Viva Wine Group


Q3 2022: Strengthened market position and positive one-off effects

July – September 2022

  • Net sales increased 8.5% to SEK 902 (831) million.
  • Operating profit increased by 48% to SEK 116 (78) million. The operating margin was positively impacted by one-off effects and amounted to 12.8% (9.4).
  • EBITA increased 63% to SEK 150 (92) million, including positive one-off effects of SEK 65 million from the sale of a warehouse property.
  • EBITA, adjusted, decreased to SEK 87 (98) million. EBITA margin, adjusted, was 9.6% (11.8).
  • Earnings per share amounted to SEK 0.96 (0.70).
  • Market share increased to 25.3% (25.2) in Sweden, to 15.9% (15.5) in Finland and to 5.0% (3.9) in Norway.

January – September 2022

  • Net sales increased 20.5% to SEK 2,772 (2,300) million.
  • Operating profi t improved by 11.7% to SEK 249 (223) million. Operating margin was 9.0% (9.7).
  • EBITA increased by 37% to SEK 333 (243) million.
  • EBITA, adjusted, increased to SEK 278 (255) million. EBITA margin, adjusted, was 10.0% (11.1).
  • Earnings per share amounted to SEK 2.34 (2.25).
  • Market share increased to 25.4% (25.2) in Sweden, to 16.1% (15.5) in Finland and to 5.2% (3.7) in Norway.

Significant events during the quarter

  • Sale of warehouse property in Germany as part of streamlining e-commerce operations in Europe. The impact on EBITA was SEK 65 million in the quarter.

Significant events during the period

  • Vin och Vind AB, an associate of Viva Wine Group, purchased 81 percent of the shares in Viva Global AB (Viva China) on 1 June.
  • Acquisition of MyTaste & Food AB (Vinklubben). The purchase price was SEK 120 million on a cash and debtfree basis. The transaction was completed on 1 April.
  • Strengthened management team with new COO and CEO of Viva eCom.

Emil Sallnäs, CEO comments:

INCREASED MARKET SHARE IN NORDIC REGION AND CONTINUED EFFICIENCY IMPROVEMENTS IN EUROPE

We had a stable performance in the Nordic monopoly markets and increased our market shares in all countries. Efforts to streamline and expand our e-commerce operations in Europe continue, and we sold a warehouse property in Germany during the quarter.

MARKET SENTIMENT INFLUENCES CUSTOMER BEHAVIOUR
Retail monopoly sales volumes declined in the quarter, driven by both a society without Covid restrictions and generally weaker market sentiment due to inflation and recession fears. Given that customers also clearly demand wines in the lower price ranges, the fact that we have increased our market share shows the strength of our product range and our steadfast innovation and product development initiatives.

In the eCom segment, organic growth has been negative, which can mainly be attributed to a return to pre-covid purchasing patterns, but also to a general slowdown in the economy with increased price sensitivity. Here we see great benefits from our broad product offering and our digital D2C business, where we can meet customer demand for less expensive products. In that part of the business we see growth in the quarter.

MARGINS LAG BEHIND
Some of the initial effects of the war in Ukraine have now been addressed, but the impact of the war in terms of increased input and distribution costs is negatively affecting margins. The weak Swedish krona is also pressuring our operating margins. We address this through currency hedging, but there is of course a balancing act as exchange rate movements are difficult to predict. We plan to gradually compensate for the increased costs, but there are delaying effects as price adjustments in the Nordic monopoly markets can only be made at predetermined pricing windows. In the Swedish market, this price adjustment window occurred in September and in Finland and Norway in October, which means that the effect will not have full impact until the fourth quarter. In eCom, the pricing mechanism is more immediate and we are also actively working on product mix and assortment. This means that we can more quickly offset cost increases, which is reflected in the improved profitability in the quarter.

EFFICIENCY AND PROFITABLE EXPANSION IN ECOM
At the end of the quarter, we sold one of our warehouses in Germany. In addition to the positive effect of SEK 65 million on EBITA, the deal is an important step in creating an efficient organisation and logistics in the eCom segment. Significant synergies can be gained by centralising certain e-commerce functions and this is one of our key focus areas for eCom. We are also actively pursuing expansion into more markets, while also exploring acquisition candidates that fit our structure. Our top priority is profitability with or without acquisitions.

OUR SUSTAINABILITY AGENDA DELIVERS
One very positive effect of society without covid restrictions is that we have been able to visit our producers again. During the quarter, we resumed our own monitoring and enrolment of independent third party sustainability audits. It is indeed gratifying to see how Viva Wine Group's ambitious sustainability agenda inspires our producers. There is a strong willingness among producers to futureproof their farming practices and promote sustainable production. This is noticeable not least through investments in sustainability certifications as well as investments in water and energy efficiency improvements, including the installation of solar panels in order to reduce climate impact, increase electricity self-sufficiency and reduce energy costs.

We are also pleased to note that this year's harvests have been excellent despite the turbulent weather with severe droughts. This is positive for the coming years and will contribute to more stable prices for our most important input product. We are experiencing a market with weaker purchasing power and changing customer behaviour. At the same time, we continue to do what we do well. With high activity in the monopoly markets, we ensure that we offer good products that are in demand and therefore also increase our market share. In our eCom business, much remains to be done in terms of both efficiency and development, and we see great opportunities for the segment to grow profitably. This is the strength of our company.

Emil Sallnäs, CEO Viva Wine Group
Stockholm, November 2022

Please see the full report in the attached pdf.

Publication and presentation
Viva Wine Group's interim report for the third quarter 2022 will be published on 16 November 2022 at 8:00 a.m. On the same day at 11:00 a.m. CET a webcast telephone conference will be held with CEO Emil Sallnäs and CFO Linn Gäfvert. The webcast can be accessed here: https://financialhearings.com/event/44428. The presentation will also be made available at https://investors.vivagroup.se/reports-presentations/

For more information, please contact:
Mikael Sundström, Director Sustainability, Communications & Investor Relations
Tel: +46 70 943 22 26
Email: mikael.sundstrom@vivagroup.se