Welcome to the Brødrene Hartmann annual report for 2022. For the first part of this call, all participants are in a listen only mode. Afterwards, there'll be a question and answer session. To ask a question, please press five star on your telephone keypad. This call is being recorded. I'll now hand it over to the speakers. Please begin. Thank you. Thank you for listening in on our 2022 earnings call. I'm Torben Rosenkrantz-Theil, and I'm the CEO of Hartmann. CFO Flemming Steen is with me on this call today. I will begin with a few highlights and some comments on the extraordinary challenges and turbulence that we faced in 2022. Flemming will present the business performance and financials before I briefly touch on some key strategy elements and initiatives. Finally, we will comment on the 2023 outlook before turning to the Q&A session. Let's turn to slide two for the highlights. We grew our business and delivered a solid business performance in an extraordinarily challenging and turbulent year. We navigated in an environment impacted by the war in Ukraine, historic high energy and raw material prices, high inflationary pressure, and macroeconomic challenges. To mitigate these developments, we successfully implemented necessary pricing actions in our markets. Despite overall market softness, we grew volumes in North America and Argentina. We increased market share in several markets. Therefore, it was satisfactory that we generated 26% revenue growth. We maintained a stable profitability driven by pricing actions and cost containment initiatives despite soft market demand as well as historically steep increases in prices of recycled paper and energy. We also continued our efforts to strengthen production efficiency. Combined these initiatives mitigated the negative external conditions. We delivered decent earnings and a profit margin of 7.5%. In these challenging times, it's satisfactory that we continue to see growth potential for moulded fibre egg packaging. During the year, conversion from oil-based plastic packaging to sustainable paper-based moulded fibre packaging continued. We completed the remaining part of the comprehensive and strategic capacity expansion program in Europe and North America to accommodate the expected growth in long-term demand. Let's go to slide three with comments on the challenging environment we navigated in during 2022. As already mentioned, we faced a significant increase in costs across our markets as our two most important raw materials reached historic high prices. Particularly in Europe, energy prices escalated and peaked at all-time highs in Q3. Also, recycled paper prices increased steeply during the first half of 2022. The financial impact of this development was mitigated by pricing actions across all of our markets. Looking into 2023, we expect energy costs to remain high and volatile. The inflationary pressure and consequent negative impact on consumer prices and personal disposable income had opposite effects on demand for egg packaging. The reduced consumer disposable income entailed a trade-down effect where expensive protein sources, such as meat and fish, were replaced by eggs. At the same time, egg supply declined due to a severe outbreak of avian flu and surging feed costs causing unusually high egg prices, reduced availability in some markets, and fewer egg promotion campaigns in the supermarkets. Our markets in Argentina and Brazil remained impacted by low economic growth, rising inflation, currency fluctuations, and increased political tension causing reduced consumer purchasing power and increased competition. Furthermore, because of the Russian invasion of Ukraine over a year ago, we initiated a sales process for our Russian factory, and the activities were classified as continuing operations in Q2 2022. The efforts to divest the factory are impacted by complex legal changes and challenges related to Russian as well as EU legislations and sanctions, a situation that we expect to continue in 2023. The reclassification entailed an impairment loss of DKK 81 million in Q2 and an additional impairment of DKK 36 million at the end of 2022. In the annual report and during this conference call, we are commenting on our continuing operations only. Let's now flip to slide four for an update from Flemming Steen on segment performance and our financials. Thank you, Torben. Our 2022 performance was significantly impacted by the beforementioned market volatility. Overall, we saw market softness, demand was lower than expected. We alleviated these factors as well as higher input costs by lifting average selling prices to protect a stable profitability. Our Americas business increased revenue by 36%, driven by the pricing actions and the volume growth in North America as well as in Argentina. The market remains subdued and impacted by the opposite inflationary effects on demand for egg packaging outlined by Torben. We grew market share positively impacted by North American customers converting from plastics to moulded fibre packaging. Driven by the higher revenue and improved capacity utilization, the profit margin improved to 8.1% despite high raw material prices, inflationary pressure, and overall macroeconomic development. The economic uncertainty in South America continued, and particularly the market in Brazil remained challenging. Our Eurasia business grew revenue by 20%, mainly due to pricing actions. Volume dropped slightly from loss of volume in Russia and Ukraine, market softness, fire in the factory in India, and unusually high egg prices, which led to fewer supermarket promotions. Overall, egg supply dropped due to the outbreak of avian flu and increased feed costs. Higher recycled paper cost and the energy crisis in Europe had a severe impact on our profitability, which dropped to 8.7% from a 2021 result positively impacted by licensed income of DKK 78 million. Let's turn to slide five for a few comments on the consolidated figures. Our 2022 profitability came out higher than expected while revenue was in line with the most recent guidance provided in November. Despite the challenging market conditions and a negative currency impact of DKK 90 million, we grew consolidated revenue by 26% to DKK 3.35 billion in 2022. The result was positively affected by progress both in Eurasia and Americas. We secured a stable operating profit of DKK 252 million, positively impacted by DKK 36 million from currency effects, while the profit margin declined to 7.5%, mainly due to unprecedented high raw material prices. As mentioned before, 2021 operating profit was positively affected by a license income of DKK 78 million, a significant increase in 2022. Special items amounted to an expense of DKK 36 million, a net income of DKK 44 million related to the effect from a write-down and disposal of assets on the back of a fire in the factory in India in May 2022, and the estimated insurance coverage to reestablish building and production capacity. In addition, an expense of DKK 78 million related to impairment of non-current assets in Brazil in response to slowing economic growth, high inflation, and increasing interest rates. Our 2022 profit was DKK 61 million for the continuing business and minus DKK 30 million, including the discontinuing operations in Russia. Free cash flow came to a net inflow of DKK 23 million, and the Return on Invested Capital was 11.1%. Torben will now provide an update on our strategy and some key initiatives this year. Please go to slide six. Thank you, Flemming Steen. I'll just spend a moment recapping our strategy. During the past years, we have invested significantly in our business to accommodate the expected underlying increase in demand across our markets once the current turbulence and volatility settle. The expected demand increase remains based on three macro trends. Firstly, we continue to see increased sustainability awareness amongst consumers and decision-makers reacting against single-use plastic packaging. This movement drives the conversion to moulded fibre packaging as a superior and proven alternative. Supermarkets embrace the change and some even drive the change, and several large retailers have set out to ban or significantly reduce single-use plastic packaging. Over the coming years, we expect to see regulatory changes supporting this movement. Demographics continue to play an important role in driving the demand for food products and our packaging. We expect urbanization to drive retail trade and a continuous shift from sales in open markets to retail packaging sales in supermarkets. The world population is projected to reach around 10 billion people in 2050, and we see demand for our products increase steadily along with this growth. Lastly, focus on health, nutrition, local production, recycling, and animal welfare continue to increase. Against this background, we expect egg consumption to raise and a more varied supply of eggs. The egg category will become more complex, and our customers are already demanding packaging that stands out and promotes specialty eggs in the supermarkets. To benefit from these overall trends, we're drawing on our four key strengths. One, based on our expertise, we offer advice to customers based on experience and consumer research that opens for a data-based approach to branding and marketing. Two, our solid footprint with sales in more than 50 countries and efficient factories gives us a great and expanding platform to grow the business. Three, our product portfolio is versatile and tailored to fit the specific demands across our markets. Our sustainable profile is strong as all products are based on renewable raw materials with the option to choose FSC certified and CO2 neutral products as well. Four, we have outstanding technology competencies that has been refined since 1936 and allow for continued development of our own manufacturing setup and external machinery sales in selected markets. Let's flip to slide seven to go through our strategic focus areas in 2022. In 2022, our three key focus areas were capacity, efficiency, and marketing. We continue to focus on growing volumes and maintaining a high utilization rate and to combine it with enhanced efficiency through automation, process improvement, and continued technological development at our factories. We also consider attractive expansion opportunities in existing and new markets. Let's look at some of the initiatives in 2022. We completed the capacity expansion in Europe and the USA. New capacity was added in 2021, and additional production equipment was commissioned in 2022. We optimized production allocation between our factories to mitigate the sky-high energy prices, and we initiated the sales process of our Russian factory after the invasion of Ukraine in February of last year. We continued investing in automation and implementation of new technology to enhance operations, reduce raw material consumption, and lower costs. We also established a competency center in Denmark to develop new energy systems and technologies which are necessary to reach our near-term Science Based Targets initiative that were submitted for validation in 2022. Thirdly, we rolled out new products and concepts in several markets, and we continued to build our knowledge of consumer behavior through research to be able to offer customers relevant data and insights about current consumer trends and concerns, which in even more important in these turbulent times and when supporting and assisting our customers in converting from plastic packaging to eco-friendly moulded fibre products. Let's turn to slide eight for the outlook for 2023. We anticipate continued business growth across our markets in 2023 and expect to generate consolidated revenues of DKK 3.6 billion-DKK 4 billion and operating profits before restatement for hyperinflation and special items of DKK 220 million-DKK 320 million. Revenue growth is expected to be driven by higher sales volume as well as pricing actions. We anticipate a continued challenging macroeconomic environment with low visibility and geopolitical uncertainty and that prices of recycled paper and energy will remain high and volatile. These effects may have a detrimental impact on our earnings and profit margin. Persistently high raw material prices are expected to impact production costs, which we intend to offset by adjusting selling prices and improve the overall price and product mix to protect our earnings. In the prevailing inflationary environment, we are guiding on nominal operating profits for 2023. We expect a moderate investment level of around DKK 300 million in 2023, primarily in minor capacity expansions and product efficiencies. The amount do not include the reestablishment of our factory in India compensated by insurance coverage. Our general financial ambitions are unchanged. In the slightly longer term, we still aim to grow volumes and revenues year-over-year to be able to reach a profit margin of at least 14% under relatively normal and stable market conditions. At this time, we now look forward to taking your questions. Thank you. If you do wish to ask a question, please press five star on your telephone keypad. To withdraw a question, please press five star again. We will have a brief pause while questions are being registered. The first question will be from the line of Frederikke Due Olsen from Carnegie. Please go ahead. Your line now is unmuted. Good morning, Torben and Flemming, and thank you for taking my questions. I have a couple, so I'm just going to take them one by one. Starting with your EBIT guidance. You ended the year with an EBIT margin just north of 13% in Q4, and now you guide for an interval that corresponds to 5.8%-8.4%. Can you elaborate on the underlying assumptions to your guidance and why it makes sense to expect margins to contract from Q4? Maybe especially considering that energy and recovered paper prices have trended down a bit since then. There's no doubt that Q4 was positively impacted by raw materials declining and the delay that we normally have in adjusting prices to match, which gave us a higher profit in Q4 than can be expected going forward. That makes Q4 a difficult benchmark for 2023. The reason for changing our guidance from margin to a nominal guidance is that our revenue, both in 2022 and also expected for 2023, is impacted by price increases and price contracting contraction, which is principally related to energy. Henceforth, the margin, in percentage, the relative margin, can jump up and down and that's the background for changing the guidance to a nominal figure rather than continuing with a relative figure. Okay. Torben, does that mean we should expect your selling prices to come down a bit in 2023 if energy prices come down? That's an important item to understand because we have expanded our prices considerably on the back of higher energy prices. In many cases we have had to agree with our customers that this increase firstly was solely based on energy going up and we had to commit when energy would go down to a more normalized level that the, that we would accordingly adjust our sales prices. That's what we have seen or that is what we expect to see happening as energy prices go down. Okay. Okay. That makes sense. If I look at your EBIT in absolute terms, in Q4 you reported an EBIT before special items and the restatement for hyperinflation of DKK 129 million. I know that Q4, of course, has this sort of very favorable crossing of higher prices and costs have come down a bit, and it is also a seasonally strong quarter. Even so, I mean, the mid-range of your guidance suggests an average quarterly EBIT of, I think DKK 67 million, which is almost 50% down from the result you booked in Q4. Could you maybe elaborate a bit on how that makes sense? Well, as you said, Q4 is a peak quarter, typically the best quarter of the year. As you also correctly note, our Q4 had a considerable impact from raw materials declining and prices not sales prices not because of the mentioned delay. From that standpoint, Q4, as I said, is a hard benchmark for the quarters of 2023. I would also like to point your attention to the fact that our earnings in 2022 had actually gone up quite a lot compared to 2021, which had a considerable impact from a one-off. If you look at the mid-range of our guidance for 2023, the expectation is that despite this incredibly volatile environment that we operate in, that we're still adding to our nominal earnings, which, we, consider, a success, under the circumstances. Looking at your EBIT guidance in nominal terms, I recognize of course that the mid-range corresponds to a quite substantial growth rate from the EBIT before special items and hyperinflation in 2022, taking out this one-off from the license income. If re-related to the year before, I think it's a growth rate of around 8%. Does that make sense? Does it make sense to think about this as the underlying volume growth? Would you say you're satisfied with this on the back of a rather comprehensive investment program? Well, of course, if we look at 2022, we would have loved to make more, no doubt, considering, as you mentioned, the investments made in the company over the prior years. But in 2022, very quickly we came into an all bets are off situation. Under those circumstances, we feel it's one of the greatest achievements of this company the last 10 years to be reporting a positive profit at this level, because the impact of the prices of recovered paper and energy has been so severe that one could not take for granted that we would have a profit at all. If anything, we have had a tremendous opportunity to test the robustness of our business model this year because we have presented to our customers price increases at a level that we have never, ever pushed through in one year before. Of course, we were nervous what will happen when we do it. Will the customers run away? Will they find alternatives? Will their business collapse? Against this background, we still, despite everything that can be said about previous investments levels and all that, we internally believe it's a tremendous achievement to even have a profit this year. We firmly believe there will be return on all the investments we have made. We just need to get out of the woods here and get into a more normalized scenario. We hope 2023 will be slightly more normal than 2022. In my book, the macroeconomic volatility is still there. The unpredictability of the energy market is still there. Yes, costs have gone down on energy, great in Q1. If you talk to energy experts, what they worry most about is not so much Q1, it's what's happening in Q4. What's the ability of the Western countries to fill up their storage capacity of energy over the summer. In many ways, energy experts are far more worried about the coming winter than they actually were with the winter that we're in the middle of. For that reason, you cannot at all rule out that we'll see dramatic spikes in energy again later this year. In our book, we are not in a normalized scenario, but we do enter 2023 with the self-confidence of having navigated securely 2022. Therefore, we guide with a certain element of pride a higher number for 2023 than 2022. Is it as high as we would like it to be? No, it's not. It's still a good respectable number, and it's another step in the right direction of taking the profitability of the company back to where it came from. It's another step in the direction of our long-term ambitions. We are not ashamed of what we are presenting our investors with today. If anything, the opposite. No, of course not. I also do recognize that it has been an incredibly challenging year for you guys with sort of the perfect storm of everything hitting at once. I think what I'm more so fishing for is maybe also relating to your comment on the investment program. You write that you've now implemented the remaining part of this quite comprehensive expansion program in Europe and in the U.S. I'm sort of fishing for the relation between this investment program and how volume growth has developed. If I look at your turnover of invested capital, this has been on a downward trend from, I think around 1.8-1.9 up until around 2014 to now it's below 1.5. And I'm assuming that, of course, with the selling prices, that's sort of the underlying relationship between volumes and investments is has deteriorated even further. I'm just wondering if you could elaborate a bit on when we can expect this to improve again? Sort of when will the top line follow investments? Well, we need our markets to generate more volume than what we have seen this year. This year or 2022, not only had all the challenges in the world on the cost front, we also had the greatest outbreak of avian flu in recent history in both Europe and North America, which took a considerable amount of eggs out of the market. Under these circumstances, we still kept our pants on with respects to volume and even added to our market share in some countries. But it's correctly observed that because of the investments made in recent times and the softness of the market, there is more capacity in the system than what, you know, than the volume that we produced, which is, you can say, allowing us to reduce our investments a little bit in 2022 and 2023, and it puts us in a situation where we have more capacity on the tank going into the coming couple of years. We see that actually as a good thing. Would we have preferred to be sold out already? Yes, absolutely. We are now in the fortunate situation that if customers come to us and want to do business with us, we are open and ready for business based on the investments made. The million-dollar question here is how quickly will the markets normalize from a volume standpoint? I don't have that answer. I can see that the layer population in the U.S., which went down considerably in 2022, considerably as a result of the avian flu. We can see that the farmers are repopulating, but they're not up to their normal level. In Europe, we are also in a situation of the laying flock being far below a seasonal norm. We hope and expect the Europeans as well to repopulate the farms. I don't dare to guess how fast that will happen. It is a factor that has an impact on the business in 2022 and also 2023. That, of course, if the repopulation doesn't happen quickly, the period of us having surplus capacity will be prolonged. Okay. so it is sort of correct to assume that you have some kind of capital reserve that you expect to ramp up when markets start to pick up? Yes, we have more free capacity at this moment in time than what we're used to, because of the effects described. Okay. then my last question relates to this impairment loss, of DKK 78 million on the Brazilian business. I know this is caused by slowing economic growth, et cetera, but considering that you bought the South American activities from a subsidiary of your majority shareholder of, as I recall, DKK 300 million, and then you booked an impairment loss of DKK 112 million last year, and then DKK 78 million this year, so DKK 190 million in total, if I'm not mistaken. with this in mind, do you think that you might have paid a price that was too high? sort of how should minority shareholders interpret this signal of massive write-downs on an asset that you, that you did acquire from your majority shareholder? Flemming Steen here. Thank you for the question. We have to remember that this happened back in 2014, so it's nine years ago. The market in Brazil back then looked significantly different. We made a good profit back then, and the market was much more stable than it is now. The market is also today affected by an overcapacity, so nobody could predict this development. You know, I was not there in 2014, but I have no doubt that we have not paid too much for this business. The impairment test is also affected by significant increase in the interest rates, which when you calculate your Net Present Value of this, reduces the value. Giving that, nine years has passed since we acquired it, I don't think you can say today, that we paid too much, back then. Okay. All right. That's all from my side. Thank you for taking my questions. Thank you. Thank you, Frederikke. The next question will be from the line of Christian [Mainholm], as a private investor. Please go ahead. Your line will be unmuted. Yes, good morning. I think we should speak a bit more about your guidance. Maybe could you be a bit more specific, what's the assumptions regarding the low end of the EBIT guidance, the DKK 220 million, and what, on the top of the guidance, DKK 320 million? Are these figures dependent on the top line, or is the top line more or less independent on what you guide on the EBIT? Well, to start with the first part of your questions, the lower end. One of the things that could happen, which may pull our profitability down during the year is if we see a very sharp increase in the energy cost towards the back end of the year, and we have the normal delay in recovering those costs from our customers, then because of the year stopping, at the end of December, we may end up in a situation where considerable costs are incurred in 2023, and we only recoup that in the first month of 2024. That would certainly pull us down towards the lower end of the spectrum. Of course, if we look at what could drive us up towards the high end of the spectrum, you can say if the markets recover beyond our assumptions, there could be a volume upside. And if costs and the inflationary pressure suddenly takes a sharp turn for the better, that may provide a relief, putting us further north. As we've described early on here, the unpredictability of what might happen is at a level where we have felt a need to provide a wide range. Although we are considerably lowering the width of our guidance compared to last year, which was also incredibly wide, then we still believe that we, you know, that the situation calls for a wide range and I hope that answers your question there, Christian. Yeah. Yeah. It's, if the energy prices gets back, that's a big problem for you. It depends when. If they get back to. It depends when it comes back. If it comes back at a time where our recovery of those costs through sales prices are happening in 2024, yes, then we have a problem in our books for 2023. The good news is we'll get it back in 2024, so it's more about timing because we are at a point with our customers where we have at least historically noted acceptance for energy-based price increases. Well, the time lag, is it three months or how, what's the dynamics in this, price adjustments? Well, I would say to give you a little bit of guidance here, I would say approximately two months. It's not a fixed number, it's not No, no. Roughly, I would say use two months as a guidance, then you're not too far off. Yeah. Okay. Your CapEx, the DKK 300 million, could you tell us where you are going to invest? Is it mainly still in the U.S. or is it broadly based? It is, you can say it's mainly in Europe and North America and less so in developing countries. What's the split? Is it, majority in the U.S. where you are gaining volumes or can you give us a hint? No. It's, we are investing in both places. It's not such that we have 85% in the U.S. and, 15% in Europe. The key drivers are Europe and North America, and investments are being made in both places. Okay. With these price adjustments you have made, have you lost any customers or have you gained any big customers because of that? Or do you have a stable picture? At the aggregate, we have a stable picture. Have we lost customers? Yes, absolutely. We have also gained some because there are also other players in the industry that increased their prices, which had some customers leaving them and us absorbing those customers. There has been a few ins and outs of the customer database. Not super dramatic. Again, at the aggregate level, we have actually taking market share in this period. Of course this represents a huge relief for everyone here because, as I said early on, we have gone to places with our price increases in 2022 we have never been before. We got it done. We also had to get it done because if not, we would be in a very, very serious situation at Hartmann because of our very considerable reliance on energy and the cost of recovered paper. Yeah. Any of the customers has returned to you afterwards? We can find examples of that. Our business is not only driven by price, it's also driven by service and quality and other features. We are not valued for our price increases by our customers in 2022, that's for sure. The underlying things that we provide are still valued. While I think many customers may not admit it, they also understand that the impact came out of nowhere with a very considerable impact on our business. At the end of the day, it would benefit no one in the industry that Hartmann would be unable to supply. It has been a tough year, Christian. Nothing we've ever seen before, at least not during my years in the company, and, again we are- You have earned your salaries this year. We have certainly had to work for it this year, which is quite extraordinary, as you know. Speaking about the salaries, we have just had these agreements in Denmark, regarding the development of payment for employees. Will that be a problem for you? We also know that there's a very high inflation in Hungary where you have a factory. How should we look at the cost development of salaries for the next couple of years? Well, we expect that the inflationary environment will continue for a while. Yes, it's far higher, the inflation in Hungary than Denmark. As everyone knows, even in Denmark, inflation is high. Of course, when you've been through the energy increases that we saw in 2022, that went up manyfold. Of course, inflation is a problem, but in that context, a slightly smaller problem. But it is what it is, and we will make every attempt to pass it on to our customers, and in the meantime, try to be as efficient as possible to reduce the headcount through automation where possible. Those efforts are, of course, even more relevant, in an inflationary environment. My hope is, of course, once we get to the point of negotiating salaries at a local level in our factories, that we can get results that both the company and the employees will find acceptable. A good result for me is one where nobody is really happy, but everyone can accept it, and that's what we're gunning for. Okay. My last question is a totally different one. India, you are now getting back to full capacity in Q2. What has your experience been? In the start, you were restricted by the COVID, so you didn't really have access to the factory, as far as I understood. Maybe you could tell a bit about the outlook for India and what you are going to do there in the next couple of years. Certainly. You correctly note that the start to the Indian venture was not made easier through COVID. Certainly having a very significant event through a fire there also did not provide the best of starts. Having said that, the fire also provided an opportunity to improve the facility through new equipment. It also allows us an opportunity to introduce a couple of new products in the market that we may have introduced anyway, just some years later. Out of a bad situation, we hope something positive will come. As you said, in Q2, we expect to commission the new equipment. Initially, the team out there will have to work hard for their salaries in recouping the market that was lost through the fire. We expect that will take a little bit of time, but we're confident that will happen. As I said, with a couple of new items to sell, we certainly have not given up on the plans for India. It's been a setback n eedless to say. Okay. Okay, that's all for me. Thank you. Thank you, Christian. As there are no further questions at this moment, I'll hand it back to the speakers for any closing remarks. Yeah. We have a few questions that we got on email. One is related to the guidance for 2023. I think we've answered that. It relates to whether we expect continued unprecedented increases in energy and paper prices. I think we've answered why we think that this guidance that we provide, which is a slight increase to 2022, is the right one, and that there's still a lot of uncertainty. The second question relates to the EBIT margin in Q4. Torben Rosenkrantz-Theil correctly, you know, explained that Q4 is a peak month, and it was fueled by lower energy prices, or lowe ring energy prices, which gave us a net benefit for that quarter, versus a net expense in the first three quarters of 2022. The question also related to, do we expect that to continue? We certainly expect the volatility on the energy side to continue. The big challenge will be in the fall and winter of 2023. Yes. Those were our comments. Have a great day, everyone. Thank you.