Royal Unibrew A/S
CSE:RBREW
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
420.2
589
|
| Price Target |
|
We'll email you a reminder when the closing price reaches DKK.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
You don't have any saved screeners yet
Good morning, and welcome to the Royal Unibrew conference call on the results for the first 9 months of 2018. My name is Hans Savonije, I'm the CEO of Royal Unibrew; and with me is Lars, Lars Jensen, our CFO.Today, we will highlight the progress of our strategic agenda and present our earnings results for the first 9 months of 2018. We will also talk about how we are executing on commercial priorities and, lastly, share our expectations for the rest of this year, 2018.Now please turn to Slide #2. During the first 9 months of 2018, we've seen some good momentum in the business with a strong development in both net revenue, earnings and free cash flow generation. The extraordinary good weather this summer in Northern Europe contributed to an increased consumption of beverage products in many of our key markets. However, we should not highlight the great weather alone as accountable for our strong performance so far as our underlying development is the single biggest profit driver this year. We believe our persistent involvement with consumers and customers, combined with a strong focus on innovation and continued investments in commercial initiatives, is what really drives the strong development.As you may recall from our last conference call back in August, 2018 has been an unusual busy year for all of us in Royal Unibrew. The extraordinary good weather we saw coming already during the spring earlier this year lasted throughout the entire summer in Northern Europe and created an immense pressure on our supply chain and our commercial organization. Everything, however, was handled very well through a strong and efficient team effort. And we estimate that our superior agility has helped us to gain a bit of share during this busy summer period. At the same time, we have been working intensively on executing our strategic agenda with a high level of M&A activity.If the announced acquisition of CULT obtains its final approval in December as expected, we will have completed 4 acquisitions in the last 12 months. Integration of these new businesses is all progressing as planned. Terme di Crodo, which was acquired early January, is being integrated into our existing Italian beer business. Commercially, our new Italian soft drink business is developing as expected with focus on pricing, packaging and some changes therein, a good and solid strategy, supported by innovation and entry into a few selected export markets.Next focus area is the logistical opportunity that sits in combining beer and soft drinks on the same delivery truck. Integration of Lorina, the authentic French artisanal lemonade, is also progressing according to plan. Commercially, it is almost the same agenda as with Terme di Crodo.And lastly, I'm happy to inform you that we, during quarter 4, have commenced sales and distribution of Nohrlund's ready-made cocktails in our Danish sales organization. Nohrlund is a small business today, but we see great opportunities to scale that up. The commercial efforts will first be within the on-trade segment, but we have great expectation for this new exciting product category across channels.2018 has also been an exciting year so far when it comes to innovation and commercial activity. We have initiated a large range of activities with strong focus on craft and specialty as well as a new line -- as well as new line extensions that have been launched across countries. A great example of our non-product innovation is our new tap wall system for on-trade customers. This new tap wall allows for a broader beverage portfolio at restaurants and bars. And another initiative is our new product -- our new Anarkist brewpub in the heart of Odense. Commercially, we've also had successful partnerships on the events side with the Skanderborg Music Festival in Denmark, the Flow Festival in Finland and Royal as well as Hartwall Arena activation, to mention just a few. These sponsored events are great opportunities for Royal Unibrew to engage closely with consumers and eventually create more value for our customers through a 360-degree activation.Lastly, I want to stress that we continue our investments in strengthening our commercial presence internationally to enhance our reach and improve our sales and brand tracking.With this introduction, I will hand over the word to Lars to go through -- take you through the key financial performance for the first 9 months of this year. Lars?
Thank you, Hans. Please turn to Slide #3. I'm pleased to report our financial results for the first 9 months of 2018. Our performance for the 9 months have been strong with solid development both in our net revenue, earnings and free cash flow. Overall, we estimate our market shares to have improved compared to same period last year. And has Hans stated earlier, the improvements can be seen in the context of the superior agility to move fast as demand and consumption of beverage products accelerate during the summer months.Now looking at our performance for the first 9 months of the year, I will highlight the following. Our net revenue grew 16% for the first 9 months to DKK 5.6 billion. And adjusting for acquisition, our growth was 10% organically. EBIT growth of DKK 230 million, and we estimate the extraordinary good weather this summer to have impacted our EBIT positively by approximately 7 to -- DKK 70 million to DKK 90 million. Our EBIT margin expanded to 19.4% for the first 3 months compared to 17.7%. And of course, the great weather supported the increase. Free cash flow for the period amounted to DKK 1,034,000,000 compared to DKK 711 million for the same period last year. The positive development can, to a large extent, be ascribed to the improvement in the net profit for the period, but also positive phasing from payables.We had completed the acquisitions of the 3 assets so far, while CULT is with the Danish competition authorities. Lorina, Nohrlund and CULT are all focusing on categories with higher net revenue per hectoliter, so in line with our strategy to improve the premiumization of our assortment and play in winning categories. Finally, as our momentum since August have been slightly better across the board and what we have expected, we narrowed our interval and upgraded our outlook slightly.Now please turn to Slide #4. At group level, volumes increased by 11% to 8.4 million hectoliter. Volume were negatively impacted by missing beer campaign activity in Finland in Q1 and positively affected by the volume from our acquisitions of Terme di Crodo and Lorina. For the period, we report an increased EBITDA of DKK 264 million to DKK 1,343,000,000 and an EBIT increase of DKK 230 million to DKK 1,092,000,000. Our growth in earnings is attributable to improved product mix, extraordinary good weather, slightly improved market position and through the acquisitions and in that order. As Hans highlighted in his introduction, we will continue to invest in our business to support our future growth. Now please turn to Slide #5. With a record high activity level helped by an extraordinary warm summer in northern part of Europe, our revenue improved solidly after the first 9 months. Adjusting for acquisitions, our net revenue grew 10%, while volumes ended up 4% for the first 9 months. The positive mix from revenue, combined with strong operational leverage, has led to a record EBIT.And despite an increased invested capital, our return on invested capital, excluding goodwill, improved by 4 percentage points to 34% compared to last year. EBIT increased by DKK 230 million to DKK 862 million, and EBIT margin expanded by 1.7 percentage points to 19.4%. The EBIT margin was exceptionally helped by the excellent weather. Profit before tax at DKK 1,080,000,000 is DKK 227 million higher than last year. Our balance sheet and cash flow remain strong. The acquisition of Terme di Crodo and Lorina has increased the net interest-bearing debt level to close to DKK 2.4 billion and raised the leverage level to 1.5x to EBITDA.At the end of the third quarter, our shareholder equity stood at DKK 2.8 billion, while the equity ratio decreased from 46% year-end to 34%. The decreased ratio stems mainly from the acquisitions of Terme di Crodo and Lorina, which was carried out in January and July, respectively.Now please turn to Slide #6. The performance of our key figures continue to develop positively on all parameters. And if you adjust for the weather effect, which we estimate to be in the range of DKK 70 million to DKK 90 million in 2018, we still improved our performance this year relative to last year. With that, I will hand the word back to Hans to make comments on the development in our different business segments.
Sure. Lars, thank you. Please turn to our Slide #7. This slide illustrates the performance of our segments in terms of EBIT and EBIT margin over the past 3 years. A couple of highlights to our performance. In Western Europe, we saw volumes increasing by 18% for the first 9 months, while net revenue was up 19%. Growth in the region was supported by the acquisition of Terme di Crodo and Lorina. And adjusting for these effects, volume would have been up by 4%, and net revenue improved by 8% in that period.In Denmark and Germany, we realized an increase in volume of 5% and an increase in net revenue of 11% for the first 9 months of the year. Overall and excluding the weather impact, our performance developed as expected. We estimate to have gained some value share across product categories through an intensified focus on specialty projects, such as organic and craft beer, as well as the expansion of flavor varieties in soft drinks. These initiatives have been carried out with success to meet a more diversified demand by consumers.In Southern Europe, which comprises France and Italy, net revenue increased by 49%, while volume growth ended up by -- with 121% for the first 9 months, excuse me. Adjusted for the acquisitions of Terme di Crodo and Lorina, our revenue and volumes both declined by almost 3% for the period. Consumers' cautiousness and poor summer weather, especially during the third quarter, caused the slowdown in the Italian overall beverage consumption. Commercially, we see Terme di Crodo progressing as expected with the soft drink category. Since we took over the business, we have initiated a number of innovation ideas to the portfolio with new formats and flavors to support future growth and market expansion. An example is the TonicSoda, which recently entered the market, and soda -- tonic is quite a bit segment in Italy. Opposite our Italian business, our newly acquired business, Lorina, in France benefited from the extraordinary good summer weather in quarter 3. We are currently integrating the business, and everything so far is progressing according to our plans. Lastly and as expected, our EBIT margin came in at around 20% for the first 9 months, which was roughly on par compared to last year.In our Baltic segment, volumes increased by 5%, while revenue ended up by 12% for the first 9 months. Looking at our business in Finland, revenue increased by 14%, while volumes ended up 5% for the same 9-months period. Growth was positively impacted by product/mix changes as well as some tailwinds from the extraordinary good weather, which contributed to increased sales. Lastly, we note an increased demand in Finnish retail following recent changes in the Finnish alcohol legislation, which, as you remember, took place at the very beginning of the year, which allows for a selection of new alcohol categories to be sold in the supermarket.We continue to see strong execution in our business in Finland combined with a high level of innovation brought to the market. More recently, we've seen a strengthening of our product line of specialty beers and of soft drinks with low or no sugar content.In the Baltic region, the markets overall continue to be challenged by a slightly declining beer consumption from the legislation changes implemented during recent years. And these are a combination of tax increases and pack size reductions as well as opening hours changes.Volumes in the Baltics ended 4% up 9 months into the year, while revenue came in 5% above last year. Growth in our nonalcoholic portfolio and new product innovation supported strong growth in the Baltics, especially in quarter 3. We estimate that our market shares have improved slightly and particularly in non-alcohol, whilst the beer segment remains rather unchanged for us.Earnings in our Baltic Sea segment improved significantly this year with our EBIT increasing 38% over last year to DKK 493 million. And our EBIT margin improved from 15.2% last year to almost 19% this year. Better market and product mix, less campaign volume and, of course, the summer effect led to the improvement in EBIT.Turning to our international segment, which we previously called Malt Beverages and Exports, we saw volumes increasing by 16%, whilst net revenue ended up 18% for the first 3 quarters to DKK 432 million. Adjusting for Lorina and Terme di Crodo, revenue was up by 12%, while currencies impacted revenue negatively by DKK 13 million. In our international segment, we've seen good growth in malt and beer due to better market mix, although hard currency stays an issue, in particular in Africa. We estimate the sellout growth at distributor level to be around high single digits. So our customers sell out to their customers or consumers at the high single-digit base. Lastly, our investments in strengthening our commercial presence are progressing as planned. In the segment, our EBIT improved by DKK 18 million compared to last year, and our EBIT margin improved from 22% to almost 23%. Please turn to Slide #8. Wrapping up, the great weather in Northern Europe has been extraordinary this year. And please remember that for the -- and please remember that as you project going forward and particularly to 2019. As our momentum since August has been slightly better than expected, we narrow the interval for our outcome for the rest of the year, and we upgrade our results expectations slightly.That means that our outlook is: net revenue, we increased that on the top from DKK 7.2 billion to DKK 7.3 billion; EBITDA, we take up from DKK 1.66 million (sic) [ DKK 1.66 billion ] to DKK 1.685 billion, excuse me; and EBIT of DKK 1.315 billion to DKK 1.340 billion, so up by DKK 25 million.With this, we have now completed our presentation for today, and we will take your questions as they come.
[Operator Instructions] We will now take our first question from Jonas Guldborg from Danske Bank.
I have 2 questions. First, zooming in on Finland, quite impressive growth you have there in Q3 with 21% volume growth and 23% revenue growth. Could you kind of give a little bit of more flavor on how much of this is weather, because I think that is probably not very much, and then how much is regulation? And also, just remind us on how the extraordinary campaign, is that ended now or have you extended it into Q4 or 2019? And then I would like to hear a little bit more on your new tap wall system, how it will benefit your customers and you, of course. And also, what are the costs to implement this for you and all the -- your customers and your rollout plans in general?
You, Lars, we've been very precise on what the overall effect for the summer in our estimate is, you want to give some comments to Jonas' question?
No. And Jonas, to be absolutely honest about it, it's always difficult to separate the cold and hot water when it comes to what is weather and what is changes like and when you have like inflation changes. It is very difficult. I think the trend that we have seen since the pipeline ended, so to speak, on the changes in the ready-to-drink versus cider versus beer, that has not, to our estimation, not changed throughout Q3. So that's kind of the same trend that we have seen. I think where we have been able to benefit is in other categories as well and, in particular, in the non-alcohol area where the weather was -- given the weather was so great, picked up from mid-July and until mid of August. And we -- I think if you would ask any customer in Finland, I think they would rate us as being the best supplier during that period of time. So of course, the weather is significant in the Finnish equation. On the SOK deal that you asked for, the big beer campaign, Carlsberg have the position in Q4 this year and Q1 next year. And we don't have any insights from that from, yes, from onwards. Yes. So that's the question around Finland. And then maybe a little bit intro on this tap wall system. Hans can talk about the strategy around it, but just give you a couple of flavors from kind of from some single customers. We have -- it's not a rollout to all customers. This is a system that fits into certain type of customers. But we have the -- after having had the tap wall in for about 6 months at some key customers, we have been able to see that the specialty craft area increases significantly. And we can see that the customer profitability increases significantly. And we can see that we have been able to move consumption from other alcohol beverage categories into beer, so beer becomes more interesting at the point of sale. And at the end of the day, that is also beneficial for us because higher volume with a premiumized mix, of course, increases our opportunity to generate a higher value stream. So -- and we are talking not just single-digit kind of improvements at the customer level. We are talking about improvements that is, I would say, beyond even 20% improvement in -- for the customer when installing these. And then I think Hans, strategically, you can comment on it?
Yes. I think this initiative illustrates very well what we mean by a strategy of premiumization, Jonas, because in those outlets where we, together with our customers, decide to put this kind of equipment in, we see not only a significant volume effect, but even more so a mix effect on the margins because this allows for these outlets to serve consumers and visitors more different and more premium beers, which basically is good both for our customers as well as for ourselves. It also is good for the industry because it basically underlines the fact that there is much more plurality, much more choice in beer. And then you asked the question around the cost of this equipment. This is a cost that basically, whilst it takes some cash, the reality is that we stay within the guidance that we've given you on our investments overall in CapEx. So it does not derail any of our outstanding commitments financially. I hope that, that answers your questions.
Yes. Just one follow-up. Will the tap wall be for all markets or is it only a Danish product? Or how do you see it?
We -- of course, as we learn and as we see that there are significant positive effects, it would not be very clever to confine ourselves only to Denmark, I would say.
We will take our next question from Charles Higgs from Redburn.
Hans and Lars, 3 from me, please. Firstly, on Denmark and Germany, you talked about gaining value market share across categories. I was wondering if you could just put some hard numbers behind that and specifically in Denmark. And then second question, international, you talked about entering new markets with your new Crodo product. Just wondering if you could talk about which markets those are and maybe early feedback. And then third question, Italy, they just announced a new sugar tax, but the detail is now pretty up in the air. I was wondering if I could get your views on that and the potential impact on pricing there.
Yes. If I start with the latter one, there's different suggestions in the market as we speak in terms of sugar tax, so difficult to conclude on where it goes. And one of the suggestions is also that there will be less or no tax if it is Italian sugar that is being used in the products. So it's -- I see on the net revenue basis for us, which again we will have to pass on to the -- on a gross, sorry, on a gross revenue basis, which we will have to pass on to the consumers anyway, depending on what solution that at the end will be. But between the solutions that is in the market, we are ranging up to about a 10% increase in pricing because of the sugar tax. Yes.
If you're asking about which markets we want to go into, to be quite honest, I don't want to be too frank and too open about that because this is -- must be a surprise for some other people. But we have a solid and good plans on this. We've done some market research where the opportunities are and sits. And I reiterate what I've said on these 2 acquisitions before. I think that if Terme di Crodo and Lorina would not have been Italian and French products, I would have been -- probably, we would not have touched them. But these assets are basically both coming from the cradles of gastronomy in the world. That is number one. Number two, there are in the world, to give you a bit of a flavor for where we might be looking, more than 250 million people that speak the French language and have affinity to France. And perhaps that is a good place to start, of course. And then the same goes for Italy. There are a number of countries in the world where the Italian population is significant. The Terme di Crodo product has a long-standing Italian authentic tradition and reputation. And of course, we are going to leverage that in places where we think we will have the biggest bridgehead fastest, yes. Does that clarify, Charles?
Yes, that's good. And then if you could just briefly talk about market shares in Denmark and Germany, that would be great, please.
Yes. So in terms of the Denmark, Germany, which in reality is the Danish consumers for absolutely most of it because of the border trade, I think we have been pretty good in playing the portfolio well. And giving innovation or launching innovation, fueling in categories that also grow, so that is a part of the journey that we grow in categories, product categories that also grow. So that's a double plus. And that's in categories that is also more value exposed, so with a higher net revenue per volume. So that's a kind of triple plus. So that's a little bit of the effect that you see. And then I think isolatedly in Q3, our supply chain/sales organization have delivered an outstanding performance in delivering whatever the market needed, which have given us a lift on top.
We will now take our next question from Michael Rasmussen from ABG.
Three questions. First of all, Lars, in terms of the higher than at least I had expected admin costs in Q3, can you, first of all, do the split between how much was the incentive program and how much is due to the recent acquisitions? And also, on the acquisition-related costs, should we expect any of that in Q4 and in 2019? My second question is basically a little bit on the soft drinks in Italy. If you could just talk a little bit about what has happened in terms of moves from competition after your push into tonic water and also a bit on the LemonSoda pricing, please. My final question is a bit of a household question on the CULT consolidation. Is it right to assume a turnover of around DKK 60 million in Q4?
If I take the latter first in terms of CULT, CULT has not been approved by the Danish authorities yet, so the likelihood that we get any effect into Q4 is very low. There is a process with questionnaires and they -- that has been sent out this week to a number of on-trade customers. And they will have to get the response, and they will have to work on what that then means. And then they will come back to us after that, and then we are very close to Christmas. So at the end of the day, don't expect any impact in Q4. On the admin costs, the -- given the results that we -- that you see in our statements here, undoubtedly, our bonus level for employees generally across the countries will be kind of like at the highest level that you have ever seen. And given that we have the performance -- most of the performance already in the pocket, we have also provided for the costs arguably earlier than what we would normally do. And just to remind me -- remind you all, the way that we do these things is that we measure on hard-core financial results from net revenue generation to bottom line generation, to generation of cash flow, to efficiencies in our supply chain. So this is pay-for-performance kind of mechanisms. And then -- which is by far the biggest part of the increase in the admin cost because we provide for them centrally. And then we have the acquisition part, which is, as you can see in the notes, it's about DKK 11 million all in all that we are going to the -- ultimately to have as onetime costs. And we do not see any acquisition-related cost going into 2019. The cost that we expect has and will be provided for this during this year. Most of it have already been taken. Yes. On Italy, on the soft drinks side, so if you look at the average price for our portfolio, our soft drink portfolio in the trade, so the consumer selling price, it's up by something like 7% to 9% or so on shelf compared to the year before. And of course, that does not go into our pockets alone. This is being shared also with the trade. So -- and normally, you would see that, that is a span between 40% to 60% if you play this well. And let's assume that we have played this well. So we will be, in terms of our net revenue generation from our smart, I would say, price pack strategies and our discussions with the trade to make this a more interesting category for everybody, that we generate something in that range. So let's say half of the 7% to 9% is our increase on a net revenue per volume basis. So we are trying -- and that is pretty -- it's quite a lot in a market that is overall for soft drink not increasing and where you have had weather that has also led to a slight decline. So that's, I would say, a big achievement. The flip side of the coin, as we also express here, is of course, it has a little bit of a consequence on the volume in the short term. But strategically, we really feel that this is the right thing to do. And whereas it was hard in the -- hard for us in the beginning of the year, we see that over time, that this is beneficial for us and for the customers. In terms of move from competition...
Competition, oh, yes. Yes.
Yes. I think the market is as competitive as it has been. We don't see any specific, I would say, competitors targeting us in that respect. I think this is a pretty normal market. And again, we are a niche player. So this is maybe not -- I would also say, we're not in the cola category here, so this is not -- we are not up against Coke, we are not up against Pepsi here. So no, nothing special.
We will now take our next question from Søren Samsøe from SEB.
Just trying to break down the sales distribution costs you had in Q3. I can see in the first 9 months, right, you have DKK 163 million additional costs for sales and distribution. And after Q2 -- or first half, you said DKK 54 million, so that's DKK 109 million. And then you say part of those DKK 27 million is due to acquisition, so then we're down to around DKK 82 million additional sales and distribution cost in Q3. I was wondering whether you could break down this DKK 82 million to us. What have you used them for in Q3?
Two things. First of all, you need a little bit of extra logistical cost when your volume is up. So that's, of course, a part of the equation, and then the other part is investing in the market. So we have spent significantly more money, as you highlight here, on sales and marketing efforts to, first of all, I would say, to match what competitors are doing, so share of voice-wise, and the other one to fuel initiatives that we really see has a great momentum. And I think one of them is the original Long Drink in Finland where we, throughout the year, because of the negotiation changes, have spent significantly more money because it's now a product that is available in 4,500 stores instead of having been available in 400 stores before. So that makes a big difference to the opportunities to activate a brand like that.
But can you elaborate a little bit of how that works and then increase that to increase your share of voice, then you see an increase now? How long do you expect to sort of maintain that high share? And what does it take to maintain that high share then, if you can turn around and look at it like that?
Søren, we did not necessarily increase our share of voice dramatically because the whole industry in the Nordic region has had the same kind of effects. What happens in our industry is that -- and you know that very well. When there is more movement and when there is weather like the way it is, there is also more spending by all players in the market. So it is not only us that have increased the investments in the market, it's also competition. So if you look into next year, yes, because that is one of the things, of course, that we do and you do as well, you look again at your plans. And then if the question comes down to, are you going to invest so much money again next year? Then the answer is probably the industry will go back in their planning to plan for, let's say, a normal summer, yes, and then see where the weather takes us, to be quite honest. Yes? And then share of voice is only one element. Like Lars says, we try to spend that money in a smart way, smart way means where we get the biggest returns. Yes. And there are sectors where the responsiveness of the brands and the consumer is higher than others. And this is where we put the money. And if you then ask me, where is that exactly? Then I'm not going to tell you that.
I didn't expect you to. And then on free cash flow, a massive increase and, of course, part of it also acquisition-driven. Just if you could first also maybe say what's the real underlying improvement in free cash flow. And then I guess you will have some cash outflow in Q4 because of excise duties needs to paid in Denmark and Finland. So what should we expect for Q4? Is the around just above DKK 1 billion you have done after 9 months, is that also a good estimate for the full year?
Yes, I think the short answer is -- to the latter one is that's correct. We will have an outflow for excise duties. And since the season was good in August, that runs into, yes, October. And the other part of it is that we have an effect from the factoring from the beer position in Finland. That would also play negatively into Q4. Yes. So underlying, I would say, if you take that away, so the one-time negative effect from the beer position, there's no, I would say, significant changes to our cash flow generation and the components apart from the result.
We will now take our next question from Hans Gregersen from Nordea.
Lars, if we look on the unallocated cost item, what does that include and where does M&A-related costs go during, let's say, the takeover process? Just to have an understanding of that. Then going to the Italian business, you mentioned on your -- in your quote on Page 10 that Q3 revenue dropped by 8% and sort of volumes and revenue by some 20% organically, if I get your message right. Can you give a little bit further insight what's going on, on the Italian business? In that direction, how much is weather-related? Then on the revenue upgrade, can you elaborate on what has driven that upgrade in terms of market products or whatever? And then finally, turning to your comment on the outlook on the medium-term guidance. You previously stated that the weather effect will more or less be offset by positive M&A effects going to next year. So you still reemphasize the 17% EBIT margin target. Understand you have operating leverage from higher sales due to the weather impact. But why should we actually -- or why will you not upgrade the margin target at this point of time?
Yes. So if we -- if I start with Italy, so it's a little bit back to what we discussed before that our value focus on the soft drink part of the business is not helping the volume growth. So that is one of the reasons why that organically that the business is down in Q3. Another part of it is that when the weather is bad, they have already stocked up in earlier during the year and then they start to destock. And that means that you are then not filling the warehouse again and then you have movements between the quarters. So strategically, if you look at our beer performance after 9 months, we follow the market, grosso modo, and [ Strong ] is keeping its position. There's a few of our next-in-line products that are more mainstream, international mainstream-oriented where we don't have the same promotional pressure as we had the year before. But it's not something that changes the business as such. And then -- yes, so that was Italy. Then on the unallocated, unallocated cost is always what we put in, what do we not put in there. We have certain parts of central headquarter costs that we do not split because that becomes a little bit too theoretical to change it. And this is also why that you, in principle, see that the movements are not big from year-to-year. So costs like IT, as an example, we split out to each of the areas. But we have some that we keep not allocated. But if you take, whatever, sales and marketing or sponsorships and these kind of things, that is always sitting in the market. It doesn't -- it will never sit centrally. So it is really central cost that you cannot apply to any specific region. Yes, EBIT guidance, want to take that, Hans?
You know that that's a question that comes up every now and then. Of course, we have a midterm 17% EBIT target at this moment. Of course, this year, we shoot over that. That is very clear to everybody. We've also given calibration indeed of the weather effect. Yes, we've said between DKK 70 million and DKK 90 million plus/minus. And then, as you say, Hans, for next year, we see that we get some positive input from the acquisitions that will probably compensate for a larger part of this weather effect. So why don't you take your guidance up on the margin. I think we will come back to that early next year when we've got the full year in and when we've got a full and final view of where we have landed. So at this moment, there's no change in our attitude here. But some people find us prudent. And we would like to keep it that way for the time being.
And then we, just to add, we have a lot of moving parts. We have acquisitions and effects of acquisitions and these kind of things. We have, as Hans stated earlier on, we now have a different portfolio. That does not come by itself, that -- you need to invest in it to get the snowball to roll, et cetera, et cetera. So we -- as we prove this year, we're investing heavily in the business to keep the snowball rolling or getting bigger, so to speak, on a net revenue basis, and we want to do that. And then I think -- and that's -- there's short term, there's long term, whatever, but if you look at the tone of voice around Italy at this moment of time in terms of macro and what is going to happen with the whole budget process, that is a risk to the business. A couple of years ago, the risk was maybe minor in Italy. It was bigger in Finland. Now Finland seems to be a little bit better. But then now suddenly Italy plays in as a macro environment that is not the most perfect one. And whatever kind of guidance that we have, we must be able to basically have it in the target. Yes.
Yes. So this allows us also some flexibility, Hans, that we'd like to have. That allows us to pick our choices of where to invest, where the return, in our mind, is best and fastest. So that is the background at this moment, not changing that EBIT margin target.
But Lars, could I just go back to your answer on Italy? I understand perhaps you have discontinued the water category, which of course, has a negative volume impact. But you state that the value declined significantly faster than the volume trend, which would suggest to me that the more expensive products must have contributed significant proportion of the contraction. Is that a wrong conclusion or am I missing something here?
In the quarter, correct; year-to-date, not correct.
So what you're saying is that in the quarter, beer has taken a massive dive, but this is mainly driven by weather effects and destocking, phasing, et cetera, rather than underlying share losses.
Yes, yes. We have not lost share. The quarter, isolatedly, we have not lost share on the consumer side. But of course, as you know, we have a long journey before that the products end in the hands of the consumers because we have wholesalers in between, and we have cash and carry in between in most of our business. And so when we sell to a wholesaler, it takes maybe 6 to 8 weeks before a consumer gets it in hand. So you have a lagging effect always when -- if you have like a weather impact.
But Hans, just because I hear between the lines with you that you fear something in Italy. I can tell you the following. When we did the -- made the acquisition, we made the acquisition to make 1 and 1 make 3 and not 2. That means that we said, listen, we have a subscale beer business and it needs to come up in terms of scale, yes, and we did not have at that moment a multi-beverage business. With the acquisition, we have basically created a unit that has -- that indeed has more scale and that has also got this character of a multi-product portfolio. We see that in the on-trade, we are doing exactly what we've seen, what we've set ourselves out to do. That means strengthen the position of both our beer as well as our soft drink portfolio. In the off-trade, because of the price increases that we have put through into the market, we've had a little bit of a blip throughout the first 9 months, yes, with some of the customers trying not to pay the price that we ask them. That has had some effects. But I can promise you that long term, these effects will fade, yes, and will be compensated by a lot of the very exciting innovation that we have in this product line coming up. And we also note that in that respect, of course, when you get excise tax increases in markets that are substantial, normally, that is necessarily not so bad for pricing in the market.
[Operator Instructions] We will now take our next question from Richard Withagen from Kepler.
I have 3. First of all, what measures have you taken in your production and supply chain in the course of this year to meet this high demand for beverages and enabled you to gain market share? Maybe you can give some examples. Second question is on Finland. How has the distribution of alcoholic beverages outside of Alko trended in recent months? Are there still additional outlets stocking beer or had that been more stable in the recent months? And then the last question I have is on the working capital profile of Terme di Crodo and Lorina. Are they materially different from Royal Unibrew's?
If I take the latter first. They are materially different because of the nature with lower excise. So that's, I would say, the difference. There's a less excise on these products than what you would see in our average portfolio in Royal Unibrew. So that's -- but apart from that, no material differences.
Yes, Richard, coming to your first question, measures taken in supply and examples thereof to meet increased demand. We have, by the way that we manage the business, we have a little bit more flexibility than 1 or 2 of other players in the market. For example, we have been able to supply our customers also during weekends, which some of the other people do not do. That is an example. The second thing is that we have also got historically quite significant capacity in Lahti, which gives us also flexibility to dial up and dial down, if I may say so. So those are the 2, I think, 2 most or best illustrations of how we have met increased demand from customers and consumers. You are asking about Finland and the effect of the alcohol legislation and what is happening in general to the market. In general to the market, there was initially not a lot of effects in the beer segment. So there was, until the 1st of January, beer available in the supermarkets until 4.7% alcohol percentage. And that has been taken up to a maximum 5.5%. The consumers did not find that so interesting. So also, the retailers have not stocked up in that sector in the same way as what happened in ready-to-drink. In ready-to-drink, you saw a plethora of new launches and new products, expansion of the shelves, et cetera. And that is now being corrected, you see, so there are some corrections. And in these corrections, what happens is that the weakest-performance brands fall off the shelf, and we are of the most of those.
As there are no further questions in the queue at this time, I would like to turn the call back for any additional or closing remarks.
I thank you for your questions, first of all. Many of them good and interesting and very relevant questions, thank you for that. As said, we are proud of having served our consumers and customers throughout the year with a lot of energy and a lot of new stuff that we have brought to the market. And we feel also confident that, that capability will not diminish going forward. So thank you.