Good day. Thank you for standing by. Welcome to the Brdr. Hartmann Q2 Results 2021 conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. Without any further delay, I would now like to hand the conference over to the CEO, Torben Rosenkrantz-Theil. Please go ahead, sir. Thank you, and thank you for joining our Q2 earnings call today. I'm Torben Rosenkrantz-Theil, and I'm the CEO of Hartmann, and our CFO, Flemming Steen, is with me on today's call. I will kick off the presentation with the highlights of this eventful quarter and add a bit of background for our recent adjustment of our guidance. Flemming will present the segment performance and financials before I share our perspective on some key strategy elements and initiatives. We will comment on the 2021 outlook before turning to the Q&A session. Please turn to slide two for the highlights. We came off to a good start in Q1, fueled by continued strong demand, the phasing out of COVID-19 restrictions this quarter meant that egg consumption shifted back from retail sales to food service and restaurants. This shift was very abrupt, and the impact was amplified by the fact that supermarkets across our markets decided to hold back on their normal egg promotions in the Q2 off-season as eggs were used less as a loss leader to drive traffic to the stores. After a long period of extraordinary egg sales and shortage of egg packaging, it takes time to reestablish supermarkets' confidence in the supply chain. All in all, the unprecedented market turbulence took its toll on volumes and revenue. At group level, revenue remained stable due to the contributions from our new Indian and Russian activities, as well as higher sales in our technology division. Currency developments had a negative impact on revenue this quarter. Despite the sudden change in market conditions, we were able to improve the product and price mix and maintain a profit margin of 10.8%, which is reasonable for Q2 in a historic perspective. Still, earnings were much lower than in the historically strong Q2 last year, as we faced extreme increases in raw material prices across our markets, combined with low capacity utilization due to the mentioned sudden drop in demand. The ongoing capacity expansion in our European and U.S. businesses progressed as planned in the quarter, and the investment level remained high. We still expect the new capacity to be commissioned in 2021, and we see good underlying growth opportunities ahead despite the current volatility in Q2 and Q3. Let's now turn to slide three, where Flemming will comment on the segment's performance and our finances. Thank you, Torben. After a period of record high volumes and profitability in the wake of COVID-19, the second quarter of 2021 was very volatile and marked the return of seasonality in our business. While our usual low season quarters in Q2 and Q3 were very busy in 2020, activity is below normal in the low season this year. This development was combined with dramatic increases in raw material prices in both our segments. We have intensified the dialogue with our customers on the back of the dramatically increasing raw material prices to alleviate the impact by adjusting our average sales price. Our American segment reported a slight decline in revenue as demand dropped and volumes were down due to the partial reopening of society in North America in particular. Our earnings were impacted by low utilization of our expanded production capacity and severe raw material increases, which could not be compensated by improvement of the product and price mix. In addition, we faced temporary manning challenges in the U.S. after an unstable period on the job market during COVID-19. These challenges stabilized in early Q3. Eurasia posted a moderate increase in revenue as our new factories in India and Russia were added in late 2020 and early 2021. In addition, our technology division sold more machinery this quarter. The Eurasia segment was affected by the same decline in demand as the Americas segment, and our efforts to improve the product and price mix could not outweigh these negative effects. The profit margin declined to 15.2% on the back of lower capacity utilization and soaring raw material prices. The strong profitability level was realized as the quarter came off to a very good start. Please turn to slide four for a few comments on the consolidated figures. Consolidated revenue was stable at DKK 659 million in Q2, despite the negative markets development during the quarter and a negative currency impact of DKK 34 million. As mentioned before, revenue was positively affected by the addition of our plants in India and Russia, as well as higher technology sales. Profitability was quite solid for an off-season quarter at 10.8% as we improved the product and price mix to somewhat alleviate the negative impact of skyrocketing raw material prices and lower production efficiency. While operating profit declined from DKK 137 million in Q2 2020 to DKK 71 million this quarter, it is worth noting that this is still a significant improvement from DKK 47 million in Q2 2019 and DKK 16 million back in 2018. Despite the high investment this quarter, we maintained a positive free cash flow of DKK 13 million. At the same time, the return on invested capital remained strong at 25.3%. I will now let Torben provide you with an update on our strategy and some key initiatives during the quarter. Please turn to slide five. Thank you, Flemming. We continue to invest in our business to accommodate the underlying increase in demand across our markets in the wake of the current volatility. As mentioned before, it's very important for us to highlight that we have not made investment decisions based on the demand arising from COVID-19. We have remained focused on the underlying development in demand, and I would like to stress that we continue to see very positive macro trends driving Hartmann's growth and development. Firstly, there's no doubt that demographics will continue to play an important role in driving the demand for food products and our packaging. Also, urbanization will drive retail trade and a continued shift from sales in open markets to retail packaging sales in supermarkets. The world population is expected to reach 10 billion people in 2050, and we see demand for our product increase steadily decades from now. Secondly, consumers and decision-makers are concerned about sustainability. They are reacting against the use of single-use plastic packaging. This drives the conversion to moulded-fibre packaging, which is a superior and well-proven alternative to plastics. Supermarkets are embracing the change. Several large retailers have set out to ban or significantly reduce single-use plastic packaging. We are certain that this development will be supported by regulatory changes, which are expected to come into effect over the coming years. Thirdly, we know that consumers are increasingly focused on health, nutrition, local production, recycling, and animal welfare. We therefore expect to see higher egg consumption and a more varied supply of eggs. The egg category will become more complex. Our customers are already demanding packaging that stands out and promotes specialty eggs in the supermarkets. We're drawing on our four key strengths to benefit from these overall trends. First of all, our expertise enables us to offer advice to customers based on experience and consumer research that opens for a data-based approach to branding and marketing. Secondly, our solid footprint with sales in more than 50 countries and 15 efficient factories gives us a great and expanding platform to grow the business. Thirdly, our product portfolio is versatile and tailored to fit the specific demands across our markets as our sustainable profile is strong, as all products are based on renewable materials with the option to choose FSC certified and CO2 neutral products as well. Finally, we have outstanding technology competencies that have been refined since 1936 and allow for continued development of our own manufacturing setup and external machinery sales in selected markets. Now let's turn to slide six for an overview of our current strategic focus areas. Our strategic initiatives are divided into three key focus areas of capacity, efficiency, and marketing. During the quarter, we maintained the focus on capacity expansion and efficiency improvements. We also continue to invest in marketing. Our strategy remains unchanged and focused on growing volumes and maintaining a high utilization rate. At the same time, we aim to enhance efficiency through automation, process improvements, and continued technological development at our factories. Finally, we continue to explore expansion opportunities in existing and new markets. I'll share a few comments about some of the initiatives taken for each of these three focus areas in the second quarter. Firstly, we continue to invest in additional capacity in both Europe and the USA. with expected commissioning later this year. At the same time, we made good progress with the integration of our new factories in India and Russia, which became part of the group in late 2020 and early Q1 of this year. Secondly, we continue to invest in automation and implementation of new technology to ensure smooth operations, reduce costs, and remove bottlenecks at our factories. These efforts are completed to optimize the output per employee and production line while reducing raw material consumption per unit to protect profitability. Finally, we continue to invest in marketing and sales with the European rollout of the new Plus Pack product, which offers customers better marketing space, higher efficiency at the packing station, and sustainability benefits due to a 10% weight reduction compared to its predecessor. We also continue to focus on marketing and establishing relevant data and insights about current consumer trends and concerns. We're still working to support and assist our customers in converting from plastic packaging to eco-friendly moulded-fibre products. Let's turn to slide seven and the outlook for 2021. We maintain our recently adjusted guidance and expect to increase revenue to DKK 2.6 billion-DKK 2.9 billion with a profit margin of 10%-13% before hyperinflation restatement and special items. After a strong start to the year, we expect the remainder of 2021 to be significantly impacted by the sharp increase in raw material prices and the drop in demand witnessed in the off-season quarters of Q2 and Q3. We currently expect demand to stabilize in Q4 in the high season, but the outlook is subject to an unprecedented level of uncertainty at this point. Please note that the license income of DKK 78 million received as part of a settlement of an intellectually, I'll try again, please note that the license income of DKK 78 million received as part of settlement of an intellectual property rights dispute in Q1 is included in the guidance. We remain committed to invest in capacity expansion, and we will still expect to invest around DKK 550 million in 2021, including the Q1 investments in Russian protective gear. Despite the market turbulence that we're currently facing and our recent downgrade of the 2021 outlook, we are not revising our general financial ambitions. In the slightly longer term, we will still aim to grow volumes and revenue year-on-year to be able to reach an ambitious profit margin of at least 14% under relatively stable market conditions. We now look forward to taking your questions, please. Sir, your first question comes from the line of Christian Reinhold. Please go ahead, Christian. The line is now open. Yes, good morning. Morning. Maybe you could get a bit more flavor on the GP margin development. You say the raw material prices stock is rising very much. We can also see a very steep decline that was expected, but maybe not as much as we saw here from 37.4%- 27.9%. Maybe you could speak about the moving parts in the development of the GP margin also for the full year. Absolutely. There's no doubt that we have been very severely hit by the increases in raw materials, and it's not just one raw material going up, it's everything at the same time. The main categories of raw materials that we are exposed to are paper, electricity, gas, and CO2 quotas. All of those four main categories are shooting up with a pace that we have never seen before, to a level that we've never seen before. Outside of the four main categories, of course, everything else goes up, too. Pallets, foils, films, inks, all the supporting materials, chemicals that we use in our production is going up as part of the general inflationary scenario that all companies are faced with right now. However, the four main categories are shooting up faster. Of course, despite some of these raw materials being hedged, we are very exposed. Because of the pace and the extent of these developments, we will and we have come slightly behind in terms of increasing our sales prices as fast as what we're seeing on the cost front. That's severely hurting our margins, mostly in Q3 and in Q4 when we look ahead. If we look at the first two quarters, we're quite satisfied with the developments in those quarters. Obviously, when we look at the stuff ahead of us, we are challenged, and we need to respond, obviously, to these sharp increases on the cost front. We will do so by increasing our sales prices and quite clearly in the wake of the recent adjustment to our guidance, this work is urgent. How long will it take before these increases are fully implemented in your sales prices? Can you compensate 100%, do you think in, let's say, 12 months time? I would be more confident in saying yes over an extended period of time. We are in a competitive environment, and even though our customers are expecting a price increase, we still have to fight hard to get it. We are also to a limited degree, though, we are in arrangements in customer contracts that does not provide for an immediate increase to our prices. We'll go out and fight with all we have to get the prices up. That's what we must do. There is not a single or several cost initiatives within Hartmann that will have sufficient impact to mitigate what we're seeing coming our way from our suppliers. Very important part of the recipe here is to go out and increase prices to our customers. They're expecting it, and we will do it. In many ways, we are very focused on setting ourselves up in a good way for 2022, which allows us a little bit of time during the coming months here to get those prices up prior to next year. It will be a challenge and we are ready for that challenge. We have demonstrated over the last couple of years that we can work with prices in Hartmann, and from that standpoint, we will push it through. I just wonder if as an all-time low you have had before on gross margin was in 2018, as far as I can see, where we are down as low as 26% in the second half. Is that a figure we should be looking at for this year also? It's not a figure that we would accept as an acceptable level of the business going forward. We were severely challenged as well at the end of 2018, going into 2019. At that time, the raw materials as well went berserk, and I think our numbers in 2019 and beyond demonstrate that we are able to recover such situations, and I'm confident we'll do that once again. Compared to the situation back in 2018, this is far sharper with far greater impact, which calls for far greater actions on our part, and we'll have to step up our game and respond. From that standpoint, our situation is not much different from the situation of many other companies. We are inflationary wise, we are in a different spot in this world compared to what we have been or where we have been the last 10, 15 years. From that standpoint, it is a bit of an extraordinary situation. Just last one concerning this gross margin. Is it just the raw material prices that will take down the gross margin for 2021? It's more than 50%, I assume, of sales that goes into the raw materials. You also have quite a big amount of personnel costs here. Will they be stable compared to maybe 2019? It will be a better comparison. Are there also increases here? You were talking about problems taking in people in the U.S. among other things. Well, the decline in gross margin is mostly a result of the increasing raw material costs. As an important further explanatory factor is the fact that our volumes have been extraordinarily soft. As those of you who have followed Hartmann, including yourself for many years know, we have two good quarters traditionally during the year and two low season quarters. We expected at some point that the extraordinary increases that we have enjoyed in demand will take off and we would get back to having two low season quarters. That happened now in 2021. What we didn't expect was that the volumes coming our way in Q2 and Q3 has turned out to be lower than the volumes that we normally have in a low season quarter. There are a bunch of underlying reasons in the market for that. Rest assured, it's not because we have lost market share. Of course, with us being an asset-based volume centric business, if you're taking away volume, you cannot make sufficient adjustments to your cost base fast enough. That means when the volume goes up, your contribution margin lifts very fast, very considerably, and when the volume goes down, you have the opposite impact. That's also a major reason for the declining margins over the summer here. Yes, on top of that, we have had some troubles with the U.S. labor market in Q2, expect less so in Q3. That's a secondary explaining factor here. The primary moving parts are raw materials and soft volume, and that's a terrible combination for a company like ours. Just as when we enjoyed the opposite cocktail a year ago, last year, where the volumes shot up like a rocket while the raw material prices dropped like a stone. We had the perfect combination and the best year in the history of our 103-year-old company. Right now, we're just enjoying the opposite effect here going out of the corona situation. Of course, if you take the average of the two, we're still well above average, but looking at in isolation and at what's ahead of us, we have our work cut out. Okay. Thank you. I'll jump back in the queue. Okay. Thanks, Christian. Thank you. Thank you. Your next question comes from the line of Frederikke Due Olsen. The line is now open. Please go ahead. Hi, Torben and Flemming. This is Frederikke from Carnegie. Can you hear me? Yes. Yes. Loud and clear. Good morning, Frederikke. Fantastic. Good morning. Looking at the revenue for the quarter, it is on par with the DKK 662 million you booked in Q2 2020. I'm just curious about with the new capacity you've added and the two acquisitions, would this number have been higher in a scenario with normal demand, or how should we think about this on a like-to-like basis? If we had had normal demand in Q2, we would have had a higher revenue. I think one of the key points to understand, looking at Hartmann's numbers for Q2 and what we are facing in Q3, is that demand is below normal low season volume. Just as we had a big positive surprise last year when COVID drove the volumes far above our seasonal normal, sadly, we're seeing the opposite this year, where volumes are far below normal seasonal levels. Our expectation is that this is a temporary scenario. We expect the volumes to normalize during Q4, and we expect the distribution of sales getting entirely back to normal with Q4 and Q1 being great quarters and Q2 and Q3 being low season quarters at the normal level. From that standpoint, we are of course concerned about the short-term problems that we are facing. The longer term, even the midterm outlook for our business, we believe is completely unchanged. We have to fight through the situation we're in now, but structurally, we have not seen a single data point suggesting that people will stop eating eggs or will eat fewer eggs. There's no data supporting that. Henceforth, we feel very confident that once this temporary situation is over, we're back to normal. The billion-dollar question is how long does it take to get back to normal? Is that back to normal in Q4 as we anticipate, or are we wrong, and we will all be back in September or is it February next year? Completely impossible to say. Again, structurally, the business hasn't changed. Right. Okay. Makes sense. You also write that your revenues are supported by increased machinery sales. Is it increased compared to Q1, or are you implying that you're in the higher end of what you've booked in past quarters? It has increased compared to the comparison quarter of Q2 last year. As you know, the machinery sales in terms of which quarter is booked, highly unpredictable within Hartmann and changes from year to year. This year, we sort of just happened to be invoicing a lot of that in Q2, whereas the comparison year, it was less. Okay. Q1 was average or low? In Q1, as I recall it was above average. I just don't recall the comparison quarter of Q1 the prior year. We have had the majority of our machinery sales for 2021 booked in the first two quarters, and that distribution of sales has not changed. It was very comparable. Q1 was equally higher as Q2. The balance was the same. Both these quarters were higher than the first half of last year? Yes. Okay. Perfect. Makes sense. You also mentioned that you have improved product in price mix. Is that also compared to 2020 where you had very favorable market conditions, or is it improved compared to more stable market conditions? Both. Okay. Perfect. I'll jump back in the line. Thanks. See you Sir, Mr. Weinholtz has some follow-up questions, sir. Someone has to ask some questions, so I'll do it. Yeah, please go ahead, your line is now open. Thank you. Maybe you could talk a bit more about Americas, because when I look at your figures here in Q2, I can say that cost, for instance, OPEX, is exactly as I expected. There's nothing there to be very surprised about, in my view, if you take it out from the cost of goods sold. Americas seems to be a very big problem for you and also earnings are going down substantially. Maybe you could talk a bit about maybe in more detail where we see the problems. Is it a general problem? Is it a U.S. problem? Is it Argentina? What are we speaking about here? Also, when we look into the second half, what are you looking into here in this Americas segment? Well, obviously, we recognize the considerable drop in earnings. On the top of our agenda is, of course, to do something about that. Now, just to put things in perspective here, we have activities in Canada, the U.S., Argentina, and Brazil. All of those places run profitably and have done so for the previous many quarters. Just want to make sure that we all have that in mind. In North America, North America is a market that has seen the sharpest decline in market in Q2. We've seen the same impact in Europe with the markets dropping. That drop has just been far more considerable in North America, and that's why our earnings are more severely hit in that segment compared to Europe. As we said, we have also had some challenges in one of our plants in that segment, which didn't help. The primary explanation for the margin drop is, again, the ugly combination of raw materials shooting up like a rocket and markets declining. That's driving it. If we look at the South American business, we've seen slightly more stability on the volume front. In those countries, that has been okay. In South America, though, we have seen the raw material prices there as well just go absolutely crazy, to be honest. They have been very diligent, in my opinion, in Argentina and in Brazil, in terms of increasing the sales prices, and we have pushed through unprecedented high sales price adjustments, and sadly, that has not been enough. We will keep pushing, and at some point, we'll get ahead of the costs. Right now, we're not. In Argentina, of course, as a result of the hyperinflation, they're very used to pushing through price increases, so no drama there. The Brazilians have had to step up their game in terms of pushing through price increases. Brazil, as you know, have not been a high inflation country in recent times. They have had to step up their game, and they have, but it has just not been enough. We need them to do more, of course, observing the competitive environment. I think we will see a lot of easing on the margin pressure when the volume returns. We have our plants fully staffed, ready to go, and if the volume unexpectedly doesn't materialize, then it leaves us with hard questions. Do we take down capacity? Do we wait? Do we shut down temporarily? All those questions are coming to the surface now. Again, our expectation and hope is that the volume will normalize in Q4. That combined with many of our problems that we've had in one plant out of, is it 10 in that segment, will severely reduce its impact. I'm still very much optimistic about that segment. Of course, we are very aware that the margins that we have posted here is below par. You are keeping your CapEx expectations, does that mean that you are just going ahead and you are not delaying anything regarding investments because of the market condition right now? Well, now we're in August, mid-end August here. We're guiding for the balance of the year here. In the DKK 550 million mentioned here are a bunch of projects that at this point sits at 80% completion. It doesn't make sense from that standpoint to stop these ongoing projects. If we were to do anything, we would stop getting new ideas, stopping the projects that we have on the go is not going to happen. Again, remember what we're investing in is a long-term development of the market, which we believe is unchanged. We believe the situation is temporary in nature and certainly would not call for us stopping a line install that has been completed up to 80%. That would not be an efficient way to manage our capital. Will it impact your ambitions for 2022? That we'll talk about in April 2022. My last question will be about your two acquisitions. Maybe you could speak a bit about how your experience are with those until now. You have had them for about a half a year in your company. Yeah, we can add a little bit of light. Generally, it's not part of our modus operandi here to comment on one plant, specifically more so we're commenting on a segment here. As this is new, certainly if we look at India, the Indian business is relying heavily on the fruit season and the crop being good, as we have a lot of sales going into that segment of the market. The apple crop has been quite good in this summer here. From that standpoint, they have been busy, the Indian team, and that's good. We must also say that taking over the keys to the Indian plant right in the middle of COVID-19 has not been without challenges. India has been fairly hard hit with COVID-19 and our business has continued, and we haven't had major interruptions to our activities and so on. We have had far fewer opportunities to get on-site and work with the team and be with them and so on. That's something that we have missed, certainly. The same can be said for Russia, where we have had very limited access to the country as a result of visa restrictions. Despite that, and thankfully because the team up there is strong, the business has continued, and the volume has developed as we had hoped and predicted. With both of those two plants being part of the Eurasia segment, the headlines for that segment also applies to those two countries, namely that raw materials are shooting up, and mitigating actions needs to be taken through prices. When the Eurasia segment as a whole is margin challenged for Q3 and Q4, that goes for India and Russia as well. It's the same dynamics playing out there as everywhere else. That means the Indians and the Russians will have their work cut out for them in needing to increase prices in the coming quarters. Okay. Thank you. Thanks. Thank you. No further question at this time. Please continue, sir. Okay. If no further questions, we'll wish everyone a good day. Thanks now. Thank you. This concludes the conference for today. Thank you all for participating. You may all disconnect. Stay safe, everyone. Have a good day.