yet for the glass in that part of the segment. Glass and carton is still keeping at the quite high price level as before. Of course, again, I mean, it's the EUR/SEK, which is the main part of our margins. I think that's something you at the banks should know better than us, but none of us really know, right?
No, no. Fair enough. Fair enough. Just a final one on M&A. You mentioned that the current environment is improving. Could you talk a little bit about the competition in this space? Do you see any other? Could you just elaborate on the competitive space in terms of M&A? Thank you.
Difficult to say because I think right now we do not feel that there is a huge competition, because of, as you all know, I mean, all PE options, IPO options, they are a little bit off the table. We do not see other companies consolidating or have a clear consolidating strategy right now. A few of them that are pure e-com companies and that are listed companies, and therefore they might have a little bit more information available. They, of course, have their own issues and problems with quite low valuations of their own companies. Right now, I wouldn't say there is no competition because there's always competition, but there is really no clear... There's no one that we're going head to head with as we know in the current situation.
Yeah. Important to say also, it's mostly e-com we're focusing on in the M&A.
Exactly. Yeah. Now that was the whole part of that was around the e-com, in our key markets, which means, well, Central Europe in general.
Yeah. I guess that's where the growth opportunity lies as well. That was all for me. Thank you so much. Thank you. My questions.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. There are no more questions at this time, I hand the conference back to the speakers for any closing comments.
Well, again, thank you so much for listening in, and hope to see you in real life very soon.
There's coming questions.
Oh, sorry. We did have a digital question.
Yes.
My bad.
We have one question from Andreas Lundberg at SEB. How much has the currency effect from the Swedish krona impacted the profitability in the Swedish segment?
Yeah. Well, in the Swedish segment, it has affected quite a lot. I would say that roughly if we didn't have the effects, we would have an EBITDA margin of 1.5% higher in that segment on EBITDA level.
We have a final question from Mr. John Edwards. Please, could you explain whether you had any interest in the U.K. market beyond your existing wholesale distribution joint venture?
Right now, we are focusing on expanding from our current warehouse in. When it comes to the e-com. I should say, when it comes outside of the e-com, we do not have any interest outside of Sweden. Outside of Sweden and the Nordics, in the e-com, we are focusing a lot on anything that we can work with outside from, put it, from our German base. That means that the UK at this stage would be a little bit out of our scope. Of course, we are always interested in any opportunity, and we do follow the UK market as well. Due to Brexit, and already before Brexit, it is difficult to create clear synergies between, in our case, a German business and a UK business.
One of our companies, Vicampo, actually had some trials in the U.K. market, which were disabandoned before we came in as an owner.
Yeah. The UK market is also the highest penetrated market.
Exactly
...in Europe as well. That's why it's more logical to look at the rest of Europe as well.
Thank you. No more questions from the webcast.
All right. I will say thank you again, and hope to see you soon again. Thank you and goodbye.
Thank you.