Annual and Sustainability Report 2023
Spreading
True Joy
<< Content & | Words from | Targets & | Market & | Main | Share & | Financial | Risks & Corporate | Financial | Materiality & | |
introduction | the president | strategy | consumer | Sustainability | markets | shareholders | performance | Governance | reports | Other |
- Sweeter Future
Cloetta's sustainability agenda, A Sweeter Future, focuses on creating joy and long-lasting value For You, For People and For the Planet.
The initiatives within the sustainability agenda cover topics all across the value chain where Cloetta has the ability to make an impact.
Words from | Targets & | Market & | Main | Share & | Financial | Risks & Corporate | Financial | Materiality & | Content & >> | |
the president | strategy | consumer | Sustainability | markets | shareholders | performance | Governance | reports | Other | introduction |
Sustainability | p. 22 |
update |
Know our consumer
- bring moments of Joy
During 2023, we made further progress within the climate action program by improving our data collection process through collaboration with value chain partners for our scope 3 emissions and structured our initiatives to accelerate the reduction of our scope 1 and 2 emissions. We also commenced our double materiality analysis in accordance with the EU Corporate Sustainability Reporting Directive (CSRD).
At Cloetta, consumer centricity is our long-term commitment and passion to identify and satisfy
consumer needs. Consumer and market insights are
a key source of input for our product development, p. 18 marketing, and branding strategies.
Strategic priorities
Cloetta is a proud provider of joyful moments - our brands and products bring fun and joy to memorable occasions. We are convinced that our consumer focus is the basis for Cloetta to grow and our brands to flourish. We will meet the future as a united organisation - One Cloetta - with a winning culture and passionate way of working.
Lower costs | 3 | 1 | Growth leader- | |
and greater | ship in Branded | |||
efficiency | Sustain | packaged | ||
ability | products | |||
2 | ||||
p. 10 | ||||
Sustainable value within | ||||
the Pick & mix business | ||||
Contents
About Cloetta 2023 in brief
Words from the President Targets & strategy
Long-term financial targets Sustainability targets and ambitions Strategic priorities
New greenfield facility
Market & consumer
The market
Consumer trends and behaviors
Know our consumer - bring moments of Joy
Accelerate brand strength and grow consumer base
Sustainability
Our Agenda
For You
For People
For the Planet
Value chain
2 Main markets
4
Share & shareholders
6 7 reasons to invest in Cloetta
8 Financial performance
- Net sales and profit
- Financial position
- Cash flow statement
12 | Future outlook |
Environmental impact and |
14 | environmental management |
- Statutory sustainability report
Risks & Corporate Governance18
Risks and risk management
20 Letter from the Chairman Corporate Governance Report
- Remuneration of the Group Management Team
- Internal control over financial reporting
- Board of Directors
- Group Management Team
36 | Financial reports | 75 |
41 | Consolidated financial statements | 76 |
Parent Company financial statements | 114 | |
41 | ||
Proposed appropriation of earnings | 123 | |
47 | Auditor's report | 124 |
47 | Ten-year overview | 128 |
50 | Key ratios | 130 |
52 | Reconciliation of alternative | 132 |
53 | performance measures | |
53 | Materiality & other | 134 |
53 | Materiality and impact | 134 |
EU Taxonomy reporting | 138 | |
54 | GRI Content index | 143 |
54 | Auditor's Limited Assurance Report | 146 |
59 | Glossary | 147 |
60 | Definitions | 148 |
66 | Our history | 150 |
Shareholder information | 152 | |
68 | ||
70 | ||
72 |
The audited Annual Report for Cloetta AB (publ) 556308-8144 consists of the administration report and the accompanying financial statements on pages 47-123.
The Sustainability Report ing accordance with GRI Standards is defined in the GRI Index on pages 143-145 and is limited assured by PwC. The definition of the statutory sustainability report can be found on page 53. While every care has been taken in the translation of this Annual and Sustainability Report, readers are reminded that the
original Annual and SustainabilityReport, signed by the Board of Directors or in European Single Electronic Format (ESEF), is in Swedish. The Annual and Sustainability Report in ESEF is published on www.cloetta.com.
Cloetta Annual and Sustainability Report 2023 | 1 |
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About Cloetta
1862 | 2,600* | >60 | 7 | |||
Founded in | Employees | Countries | Factories | |||
*) average 2023 | ||||||
SEK 8.3bn | 9.6% | 26%* | Pick & mix | |||
* | Branded packaged | |||||
2 74% | products | |||||
Net sales | Operating profit margin, adjusted | Business segments | ||||
*) of net sales | ||||||
Cloetta's net sales
By Category | By Country | ||
62% | Candy | 30% | Sweden |
19% | Chocolate | 21% | Finland |
10% | Pastilles | 15% | The Netherlands |
5% | Chewing gum | 10% | Denmark |
2% | Nuts | 6% | Norway |
2% | Other | 6% | Germany |
5% | The UK | ||
7% | International | ||
Markets |
Cloetta, founded in 1862, is a leading confectionery company in Northern Europe. Our products are sold in more than 60 countries worldwide with Sweden, Finland, Denmark, Norway, the Netherlands,
Germany, and the UK as the main markets. We own some of the strongest brands on the market, such as Läkerol, Cloetta, CandyKing, Jenkki, Kexchoklad, Malaco, Sportlife and Red Band. Cloetta has seven production units in five countries and the company's class B-shares are traded on Nasdaq Stockholm.
2 | Cloetta Annual and Sustainability Report 2023 |
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the president | strategy | consumer | Sustainability | markets | shareholders | performance | Governance | reports | Other | introduction |
We believe in the Power of True Joy
Cloetta Annual and Sustainability Report 2023 | 3 |
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2023 in brief
Key ratios
SEKm | 2023 | 2022 | 2021 | 2020 | 2019 |
Net sales | 8,301 | 6,869 | 6,046 | 5,695 | 6,493 |
Operating profit (EBIT), adjusted | 799 | 691 | 571 | 495 | 743 |
Operating profit margin (EBIT margin), adjusted, % | 9.6 | 10.1 | 9.4 | 8.7 | 11.4 |
Operating profit (EBIT) | 735 | 466 | 565 | 442 | 727 |
Operating profit margin (EBIT margin), % | 8.9 | 6.8 | 9.3 | 7.8 | 11.2 |
Profit before tax | 570 | 343 | 558 | 383 | 648 |
Profit for the period | 437 | 275 | 472 | 265 | 498 |
Earnings per share, basic, SEK | 1.53 | 0.96 | 1.64 | 0.92 | 1.74 |
Earnings per share, diluted, SEK | 1.53 | 0.96 | 1.64 | 0.92 | 1.74 |
Net debt/EBITDA, x | 1.7 | 1.9 | 2.0 | 2.8 | 2.2 |
Free cash flow | 496 | 305 | 664 | 366 | 538 |
Cash flow from operating activities | 778 | 519 | 858 | 641 | 724 |
Q1
- The Board proposed a dividend for 2022's result of SEK 1.00 (1.00) per share.
-
The preparatory work for the new greenfield facility in the Netherlands continued. The overall regulatory
process is taking longer than initially estimated. - CandyKing's spring novelties were recognised in leading Swedish trade and lifestyle media.
- Cloetta continued its climate journey by transitioning to more vegan products and further phasing out raw materials with high climate impact.
Q2
- Dividend of SEK 1.00 per share is approved by the AGM and paid out.
- Cloetta has extended the maturities of its current loan facilities with the existing banking group by one year. The extended loans will mature during 2025-2027.
- Cloetta submitted the Transparency Act Report, including
disclosureson human rights and labour practices. - Cloetta's Norwegian organisation moved to their new office in Lysaker.
- Cloetta continues to develop its e-commerce.
4 | Cloetta Annual and Sustainability Report 2023 |
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the president | strategy | consumer | Sustainability | markets | shareholders | performance | Governance | reports | Other | introduction | |
Net sales | |||
SEKm | |||
2,500 | |||
2,000 | |||
1,500 | |||
1,000 | |||
500 | |||
0 | |||
Q1 | Q2 | Q3 | Q4 |
2022 | 2023 |
Free cash flow
SEKm | |||
400 | |||
300 | |||
200 | |||
100 | |||
0 | |||
-100 | |||
-200 | |||
Q1 | Q2 | Q3 | Q4 |
2022 | 2023 |
Operating profit, adjusted
SEKm
250 | |||
200 | |||
150 | |||
100 | |||
50 | |||
0 | |||
Q1 | Q2 | Q3 | Q4 |
2022 | 2023 |
Q3
- Greenfield investment in line with estimates - expected new timeline will not negatively impact Return on Investment.
- Cloetta launched a new financial reporting and consolida- tion system. This bodes well for the upcoming implementa- tion of the EU Corporate Sustainability Reporting Directive (CSRD).
- Cloetta launched the new Skipper's Mini Pipes, offering small, soft liquorice pipes in a generous bag.
- Cloetta's Dutch organisation moved to their new office in Breda.
Q4
- Cloetta reported all-time high net sales and adjusted operating profit and lowest-ever leverage.
- The greenfield project progressed in all work streams, and the technical ability to build and operate Europe's first major candy factory running on renewable electricity
has been confirmed . - Mikael Norman declined re-election as the Chairman of the Board.
Cloetta Annual and Sustainability Report 2023 | 5 |
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Words from the President
A year of strong sales and improved profitability
How would you summarise the year 2023?
First of all, it was a year of strong profitable growth. It was also another rather extraordinary year, this time heavily marked by inflation, where we managed to raise our prices to adjust for higher input, raw material, and transportation costs. This was done in a fair and transparent way, and in absolute terms, leading to high customer loyalty and trust. At the same time, we continued to
execute on projects that support our long- term strategy and growth. The greenfield
efforts to premiumise our brands, making them more clear, innovative, and more
supported, are really giving results. It is worth reiterating that stronger brands always lead to higher value.
I also see a lot of evidence that we have the right culture and people onboard to develop our business, and I see so many efforts to further develop and contribute.
create further savings before the facility is up and running. There is a great pride internally that we are building an emission-free factory, employing people in Roosendaal and that we at the same time can free up capacity for
further product portfolio optimisation. During 2024, the main tasks will be to
finalise the permitting process as well as the engineering and contracting of buildings and machines. We will also close the factory in Roosendaal Borchwerf during the year with an in- and outsourcing solution in place.
project progressed according to the revised plan in all workstreams, and the technical ability to operate Europe's first major candy factory running fully on renewable electricity has been confirmed. The project is part of our ambitious sustainability agenda, where we during the year made good progress in collaboration with value chain partners for our scope 3 emissions, and structured our initiatives to accelerate the reduction of our scope 1 and 2 emissions.
Cloetta is now in many aspects a leading FMCG company in the Nordics, as we have improved our ways of working in all areas from finance to marketing and sales, as well as through the whole supply chain.
All in all, 2023 was a very successful year, and the first time in history when Cloetta reached SEK 8bn in turnover and close to SEK 800m in adjusted operating profit through organic growth efforts.
What was the most important
achievementduring the year? There are many things to be proud of I believe. First and foremost, I would say that we managed to keep the volumes relatively stable - a result of our strategic agenda to strengthen our brands over the last years and our relentless focus on execution. A big compliment to the teams in all parts of the organisation, who have done a tremendous job to provide the value needed to keep consumers enjoying our products, despite the increased pricing. The added marketing
2023 was the first time Cloetta reached SEK 8bn in turnover and close to SEK 800m in adjusted operating profit.
How is the greenfield project progressing?
The greenfield will create capacity for growth and significantly reduce cost, while reducing our greenhouse gas emissions. Since we announced the investment in 2022, the process develops with the estimate to be fully operational during the second half of 2026. One important decision during the year was when our engineering team con- cluded, in close cooperation with our suppli- ers, that we have the technical ability to build and operate the new factory fully electric. When the new factory is fully operational, it will be the first major candy factory running on renewable electricity in Europe.
We are on time with our revised timeline and are moving the process forward, while involving the project's stakeholders. I am delighted to see cross-functional teams coming up with innovative proposals to
Which important steps did you take
within your sustainability agenda? We have identified where the emission savings will come from as per 2030, and together with our suppliers, identified all our savings within the SBT-initiative.As I have said before, it is necessary to make progress and work closely with our custom-
ers, suppliers, and other parties in order to reach our targets. We truly believe that our sustainability efforts are strategic. It is in all perspectives good for the company, our culture, our business, and our stakeholders today - and definitely also in the long run. Furthermore, we are in the process of finalising our double materiality analysis,
in accordance with the European Union Corporate Sustainability Reporting Directive (CSRD). The insights gained from this process will further strengthen Cloetta's strategies, policies and actions within our ambitious sustainability agenda.
What are your greatest challenges? Cloetta is in a good place, but a lot of things can still be improved to secure the road to reach our profitability targets. We have to constantly monitor how our operations are relevant and efficient, ensure growth in pastilles and chewing gum and grow our international markets business. Given the volume growth expectations, we are also continuously
looking at taking out smaller or lower- margin products from our portfolio to create capacity to produce higher-margin products.
6 | Cloetta Annual and Sustainability Report 2023 |
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And your greatest opportunities?
In short; becoming an even more consumer- focused company through continued positioning and strengthening of the brand and product portfolio in all markets. This happens within four areas;
- Strengthening our brands in core markets
- Continued volume growth of Pick & mix via premiumisation and penetration
- Building a stronger position in the UK and Germany
- Recover profitability in all our markets
What is Cloetta's focus going forward? We will continue to grow our branded business with a high level of innovation, growing Pick & mix in a profitable way, drive cost efficiencies and execute on our sustainability agenda.
We are committed to speed up the pace towards our goals. The last few years have been challenging due to many macroeconomic developments but have also given us the opportunity to demonstrate the resilience of our core categories and brands. We have proven our ability to deliver under tough circumstances, and we believe that a more balanced environment will give us the opportunity to increase our focus on long-term business development and work with our roadmap of reaching a 14 per cent operating profit margin.
In 2023, we reported all-time high net sales and adjusted operating profit and lowest-ever leverage, and I remain confident for the future, since we have a strong pipeline of strategic initiatives to further strengthen our business. I am indeed proud of our successful pricing execution, and that we continue to take progressive, responsible steps developing our business with high sustainability ambitions. We are looking forward to 2024 and believe in our continued ability to deliver the Power of true Joy to consumers, and customers, and thereby creating shareholder value.
On a personal level, I would like to thank everyone that I have had the opportunity to
work with during my seven years at Cloetta, as I am leaving the company after the summer. I have come to the conclusion that this is the right time to make a smooth transition with as little disruption as possible to the positive momentum that Cloetta has established. I now look forward to
welcoming the new CEO to lead a truly great company with great people!
Stockholm, March 2024.
Henri de Sauvage-Nolting
President and CEO
Cloetta Annual and Sustainability Report 2023 | 7 |
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Targets
Long-term financial targets
Organic sales growth
Cloetta's long-term target is to grow organically by 1-2 per cent, which is in line with or better than the market.
Comment on the year's outcome: Organic growth was 15.7 per cent, resulting in Net sales for the first time in the company's history exceeding SEK 8 billion. Sales of Branded packaged products increased organically by 14.1 per cent primarily driven by pricing, enabled by the strengthening of our core brands and strong in-store execution. Sales of Pick & mix increased organically by 20.7 per cent driven by premiumisation of the offering, pricing, and increased consumer activation.
Net sales and | ||
organic sales growth | ||
SEKm | % | |
9,000 | 18 | |
6,000 | 12 | |
3,000 | 6 | Target |
0 | ||
0 | 1-2 % | |
-3,000 | -6 | |
-6,000 | -12 | |
-9,000 | -18 |
2019 | 2020 | 2021 | 2022 | 2023 |
Net sales | Organic sales growth | |||
EBIT margin
Cloetta's long-term target is an adjusted EBIT margin of at least 14 per cent.
Comment on the year's outcome: The adjusted EBIT margin amounted to 9.6 (10.1) per cent. Although the adjusted EBIT was the highest in the company's history, the margin was compressed due to pricing offsetting the increased input cost without generating incremental profit.
EBIT and margin, adjusted
SEKm | % | |
800 | 16 | Target |
700 | 14 | |
≥14% | ||
600 | 12 | |
500 | 10 | |
400 | 8 | |
300 | 6 | |
200 | 4 | |
100 | 2 | |
0 | 0 |
2019 | 2020 | 2021 | 2022 | 2023 |
EBIT, adjusted | EBIT margin, adjusted | |||
Net debt
Cloetta's long-term target is a net debt/EBITDA ratio of around 2.5x.
Comment on the year's outcome: In 2023, Cloetta delivered very strong cash flow, resulting in the lowest net debt/EBITDA in the company's history, of 1.7x well below the long-term target of 2.5x.
Net debt/EBITDA
SEKm | x | |||
2,400 | 3 | |||
2,000 | Target | |||
2.5x | ||||
1,600 | 2 | |||
1,200 | ||||
800 | 1 | |||
400 | ||||
0 | 0 | |||
2019 | 2020 | 2021 | 2022 | 2023 |
Net debt, SEKm | Net debt /EBITDA, x |
Dividend policy
Cloetta's policy is to have a dividend payout ratio of 40 to 60 per cent of profit for the year.
Comment on the year's outcome: The Board of Directors of Cloetta AB proposes to
distribute a dividend to the shareholders of SEK 1.00 (1.00) per share for the 2023 financial year, corresponding to 65 per cent (104) of profit for the year, equal to 59 per cent of the profit for the year excluding impact of the impairment and provisions and other items affecting comparability relating to the greenfield facility. The dividend proposal is in line with the Board's previously expressed ambition to continue to propose a stable dividend
in line with 2022 and is supported by a healthy cash flow and strong balance sheet.
Dividend policy (share of profit)
%
100
80 | ||||
60 | Target | |||
40 | 40-60% | |||
20 | ||||
0 | ||||
2019 | 2020 | 2021 | 2022* | 2023* |
- Adjusted for items affecting comparability relating to the greenfield facility.
8 | Cloetta Annual and Sustainability Report 2023 |
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Cloetta AB published this content on 11 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 March 2024 07:16:03 UTC.