Annual Report (ESEF) • Mar 1, 2023
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Download Source FileUntitled Royal Unibrew A/S CVR no. 41 95 67 12 Annual Report 2022 our people We recruit, develop and retain entrepreneurial and empowered people thirsting for success and striving to do better every day. Our people drive our success and progress – and live and protect our values. We work as one team and find solutions to all challenges. our consumers Bringing people together and faci- litating great moments and enjoy- ment is the heart of our business. We offer strong local beverage brands in combination with global brands – continuously striving to match consumers’ changing prefe- rences through meaningful innova- tions and by offering a broad range of refreshments that deliver choice. THE PREFERRED CHOICE We want to be the preferred choice of local beverage partner that challenge the status quo by doing better every day in a fun, agile and sustainable way THE PREFERRED CHOICE for Purpose and ambition our customers We partner with our customers and strive to grow together by offering a portfolio of relevant brands and having a challenger mindset. With our local, decen- tralized setup we focus on agility and close collaboration – aiming to provide best-in-class service as well as pursuing extraordinary brand execution in all channels. the future We are deeply rooted in the communities where we work, and we partner with all our stake- holders to make a positive impact on society. Our focus is to build a long-term sustainable business and to minimize the environmental footprint of our operations from raw materials to the end consump- tion. our shareholders Our main focus is to invest behind the categories and channels that grow the most, pushing premiumization and driving organic EBIT growth. On top of this, we will do value accretive bolt-on as well as strategic acquisitions if possible. We aim to increase distribu- tion to shareholders over time through dividend and share buy-backs. ROYAL UNIBREW Annual Report 2022 2 Letter from the CEO & the Chair The year of agile behavior and brave decisions Royal Unibrew’s business momentum continues to be strong owing to our solid brand portfolio, and we continue to consolidate our market shares across geographies despite the challenges posed by unexpected inflation and historically high energy prices. 2022 was a year characterized by unprecedented circum- stances and uncertainty. We have been compelled to deal with the consequences of high and unexpected inflation and historically high energy prices, as a result of the pointless war in Ukraine. The high inflation impacted our cost base negatively resulting in pressure on our earnings. Even so, we are confident that Royal Unibrew is on the right path. Our strategy, THE PREFERRED CHOICE, together with our niche and multi-beverage models continue to work and pave the way for building our business even stronger. We continue to expand our platform by organic growth and, additionally, we continue to grow our business through partnerships and acquisitions that fit to Royal Unibrew and our ambition of being THE PREFERRED CHOICE of beverage partner in local markets. In the course of the year, we agreed to expand our partnerships with PepsiCo on both snacks and beverages, as well as our partnership with Diageo on ready-to-drink (RTD) to also cover Norway. We continue to bring innovations to market for the purpose of expanding the choices for our consumers. Finally, we have been able to keep our supply chain up and running despite several challenges, including periodic shortage of certain materials during 2022. We continued our sustainability journey in 2022, and we took a big step, as our ESG score was among the best in the global beverage industry, which contributes positively to our ambition of being THE PREFERRED CHOICE for the future. “Royal Unibrew generated healthy top line growth in 2022. Our revenue has almost doubled since 2020 despite the challenges of the pandemic followed by unexpected inflation driven mostly by high energy prices. There is no doubt that Royal Unibrew is in strong shape, which makes us confident about the future.” Lars Jensen President & CEO Peter Ruzicka Chair CEO Letter ROYAL UNIBREW Annual Report 2022 3 We look for ways to reduce our environmental footprint, to find more sustainable solutions for our customers and to offer more sustainable products to our consumers. Our environ- mental agenda in 2022 has been busy, in particular regarding the construction of our solar park in Denmark and the biogas plant in Finland. The first solar panel was installed in the solar park by the end of the year, and shortly after the solar panel produced the first kilowatt-hour. The installation is now ramping up and the park will be in full operation very soon. As for the biogas plant in Finland, we expect to inaugurate the plant during the first quarter of 2023. From this point, Royal Unibrew will be independent of fossil fuels in our production in Finland. Hence, 2023 marks an important milestone in our pursuit of a fossil free future. By the end of the year, we also submitted our ambitious emis- sions reduction targets to the Science Based Target initiative (SBTi) for official validation. And of course, we supported UN Global Compact and will continue to do so. “The success of Royal Unibrew is a product of our colleagues’ extraordinary efforts.” Our business is firmly anchored in the purpose and ambition of being THE PREFERRED CHOICE of local beverage partner that challenges the status quo by doing better every day in a fun, agile and sustainable way. Agility has always been a cornerstone of our business, but 2022 taught us that this quality is more important than ever before. Our colleagues around the world have proven that agility, persistency and a can-do attitude are possible even in times of high uncertainty and constant change. That is not to be taken for granted. We would like to express our appreciation to all our colleagues throughout the organization for their commitment and extraordinary efforts in a challenging year. Likewise, we would like to take the opportunity to thank our board of directors for safeguarding Royal Unibrew’s interests and our shareholders for their persistence and continued trust. “We have to keep both hands on the wheel in 2023, as there will be misty periods and continuing challenges.” We are looking into a year with just as many moving parts as we experienced in 2022. The business and consumer envi- ronment will continue to be challenging; therefore, we need to keep both hands on the wheel. The agenda of 2023 is set with the aim of maintaining our strong business momentum and secure future growth. We must close the gap between cost inflation and price increases. We anticipate a hurdle of costs in 2023 that we have to pass on to our customers to close the gap between cost inflation and price increases. We managed to reduce the gap in both Q3 and Q4 in 2022, and we are convinced that we will close the gap during the first half of 2023. It is evident that we must continue to work hard on implementing price increases to neutralize the consequences of inflation. We must prepare to deal with changing consumer behavior. We expect to see further changes in consumer preferences in 2023. Thus, we must continue to be agile and brave in the way we do business: agile and brave enough to change course from one day to another if the consumer needs changes. At all times, we need to have the right products, in the right packaging sizes, at the right prices, in the right locations and at the right time to meet the needs of our consumers. We must continue to focus on key growth categories and efficiency. Our focus on growth categories have proven to work in 2022. We expect the greatest growth potential across geographies in the no/low sugar category as well as the energy drinks category. In other words, we expect the beverage industry trends from 2022 to remain on the world map. We must continue to invest behind our key brands across growth categories with a continued focus on ROIC. Conversely, we have to cut the tail of the SKUs with no or low growth potential. It is our belief that this is a necessary step to improve efficiency. We will continue the integration process of our latest acquisitions, which involves roll-out of Royal Unibrew’s IT systems in Sweden, Norway and Canada. In addition, we will begin the integration of the production facility at Amsterdam Brewery in Canada. We look forward to yet another busy and exciting year. Lars Jensen P eter Ruzicka President & CEO Chair of the Board ROYAL UNIBREW Annual Report 2022 4 Contents Management report Who we are 6 Strategy 13 Our business 15 Performance 29 Governance 42 Corporate social responsibility 63 Financial statements Signatures and statements 102 Consolidated financial statements 108 Parent company financial statements 150 Other information 169 → Mergers, acquisitions and partnerships Page 20 → Financial review Page 30-32 → Corporate social responsibility Page 63 Follow us: royalunibrew.com Contents ROYAL UNIBREW Annual Report 2022 5 Who we are → Royal Unibrew in brief • Results for 2022 and outlook for 2023 • Results for 2022 - business segments Financial highlights and ratios • ESG highlights and ratios Who we are Who we are ROYAL UNIBREW Annual Report 2022 6 Markets Multi-beverage Multi-niche Production Non- alcoholic Western Europe Northern Europe Above mainstream brands Multi-niche and niche International International Alcoholic Nothern Europe Western Europe Mainstream brands Multi- beverage 67 64 36 33 2021 2022 82 76 14 10 10 8 2021 2022 5249 51 48 2021 2022 78 76 24 22 2021 2022 12 11 78 77 11 11 2021 2022 Net revenue by brand category () Volume by segment () EBIT by segment () * Royal Unibrew also has a production facility in Toronto, Canada from the acquisition of Amsterdam Brewery. Royal Unibrew is a leading regional multi-beverage company with strong local brand portfolios in our main markets in the Nordic region, the Baltic countries, Italy, France and Canada. In addition, our products are sold in more than 70 countries in the rest of the world. W e strive to offer our customers a broad portfolio of high-quality beverages, which accommodates our consumers’ demands across a wide range of categories, including beer, malt beverages, soft drinks, energy drinks, cider/RTD, juice, water, wine and spirits. Our business is based on a solid foundation of strong local brands. As for Northern Europe, our local brands are accompanied by well-known international brands on license (PepsiCo and Heineken) and trading goods (e.g., Diageo), whereas for Canada it is a mix of our own brands and agency brands. We want to be THE PREFERRED CHOICE as local beverage partner that challenge the status quo by doing better every day in a fun, agile and sustainable way, creating good and enjoyable moments for our consumers. Net revenue split in alcoholic vs. non-alcoholic () Royal Unibrew in brief Net revenue split () Who we are Royal Unibrew in brief 7 2018 2019 2020 2021 2022 CO 2 from production CO 2 (kgCO 2 /hl) scope 1+2 0 10 20 30 40 50 1 2 3 4 5 2018 2019 2020 2021 2022 Net revenue 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 -4 -1 2 5 8 11 14 Organic growth 2018 2019 2020 2021 2022 EBIT 600 800 1,000 1,200 1,400 1,600 1,800 0 5 10 15 20 25 EBIT margin 0 5 10 15 20 25 30 Adjusted 2018 2019 2020 2021 2022 30 35 40 45 50 55 60 2018 2019 2020 2021 2022 0 400 800 1,200 1,600 2018 2019 2020 2021 2022 13.2� EBIT-margin for 2022, a decrease of 5.7 percentage point - 8� EBIT decrease for 2022 to DKK 1,516 million + 31� Net revenue increase for 2022 to DKK 11,487 million 15� EPS increase for 2022, to DKK 30.5 per share Earning per share (DKK) Share of CSD volumes with no/low sugar cotent (%) Net Revenue/organic growth (mDKK) () CO 2 from production Results for 2022 and outlook for 2023 EBIT/EBIT margin (mDKK) () Free cash flow (mDKK) Outlook for 2023 mDKK Outlook Actual 2022 Actual 2021 Net revenue 13,000-14,000 11,487 8,746 EBIT 1,550-1,750 1,516 1,652 Please refer to page 28 for more details. Our 2022 results were characterized by solid net revenue development and slight declining EBIT despite significant cost inflation, differences in levels and timing of price increases in the market, a challenged supply chain and a changing consumer environment. Developments in 2022 • S trong performance across geographies leading to increased market shares in most markets • Organic EBIT decline of 14% due to high cost inflation, high freight rates and the delay in increasing prices towards customers • Free cash flow of DKK 577 million was negatively impacted by a negative development in NWC. • E arnings per share up from DKK 26.5 to DKK 30.5 (+15%). Adjusted for the remeasurement of the shareholding in Hansa Borg bryg- gerier, earnings per share declined to DKK 23.1 corresponding to -13% • CO 2 from production increased by 13% in 2022 driven by acquisitions and a shift to oil on some produc- tion sites. • In 2022, total distribution to shareholders was DKK 992 million • A dividend of DKK 14.50 per share for 2022 (2021: DKK 14.50) is proposed to the AGM • W e expect an EBIT in the range of DKK 1,550-1,750 million in 2023 based on net revenue of DKK 13-14 billion. adjusted for gains on remeasurements of investments in associates Who we are Results for 202x and outlook ROYAL UNIBREW Annual Report 2022 8 Results for 2022 - business segments Northern Europe DENMARK, GERMANY, FINLAND, NORWAY, SWEDEN, LATVIA, LITHUANIA AND ESTONIA Western Europe ITALY AND FRANCE International MORE THAN 70 MARKETS IN AMERICAS AND EMEAA 10.4mhl VOLUME (up by 7%) 1.6mhl VOLUME (up by 21) 1.4 mhl VOLUME (up by 7%) 1,247mDKK EBIT (down by 0%) 157mDKK EBIT (down by 35%) 128 mDKK EBIT (down by 30%) 8.9bnDKK NET REVENUE (up by 35%) 1.4bnDKK NET REVENUE (up by 16%) 1.2 bnDKK NET REVENUE (up by 22%) 13.9� EBIT-MARGIN (down by 5.0pp) 11.6� EBIT-MARGIN (down by 9.1pp) 10.7� EBIT-MARGIN (down by 8.1pp) → Read more: page 34 → Read more: page 38 → Read more: page 40 Performance Results for 202x - business segments ROYAL UNIBREW Annual Report 2022 9 2022 2021 2020 2019 2018 Sales volume (million hectoliters) 13.4 12.3 11.1 11.0 10.8 Organic volume growth (%) 1 9 0 1 3 Income statement (mDKK) Net revenue * 11,487 8,746 7,315 7,692 7,298 Organic growth net revenue (%) 11 12 -3 1 9 EBITDA 1,997 2,020 1,861 1,814 1,673 EBITDA margin (%) 17.4 23.1 25.4 23.6 22.9 Earnings before interest and tax (EBIT) 1,516 1,652 1,515 1,469 1,339 Organic EBIT growth (%) -14 6 2 4 21 EBIT margin (%) 13.2 18.9 20.7 19.1 18.4 Income after tax from investments in associates ** 362 37 33 25 20 Other financial income and expenses, net -93 -42 -43 -36 -31 Profit before tax 1,785 1,647 1,505 1,458 1,328 Net profit for the year 1,491 1,298 1,198 1,140 1,040 Parent company shareholders' share of net profit 1,492 1,299 1,183 1,142 1,041 Balance sheet (mDKK) Non-current assets 11,416 8,771 7,015 7,163 6,775 Total assets 14,474 10,914 8,306 8,493 8,062 Equity 5,158 3,342 3,332 3,106 2,908 Net interest-bearing debt 4,460 3,536 2,193 2,705 2,522 Net working capital -770 -1,102 -875 -671 -748 Invested capital 10,451 7,449 5,927 6,211 5,835 Cash flows (mDKK) Operating activities 1,135 1,753 1,738 1,402 1,214 Investing activities -558 -457 -324 -262 -401 Free cash flow 577 1,296 1,414 1,140 813 * The IFRS-15 accounting policy concerning customer contracts was reassessed, and some sales costs were reclassifed to rebates, and as a consequence net revenue and sales costs are reduced with the same amount in 2020 and onwards. 2022 2021 2020 2019 2018 Share ratios (DKK) Number of shares (million) 50.2 48.8 49.4 50.1 51.0 Earnings per share (EPS) *** 23.1 26.5 24.1 23.0 20.6 Diluted earnings per share *** 23.1 26.5 24.1 22.9 20.6 Free cash flow per share 11.8 26.4 28.8 23.0 16.1 Dividend per share 14.5 14.5 13.5 12.2 10.8 Year-end price per share 495.3 737.2 706.6 610.0 449.0 Employees Average number of employees 3,365 2,890 2,631 2,567 2,416 Financial ratios (%) Return on invested capital including goodwill (ROIC) 13 19 20 19 21 Return on invested capital excluding goodwill (ROIC) 22 32 33 30 33 Free cash flow as a percentage of net revenue 5 15 19 0 11 Capex as a percentage of net revenue 5 5 5 4 6 Cash conversion 39 100 118 100 78 Net interest-bearing debt/EBITDA (times) 2.2 1.7 1.2 1.5 1.5 Equity ratio 36 31 40 37 36 Return on equity (ROE) 35 40 37 38 36 Dividend payout ratio (DPR) 49 55 56 54 53 ** Income after tax from investments in associates includes gain on remeasurements of investments in associates of DKK 360 million in 2022. *** Earnings per share (EPS) and diluted earnings per share are adjusted for gain on remeasurements of investments in associates (DKK 360 million) in 2022. Had no adjustment been made, earnings per share (EPS) and diluted earnings per share would have been 30.5 in 2022. Ratios comprised by the "Recommendations and Financial Ratios" issued by the Chartered Financial Analyst Society Denmark's Committee for Accounting standards have been calculated according to the recommendations. Definitions of financial highlights and ratios are provided on page 173. Compared to Annual Report 2020 the definition of free cash flow has been updated to reflect market practise of the IFRS 16 implementation. Comparables for 2020 and 2019 have been adjusted. Financial highlights and ratios Who we are Financial Highlights and Ratios ROYAL UNIBREW Annual Report 2022 10 0 10 20 30 40 20192018 2015 20172016 2020 2021 2022 0 1 2 3 4 5 -42% 0 2 4 6 8 10 January February March April May June July August Septemb er October November December 0.0 0.9 1.8 2.7 3.6 4.5 We continued our sustainability journey in 2022 with efforts to reduce our footprint and potential impacts for our consumers and customers, our products, and our people. The volume growth for no and low products significantly outperformed regular products (see page 8) and we reached our goal of allocating 40% of our marketing budget to sustain- ability. The overall increase in consumption of energy and water, and emission of CO 2 between 2021 and 2022 was primarily driven by our acquisitions. We reached our 2022 target on decarbonization with a 42% reduction in CO 2 per hl compared to 2015 (organic), despite of the energy shortage in Europe. However, it did result in some production sites changing from natural gas to oil to support a steady supply of gas for households and secure our contin- uous operations. An effect of this was an increase in CO 2 emissions for the Group. Our transition to a fossil free future continues with more efficiency projects at our sites and investments in renewable energy sources. ESG highlights and ratios The 2022 targets on recycled content of our packaging material were achieved as well. We believe that we are well equipped to reach our goal of 100% recycled, recyclable or reusable packaging in 2025. We submitted our CO 2 reduction targets aligned with the Paris Agreement for validation by the Science Based Targets initiative, underlining our commitment to reducing the carbon footprint from the entire value chain we are a part of. Leadership training was in focus for our managers as an initia- tive under the strategic pillar Our people. The training covered, e.g., sustainable leadership; building high quality connections; and implementing diversity, equity and inclusion in leadership. We expect to see the effect in our people data going forward. Target % recycled materials 2022 Tar get Realized Recycled paper labels >90% 92% Recycled corrugated cardboard >90% 98% Recycled PET >30% 64% Energy consumption for heating in 2022 (organic) (GWh) (kg CO 2 /hl) CO 2 emission from 2015 baseline in production (organic) Absolute CO 2 from production kg CO 2 /hl Fuel oil - GWh Natural gas - GWh kg CO 2 /hl (mkg) (kg CO 2 /hl) Who we are ESG Highlights and ratios summary ROYAL UNIBREW Annual Report 2022 11 ESG highlights and ratios in numbers 2022 2021 2020 2019 2018 PRODUCTION FIGURES Production sites 19 14 9 9 9 Production volume, total million hl 12.1 11.5 10.6 10.3 10.4 CO 2 emissions Scope 1 & 2 (location based) million kgCO 2 40.5 35.8 35.7 40.0 39.8 Scope 1 & 2 (market based) million kgCO 2 31.1 26.8 24.2 26.2 n/a Scope 3 million kgCO 2 n/a 367.5 n/a 372.6 n/a ENVIRONMENT & CLIMATE Purchased electricity GWh 98.7 84.2 79.1 81.4 81.2 Natural gas GWh 87.3 99.5 88.3 94.2 88.9 Purchased heat/steam/cooling GWh 34.6 33.5 30.6 37.8 40.8 Other GWh 27.0 3.1 2.8 1.9 2.9 Energy, total GWh 247.6 220.3 200.8 215.3 213.8 Water consumption, total million hl 37.5 34.8 33.3 33.3 33.3 Wastewater, total million hl 23.7 22.8 22.3 22.3 22.7 Hazardous waste million kg 0.1 0.0 0.1 0.1 0.1 Landfilled waste million kg 0.6 0.7 0.9 0.4 0.5 Incinerated waste million kg 0.7 0.6 0.7 1.5 1.1 Recycled waste million kg 10.5 5.5 5.5 5.9 5.4 Solid waste, total million kg 11.9 6.8 7.2 7.9 7.1 Recycled waste % % 88.3 80.6 76.8 74. 7 76.1 Spent grain & yeast million kg 91.7 79.2 76.8 77.4 80.9 RELATIVE PRODUCTION FIGURES Energy kWh/hl 20.5 19.2 18.9 20.9 20.6 CO 2 kg CO 2 /hl 3.3 3.1 3.4 3.9 3.8 Water hl/hl 3.1 3.0 3.1 3.2 3.2 Waste kg/hl 1.0 0.6 0.7 0.8 0.7 2022 2021 2020 2019 2018 PACKAGING MATERIALS Cans % 43.8 43.4 41.7 40.2 n/a Returnable glass bottles % 2.3 2.4 2.9 3.4 n/a Non returnable glass bottles % 10.1 9.1 7.9 8.7 n/a PET % 33.4 36.0 36.8 37.0 n/a Kegs % 2.9 2.0 1.9 3.5 n/a Bulk % 1.0 0.3 0.2 2.9 n/a Other % 6.5 6.8 8.5 6.5 n/a PEOPLE WELL-BEING & DEVELOPMENT Occupational health & safety Total number of lost-time incidents (LTIs) Number 63 53 56 42 39 Lost time incident frequency per million working hrs 11.1 11.3 13.7 10.8 10.2 Number of lost days Hrs 1,153 944 2,070 1,594 687 Lost day rate per million working day 203 202 506 412 180 Fatalities Number 0 0 0 0 0 Employee engagement Employee turnover % 17.1 15.0 13.9 17.5 20.6 Leave of absence due to illness (not work related) % 3.6 3.8 3.7 3.9 3.5 Diversity Employees by gender, total Female % 26 26 24 25 26 Male % 74 74 76 75 74 Employees by gender, Int. Management teams Female % 28 29 33 32 31 Male % 72 71 67 68 69 * Location based: Calculated CO 2 emission based on IEA country factors and DEFRA data ** Market based: Subtracting CO 2 emission covered by green certificates *** Calculated at least every third year Packaging material excluding Amsterdam Brewery Co. Ltd. Who we are ESG Highlights and Ratios ROYAL UNIBREW Annual Report 2022 12 → Our strategy Strategy Strategy Strategy ROYAL UNIBREW Annual Report 2022 13 • Diverse portfolios • Agile collaboration • Local • Market challenger • Taste • Local • Health • Availability Consumers Customers Future Employees Shareholders • Sustainability • Product circularity • Partnerships • Green energy • EBIT growth • Investments • Acquisitions • Distributions • Entrepreneurial • Solution-oriented • Ownership • Fun Our strategy – THE PREFERRED CHOICE Our strategy is based on our ambition to be THE PREFERRED CHOICE of local beverage partner for all our stakeholders. We want to do so by building strong local multi-beverage businesses with strong market positions in our main markets. This is obtained through strong local portfolios complemented by well-known international partner brands. In markets where we do not have a multi-beverage presence, we want to build and develop strong niche positions. Our growth formula (see page 19) is based on both organic and inorganic opportunities. We have identified six structural growth areas to focus on within our business. This includes partnerships and inorganic investments to the extent that they fit strategically and strengthen our current market posi- tions. Consumers We want to build a solid busi- ness based on strong local brands as well as partnership brands. This means that we want to serve our consumers with a broad portfolio character- ized by taste, quality and innova- tions in relevant categories. Future We want to be among the most sustainable beverage companies by minimizing our environmental footprint. We take responsibility for the entire value chain and focus on product circularity as well as zero carbon emissions. We want to make a positive impact on society, and hereby give back to all our stakeholders. Shareholders We want to create sustainable profit growth through organic and inorganic investments resulting in higher value creation than our peers. Therefore, we aim to reward our shareholders with an attractive and efficient capital allocation. Customers We have a mindset of being the market challenger, and we want to grow together with our customers through agile collaboration. This mindset is a cornerstone in our company culture, and we work hard every day to offer the best solutions to our customers. This includes a diverse and local product port- folio, high service levels and the right equipment to the delight of our customers who are provided with the best selection of beverages. Employees Our employees are the founda- tion of our business. We need talented, diverse and engaged people to achieve our strategy. We strive to create a perfor- mance based winning culture with the proudest employees in the industry who take owner- ship of their work while having fun. Strategy Our strategy ROYAL UNIBREW Annual Report 2022 14 → Operating model • Equity story • Our growth formula • Mergers, acquisitions and partnerships Our categories • Financial targets and capital allocation • Outlook for 2023 Our business Our business Our business ROYAL UNIBREW Annual Report 2022 15 WAREHOUSING & DISTRIBUTION EM PLOYEES PACKAGING RAW MATE R IAL S COMMUNITIESCUSTOMER CONSUMERS PRODUCTION Royal Unibrew’s operating model Operating model Royal Unibrew is a multi-beverage business, and our operating model emphasizes the importance of a decentralized organizational structure securing agile decision making tailored to the needs of local consumers and customers. Our portfolio is based on beverages that can be kept at ambient temperatures securing a longer shelf life and maximum leverage throughout our value chain. The business is anchored in strong local brand portfolios reinforced by important international partnerships. This yields high-quality beverage propositions in relevant packaging formats for the benefit of our customers who are given the opportunity to serve the consumers for all occasions. The business model is operated with a lean centralized setup, where only procurement and IT are run as global functions. This is to ensure that we reap the scale benefits from common procurement across the Group, and that we monitor and operate the business through our simple and proven performance management, ERP and supporting systems. Commercial organizations are locally anchored and have a high degree of decision power, which secures a clear mandate and local ownership of the business development. Value chain We use ingredients such as barley, water, sugar, juice, etc. for our beverages. It is important that we achieve a stable, high- quality and sustainable supply; therefore, we work in close collaboration with our suppliers to understand the environ- mental and social footprint of our total activities. Additionally, our suppliers must comply with our Code of Conduct and ethical guidelines. We operate at nineteen production facilities in eight coun- tries. In general, all our products are produced at the same facilities, meaning that all beverages are filled on cans, glass bottles or PET bottles at the same filling lines no matter product category. We also leverage our multi-beverage posi- tion with regard to common warehouses and logistic setups, as all our products can be stored at same temperatures and transported on the same trucks. On the commercial side, the multi-beverage platform also yields a lot of synergies, as the same salesforce can sell all our products. Hence, our commercial organization is able to spend more time with our customers securing strong commercial relationships and top class in outlet execution. Products/brands Our multi-beverage model stretches across all relevant cate- gories where products can be kept at ambient temperatures, as it provides scale benefits throughout the value chain. We operate in both non-alcoholic and alcoholic categories, and we aim to have no/low sugar alternatives in the non- a lcoholic Our business Operating model ROYAL UNIBREW Annual Report 2022 16 where our talented and loyal employees will feel engaged and included in a dynamic, team-oriented work culture that truly values each individual. Royal Unibrew aims to be a responsible member of the community and make positive contributions to the sustain- able development of society. We are deeply rooted in the communities where we work, and we want to give back to all our stakeholders, as it will strengthen our business over time. It is part of our culture to engage not only in the local societies surrounding our premises, sports clubs and our employees’ families, but also in our brand communities in collaboration with our customers, business partners and NGOs. segment and no/low alcohol alternatives in the alcoholic segment. Our product portfolio is based on strong local brands – many with iconic status in their home market. We want to offer a portfolio of relevant brands and strive to execute brilliantly in all channels. By working with the brand identities through strong marketing efforts, we seek to continue the premiumi- zation of our total portfolio. Our own brands are supplemented by strong international brands either on license agreements or third-party distribu- tion agreements. We aim for a market leading position within the categories we operate in across the different markets where we are present. Sales channels In our Nordic multi-beverage markets, we have strong market positions with broad portfolios and extensive sales channel coverage. All customers across all sales channels are important for our business, as they are our main route to market and thereby a prerequisite for having offerings to all consumers on various occasions. Supporting the commercial direction and investing behind the more profitable channels in a focused effort are also contrib- uting to the premiumization of our total business. In our multi-beverage markets, we strive to fully control the route to market, as it creates efficiency in our value chain, as well as enabling the best service to our customers. Environment, sustainability and governance We have an ambitious aspiration to become a global leader in sustainable beverages, which is manifested in our ambitious decarbonization targets. At the end of 2022, these emis- sion reduction targets were submitted to the Science Based Target initiative (SBTi) for official validation. We also continue to support UN Global Compact. We support and seek a circular economy for our packaging, and we want 100% of our packaging materials to be recycled, recyclable or reusable by 2025. In our main markets, the Deposit Return Systems secure a very high level of recycling, but we continue to make efforts to improve. Our colleagues are the foundation of our business, and we want to have the most engaged, diverse and talented people with an entrepreneurial attitude, empowered and striving to do better every day. We employ around 3,600 people across the Group, and we aim to create a safe work environment, Net revenue channel split, Off-Trade vs. On-Trade (%) Northern Europe Western Europe Royal Unibrew International 100% 0 20 40 60 80 100 75% 75% 80% 67% 25% 25% 20% 33% Off-Trade On-Trade Our business ROYAL UNIBREW Annual Report 2022 17 Equity story Royal Unibrew is a growth company with high cash generation and a disciplined capital allocation for the benefit of all our stakeholders. Strong market positions Our strong market positions are vital for profitability. Multi-niche and multi-beverage offerings through leading brand portfolios increase the numbers of must stock brands in the individual markets and thereby increase our portfolios’ attractive- ness toward customers. We are a market leading beverage supplier throughout the Nordics and the Baltic countries, while we are market leading in categories in our multi-niche markets. Strong track record of earnings growth The development of the multi-beverage operating model and the expansion of market platforms, from which we have and are creating multi-beverage operating models, have over time created significant earnings growth. During the past ten years, the average annual growth in EBIT has been 12%, which has been driven by both organic and inorganic contributions. A sustainable business Royal Unibrew has established a robust founda- tion with concrete initiatives, goals and KPIs for achieving our long-term strategy of being among the most sustainable beverage companies globally. We continue to support UN Global Compact and has enrolled in the Task Force on Climate-Related Financial Disclosures (TCFD). By the end of 2022, we also submitted our ambitious emissions reduc- tion targets to the Science Based Targets initiative (SBTi) for official validation. Leading brand portfolio We want to be THE PREFERRED CHOICE for our customers and consumers. This is secured through a portfolio of beverages that can be kept at ambient temperatures. Superior portfolios are based on strong local brands supported and enforced by strong, well-known international brands through partnerships. Disciplined capital allocation The main objective of our capital allocation is to maintain financial flexibility in order to make the necessary invest- ments in organic growth – and at the same time still be able to do value creating acquisitions. Historically, this approach has enabled a healthy redistribution of surplus cash through dividends and periodic share buy-backs. Cash generative business Our multi-beverage operating model yields high profitability, as beverages, assets and people are leveraged throughout the value chain. High profitability is the foundation for a high return on invested capital (ROIC), which secures the ability to invest in value creating growth – both organic and inor- ganic – while maintaining our financial flexibility. Clear growth and value oriented long-term strategy We have identified six focus areas for Royal Unibrew’s long-term strategy: energy drinks, enhanced water, cider/RTD, no/low sugar products, no/low alcoholic products and premiumization. All these areas are expected to structurally grow faster than the average beverage market. In addition, most of the areas are expected to generate higher margins than Royal Unibrew’s average margin. Our business Equity story ROYAL UNIBREW Annual Report 2022 18 Our growth formula The growth formula, which has proven to work through years, is intact and Royal Unibrew remains committed to deliver profitable earnings growth in the coming years. Royal Unibrew has market leading portfolios of non-alcoholic and alcoholic beverages throughout its main markets with multi-beverage offerings in the Nordic region and the Baltic countries and leading market share positions in several categories. In addition, Royal Unibrew has strong niche positions in Italy, France and Canada as well as export business in more than 70 addi- tional countries. Over the past years, we have channeled more commercial investments toward the fastest growing categories in our portfolio with the aim of delivering higher organic growth than the underlying market growth. Innovations backed by strong consumer insights combined with talented and experienced employees, who secure strong in-store execution, pave the way for growing faster than the markets where we operate. Costs and efficiency improvements have always been high on the agenda in Royal Unibrew. Teamwork is a corner- stone of our workplace culture and along with our colleagues’ can-do attitude, it helps us finding solutions to all challenges, which secures that we do things in a better, more efficient way every day. The multi-beverage model enables us to achieve higher utilization of fixed assets, higher efficiency in sales and logistics and, in general, higher produc- tivity per employee. In combination with our strategic focus on structurally growing areas in our business with higher margins, we optimize our ability to increase price per volume unit and/or reduce cost per volume unit, which form a solid founda- tion for an underlying margin expansion. We invest behind the fastest growing brands, categories and channels, while we at the same time focus on premiu- mizing our portfolio of beverages to drive value growth. Premiumization is driven by our talented people who use valuable market insights to innovate new products with a higher sales price per volume unit than the average. Price per volume unit is increasing significantly as a consequence of cost inflation, which means that we need to stay focused on the underlying profitability of our products. We do so by monitoring consumer demand, leveraging our price/pack architecture and other price/mix tools. Value creation through acquisitions of companies have always been a core part of Royal Unibrew’s strategy. We have created significant value through acquisitions over time, and the foun- dation for acquisitions will always be that they can be incorporated in our operating model and, likewise, that our business model enables us to extract synergies from the combination of businesses. We seek to improve our market positions through bolt-on or brands/ category acquisitions, while larger transformational acquisitions usually open multi-beverage opportunities in new geographies. Finally, we may acquire produc- tion assets to expand production capacity or bring production closer to consumption. We want to create profitable growth while maintaining financial flexibility. The multi-beverage model is a highly cash generative business, and it provides us the ability to develop the business in line with our strategic priorities while at the same time being able to distribute an attractive pay-out to our shareholders. It is our priority to create a positive total shareholder return through a combination of growing distribution (dividends and share buy-backs) and increasing share price. Share buy-backs will be the balancing instrument to secure that we remain financially flexible within our capital allocation policy (see page 26). Shares bought back are generally intended to be canceled leading to a higher earnings per share. Our growth formula: volume+value+efficiency+potential M&A = increased earnings + share buy-backs = increased earnings per share Volume growth Premiumization Efficiency improvements Mergers & acquisitions Share buy-backs Our business Our growth formula ROYAL UNIBREW Annual Report 2022 19 Mergers, acquisitions and partnerships It is a core part of our strategy to pursue structural improvements through M&A and partnerships provided that they fit strategically and strengthen our current market positions. Mergers and acquisitions Royal Unibrew is built on mergers and acquisitions. The Danish business is founded on mergers and acquisitions of more than 30 regional, Danish beverage companies, while our interna- tional expansion has mostly been driven by acquisitions. Over the past ten years, we have added almost DKK 6 billion in net revenue from acquisitions, corresponding to almost DKK 600 million per year. We categorize our acquisitions and potential acquisitions into four different types: bolt-on acquisitions, asset acquisi- tions, brand/category acquisitions and platform acquisitions. Bolt-on acquisitions are pursued in markets where Royal Unibrew already has a multi-beverage offering. A bolt-on acquisition is by nature relatively small compared to the existing business in the market, and it is normally fairly simple to integrate. However, it creates significant value as synergies tend to be large. Asset acquisitions are pursued in markets where we can obtain additional production capacity close to our consumers. Usually, it is less expensive than building new capacity and consequently, accelerates expansion of new capacity, while bringing logistic synergies and a reduced CO 2 footprint by an optimized route-to-market. Brand/category acquisitions are pursued to gain exposure to brands or categories in existing niche or multi-niche markets or in categories where we are already present by which the acquisition significantly improve our market position. Platform acquisitions are pursued to get a strong market position within one or more categories in markets where we have limited or no presence. Platform acquisitions are more demanding in terms of integration due to the higher complexity, and while synergies in the short-term are limited, the long-term potential is significant. International Royal Unibrew’s International segment is based on a low-risk partnership model with beverages primarily produced in Denmark from where the products are exported to markets around the world. Two years ago, we decided to look into the possibility of moving production closer to consumption to consolidate a better balance between our costs and local Our business Mergers & Acquisitions ROYAL UNIBREW Annual Report 2022 20 Brand partnerships Country Partnerships established DENMARK DANISH/ GERMAN BORDER FINLAND SWEDEN NORWAY BALTIC Integration finalized within Bolt-on Asset Platform Brand/category 100% 12 months0 months 24 months competitions costs, but also to future-proof the environ- mental sustainability of our international business. We see three potential routes to bring production closer to consumption in the International segment: 1. Invest in assets 2. O utsource production under license agreement 3. Third party production The acquisition of Amsterdam Brewery Co. Ltd. in Toronto is an example of an investment in assets in the International segment to bring production closer to consumption. Integration processes and synergies The speed of integration is dependent on the size and complexity of the acquired company. Therefore, the real- ization of synergies, and thereby creation of value, is also different from case to case. Common to acquisitions is that they always have an initial phase of operational investments during the first period of the integration, which is usually final- ized within the first six to 24 months depending on the size and complexity of the acquired business. It is not until after this initial phase where the acquisition is fully integrated that we can start to really benefit from synergies. Synergies are split into two buckets: operational and commercial synergies. In most acquisitions there are initial operational synergies to extract, but we always acquire busi- nesses to make them stronger and bigger. For that reason, the initial operational synergies are partly reinvested into the acquired business, as we start to streamline the business and adjust the organization to fit our model of strong local owner- ship and our performance management model. The integra- tion is finalized by the implementation of Royal Unibrew’s IT systems. Once the IT systems and operational model are implemented the commercial work gets full attention. The commercial agenda is centered around quality of the revenue, i.e., making sure that it is the right parts of the product portfolio that is being prioritized so that the strongest possible market positions are built within the most profitable parts of the portfolio. The eventual margin potential of an acquisition depends on the type of acquisition as well as the operating model it becomes part of. A bolt-on acquisition in a multi-beverage market setup will have a margin potential of at least our medium-to-long-term EBIT margin target, as we benefit from utilizing our infrastructure. When it comes to platform acquisitions, it is dependent on the degree of multi-beverage offering and the level of own Integration of acquisitions depends on type and complexity Our business ROYAL UNIBREW Annual Report 2022 2121 Average Group margin Multi- beverage Multi- niche New platforms Trading products brands and products. As an example, the acquisition of Solera Beverage Group was an acquisition of a company that distrib- utes third-party brands, which comes with a low margin. Introducing our own brands on that platform will bring a high incremental margin, but margins will not approach average group margins in the short-to-medium-term. Partnerships Partner brands play an important role in our product portfolio across the markets in which we operate. Our partnership with PepsiCo strengthens our total offering, as it provides us a great supplement to our portfolio of local carbonated soft drinks and adds must stock brands to our value proposition toward customers. Our partnership with PepsiCo on snacks complements our beverage portfolio, as it creates cross-selling opportunities. When consumers buy beverages, they often also buy snacks, and when consumers buy snacks, they almost always buy beverages as well. Therefore, the cross-promotion opportuni- ties in all sales channels are significant. Our license agreement with Heineken secures a global lager beer in our beer portfolio. Our own local premium beer brands have limited potential outside the local markets. The global Heineken brand secures relevance for those of our customers who desire an international beer as part of their offering to consumers. In the same way, our partnership with Diageo adds interna- tional must stock brands to our portfolio increasing the value of our total offerings to our customers. Our partnerships are attractive as they supply strategic value to the portfolio; likewise, they provide an interesting profita- bility. Relative profilability across operating models (Illustrative) Our business ROYAL UNIBREW Annual Report 2022 22 ↗ ↗ ↗ ↗ ↗ ↗ ↗ ↗ Total revenueEBIT margin ↗ ↗ Company phase: 1 2008 – 2013: “Turnaround” 2 2013 – 2017: “Profitable growth” 3 2017 – 2021: “Organic profit growth” 4 2021 – 2023: “Expand platforms” 5 2023: “Organic development and extract synergies” Key priority: Company turn-around Establish growth platform to build on Reinforce growth platform and prepare for additional expansion Invest in expansion, short-term profit margin dilution Grow absolute EBIT while rebuiling margins Drivers: • Cost adaptation • Streamlining • Cost efficiency • Better use of assets • Integrations of acquisitions • Integration of and investing in future growth platforms • Grow core business in core markets • Unlock synergies from platform acquisitions M&A: • None; fix the base before pursuing inorganic expansion opportunities • Leapfrog ahead via transforma- tional acquisition Hartwall • Reinforce growth platform by acquiring very strong and local brands Crodo, Cult, Lorina and Bauskas, etc. • Invest in future growth by acquiring new platforms to build upon: Solera, Crazy Tiger, Hansa Borg, etc. • Focus on post-merger integration Revenue impact: EBIT margin %: Financial impact: Top line growth + profit margin expansion Top line growth + profit margin expansion Top line growth + profit margin consolidation Top line growth + profit margin contraction due to inflation and dilutive acquisitions Top line growth + profit margin expansion through synergies and price increases/deflation Illustrative: Phases in Royal Unibrew's development Our business ROYAL UNIBREW Annual Report 2022 23 31 29 13 5 5 3 4 10 2021 Beer CSD Water Cider/RTD Juice Malt Energy Wine & spirits 32 33 2021 2022 7 10 5 5 3 5 Our multi-beverage model covers all beverage categories encompassing beverages that can be stored at ambient temperatures. We are present in both non-alcoholic as well as alcoholic categories, and it is our ambition to have no/low sugar alternatives in the non-alcoholic segment as well as no/low alcoholic alternatives in the alcoholic segment. Organic net revenue growth from non-alcoholic beverages was higher than organic net revenue growth from alcoholic beverages during 2022, although the split changed in favor of alcoholic beverages due to acquisitions. Net revenue from alcoholic beverages was 52% of total net revenue in 2022, whereas it was 49% in 2021. Energy drinks and Cider/RTD are among the most profitable categories in our product portfolio and are growing faster than Group average. Non-alcoholic beverages Our largest non-alcoholic beverage category, carbonated soft drinks (CSD), grew organically by 12% in 2022 and amounted to 29% of total net revenue. The acquisition effect in 2022 had a dilutive result on the relative share of total net revenue, as the acquisitions had much lower CSD shares than the Group average. Our CSD portfolio includes iconic local brands like Faxe Kondi, Jaffa, LemonSoda and Lorina as well as the international partnership brand PepsiCo. Energy drinks, which is one of our strategic focus areas of growth, continued its strong growth in 2022, where organic growth reached 34%. The category’s share of total net revenue remained at 5% in 2022. Our energy drinks value proposition is now covering Denmark, Finland, Norway, the Baltic countries, France and Italy as well as a number of markets in our International business segment. Our core water brands Novelle and Egekilde contributed to organic net revenue growth reaching 12% for 2022. Water continues to constitute 5% of total net revenue. The share of total net revenue for malt beverages remained at 3% in 2022, despite 24% organic growth. This can be explained by the fact that none of our acquired businesses have any exposure to malt beverages. Our categories Revenue split categories (%) Beer CSD Wine and spirits Cider/RTD Energy Water Malt Other Our business Our categories ROYAL UNIBREW Annual Report 2022 24 -5 0 5 10 15 20 25 30 35 Beer CSD Wine and spirits Cider/RTD Energy drinks Water Malt beverages 9% 12% -1% 8% 34% 12% 24% Alcoholic beverages Beer is our biggest category measured by net revenue. In 2022, the beer category constituted 31% of total net revenue for the Group. In both Denmark and the Baltic countries organic net revenue growth in the beer category was double-digit percent- ages driving a 12% organic net revenue growth for beer in total. With the acquisition of Solera Beverage Group, wine and spirits now constitute around 12% of Royal Unibrew’s total net revenue. In absolute numbers, net revenue from wine and spirits has more than doubled in 2022 compared to 2021. The decline in organic net revenue amounted to 1%, as the Finnish market normalized following positive side-effects of COVID-19 in 2020 and 2021. Our cider/RTD net revenue grew organically by 8% in 2022 reaching 10% of the Group's total net revenue. Organic net revenue growth was driven by a diverse range of our brands, including Original, Cult Shaker, Nohrlund etc. Organic category net revenue growth (%) Our business 25ROYAL UNIBREW Annual Report 2022 Dividend pay-out ratio EBIT margin dilution in 2022 NIBD / EBITDA 2018 2019 2020 2021 2022 2.21.5 1.5 1.2 1.7 2018 2019 2020 2021 2022 49%53% 54% 56% 55% 2018 EBIT margin 2021 EBIT margin excl. M&A dilution and base effect 2019 Organic 2020 2021 2022 Base effect M&A dilution EBIT margin reported 18.4% 18.9% 19.1% 16.1% -2.8% -1.5% 20.7% 13.2% -1.4% 13.2% 18.9% <2.5 times 40- 60% of consolidated profit for the year 20- 21% EBIT margin We want to invest in our business to secure the best long-term development of the business as well as shareholder value creation to the benefit of all our stakeholders. This is done by setting ambitious financial targets governed by strict capital management. The aim is to create the necessary financial flexibility to invest in both organic and inorganic profitable growth opportunities while maintaining an efficient capital allocation. In recent years, we have been able to invest significantly in both organic and inorganic growth opportunities as a result of our solid financial flexibility. The long-term strength of our business is based on innovations, investments in production assets, sales and marketing as well as organizational capa- bilities: All this necessary to pursue growth opportunities, partnerships and efficiency improvements. Despite these investments, we sustained considerable distributions to our shareholders. Profitability We want to drive organic EBIT growth, as this is the base for shareholder value creation. On top of this, acquisitions have added to the value creation of Royal Unibrew. Our decisions are based on maximizing long-term EBIT. We have a long-term EBIT margin target of 20-21%, and we believe a high EBIT margin is a seal of approval and a guiding star in our effort to maximize long-term EBIT. It secures that we maintain an overall focus on driving profitable growth and high cash conversion. During the past years, we have acquired several companies of different sizes, but almost all dilutive to the average Group EBIT margin. The dilution from acquisitions amounted to 1.4 percentage points on the EBIT margin in 2022. Organically, the EBIT margin declined by 2.1%, as we are building strong platforms for future growth in our markets by investing in organizations, IT and multi-beverage setups. This means that a return to an EBIT margin of 20-21% in the medium-to-long term is dependent on no further large margin dilutive acquisi- tions. The input price inflation, which we have seen in the past couple of years, is also significantly diluting the EBIT margin, as we aim to pass on the inflation defending the absolute earnings per volume unit and not the margin. This means that we aim to raise our revenue through price increases and mix effects by the same amount that our cost base has inflated. Same earnings on a higher revenue base has in total and purely mathemati- cally diluted our EBIT margin by 2.2 percentage points over the Financial targets and capital allocation Our business Financial targets ROYAL UNIBREW Annual Report 2022 26 past two years. A return to EBIT margins of more than 20% is contingent on declining input cost during the coming years. In our well-established multi-beverage markets, we expect to continue to deliver an EBIT margin at least in line with our long-term margin target, as we can extract the benefits and synergies of our business model. In our less estab- lished multi-niche markets, we will strive to increase the EBIT margin toward the long-term EBIT margin target. This reflects our belief in our ability to expand the EBIT margin, as we realize synergies from recent acquisitions through efficiency improvements in our existing business and benefit from investments into our selected growth opportunities. Capital structure and distribution policy The objective of our capital structure policy is to secure flex- ibility to develop the business in line with our strategic priori- ties. It remains our target to have a net interest-bearing debt below 2.5 times EBITDA, and we aim for around 1.5 times EBITDA to secure sufficient financial flexibility. We endeavor to secure financial flexibility through long-term loan agree- ments and facilities. We may depart from the targeted ratio for a certain period if structural business opportunities arise. Total distribution for the year mDKK 2022 2021 2020 2019 2018 Dividend 692 653 600 538 451 Share buy-backs 300 582 362 433 484 Total distibution 992 1,235 962 971 935 as a % of prior year consolidated profit 76 103 84 93 113 Our priorities for capital allocation are as follows: 1. M aintain financial flexibility - Net debt/EBITDA less than 2.5 2. I nvest in organic growth 3. Acquisitions 4. S table dividend pay-out ratio (40-60%) 5. Share buy-backs to adjust capital structure Our annual investments, including repayment on lease facil- ities (IFRS 16), are expected to account for an average of 5% of net revenue. During the first year of the pandemic, we were not able to expand our production capacity despite the fact that we had strong growth, as we did not allow external people into our production facilities. Along with the expansion of our partnership business, we will in the coming years invest in additional capacity. We also need to make additional energy investments to become CO 2 neutral; therefore, we may exceed our 5% target in the coming years. Both the capacity and carbon reducing investments are supporting a return to our 20-21% EBIT margin target. The Board of Directors evaluates ongoing whether the capital structure is to be adjusted by launching share buy-back programs. The general intention is that shares bought back will be canceled. Our business 27ROYAL UNIBREW Annual Report 2022 Outlook for 2023 Outlook for 2023 mDKK Outlook Actual 2022 Actual 2021 Net revenue 13,000-14,000 11,487 8,746 EBIT 1,550-1,750 1,516 1,652 We expect an EBIT in the range of DKK 1,550-1,750 million in 2023 based on net revenue of DKK 13-14 billion. Revenue The guided revenue is substantially higher than in 2022. Roughly DKK 0.5 billion comes from acquisitions and the remainder comes from extensions of partnerships and price/ mix increases to mitigate the impact from cost increases. The beverage category is expected to be resilient in a consumer environment characterised by high inflation and pressure on the discretionary spending amongst consumers. We expect affordability to remain a key focus for consumers during 2023 and consequently our channel mix to be slightly negative as well as we expect private label and discount brands to gain share in the overall market. Profitability Our focus in 2023 is to safeguard our profitability on a per hectoliter basis, which will have a margin dilutive effect in 2023. The additional revenue coming from extensions of part- nerships and acquisitions has a lower margin than the group average. The destocking we have seen in Italy continue into the begin- ning of 2023 and we expect the business to return to normal during early springtime. Profitability will be slightly backend loaded in 2023 compared to normal seasonality as price increases will take effect during the year, and as the de-stocking during the second half of 2022 in Italy had a negative one-off effect during the period. Significant cost increases are expected during 2023 primarily stemming from raw and packaging materials, but also due to the general inflationary pressure. The guidance is based on hedged commodity prices at the end of February and forward pricing on the non-hedged part. Top and bottom end of range The macro setting is highly uncertain due to geopolitical uncertainty, inflation and pressure on consumers discre- tionary spending power. The main factors impacting profita- bility are: • C ommodity price development and the supply situation • Consumer behaviour and impact on channel mix • C ustomers reaction to price increases Financial assumptions • A cquisitions of Hansa Borg and Amsterdam to add around DKK 0.5 billion in incremental net revenue with single-digit EBIT margin • The guidance is built on normal summer weather and trav- elling activities • In 2023, our capex is expected to be around 5-6% of net revenue. We will increase our investments in CSR and in expansion of capacity to support future growth • C orporate income tax rate is expected to amount to around 21% Our business Outlook for 202x ROYAL UNIBREW Annual Report 2022 28 → Financial review • Northern Europe Western Europe • International Performance Performance Performance ROYAL UNIBREW Annual Report 2022 29 Financial review of Q4 2022 and FY 2022 results The fourth quarter of 2022 marked the end to a year where our business has shown resilience and our people have executed competently in an environment with a lot of uncertainty, huge cost pressure on our customers and lower spending power for our consumers leading to a change in their shopping behaviors. We experienced an organic volume decline of -2% in Q4 2022 primarily driven by destocking in the Italian wholesale market. The destocking is driven by tougher economic conditions where wholesalers reduce inventories to improve cash flow - we experienced the same development after the financial crisis in 2008. Top line momentum reflects the pricing initiatives we have taken through 2022 to mitigate the high inflationary pressure in input prices. Net revenue increased organically by 3% in Q4 2022 driven by a price/mix effect of 8% in Northern Europe and 6% in International, whereas product mix in Italy resulted in a negative price/mix effect for Western Europe. We have implemented price increases in some markets from the begin- ning of 2023 and will follow in the remaining markets during the first quarter of the year. The development in EBIT improved sequentially in Q4 2022, as the organic decline improved to -8% (Q3 2022: -19%). In total, EBIT declined organically by -15% in H2 2022 as a result of destocking in Italy and continued headwinds in Interna- tional due to primarily high freight costs. As expected, EBIT developed very favourably in Northern Europe in Q4 2022 as a result of strong execution and easy comparable numbers from 2021 where the On-Trade was closed down in December in particularly in Denmark and Finland. Key highlights Q4: • O rganic volume growth of -2% (FY 2022: 1%) • Positive price/mix from pricing initiatives • O rganic net revenue growth of 3% (FY 2022: 11%) • EBIT declined organically by -8% (FY 2022: -14%) • E BIT margin down by 1.8 percentage points to 10.9% (FY 2022: down 5.7 percentage points to 13.2%) Financial highlights Q4 and FY 2022 Volume for Q4 2022 increased by 5% compared to Q4 2021 and amounted to 3.1 million hectoliters. Organic volume growth was -2% with the difference of approximately 200 million hectoliters explained by the acquisitions of Hansa Borg and Amsterdam Brewery. For FY 2022, volume was up by 9%, corresponding to organic growth of 1%. In Q4 2022, net revenue increased by 17% (organic: 3%) and amounted to DKK 2,818 million. Net revenue growth in FY 2022 was 31% (organic: 11%) compared to 2021 and amounted to DKK 11,487 million. Production cost increased by DKK 433 million in Q4 2022 corresponding to an increase of 32%. As a result, gross profit declined by -2% resulting in a gross profit margin of 37.1%, which is 7.2 percentage points lower than in 2021. The decline is primarily caused by the time lag between inflation in COGS and sales price increases, but also a result of a negative channel and product mix as well as dilutive acquisitions. In FY 2022, the gross profit margin declined by 6.3 percentage points to 42.4% compared to 2021. Sales and distribution costs increased by 8% in Q4 2022 but declined as a percentage of net revenue to 25.3% from 27.5% in Q4 2021. This was the result of lower sales and marketing expenses in the quarter, and although freight and distribution costs increased they still constituted a lower percentage of revenue than in the same period of 2021. In FY 2022, sales Performance Financial review ROYAL UNIBREW Annual Report 2022 30 & distribution costs increased by 34% and increased from 25.0% of net revenue in 2021 to 25.5% in 2022. Earnings before interest and tax (EBIT) for Q4 was DKK 1 million higher than in 2021 and amounted to DKK 306 million (2021: DKK 305 million). In FY 2022, EBIT declined by DKK 136 million compared to 2021 and amounted to DKK 1,516 million (2021: DKK 1,652 million). The reported EBIT margin decreased by 1.8 percentage points to 10.9% in Q4 2022 as a consequence of higher production costs and the time lag between input price inflation and price increases. In FY 2022, the reported EBIT margin declined by 5.7 percentage points compared to 2021. In the last quarter of 2022, acquisitions diluted the EBIT margin by 0.4 percentage point, whereas they diluted the EBIT margin by 1.4 percentage points in FY 2022 compared to the year before. Free cash flow amounted to DKK -37 million in Q4 2022 compared to DKK 62 million in Q4 2021, whereas free cash flow for FY 2022 was DKK 577 million compared to DKK 1,296 million in 2021. The development is negatively impacted by an increase in working capital of DKK 585 million driven by higher inventories and an increase in receivables that is larger than the development in payables. Management’s review The price increases implemented throughout 2022 supported the top line in Q4 and FY 2022 while volumes remained resilient in most markets. Especially Northern Europe showed strong top line momentum in Q4 2022, whereas Western Europe, driven by destocking in Italy, experienced weakness both on top line and earnings. The International division had Developments in activities for the period October 1 - December 31 broken into market segments Northern Europe Western Europe International Group Q4 2022 Q4 2021 Q4 2022 Q4 2021 Q4 2022 Q4 2021 Q4 2022 Q4 2021 Volumes (million hectoliters) 2.5 2.3 0.2 0.3 0.4 0.3 3.1 3.0 Organic volume growth (%) -2 -21 10 -2 Net revenue (DKK million) 2,278 1,893 187 254 352 259 2,818 2,407 Organic net revenue growth (%) 6 -26 16 3 strong top line momentum throughout most of 2022 but continued to be negatively impacted by high cost levels. The destocking in Italy impacted the development in Western Europe from the end of Q3 2022 and well into the last quarter of the year. The negative impact was bigger than initially estimated, as the stock level at wholesalers has been reduced predominantly due to cash optimization. The year-on-year increase in freight and distribution costs clearly decelerated in Q4 2022 and grew slower than net revenue. In 2022, freight and distribution costs grew more than net revenue. Net debt Net debt by the end of 2022 amounted to DKK 4,460 million, which is an increase of DKK 924 million compared to year-end 2021. Net interest-bearing debt/EBITDA increased from 1.7 to 2.2 over the same period mainly explained by share buy-backs, dividends and acquisitions. Financial review In Northern Europe, volumes decreased by -2% organically in Q4 2022, resulting in a FY 2022 organic volume decline of -1%. Price initiatives impacted price/mix positively leading to a 6% organic net revenue growth for Q4 2022 and a 10% organic revenue growth for FY 2022. Volume growth in Western Europe was negatively impacted by destocking in Italy in Q4 2022. As a result, volumes declined organically by -21% in Q4 2022, whereas net revenue declined organically by -26% in the quarter as price/ mix was negatively impacted by product mix. For FY 2022, volumes in Western Europe increased organically by 15%, whereas net revenue increased organically by 10% impacted by a negative price/mix. The positive top line development in International continued in Q4 2022 with 10 organic volume growth and 16% organic net revenue growth. For FY 2022, volumes increased organi- cally by 6% and net revenue by 17%. Performance ROYAL UNIBREW Annual Report 2022 31 On Group level this led to an organic volume decline of -2% in the last quarter of 2022 taking the full-year development to a 1% organic volume increase. Price initiatives throughout the Group supported a positive price/mix impact and an organic net revenue increase of 3% for Q4 2022 and 11% for FY 2022. EBIT declined by DKK 1 million in Q4 2022, resulting in an EBIT decline of DKK 106 million in H2 2022 corresponding to an organic decline of -15%. The International division continued to be negatively impacted by high costs and consequently EBIT declined organically by -35% in H2 2022. In Western Europe, the destocking in Italy and the time lag between input price inflation and price increases resulted in an organic EBIT decline of -77% in H2 2022 and -46% for FY 2022. In Northern Europe, EBIT developed favourably in Q4 2022 as a result of strong execution and easy comparable numbers from 2021 where the On-Trade was closed down in December in Denmark and Finland resulting in an organic EBIT decline of -4% in H2 2022 and -6% for FY 2022. In Denmark, net revenue increased by 11% to DKK 781 million in Q4 2022 and for FY 2022, net revenue increased organ- ically by 12%. In Finland, net revenue increased organically by 4% in Q4 2022, whereas net revenue grew by around 9% organically in FY 2022. Both markets were supported by price initiatives and strong commercial execution. In Norway, net revenue amounted to DKK 482 million in Q4 2022, which was almost a doubling of net revenue compared to the year before and a result of the acquisition of Hansa Borg Bryggerier. Organically, net revenue declined by -17% as a result of the normalization of the market following positive Developments in activities for the period July 1 - December 31 broken into market segments Northern Europe Western Europe International Unallocated Group H2 2022 H2 2021 H2 2022 H2 2021 H2 2022 H2 2021 H2 2022 H2 2021 H2 2022 H2 2021 Volumes (million hectoliters) 5.5 5.0 0.7 0.7 0.7 0.6 6.9 6.4 Organic volume growth (%) -1 -3 11 0 Net revenue (DKK million) 4,891 3,728 591 626 631 488 6,114 4,841 Organic net revenue growth (%) 9 -6 19 8 EBIT (DKK million) 709 706 28 118 61 89 -3 -12 796 902 Organic EBIT growth (%) -4 -77 -35 -15 EBIT margin (%) 14.5 18.9 4.7 18.8 9.7 18.2 13.0 18.6 Net revenue (DKK million) - selected countries Q4 2022 Q4 2021 % change H2 2022 H2 2021 % change FY 2022 FY 2021 % change Denmark 781 701 11 1 ,674 1,512 11 3.,169 2,814 13 Finland 700 674 4 1,554 1,403 11 2,958 2,569 15 Norway 482 247 95 960 276 248 1,495 277 440 Sweden 95 89 7 191 108 77 379 118 221 Baltic 221 182 21 512 429 19 942 827 14 impact on domestic sales during COVID-19. In FY 2022, net revenue increased organically by high-single-digits. In Sweden, net revenue increased organically by 7% to DKK 95 million in Q4 2022. In the Baltic countries, net revenue increased organically by 21% in Q4 2022 as a result of high price increases, whereas for FY 2022 the organic net revenue growth amounted to 13%. Performance ROYAL UNIBREW Annual Report 2022 32 2021 2022 76 78 2021 2022 13 12 2021 2022 11 10 2021 2022 76 82 2021 2022 14 10 2021 2022 10 8 Share of Net revenue Share of Net revenue Share of Net revenue Share of EBIT Share of EBIT Share of EBIT Overview business segments financial performance Northern Europe DENMARK, GERMANY, FINLAND, NORWAY, SWEDEN, LATVIA, LITHUANIA AND ESTONIA Western Europe ITALY AND FRANCE International MORE THAN 70 MARKETS IN AMERICAS AND EMEAA → Read more: page 40→ Read more: page 34 → Read more: page 38 Performance Overview business segments nancial performance ROYAL UNIBREW Annual Report 2022 33 Northern Europe NORTHERN EUROPE mDKK 2022 2021 % changes %organic Volumes (mhl) 10.4 9.7 7 -1 Net revenue 8,943 6,605 35 10 EBIT 1,247 1,249 0 -6 EBIT margin (%) 13.9 18.9 Financial performance In Northern Europe, total volumes showed an increase of 7% to 10.4 million hectoliters in 2022. Organically, volumes declined by 1% compared to 2021. Net revenue increased by 35% to DKK 8.9 billion of which around 25 percentage points contributes to M&A activity resulting in 10% organic net revenue growth in 2022. Price increases taken throughout the year positively impacted the topline, whereas volumes did experience a slight negative impact. “Our multi-beverage strategy proved its success in Northern Europe in a very difficult year with unexpected inflation and changes to consumer preferences. We are ready to take on the world of uncertainties that we expect for 2023 with new partner agreements, an agile organization and strong brands.” Kalle Järvinen, SVP Baltic Sea, Sweden & Norway and Managing Director Hartwall, Finland 10.4 mhl VOLUME (up by 7%) 1,247 mDKK EBIT (down by 0%) 8.9 bnDKK NET REVENUE (up by 35%) 13.9% EBIT-MARGIN (down by 5.0pp) 2020 0 2 4 6 8 10 12 2021 2022 2020 0.0 1.5 3.0 4.5 6.0 7.5 9.0 2021 2022 2020 0.0 0.3 0.6 0.9 1.2 1.5 1.8 2021 2022 2020 0 4 8 12 16 20 24 2021 2022 Volumes (mhl) Net revenue (bnDKK) EBIT (bnDKK) EBIT-margin (%) Earnings before interest and tax (EBIT) for 2022 decreased to DKK 1,247 million and was DKK 2 million below the 2021 figure. The EBIT margin declined by 5.0 percentage points from 18.9% in 2021 to 13.9% in 2022. The time lag between when input price inflation happened and our price increases to customers did impact earnings and the EBIT margin significantly in 2022. Northern Europe ROYAL UNIBREW Annual Report 2022 34 We had a strong year in Finland despite On-Trade lockdowns due to COVID-19 in Q1 and heavy cost pressures mounting as a result of Russia’s invasion of Ukraine. The strong result was built on growth of our key brands: Original, Novelle, Vichy and license brand Pepsi supported by our quick ability to adapt the business to increased costs and changing consumer sentiment. While we increased our prices due to cost increases on the total portfolio, we maintained our market share. The integration of Solera Finland was completed success- fully, capturing the expected synergies while the wine and spirits business grew faster than expected. We also partnered with new On-Trade customers in particular in the fast food segment where we have been underrepresented. Partnering with fast expanding KFC and signing a deal to partner with the restaurant chain Subway with effect from the beginning of 2023 help us build volume, as the fast food segment is also growing in Finland. Low consumer confidence coupled with high inflation started to impact the consumer spending patterns toward the end of the year resulting in reduced category growth. While employ- ment rates still remain high, the low consumer confidence will be challenging in the beginning of 2023 particularly for our On-Trade customers and for our mix. Nevertheless, we believe that our wide portfolio and channel coverage provide us options for continued growth in an ever-changing market situation. Our portfolio was further expanded by the introduc- tion of Ekaterra Teas (Lipton and Pukka) in 2022 and PepsiCo snacks (Doritos and Lay's) from the beginning of 2023. In the first weeks of 2022, COVID-19 and lockdowns were still factors that limited development and initiatives in our Danish business. Fortunately, the COVID-19 restrictions gradually eased and were replaced by a portion of optimism for the year and a gradual return to normality in the market. Russia's invasion of Ukraine at the end of February 2022 triggered a high level of uncertainty in all areas reinforced by the escalating energy crisis and high inflation. The geopolit- ical situation contributed negatively to supplies of virtually all goods and components and led to several price increases - not only on beverages. One of the consequences of this was clearly seen in Off-Trade, where consumers started to turn more toward discount stores with more narrow assortments. With regards to On-Trade, we have maintained good and close dialogue with our customers, and we have entered into several new, larger agreements on collaborations and existing agreements were successfully renegotiated. One of the year's highlights was a return to the festivities. Larger events and festivals boomed, and it was the busiest year in the Event/Technology department ever. The number of concerts and other outdoor events increased, and our part- ners felt the guests' eagerness to gather again. Despite the tougher conditions in the market, we continued to work with our multi-beverage strategy and our purpose and Development and initiatives in 2022 Performance 35ROYAL UNIBREW Annual Report 2022 ambition of being THE PREFERRED CHOICE. The work has resulted in various forms of collaborations and partnerships, including a Nordic agreement (Finland and Norway) with Ekaterra, formerly part of Unilever, for the sales and distribu- tion of the tea brands Pukka, Lipton and Medova in Denmark from June 2022. In the first six months, the collaboration helped us attract new customers, and we already see positive rates in the development of the brands. At the end of the year, we announced a signing of an interna- tional distribution agreement with Danish Rebæl on sales and distribution of Rebæl's high-end and premium hand-brewed lemonades, gastro juices and cocktails. The joint focus on quality, craftsmanship and innovation is a central cornerstone of the collaboration, and we expect this to be the driving force in strengthening the distribution of the well-reputed crafted drinks. Overall, there has been a positive development of turnover, we have gained market shares, and we have successfully devel- oped exciting innovations and strong marketing campaigns - and for the third time in a row, we are named as the trade's preferred beverage supplier both at head office level and in the stores, cf. Gradient Benchmark analysis. In the first half of the year, the Norwegian market was impacted by COVID-19. On-Trade was negatively affected, but only to a limited extent in the first 2-3 months of the year. Vinmonopolet (the wine monopoly) and the On-Trade experienced significant additional sales. However, the overall positive effect decreased from the summer and moved back to a normal level in the second half of the year. Performance ROYAL UNIBREW Annual Report 2022 36 Since Royal Unibrew acquired Hansa Borg Bryggerier in May 2022, we have been working on a merger of the Norwegian companies Solera, Vinestor, Multibev, Cuveco and Hansa Borg Bryggerier. Appointing a joint management and merging the commercial areas have made us a significantly stronger beverage supplier in Norway with a unique product range within all sales channels. During the second half of the year, the management continued to work on planning the integra- tion of all business areas, which will provide synergy effects both on commercial additional sales and costs/operations. With a significantly stronger market position within On-Trade, Off-Trade and Vinmonopolet, we will be a solid future busi- ness partner for companies with strong brands that aim to gain a foothold in the Norwegian market. During 2022, we strengthened our low alcohol portfolio, particularly on the Hansa brand. To decrease our environ- mental footprint and to increase efficiency of our opera- tions, we have closed one of our production sites. We have also been working on energy efficiency measures and have succeeded in reducing energy spend with as much as nine percent during 2022. Hansa Borg Bryggerier has entered into a partnership with Too Good to Go, a community of Waste Warriors fighting food waste, to sell surplus non-alcoholic beverages through their food rescue app. One year into the collaboration, in November 2022, we could announce that we have saved over 100,000 units of beverages from our Cash & Carry’s in Bergen, Oslo and Sarpsborg. A new Transparency Act came into force in Norway on July 1, 2022, requiring enterprises to conduct due diligence assess- ments, meaning that an enterprise must look at both its own business, its supply chain, and its business partners to identify the largest risks. To ensure responsibility in the supply chain and to carry out the assessments in accordance with the OECD Guidelines for Multinational Enterprises, we partnered with Factlines in 2022 to get a systematic, digital, complete solution for responsible supplier follow-up with focus on sustainability and the Transparency Act. 89% of our spend was covered by December 2022. The response rate is high, and we have succeeded in establishing increased awareness in our supply chain. It was yet another successful year for Royal Unibrew’s premium and craft beers in the Baltic countries. Continued positive development of our brewery in Latvia, Bauskas alus, as well as our acquisition of Tanker Brewery in Estonia were the main contributors to success. We continued to focus on growing our non-alcoholic beers faster than the market, and we maintained a clear market leader position in Lithunia with our Kalnapilis brand. PepsiCo delivered outstanding results in the CSD category and won a massive blind tasting over the leading cola brand. The blind tasting showed that more than 60% preferred the taste of Pepsi, which was also reflected in the growth of sales and market share in the Baltic countries. Increased focus on premiumization of the CSD portfolio also resulted in profita- bility increase. We continued the roll-out of CULT as part of our multi-bev- erage strategy. High level of innovation, maximization of trade availability as well as outstanding brand communication contributed to sales increase of +30% and gain of market share in the growing energy drinks category. In spring 2022, a customer survey was completed by 101 companies in Lithuania and 101 companies in Latvia. The survey was conducted by Kantar for Royal Unibrew Baltic to access the level of sustainability, social responsibility, and reputation of Kalnapilio-Tauro grupe and Cido grupa in the eyes of On-Trade and Off-Trade business partners. The survey showed that the reputation of Kalnapilio-Tauro grupe was rated the highest by its partners compared to competitors in Lithuania. Likewise, business partners rated the reputation of Cido Grupa the highest in the beverage industry compared to competitors in Latvia. Royal Unibrew Baltic used PR to promote its position as #1 Sustainable partner resulting in extensive media publicity across the Baltic countries. Performance ROYAL UNIBREW Annual Report 2022 37 Western Europe Financial performance Volume in 2022 showed a 21% increase, while net revenue increased by 16%. Organic volume increased by 15% and net revenue by 10%. The lower growth in net revenue compared to volume is caused by higher growth in carbonated soft drinks with lower revenue per hectoliter than in beer. “Strong top line momentum continued in 2022 despite cost pressure and intensified competition in some categories. Our profitability was hit by the cost inflation and a reduction in our wholesalers’ inventory toward the end of the year. In 2023, we will work on balancing sales-in and sales-out while re-establishing the per hectoliter profitability by category. “ Jan Ankersen, SVP South Europe and GM Italy EBIT amounted to DKK 157 million in 2022, which were DKK 85 million lower than in 2021. The EBIT margin went down by 9.1 percentage points from 20.7% in 2021 to 11.6% in 2022. The weak development in earnings was caused by input price inflation and the time lag until we increased our prices toward customers and the destocking at wholesalers in Italy from the end of Q3 2022 until the end of the year. 1.6 mhl VOLUME (up by 21%) 157mDKK EBIT (down by 32%) 1.4 bnDKK NET REVENUE (up by 16%) 11.6% EBIT-MARGIN (down by 9.1pp) 0 50 100 150 200 250 300 2020 202 1 2022 0 4 8 12 16 20 24 2020 2021 2022 2020 2021 2022 0.0 0.3 0.6 0.9 1.2 1.5 1.8 2.1 2020 0.0 0.3 0.6 0.9 1.2 1.5 1.8 2021 2022 1800 2400 2700 3000 3300 3600 EBIT (mDKK) EBIT-margin (%) volumes (mhl) Net revenue (bnDKK) WESTERN EUROPE mDKK 2022 2021 % changes %organic Volumes (mhl) 1.6 1.3 21 15 Net revenue 1,353 1,168 16 10 EBIT 157 242 -35 -46 EBIT margin (%) 11.6 20.7 Western Europe ROYAL UNIBREW Annual Report 2022 38 In 2022, the Italian business grew faster than the market in all the categories in which we are present in Italy, i.e., beer, carbonated soft drinks and energy drinks. In Off-Trade, the Ceres brand significantly outperformed the market with close to double-digit growth in sell-out supported by a strong marketing push focusing on digital content and attraction of new consumers. The growth was also a result of a step change of in-store execution as well as an improvement of the sales force during the past two years. Finally, we launched Ceres Strong Ale in a new 50cl can with great success. The LemonSoda brand also grew significantly faster than the underlying carbonated soft drinks market gaining signifi- cant market shares in the lemonade segment. The growth was supported by a new advertising campaign celebrating the “original Italian lemonade”. LemonSoda benefits from the stronger sales force and commercial focus on in-store execution. LemonSoda Zero, which is now accompanied by the newly launched OranSoda Zero, continues to grow significantly in the no sugar segment. The carbonated soft drinks sales were also supported by a warm summer in Italy in 2022. In the high growth energy drinks market, Lemonsoda Energy Activator continues to gain market shares consolidating its positioning as number three in the market. On-Trade sales showed a significant recovery in 2022 compared to the year before. The recovery was especially strong in the first quarter of the year, whereas the second half of the year slowed down as a result of the energy crisis, input price inflation and wholesalers destocking. Sales-out from our wholesalers to final point of consumption remain strong and higher than 2019. In France, Royal Unibrew was capable of growing net revenue in a tough Off-Trade environment, hit by input price inflation and reinforced competition in the energy drinks category. The strategy of entering the convenience store distribution channel with our products works well, and we are ahead of schedule for 2022. The Lorina brand delivered the highest net revenue ever in both Off-Trade and convenience. Lorina is now the most premium brand in the clear carbonated soft drinks category (not only in the lemonade category) as a result of strong execution of our price/pack strategy. Small packaging formats (glass and cans) contributed strongly to the growth. Likewise, the reinforced sales structure contributed to growth by adding new customers in the convenience channel, espe- cially bakeries. Crazy Tiger, our French brand of energy drinks, also sat a new record in 2022: All-time high net revenue based on record high weighted distribution of 98% of all Off-Trade outlets. Development and initiatives in 2022 Performance 39ROYAL UNIBREW Annual Report 2022 International Financial performance In International, total volumes showed a 7% increase in 2022 to 1.4 million hectoliters corresponding to a 6% organic increase. The inorganic development is explained by the acquisition of Amsterdam Brewery Co. Ltd. Net revenue was 22% higher than in 2021 and reached DKK 1,191 million in 2022, corresponding to 17% organic growth. Implementation of price increases throughout the year supported the strong net revenue growth. “Our International business is being redefined and future-proofed by revising our route to market and supply chain structure with an ambition to localize production and becoming less dependent on long distance transportation. In 2022, Amsterdam Brewery became an appreciated member of our family, and we also expanded our malt beverage license business in the Caribbean.” Michael Nørgaard Jensen, SVP International Earnings before interest and tax (EBIT) for 2022 showed a DKK 55 million decline from DKK 183 million in 2021 to DKK 128 million in 2022, negatively impacted by input price infla- tion, including significant increases in transportation costs to overseas markets. Consequently, the EBIT margin declined by 8.1 percentage points from 18.8% in 2021 to 10.7% in 2022. Volumes (mhl) EBIT (mDKK) EBIT-margin () Net revenue (bnDKK) 1.4 mhl VOLUME (up by 7) 128 mDKK EBIT (down by 30) 1.2 bnDKK NET REVENUE (up by 22) 10.7� EBIT-MARGIN (down by 8.1pp) INTERNATIONAL mDKK 2022 2021 % changes %organic Volumes (mhl) 1.4 1..3 7 6 Net revenue 1,191 973 22 17 EBIT 128 183 -30 -32 EBIT margin (%) 10.7 18.8 2021 0 4 8 12 16 20 24 2020 2022 2021 0.0 0.3 0.6 0.9 1.2 1.5 1.8 2020 2022 0 35 70 105 140 175 210 20212020 2022 0.0 0.3 0.6 0.9 1.2 1.5 1.8 20212020 2022 International ROYAL UNIBREW Annual Report 2022 40 In 2022, we acquired Amsterdam Brewery Co. Ltd. in Canada. Amsterdam Brewery consists of a craft brewing unit and the most iconic brew restaurant at the harbor front in Toronto, Canada. The acquisition is an important supplement to our agency business, Bruce Ashley Group, in Canada and will solidify our position in Ontario as well as the rest of Canada. Amsterdam Brewery has performed very well in the period of our ownership in both brewing and the restaurant business. Our Faxe brand continues to be a strong performer in both the Canadian market as well as Africa. Faxe is consolidating its position in the current markets through a focused market strategy and improved marketing activation. Our malt business continues to perform well in the relevant markets. Our route to market has undergone changes in Trin- idad as we are moving into a license model in the beginning of 2023. The malt expansion in the USA is going well, and we are building a stronger position in several states across the US. Malt in Africa continues to grow despite political disrup- tions in some countries. We are continuously improving our footprint for both malt and beer in the Americas and Africa as well as expanding our partnerships. Our RTD/Cider business in Asia is healthy, but the business has experienced turbulence linked to the alternately opening and closing of the On-Trade channel in the country due to COVID-19 restrictions. Our Crodo business is growing significantly outside of Italy, and we experience solid market share improvements across markets. It is our ambition to grow our Crodo business further; therefore, a market expansion has been initiated in selected countries in Southern Europe. New partnerships have been initiated in key markets across the Mediterranean region. The beer category has been under pressure in Germany due to supply chain and cost challenges but a change in route to market shows signs of improve- ments. Finally, UK is performing very well in malt with a strong market share position. Our international business is currently being redefined and future-proofed by revising our route to market, including our supply chain structure, with an ambition of localizing our production setup over time to become less dependent on transportation and freight as well as import restrictions and taxes. In addition, we will reduce our carbon footprint signifi- cantly with a local production setup compared to our current route to market, which includes long distance transportation and freight. Development and initiatives in 2022 Performance ROYAL UNIBREW Annual Report 2022 41 → Corporate governance • Risk management • Remuneration Board of Directors and Executive Management • Shareholder information Governance Governance Governance ROYAL UNIBREW Annual Report 2022 42 Corporate governance Annual General Meeting / shareholders The Annual General Meeting (AGM) is the ultimate authority in all affairs of Royal Unibrew. According to the Articles of Association of Royal Unibrew, AGMs shall be called not earlier than five weeks and not later than three weeks prior to the AGM. It is an objective to formulate the notice convening the meeting and the agenda in a way that gives shareholders an adequate presentation of the business to be transacted at the general meeting. Proxies are limited to a specific AGM and are formulated also to allow absent shareholders to give specific proxies for individual items of the agenda – either to the Board of Directors or to a person attending the AGM. All documents relating to AGMs are available at Royal Unibrew’s website no later than three weeks prior to the AGM. Each share of a nominal value of DKK 2 entitles the holder to one vote. Royal Unibrew’s shares are not subject to any restrictions of voting rights, and the Company has one class of shares. The framework for Royal Unibrew’s corporate governance is based on recommendations by the Danish Committee on Corporate Governance, current legislation and regulation, best practices and internal rules. Royal Unibrew’s objective is to ensure that Royal Unibrew meets its obligations to shareholders, customers, employees, authorities and other stakeholders and that long-term value creation is pursued. Annual General Meeting / shareholders Board of Directors Senior Leadership Team Growth Leadership Team Organization Executive Management Team Audit Committee Nomination & Remuneration Committee Governance Corporate governance ROYAL UNIBREW Annual Report 2022 43 Proposals for resolutions to be considered at the AGM may be submitted by shareholders to the Board of Directors no later than six weeks prior to the date of the AGM. Board of Directors The Board of Directors oversees the company’s overall strategy and supervises the organizational, financial and performance management of the Company. In addition, the Board of Directors continuously evaluates the work performed by the Executive Management on behalf of the shareholders. Attendance at meetings (in total 14) Position Board meetings Peter Ruzicka Chair Jais Valeur Deputy chair Martin Alsø Board member Torben Carlsen Board member Heidi Kleinbach-Sauter Board member Claus Kærgaard Board member Michael Nielsen Board member Christian Sagild Board member Catharina Board member Stackelberg-Hammarén Attended the meeting Did not attend the meeting Not a board member at the time The Board of Directors performs its tasks in accordance with the Rules of Procedure of the Company governing the Board of Directors and the Executive Management. These Rules of Procedure are reviewed and updated annually by the Board of Directors. The Board of Directors usually meets for six annual ordinary board meetings. Under normal circumstances at least one of the meetings centres around the Company’s strategy and prospects, and at least one meeting takes place in a market in which the Company operates. In 2022, eight extraordi- nary meetings were held resulting in a total of fourteen board meetings during the year. The Board of Directors has established the following commit- tees: Nomination and Remuneration Committee The committee consists of the Chair and the Deputy Chair of the Board of Directors. The principal duty of the Nomination and Remuneration Committee is to assist the Board of Direc- tors in nomination of members to the Board of Directors and Executive Management. Furthermore, the committee secures that the remuneration policy is updated and that the princi- ples are followed. The committee reviews executive compen- sation, design of short- and long-term incentive schemes including proposal of KPIs. Attendance at meetings (in total 5) Remuneration and Position Nomination Committee Peter Ruzicka Chair Jais Valeur Deputy chair Attended the meeting Did not attend the meeting Not a committee member at the time Audit Committee The committee consists of two members: the Chair (Christian Sagild) and one board member (Peter Ruzicka). The principal duty of the Audit Committee is to secure quality and integrity in the Company’s presentation of financial statements, audit and financial reporting including compliance with relevant accounting legislation and other legal requirements. In addi- tion, the Audit Committee monitors accounting and reporting processes, the audit of the Company’s financial reporting, risk issues and the external auditor’s performance and independ- ence. The Audit Committee, likewise, oversees the responsi- bility of monitoring the whistle-blower reporting system and ESG reporting. Finally, the Audit Committee assesses and recommends to the Board of Directors election of external auditors. The external auditor has participated in all ordinary meetings of the Audit Committee. The committee held five meetings in 2022. Governance ROYAL UNIBREW Annual Report 2022 44 Attendance at meetings (in total 6) Position Audit Committee Meetings Christian Sagild Chair Audit Committee Board member Peter Ruzicka Chair of the Board of Directors Attended the meeting Did not attend the meeting Not a committee member at the time Evaluation of the work of the Board of Directors Evaluation of the work of the Board of Directors is conducted annually. The purpose of the evaluation is to ensure that the Board of Directors (as a body) has expertise and experience within Fast Moving Consumer Goods (FMCG), produc- tion, sales and marketing of brands globally and in busi- ness-to-business markets, strategic and general manage- ment as well as expertise and experience with economic, financial and capital market issues including those relating to listed companies. The evaluation is facilitated by the Chair of the Board of Directors, who requests written response to a questionnaire from all board members. The evaluation is based on the findings of the questionnaire. The findings of the latest evaluation were presented and discussed at board meetings in 2022. Based on the 2022 evaluation, it was concluded that the Board of Directors possesses the neces- sary competencies taken into consideration Royal Unibrew’s business model and strategy. An external consultant is involved in the evaluation at least every third year. An evaluation by an external consultant took place in 2020. Both the performance of the Executive Management and the cooperation between the Board of Directors and the Execu- tive Management are evaluated annually as a minimum. Composition of the Board of Directors When composing the Board of Directors, the Company emphasizes that the members have the competencies required. The Board of Directors assesses its composition annually ensuring that the combination of competencies and diversity of the members match the Group’s activities. Candidates for the Board of Directors are recommended for election by the AGM supported by motivation in writing by the Board of Directors as well as a description of the recruiting criteria. The individual members’ competencies and creden- tials are described in the below section on the Board of Direc- tors and the Executive Management (see page 53-57). Three of the members of the Board of Directors are elected by the employees of Royal Unibrew for a period of four years pursuant to the Danish Companies Act. Election took place in 2022. Newly elected board members are upon their election intro- duced to the Company through a focused program. Executive Management The CEO and the CFO report to the Board of Directors. Together with the Senior Leadership Team (SLT) they are responsible for the day-to-day management and strategy. In addition, we operate with a Growth Leadership Team (GLT) comprising leaders within Group functions and country managers with broad experience and special expertise within their area of business in order to achieve our strategy of being THE PREFERRED CHOICE. Diversity and inclusion The international management teams of Royal Unibrew – a total of 149 leaders – comprises 72% (2021: 71%) male and 28% (2021: 29%) female. Reference group was been impacted by the acquisitions of Hansa Borg Bryggerier and Amsterdam Brewery in 2022. Our target is a more balanced gender representation of at least 40% of the underrepresented gender among the Board of Directors and in international management teams by 2025. When recruiting new execu- tives, we identify candidates of all genders without discrim- ination and aim to encourage female candidates’ interest in taking on managerial tasks. Currently, the Board of Directors consists of six board members elected by the AGM and three board members elected by the employees based in Denmark. Three of the members elected by the AGM are Danish and three are non-Danish. Two of the AGM elected board members are female (33%). Governance ROYAL UNIBREW Annual Report 2022 45 55 53 34 34 6 7 7 4 2021 2022 2020 2018 2019 2021 2022 4.0 4.9 5.8 6.7 7.6 Development in total contribution billions We aim for the Board of Directors to consist of expert members who, to the widest extent possible, complement each other in terms of education, experience, age, back- ground, nationality, gender etc. This is to ensure a competent and versatile contribution to the board at Royal Unibrew. These matters are taking into consideration when the Nomination and Remuneration Committee identifies new candidates for the Board of Directors, and it is the commit- tee’s objective to identify both male and female candidates. Recommendation of candidates will always be based on an assessment of the competencies of the individual candi- date and how he/she will match Royal Unibrew’s needs and contribute to the overall efficiency of the board. Whistle-blower system Royal Unibrew is committed to doing business according to high ethical standards striving to be responsible, committed, holistic, creative, ambitious as well as honest and open. The Company’s secure whistle-blower system provides employees and third parties doing business with Royal Unibrew the possibility to report knowledge or suspicion of non-conformance with Royal Unibrew’s Code of Conduct or other serious offences. The whistle-blower system can be accessed from Royal Unibrew’s website and is available in seven languages. When communicating through the whistle-blower system, the communication is encrypted, if so chosen, in order to maintain anonymity. Filings are evaluated by Group General Counsel and Director of Finance and Treasury. The Audit Committee oversees the responsibility of monitoring the whistle-blower reporting system. Reporting is made in compliance with national data protection regulation and GDPR. No cases were reported in 2022. Corporate Governance Report 2022 The Board of Directors regularly reviews Royal Unibrew’s corporate governance framework and policies in relation to the activities of Royal Unibrew. A detailed description as well as an overview of Royal Unibrew’s position on each of the recommendations have been prepared in compliance with recommendations on corporate governance issued by the DanishCommittee on Corporate Governance, cf. Section 107b of the Danish Financial Statements Act. → For further information see Corporate Governance Report 2022 The total contribution through taxes in 2022 amounted to DKK 7.4 billion (2021: 5.4 billion). Tax by category (%) Excise duties VAT Personal taxes and social security contributions Company income taxes Tax Royal Unibrew seeks to comply with all tax legis- lations to its business operations and, in doing so, aims to minimize its tax risks by actively seeking to identify, evaluate, monitor and manage tax risks. Please refer to page 72 for further details. Governance ROYAL UNIBREW Annual Report 2022 46 Risk management We are exposed to a variety of risks some of which are beyond our direct control. These risks may have a signifi- cant impact on our business if not properly assessed and controlled. Maintaining a sound and deeply rooted risk culture, including a strong control environment, is essential for the continued development of Royal Unibrew, and the purpose of our risk management approach is to address and handle risks and uncertainties in due time. On an ongoing basis, we assess risks within each of the identified key risk areas based on their potential impact and likelihood. A year characterized by geopolitical challenges We entered into 2022 with COVID-19 restrictions in most of our key markets, and at the same time the pressure on input prices continued due to inflation. The Russian invasion of Ukraine increased uncertainty even more, especially related to energy supply and energy prices. Royal Unibrew had limited business activities in Russia, and all export and import to and from Russia were quickly shut down in protest against the aggression. We closed three acquisitions in 2022. Royal Unibrew has a strong track record of integrating new companies into its existing business setup. Nevertheless, the acquisitions will naturally add more complexity to our business and, thereby, also additional risks. We take an active approach to risk management to ensure that our key risks are identified, monitored and mitigated in a structured and prioritized manner. Royal Unibrew has defined clear risk management processes, including policies and procedures, for the dual purpose of minimizing the effects of our key risks and protecting our people, assets, reputation, values and freedom to operate. Governance Risk management ROYAL UNIBREW Annual Report 2022 47 1 2 3 4 Time; final decision mandate 1 2 3 4 Risk management structure and governance Royal Unibrew’s risk management structure is based on a systematic process of risk identification, risk analysis and risk assessment. This struc- ture provides a detailed overview of key risks relating to the realization of our strategies in the short- and long-term and enables us to take the required measures to address risks. At Royal Unibrew risk management is an enterprise-wide effort, where local risk owners as well as central risk owners from group functions are appointed to facilitate the risk identification, control, mitigation and reporting of current and emerging risks supported by the central risk management function. The identified risks and proposed action plans are reviewed and assessed by Royal Unibrew’s Growth Leadership Team, while the Audit Committee reviews the adequacy and effectiveness of the risk management system. Subsequently, the Executive Management presents the key risks to the Board of Directors and reports the necessary risk-mitigating activities/ action plans for review. The Board of Directors is ultimately responsible for assessing the nature and extent of risks associated with Royal Unibrew’s strategic direction and activities as well as the implementation of effective risk identification, assessment and mitigation. Risks are assessed under a two-dimensional “heat map” assessment system, where the impact of each risk is estimated in relation to profit, damage to Royal Unibrew’s reputation, violation of legislation or environmental and climate, social and governance implications as well as the likelihood of the risk resulting in an incident. Based on the continuous assessment of potential risks, the ”heat map” is updated to bring a current and better understanding of potential risks and, likewise, to ensure that adequate mitigation efforts are initiated. Royal Unibrew leverages a structured stage-gate process to ensure timely identification and mitigation of key risks Staff functions and business units • Risk identification, assessment, quantification and recording • Risk mitigation suggestions • Risk monitoring management • Regular reporting to the Growth Leadership Team Audit Committee • Monitors the development in total strategic risk exposures • Monitors the development in individual risk factors • Verifies compliance with overall risk policy Board of Directors • Approves overall risk policy • Reviews risk findings reported by the Growth Leadership Team Growth Leadership Team • Determines risk management policies and individual risk strategies • Risk mitigation efforts implementation • Ensures consistency between risk management policy and business objectives • Evaluates, rates and manages key risk developments • Ensures resource availability to implement efficient risk management. Total risk universe of known and unknown risks that may or may not be encountered at any given point in time Prioritized risk pool for review on next level Prioritized risk pool for review on next level Review final presentation and compliance Incoming risk pool from previous level Incoming risk pool from previous level Final review and approval Incoming risk pool either due to high impact and/or high potential likelihood Governance Risk management structure and governance ROYAL UNIBREW Annual Report 2022 48 Key risk factors in 2022 Area Description Development Risk mitigation Raw materials and utility Prices and availability of a large number of key commodities fluctuate in line with world market. To the extent that higher unit costs cannot be compensated for by means of higher selling price per unit, or in other ways of increasing the average selling price per unit correspondingly, Royal Unibrew’s earnings will decrease. The price fluctuation can also lead to deficiency of raw materials and affect Royal Unibrew's earnings negatively. Decreasing availability of recycled materials, due to lack of robust Deposit Return Systems (DRS) or other collection systems as well as poor run or lack of recycling facilities, is a potential risk. Most raw material prices and other input costs have continued to increase during 2022, and especially prices on energy in- tensive materials (e.g., glass bottles, cans, malt and sugar) have increased, which is a trend that we expect to continue in 2023. As a consequence of the European energy crisis, some of our production sites have been categorized as non-protected customers meaning that we are not guaranteed the needed gas supply at these sites in case of potential gas supply dis- ruptions. Royal Unibrew monitors the trend in commodity prices in close collaboration with our suppliers. Hedging against short-term price increases take place on rolling basis through agreements with suppliers and, likewise, through commodity hedges with financial institutions (e.g., aluminum and energy for heating). Price increases toward customers, directly and indirectly are used as a tool to compensate for higher raw material prices and other input prices. Our new 12GWh solar panel park in Faxe, Denmark, will be ready to produce renewable energy in the beginning of 2023 and will make the local production less vulnerable against price volatility on elec- tricity. Moreover, it will make us more independent of gas. We have invested in our production facilities, including an upgrade of burners for oil-based heating making us less dependent on gas supply. For many of our products, we can change packaging material if short- age or significant price increases are experienced. Our key risks An aggregated presentation of our key risks and how we attempt to address and mitigate such risks is outlined in the following. Additional risks, not presently identified or those currently deemed to be less material, may also have an adverse effect on our business. Climate-related risks have been included into the Enterprise Risk Management (ERM) framework valid for 2022. A detailed description of the financial risks is included in note 3. Governance Our key risks ROYAL UNIBREW Annual Report 2022 49 Area Description Development Risk mitigation Beverage Industry In most markets the product categories beer and soft drinks are characterized by tough price competition and intensive marketing from a number of suppliers. We have evolved our footprint further in 2022 by closing three acquisitions. With the acquisition of Hansa Borg Bryggerier and Amsterdam Brewery Co. Ltd., we have acquired production capacity close to our consumers and customers. Read more about the acquisitions in note 24. Royal Unibrew’s earnings and competitiveness are ensured through constant focus on markets and segments in which Royal Unibrew holds or may achieve a significant position. Our invest- ments in digital solutions and our continuous improvements across the Group are expected to limit the negative effects from the changes in the industry. Moreover, Royal Unibrew focuses on value management through the development of products, con- tainers and packaging, cooperation with customers and communi- cation with consumers. IT risk Royal Unibrew’s activities are to a large extent dependent on the established IT systems and the quality of the applied IT security solutions. A prolonged breakdown, unintended malo- peration or unauthorized break-in into the systems supporting sales and supply processes as well as internal information systems may involve a significant risk of interruption of Royal Unibrew’s activities. When acquiring companies, it is our risk philosophy to adopt the companies into our existing IT system landscape and IT security framework. On March 1, 2022, MC Energy was inte- grated in our ERP platform and merged with Geyer Fréres, and we expect to integrate Solera Sweden in Q2 2023. The geopolitical situation has accelerated the risk of cyberat- tacks. Royal Unibrew works consistently to improve our IT security. We have established procedures to ensure: • day-to-day operation of the IT systems supporting the key busi- ness processes, • protection against data loss, • protection against unauthorized access to and distribution of confidential data, • general protection against cybercrime and securing physical access to RU facilities. The CIO presents risk on Audit Committee meetings biannually. Macro- economic uncertainty Royal Unibrew’s products are sold in markets and market areas where market developments are usually determined by eco- nomic cycles. Macroeconomic uncertainty, including changes of free trade agreements, low growth of long duration, outbreaks causing a threat to the public health or geopolitical instability, may affect earnings negatively. Consequently, we may expe- rience declining consumption or shifts in product mix toward products in other packaging formats with lower earnings. We have seen changes in consumer behavior due to the infla- tionary environment where the consumers to a greater extent use the discount stores in their daily shopping. At the same time, we have experienced a more competitive landscape in the marketplace. Royal Unibrew focuses on flexibility in all operations. Thus, we strive to get some leeway for reducing the effects of macroeconomic uncertainty as well as changing consumption patterns. The efforts directed at continuous improvements across the busi- ness are expected to limit the negative effects of macroeconomic changes. Governance ROYAL UNIBREW Annual Report 2022 50 Area Description Development Risk mitigation Partnership Royal Unibrew cooperates with different partners across mar- kets and product categories. Changes in these relationships may affect the Group’s sales, net revenue and earnings. In 2022, Royal Unibrew and PepsiCo agreed on extending their partnership, which means that Royal Unibrew will take over the responsibility of the PepsiCo beverage portfolio on the border between Denmark and Germany as of January 2023. The agreement includes production, logistics, sales and marketing operations in this important business area. In addition, Royal Unibrew will take over sales, distribution and trade marketing of PepsiCo’s snack brands Lay’s and Doritos in the Nordic countries, including Denmark, Sweden, Norway, Finland as well as Greenland and the Faroe Islands, with effect from January 2023 as well. Royal Unibrew has in general a long history with our partners and mitigate the partnership risks by entering into long-term agree- ments and by providing adequate business results to ensure a mutually beneficial development of the partnerships. Statutory restrictions Royal Unibrew’s activities are subject to national legislation in the markets in which Royal Unibrew operates. Changes in applicable legislation may impact the ability to operate, e.g., by way of restrictions on production, packaging, marketing and sale of Royal Unibrew’s products or due to increasing taxes on raw materials and consumption. Such restrictions may affect the Group’s sales and earnings significantly. At the beginning of 2022, restrictions on opening hours at bars, hotels and restaurants due to COVID-19 affected our custom- ers’ sales negatively. Products with less sugar as well as products with no/low alcohol are on the agenda of many local and regional govern- ments. Royal Unibrew continues to bring product innovations to market within both categories. At the end of 2022, the European Commission presented its draft rules on reusable packaging. Royal Unibrew will monitor the development of these rules closely. Royal Unibrew participates in local and international cooperation fora within the beverage industry. The purpose is to influence leg- islative decision makers, that is, to ensure that conditions, including taxes that may impact the production, packaging, marketing and sales of Royal Unibrew’s products, do not deteriorate. Governance ROYAL UNIBREW Annual Report 2022 51 Managing ESG and climate risks We declared our support to the Task Force on Climate-related Financial Disclosures (TCFD) in 2021, which demonstrate our commitment to building a more resilient financial system and safeguarding against climate risks through better disclosures. We updated our CSR materiality overview in 2022, which will be used in a risk assessment and scenario analysis during 2023. The requirements on risk assessment in the EU Direc- tive on Corporate Social Responsibility and the EU Taxonomy, which are currently under development, will be further scruti- nized and implemented. Reporting according to the recommendations of the TCFD Governance Disclose the organization’s governance around climate- related risks and opportunities. The Board of Directors of Royal Unibrew sets the direction for Royal Unibrew’s strategy, targets, risks and opportunities together with the Executive Management. Together with Group CSR and Finance, the Executive Management is responsible for the sustainability targets, reporting and progress throughout the organization. → Read more about the sustainability governance on p. 70 → Read more about the integration of ESG in the management compensation on p. 53 Strategy Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy and financial planning where such information is material. Our sustainability targets are integrated in our business strategy of being THE PREFERRED CHOICE for the future leading the beverage industry with respect to climate action and the demand for sustainable products. Our aspiration of becoming a global leader in sustainable beverages with ambitious decarbonization targets entails committing to the science based 1.5°C climate target aligned with the Paris Agreement. We have submitted our targets to the Science Based Target initiative (SBTi) in 2022 and they will be vali- dated in 2023. We have for several years disclosed our climate performance, strategy and risk management as well as our metrics and targets in our annual reports but also at a more granular level through our CDP disclosure (Carbon Disclosure Project). → Read more about our strategy on p. 64 Risk management Disclose how the organization identifies, assesses and manages climate-related risks. Climate-related risks are captured in our Enterprise Risk Management (ERM) process. The risks are identified and assessed, and key risks are evaluated based on their potential impact and likelihood. → Read more about our risk management process on p. 70 Metrics and targets Disclose the metrics and targets used to assess and manage relevant climate-related risk and opportunities, where such information is material. R oyal Unibrew has set ambitious science-based targets to reduce value chain carbon emissions. Our target is to be 100% carbon emission free in scope 1 and 2 in 2025 (excl. internal logistics) O ur target is a 50% reduction in supply chain emissions in scope 1, 2 and 3 in 2030 → Read more about our ambitious targets on p. 65 Governance ROYAL UNIBREW Annual Report 2022 52 Remuneration Remuneration of the Executive Management mDKK 2022 Change 2021 Granted pay Fixed salaries to Executive Management 14 13 Severance payment 0 0 Short-term bonus scheme for Executive Management 2 6 Long-term bonus scheme for Executive Management 8 7 Remuneration of Executive Management 24 -10% 27 Remuneration of Board of Directors 5 5 Total remuneration of Board of Directors and Executive Management 29 32 Expensed pay Adjustment to granted pay: Long-term bonus (note 6) -9 -3 Total remuneration of Board of Directors and Executive Management 20 28 Average remuneration of employees Royal Unibrew employees (Group) 0.5 9% 0.4 * Expensed pay is the P&L change in Royal Unibrew A/S accounts. The adjustment represents fair value adjustments to the LTIP. Royal Unibrew delivered strong revenue growth in 2022, whereas EBIT and the free cash flow were negatively impacted by the consequences of high inflation and historically high energy prices. We continued our sustainability journey, and we hereby got a step closer our target to be among the global leaders of sustainability in the beverage industry. Royal Unibrew has prepared a Remuneration Report in accord- ance with section 139b of the Danish Companies Act for the financial year 2022, which concludes that the remuneration of the Board of Directors and the Executive Management is disclosed in accordance with the incentive guidelines and remuneration policy adopted at the Annual General Meeting on April 27, 2022. When granting the variable part of the remuner- ation, information is made available for the potential value of the programs at the time of exercise. The overall objective of the remuneration is to attract, motivate and retain qualified members of the Board of Directors and the Executive Management. Executive Management The remuneration of the Executive Management comprises a base salary, a short-term cash-based bonus, a long-term share-based incentive plan and other customary benefits. The renumeration is designed to attract and retain members of the Executive Management and align interest with shareholders. The fixed remuneration to the Executive Management is based on benchmarks from similar positions in C25 companies in Denmark. The variable remuneration, on the other hand, is designed to drive performance in line with Royal Unibrew’s strategy, financial and non-financial targets. Board of Directors The members of the Board of Directors receive a fixed cash remuneration and a multiplier of the fixed cash remuneration for their extended duties as Chair, Deputy Chair and members of the Board Committees. Except for board members elected by the employees, members of the Board of Directors did not receive any performance or share-based remuneration in 2022. → Read our full Remuneration Report here The overall guidelines for incentive pay adopted at the Company’s Annual General Meeting are available at http://investor.royalunibrew.com/corporate-governance. Governance Remuneration ROYAL UNIBREW Annual Report 2022 53 Board of Directors and Executive Management From upper left: Lars Vestergaard, Michael Nielsen, Heidi Kleinbach-Sauter, Martin Alsø, Claus Kærgaard From lower left: Torben Carlsen, Catharina Stackelberg-Hammarén, Peter Ruzicka, Lars Jensen, Christian Sagild, Jais Valeur Governance ROYAL UNIBREW Annual Report 2022 54 Board of Directors and Executive Management Peter A. Ruzicka Chair of the Board Jais Valeur Deputy Chair of the Board Position Professional board member Group CEO of Danish Crown Directorships Chair of the Board of Directors of Pandora A/S, Denmark Member of the Board of Directors of Aspelin Ramm Gruppen AS, AKA AS, both in Norway, and Axfood AB, Sweden Member of the Board of Directors of Foss A/S, Denmark Special competencies Broad international experience within the food and beverage industry as well as FMCG (Fast Moving Consumer Goods). In addition, special operational expertise with strategy execution and transformation Special expertise in general management of international enterprises within FMCG (Fast Moving Consumer Goods) Committees Chair of the Nomination and Remuneration Committee Member of the Audit Committee Member of the Nomination and Remuneration Committee Initially elected 2021 2013 Term of office 2022-2023 2022-2023 Considered independent Yes Yes Nationality Norwegian Danish Year of birth and gender 1964, male 1962, male No. of Royal Unibrew shares (change from January 1, 2022) 1,000 1,381 (+405) Board of Directors Governance Board of Directors ROYAL UNIBREW Annual Report 2022 55 Board of Directors (continued) Martin Alsø Member of the Board Elected by the employees Torben Carlsen Member of the Board Heidi Kleinbach-Sauter Member of the Board Claus Kærgaard Member of the Board Elected by the employees Position Business Unit Manager in Royal Unibrew President & CEO of DFDS Professional board member Sales Manager Off-Trade in Royal Unibrew Directorships Member of the Board of Directors of PPC Ejendomme A/S, Dyal 1 ApS, and P/S Dyal Investment, all in Denmark Member of the Board of Directors of Chr. Hansen Holding A/S, Denmark Special competencies Broad international expertise and knowledge within finance, risk management, M&A and manage- ment of international corporations Broad international experience within general management, tech- nology, quality management and science within the food and bever- age industry. Global thought leader on diversity and inclusion Committees Initially elected 2014 2021 2019 2018 Term of office 2022-2026 2022-2023 2022-2023 2022-2026 Considered independent No Yes Yes No Nationality Danish Danish German/US Danish Year of birth and gender 1974, male 1965, male 1956, female 1968, male No. of Royal Unibrew shares (change from January 1, 2022) 2,400 3,300 (+1,800) - 180 Governance ROYAL UNIBREW Annual Report 2022 56 Board of Directors (continued) Michael Nielsen Member of the Board Elected by the employees Christian Sagild Member of the Board Catharina Stackelberg- Hammarén Member of the Board Position Brewery worker in Royal Unibrew Professional board member Senior Advisor, member of the Board of Directors of Marketing Clinic Oy & Knowit Insight OY Directorships Chair of the Board of Directors of Nordic Solar A/S, and Penneo A/S, both in Denmark Deputy Chair of the Board of direc- tors of Ambu A/S, Denmark Chair of the Board of Directors of Alma Media Member of the Board of Directors of Kojamo and Purmo Group. All companies listed on the Helsinki Stock Exchange, Finland Special competencies Special expertise within general management of listed enterprises, including in-depth insight within finance and risk management Special expertise in strategy, mar- keting and digitalization Committees Chair of the Audit Committee Initially elected 2022 2018 2019 Term of office 2022-2026 2022-2023 2022-2023 Considered independent No Yes Yes Nationality Danish Danish Finnish Year of birth and gender 1974, male 1959, male 1970, female No. of Royal Unibrew shares (change from January 1, 2022) 21 3,000 450 Governance ROYAL UNIBREW Annual Report 2022 57 Lars Jensen President & CEO Lars Vestergaard CFO Qualifications Diploma in Business Economics, Informatics and Management Accounting, Copenhagen Business School Master of Science (MSc) in Economics Aarhus University Positions CEO from September 2020 COO April-August 2020 CFO December 2011-March 2020 Joined Royal Unibrew in 1993 CFO from April 2020 Member of the Board of Directors April 2018-March 2020 Directorships Member of the Board of Directors of Matas A/S, Denmark Member of the Board of Directors of CO-RO A/S, Denmark Nationality Danish Danish Year of birth and gender 1973, male 1974, male No. of Royal Unibrew shares (change from January 1, 2022) 79,156 3,733 (+1,700) Executive Management Governance Executive Management ROYAL UNIBREW Annual Report 2022 58 Shareholder information The management of Royal Unibrew is dedicated to maintaining a good and transparent communication and dialog with the Company shareholders and other stakeholders. Share information The Royal Unibrew share is listed on Nasdaq Copenhagen A/S and is included in the Danish OMX C25. In 2022, a total of 30,196,514 (2021: 25,896,129) shares were traded corresponding to 60.2% (2021: 53%) of the total number of shares traded (at year end) through Nasdaq Copenhagen A/S (source: Bloomberg). The trading value amounted to DKK 17,321 million (2021: DKK 19,195 million) representing a 10% decrease. Basic information Share capital, DKK 100,400,000 Number of shares 50,200,000 Denomination DKK2 Number of share classes 1 Restriction of voting right None Place of listing Nasdaq Copenhagen A/S Short name RBREW ISIN code DK0060634707 Bloomberg code RBREW DC Reuter code RBREW.CO Index OMXC25 Development in Royal Unibrew’s share capital DKK ‘000 2022 2021 2020 2019 2018 Share capital 1/1 97,600 98,700 100,200 102,000 105,400 Capital reduction -1,100 -1,500 -1,800 -3,400 Capital increase 2,800 Share capital 31/12 100,400 97,600 98,700 100,200 102,000 Governance Shareholder information ROYAL UNIBREW Annual Report 2022 59 2021 2022 39 4 56 49 4 1 1 46 0 20 40 60 80 100 120 140 160 jan feb mar apr may jun jul aug sep okt nov dec Royal Unibrew OMX C 25 Peer group APRIL 27 2023 APRIL 27 2023 APRIL 28 2023 MAY 2 2023 At the end of 2022, the price of the Royal Unibrew share was DKK 495.30 compared to DKK 737.20 per share at the end of 2021. Royal Unibrew’s market capitalization amounted to DKK 25 billion at the end of 2022 compared to DKK 36 billion at the end of 2021. Each share carries one vote, and all share- holders registered in the Company’s register of shareholders are entitled to vote. Change of control The realization of a takeover bid resulting in change of control of the Company will entitle a few trading partners and lenders to terminate trading agreements entered. The Executive Management will not be entitled to any compensa- tion. However, a member of the Executive Management may choose to consider himself dismissed. Share buy-backs and treasury shares At the AGM on April 28, 2022, the Board of Directors was authorized to acquire treasury shares for up to 10% of the total share capital in the period up to the next AGM. In 2022, Royal Unibrew bought back a total of 490,335 shares at a market value of DKK 300 million, and as of December 31, 2022, Royal Unibrew held 576,952 treasury shares of a nominal value of DKK 2 each corresponding to 1.1% of the Company’s share capital, whereof 70,000 are for the purpose of covering the incentive programs offered to the Executive Management and key employees. The initiated share buy-back program was carried out in accordance with the “Safe Harbour” method. Break-down of shareholders at the end of 2022 Share performance 2022 (index) Note: The peer group consists of: AB InBev, Carlsberg, Heineken, Molson Coors Brewing Company, Britvic, Olvi, AG Barr, C&C Group, Coca Cola, PepsiCo, Keurig Dr Pepper (Source: Bloomberg). Foreign investors Danish investors Not registered Danish and foreign investors Royal Unibrew Royal Unibrew OMX C25 Peer group Dividend dates for 2023 Resolution at AGM Last trading date with right to dividend for 2022 First trading date without right to dividend for 2022 Distribution of dividend Governance ROYAL UNIBREW Annual Report 2022 60 Capital increase At the AGM in 2022 the Board of Directors was authorized to issue up to 10,000,000 new shares. In connection with the acquisition of Hansa Borg a capital increase of 1,400,000 shares were completed, as the acquisition was partly paid in Royal Unibrew shares. The new shares were admitted to trading and officially listed on Nasdaq Copenhagen A/S on May 31, 2022. At the end of 2022, the total number of shares of the Company was 50,200,000, including treasury shares. Dividends The Board of Directors proposes an ordinary dividend of DKK 14.50 per share for 2022 (2021: DKK 14.50). Ownership At the end of 2022, Royal Unibrew had approximately 34,694 registered shareholders holding together 95.7% of the total share capital. According to the latest Company announce- ments or other public announcements, the following share- holder hold more than 5% of the share capital: Shareholder End of February 2022 Chr. Augustinus Fabrikker A/S, Denmark 14.94% (reported on May 30, 2022) Share transactions made by members of the Board of Direc- tors and the Executive Management are governed by Royal Unibrew’s insider rules. Therefore, the members’ transactions as well as those of their connected persons are subject to a notification requirement according to the Market Abuse Regulation. Individuals on Royal Unibrew’s insider lists as well as their spouses and children below the age of 18 may trade Royal Unibrew shares only when the Board of Direc- tors has announced that the window for trading shares is open (provided that they do not have inside information). This normally applies for a period of four weeks following an announcement of financial results. On December 31, 2022, members of the Board of Directors held 11,732 shares of the Company, and members of the Executive Management held 82,889 shares corresponding to a total of 0.2% of the share capital. Annual General Meeting • The Company’s AGM will be held on April 27, 2023, at 4 pm CEST. The Annual General Meeting will be held as a fully virtual general meeting giving shareholders the possibility to follow the live stream, ask questions and vote • I nformation on the registration for electronic communica- tion is provided at Royal Unibrew’s website www.royaluni- brew.com under “Investor” • Registration of shareholder’s name is handled by the bank that holds the shares in safe custody Communication with shareholders and stakeholder relations The management of Royal Unibrew is dedicated to main- taining a good and transparent communication and dialogue with the company shareholders and other stakeholders. We believe that a high level of transparency in the communication of the Company’s development supports our work and a fair valuation of the Company’s shares. Our openness is limited by the duties of disclosure of Nasdaq Copenhagen A/S as well as competitive considerations. The dialog with and communication to shareholders and other stakeholders take place in connection with the publishing of Share ratios per share of DKK 2 – DKK 2022 2021 2020 2019 2018 Parent company shareholders’ share of earnings per share 23.1 26.5 24.1 23.0 20.6 Parent company shareholders’ diluted share of earnings per share 23.1 26.5 24.1 22.9 20.6 Free cash flow per share 11.8 26.4 28.8 23.4 18.7 Year-end price per share 495.30 737.20 706.60 610.00 449.0 Dividend per share 14.50 14.50 13.50 12.20 10.80 Number of shares 50,200,000 48,800,000 49,350,000 50,100,000 51,000,000 * Earnings per share and diluted earnings per share are adjusted for gain on remeasurements of investments in associates (DKK 360 million) in 2022 Governance ROYAL UNIBREW Annual Report 2022 61 Financial calendar 2023 MARCH 1 2023 APRIL 27 2023 APRIL 27 2023 AUGUST 22 2023 NOV 8 2023 financial reports and other announcements communicated via audio casts as well as meetings with investors, analysts and media relations. Financial reports and other announce- ments are available at Royal Unibrew’s website immediately after publication. Our website also includes material used in connection with investor presentations, seminars, capital market updates and audio casts. Investor relations activities Royal Unibrew aims to ensure open and timely information to its shareholders and other stakeholders. In order to maintain and develop good relations with the Company’s stakeholders, a number of activities are carried out continuously. In 2022, Royal Unibrew facilitated three audio casts in connection with the publication of the Annual Report 2021 as well as H1 Interim Report and Q3 Trading Statement 2022. Presentations from audio casts, seminars, etc., are available at Royal Unibrew’s website www.royaluni- brew.com under “Investor”. Moreover, Royal Unibrew facilitates and participates in analyst and investor meetings in connection with the publication of financial reports. In 2022, we have participated in around 280 meetings with more than 400 investors. Currently, Royal Unibrew is covered by 16 brokers, including brokers from major international investment banks. Analysts covering the Royal Unibrew share can be found at www.royal- unibrew.com under “Investor”. Shareholders, analysts, investors, stockbrokers and other stakeholders who have questions concerning Royal Unibrew may contact Royal Unibrew A/S, Faxe Alle 1, DK-4640 Faxe: Contacts Jonas Guldborg Hansen (Head of IR) [email protected] Telephone +45 20 10 12 45 Stine Felten (daily IR contact) [email protected] Telephone +45 29 23 04 93 Annual Report 2022 Trading Statement Q1 Annual General Meeting Interim Report H1 Trading Statement Q3 Governance ROYAL UNIBREW Annual Report 2022 62 → Our long-term sustainability strategy • Managing sustainability Our consumers and customers • Our products • Our people This section is prepared in accordance with section 99a, b and d of the Danish Financial Statement Act and supporting our Communication On Progress report in accordance with UN Global Compact. Corporate social responsibility Corporate social responsibility Corporate social responsibility ROYAL UNIBREW Annual Report 2022 63 Our long-term sustainability strategy Our strategy supports our ambition of being THE PREFERRED CHOICE for the future - leading the beverage industry with respect to climate action and the demand for sustainable products. We will reduce the impact of our operations and products as well as the entire value chain while at the same time deliver sustainable business growth. During 2022, we continued the implementation of our strategy and objectives in concrete projects and initiatives to achieve our short- and long-term targets for our strategic pillars: • Our consumers & customers • O ur products • O ur people For each of these areas, we have defined 2025 and 2030 commitments complementing our short-term targets set in 2019. We aim for a substantial and industry-leading reduction in carbon emissions from the entire value chain, providing great tasting, healthy, nutritious and responsible products and at the same time enabling a deeply engrained safety and sustainability culture in our company. We monitor our perfor- mance closely and diligently to ensure progress and to make timely adjustments if needed. In 2022, Royal Unibrew’s aspiration of becoming a global leader in sustainable beverages with ambitious decarboni- zation targets was reinforced, as we submitted our targets to be 100% carbon emission free in 2025 in scope 1 and 2, excluding logistics and biogenic emissions, and 50% reduc- tion in CO 2 emissions by 2030 for scope 1, 2 and 3 for valida- tion by the Science Based Target initiative (SBTi). All acquired sites are in scope. The geopolitical and supply challenges that Royal Unibrew faced in 2022 have only accelerated our deter- mination to transform from fossil-based energy sources to renewable energy. The roadmaps for energy efficiencies and CO 2 reductions are now in place in all markets. We reviewed our materiality assessment to make sure it is up-to- date and matches the views and concerns of our stakeholders. A couple of new issues were added and further emphasized: biodiversity/regenerative agriculture as well as ESG (Environ - mental, Social and Governance) risk management and mitigation. I n 2023, we will fully integrate the materiality assessment in our ERM (Enterprise Risk Management) framework to not only cover climate-related financial disclosures, as per TCFD (Task Force on Climate-Related Disclosures) but all ESG risks and opportunities. We initiated the establishment of processes and procedures to be ready for disclosure on the additional EU Taxonomy KPIs as well as the indicators of the CSRD (Corporate Sustainability Reporting Directive) that are getting into force in 2023. Royal Unibrew aims for limited assurance next year. Coordinated and wide-ranging efforts are needed in order to succeed with our ambitious sustainability strategy – and “I am really proud that we are getting more and more transparent on how we operationalize our aspiration of becoming a global leader in sustainable beverages, and how we deliver results together with our stakeholders. There are a lot of uncertainties ahead due to the geopolitical challenges and the resulting supply security issues as well as expected recession in many markets, but we firmly believe that we have the right foundation to abate risks and explore ESG opportunities.” Lars Jensen, President and CEO we cannot do it alone. We will innovate, develop and engage in partnerships with our key stakeholders, such as strategic suppliers, major customers, consumers, local communities and our employees for mutual benefit. In general, we are on-track to deliver on our short-term 2022/2025 targets as well as our long-term 2030 targets. Due to the geopolitical challenges in 2022, our initiative on packaging waste in the Americas, Africa and Asia is delayed. Corporate social responsibility Our long-term sustainability strategy ROYAL UNIBREW Annual Report 2022 64 96% 71% 10- 12% Not measured yet in all markets Overall KPIs Our consumers & customers No/low growing faster than average on the portfolio and faster than market (YoY) #1 partner of choice for customers as sustainable beverage supplier by 2030 40% of marketing budget allocated to brands/ campaigns with a sustainability position by 2025 Our products 100% carbon emission free by 2025 in scope 1 and 2 50% reduction in supply chain emissions (scope 1, 2, 3) by 2030 100% recycled, recyclable or reusable packaging by 2025 Our people 100% safety culture 80% of employees being Royal Unibrew ambassadors by 2030 100% sustainability culture by 2025 Disclaimer: The targets apply to our current footprint. It is our ambition that our acquisitions will be integrated, but a grace period may be required * without distribution and biogenic emissions Corporate social responsibility Overall KPIs ROYAL UNIBREW Annual Report 2022 65 Achievement highlights in 2022 We continued our sustainability journey with efforts to reduce our footprints and potential impacts for our consumers and customers, our products and our people while at the same time following up on our short-term targets for 2022/2025. Our 2022 targets were met on no/low, recycled content of packaging materials and decarbonization. Circular materials Royal Unibrew wants to provide choice for the consumers, but we are aware of the global challenges formulated by WHO regarding obesity as well as potential alcohol abuse. We take our responsibility very seriously, which is reflected in our product labelling, our marketing of products and not least in the way we develop new products. We want to offer products with great taste for every occasion including a balanced launch of regular, no and low products in different categories. Our marketing policies for promotion, adver- tising, and sponsorships are aligned with legal requirements and guidelines by the interna- tional trade associations. Between 2018 and 2022, the volume growth for no and low products significantly outper- formed regular products for both carbonated soft drinks (CSD), beer and cider/RTD. For our CSD, water and energy drinks portfolio, this is also reflected in a 2% general reduction in calory content per 100 ml across our markets during the same period. No and low sugar, calories and alcohol In 2022, we updated our materiality assessment and identified biodiver- sity and ESG risk management as new material topics. Water and responsible sourcing have become even more material. We succeeded in mapping out our entire scope 3 emissions, and we submitted our decarbonization targets for external verification by the Science Based Target initiative in 2022. Scope 3 accounts for 91.2% of our carbon emissions. The processes and procedures for the EU Taxonomy and management of climate related risks and opportunities were further elaborated during the year. Disclo- sure of eligibility of turnover, capital and operational expenditure has been initiated. Likewise, Royal Unibrew has prepared for new requirements on ESG disclosures in compliance with the Corporate Social Reporting Directive, i.e. we have expanded our ESG indicators and firmed up internal controls and processes to get ready for disclosure in 2023. Collective bargaining agreements continue to cover all eligible employees in Royal Unibrew. Our governance and responsibility We continue to invest in renewable energy and other more sustainable solutions. In 2022, major projects were approved such as boiler replacements in the Baltic countries transforming from fossil fuels to biobased fuels; implementation of heat pumps in Denmark that will reduce the heat consump- tion with 30% and CO 2 emissions by approx- imately 25%; and installation of solar panels in several markets. The technologies are all eligible under the EU Taxonomy. Two major investments will be inaugurated in 2023. One project concerning a solar park in Faxe, Denmark, delivering renewable energy to cover approximately 40% of the power consumption at Royal Unibrew’s largest production site nearby. The other project relates to converting all heat consumption from fossil fuels to 100% biobased fuels at our second largest production site in Lahti, Finland. We do so by establishing a biore- actor utilizing our spent grain supported with biogas from a nearby landfill. We have advanced plans at all our production sites, where we aim for at least 14% reduction in energy consumption compared to 2021 with a total reduction of at least 47% of our carbon emissions in 2025. Adding current RECs for electricity adds up to a total decarbonization of 71%. Decarbonization through investment in renewable energy Royal Unibrew has succeeded in lowering the carbon intensity of our production year-on-year. From 2015 to 2022, we have had a decrease of 42% kgCO 2 /hl while at the same time a volume increase of 20%. Our success is a combination of our keen focus on energy efficiency projects and change in product mix due to COVID-19 continuing into 2022. In this period, we made a shift from the more energy consuming brewing process to less energy consuming soft drinks production. Our temporary shift from natural gas to oil, to ensure supply security in Europe at some of our sites, had an impact on our carbon footprint in 2022. Royal Unibrew’s production facilities are not located in high or extremely high water stressed areas, except from a small facility in Estonia (0.1%). It is our ambition to produce with less impact on the surrounding environment; therefore, water preservation and quality is very important. 52% of our water is consumed in low and medium low water stressed areas. 100% of all wastewater is treated. Reducing water consumption remains a priority, and the consumption of water per hecto - liter has decreased by 9% from 2015 to 2022. W e define requirements for environmental and climate efficiency as well as goals for decarboni- zation for our suppliers. Efficiency improve- ment affected by supply security 96% of our packaging materials are now reus- able, recyclable or recycled. 64% of our PET bottles are made of recycled materials irrespective of size, design and brand. 100% of our by-product spend grain and yeast from production is utilized for food, feed or biogas. 88% of waste from production is being recycled. All our primary packaging contains information on material, recycling and deposit return, which is one of the ways we engage with consumers to close the loop. The effect can be measured by the return rates, where the average return is above 90% and increasing year-on-year. Corporate social responsibility Achievement highlights ROYAL UNIBREW Annual Report 2022 66 2018 2019 2020 2021 2022 Our sustainability journey Year-on-year improvements of eco-efficiencies (energy, water, packaging, waste per produced hl) Signing up to UN Global Compact Initiated implementation of our 2025/2030 sustainability strategy Materiality assessment reviewed Establishing the framework for our sustainability strategy and setting long-term targets (2030) and KPIs Establishing 2020-2022 targets aligned with the SDGs focusing on CO 2 , recycled packaging, no/low products and employee safety Joining and committing to SBTi (Science Based Target initiative) for Paris Agreement alignment Submitting targets for SBTi validation Implementation of a number of initiatives including renewable energy, use of recycled plastic, launch of no/ low products, continued local engagement and focus on employee safety Materiality assessment highlighting nine strategic focus areas for sustainability Calculating carbon footprint and overview of carbon emissions throughout the entire value chain Endorsing TCFD (Taskforce on Climate-Related Financial Disclosure) framework Final plans for roadmaps for energy efficiency and decarbonization toward 2025 Disclosing country- by-country tax and EU Taxonomy eligibility Before 2018 We are committed to conducting our business in a sustainable, responsible and ethical way. Royal Unibrew is a strong regional beverage company founded on locally anchored facilities, employees and sourcing of materials and services. We aim to provide successful, sustainable brands that people trust. Therefore, we have always been committed to contributing positively to the development in the areas in which we operate, to limit our environmental impact, to establish safe and good working conditions for our employees and to deliver high quality prod- ucts to our consumers. We realize that being regional, yet with global presence necessitate that we continuously work hard to improve our efforts and have a sustainability scope that encompasses the entire value chain across our markets. Our sustainability approach is underpinned by Royal Unibrew’s purpose and strategy, our continued commitment to support the principles of the UN Global Compact (UNGC), the UN Sustainable Development Goals (SDGs) as well as our endorsement of the TCFD recommendations with balanced disclosure of climate risks and climate opportunities. A strong company culture is crucial for our ongoing progress – a culture in which decisions are made with respect to our consumers', customers’, suppliers’ and other key stakeholders’ views and priorities, and a culture that encourages people to take responsibility for their own actions. We believe that this approach constitutes a strong foundation to integrate sustainability deeper into our organization and to realize our ambitious targets. During 2022, we continued to work on implementation plans and activities for each strategic pillar in all markets to ensure that Royal Unibrew is progressing and delivers results on both our short-term and long-term targets. We mapped and assessed our entire scope 3 contribution and submitted our decarbonization targets for approval by the Science Based Target initiative (SBTi). This also entailed a finetuning of some of our sub-targets as a result of our acquisitions. We are confident that our targets will be approved. Furthermore, Royal Unibrew has integrated the five acquisi- tions completed in 2021, and the integration of the acquired companies in 2022 is well under way. The new companies, their business models and competencies encourage us to reconsider some of our programs and approaches, such as our responsible sourcing and supplier management proce- dures, as they challenge a number of our KPIs. Managing sustainability Corporate social responsibility Managing sustainability ROYAL UNIBREW Annual Report 2022 67 Our policies and systems Royal Unibrew is working in accordance with international and national legislation as well as international guidelines, conventions, and standards for corporate social responsibility (CSR/ESG) and sustainability. Our policies and systems ensure compliance. The implementation of processes and proce- dures to disclose in accordance with the six objectives of the EU Taxonomy (classification of environmentally sustainable economic activities), KPIs and assessment of eligibility and alignment were in focus in 2022 and will continue to be so in 2023. Furthermore, getting ready for the tran- sition from soft law to hard law on ESG reporting, as required by the Corporate Social Reporting Directive, was initiated in 2022. We do believe that common disclo- sure standards will serve well for maximum transparency toward our stakeholders just as the existing standards including GRI, the UN Guiding Principles and OECD guidelines have provided historically. Although Royal Unibrew has been disclosing ESG perfor- mance KPIs for many years, the extensive Policies and systems Policy Systems, procedures and guidelines Our consumers & customers Group level: • Business Ethics Policy • Data Ethics Policy • Tax Policy ISO 9001 (8 sites) Global Food Safety (GFSI) recognized standards (13 sites) Tax compliance and transfer pricing documentation Our products Group level: • Business Ethics Policy • Environment & Climate policy • Supplier Code of Conduct ISO 14001 (5 sites) Energy assessment at all production sites Supplier management processes and procedures Disclosures: CDP Our people Group level: • Business Ethics • Remuneration policy • Diversity & Inclusion Policy • Data ethics Policy • Tax Policy Ethical guidelines ISO 45001 (3 sites) OHS Management Systems Employee engagement survey Employee master data Tax compliance and transfer pricing documentation Mandatory training: GDPR, competition, marketing law, etc. and not always business relevant disclosure and documentation requirements trigger a need for substantial headcount increase to provide data and documentation. We are monitoring other upcoming EU legislation closely such as the proposed corporate sustainable due diligence, packaging and packaging waste, climate labeling etc. In 2022, we continued codification of several of our internal guidelines and proce- dures, and the Board of Directors adopted our Tax Policy. Furthermore, we simplified requirements for our suppliers on the basis of our Business Ethics Policy. We have sharp- ened the requirements on CO 2 reduction and renewable energy targets for all categories, and we have made specific requirements for agricultural raw materials such as biodiver- sity, consumption of water and use of pesti- cides. Additionally, we have made circularity the core for packaging material. Corporate social responsibility Our policies and systems ROYAL UNIBREW Annual Report 2022 68 Our Data Ethics Policy adopted by the Board of Directors specifies requirements for topics such as legality, ethical design, security, transparency and respect for human rights. → For further information see Data Ethics Statement 2022 The majority of our production sites are operating in accordance with internation- ally recognized quality standards and have food safety certification in accordance with standards recognized by GFSI (Global Food Safety Initiative). In addition, we have a systematic approach to environment, health and safety where several production sites are certified. Royal Unibrew’s policies and our Supplier Code of Conduct provide guidance for our employees, third parties acting on behalf of the company and suppliers regarding anti-corruption, environment, human rights and labor standards, including occupational health and safety but also quality and food safety, GDPR (General Data Protection Regu- lation), competition, responsible marketing and responsible products. The basic require- ment for Royal Unibrew is being in legal compliance, i.e., having the right mechanisms, systems and programs to ensure that we have no violations. Internal controls and the whistle-blower scheme are important means for controlling and reporting potential irregularities also by external stakeholders. Regular training is among our tools to ensure compliance inter- nally; thus, employees are trained in relevant aspects depending on their functions inside and outside of Royal Unibrew. Corporate social responsibility ROYAL UNIBREW Annual Report 2022 69 Our governance structure Our sustainability activities are anchored at the Board of Directors that has the oversight of our strategy, targets, risks, opportunities and group policies together with the Executive Management. Our targets are implemented through the Growth Leadership Team, consisting of SVPs and VPs from our main markets and group functions, including Group Director CSR. To ensure focus on sustainability, the Group CSR Director reports directly to the CEO. Thereby, sustainability/ESG adheres to the very same principles as other business critical decisions (see page 43). Signing up to the UN Global Compact in 2019 was the starting point for further formalization of our sustainability efforts followed by endorsement of TCFD and submission of our emissions reduction targets for SBTi approval, including further improvement of transparency in our sustainability policies, systems and due diligence processes. We aim to continuously improve these fundamentals. Establishing clear accounting policies for sustainability data and thus establishing a basis for transparency and external assurance has been an integral part of this process. Group CSR and Finance are responsible for measuring our results, including good practice guidelines for risks and controls. Based on the accounting policies, a control framework is established to ensure consistent quality in our reports and documentation. The ESG data governance responsibility lies at the Audit Committee, whereas the Board of Directors over- sees all sustainability aspects. We have implemented policies and procedures to minimize risks from our activities and to ensure our freedom to operate. Compliance with legal and other requirements, including our Business Ethics Policy, is fundamental. Materiality We engage with our stakeholders in a regular dialog to understand their needs and concerns by means of various approaches and tools. Our key stakeholders are defined in our purpose and strategy of being the PREFERRED CHOICE for our consumers, customers, shareholders, employees and the future. In addition, our business partners, suppliers, legislators, local communities and NGOs are among our stakeholders. We strive to work with a balanced approach toward our stakeholders by disclosing potential risks to our business and how we control these as well as by expressing the oppor- tunities for Royal Unibrew: commercially as a sustainable beverage company and locally as a sustainable partner and not least as a preferred workplace. Corporate social responsibility Our governance structure ROYAL UNIBREW Annual Report 2022 70 During 2022, Royal Unibrew conducted a thorough materi- ality assessment to determine if our strategy still addresses relevant ESG issues. We identified global trends, standards and benchmarks, and we engaged with stakeholders to understand their views. In addition, we analysed and defined material topics. The materiality assessment was reviewed and validated by the Growth Leadership Team and hereafter reviewed and approved by the Board of Directors. One of the outcomes of the process is to integrate the mate- riality assessment in the Enterprise Risk Management (ERM) framework to ensure that the wider ESG issues are inte- grated in the financial risk and opportunity management and evaluation. We will implement this change in 2023. We found that biodiversity, sustainable farming and deforestation are becoming even more material for the beverage sector. There- fore, Royal Unibrew aims to formulate targets and commence initiatives for regenerative agriculture in 2023. 1 15 16 17 19 20 21 22 23 18 2 5 6 7 8 9 10 11 12 1314 3 4 Importance for stakeholders, incl. society 1 2 3 4 5 Impact on Royal Unibrew and surroundings 1 5 High 4 3 2 Social Social/environmental Environmental Consumer Other 1 Diversity, Equity and Inclusion 2 Occupational Health & Safety 3 Employee attraction & retention 4 Human rights in business 5 Responsible procurement, incl. due diligence 6 Local sourcing 7 Dangerous substance 8 Sustainable farming, incl. deforestation & land-use change 9 Biodiversity 10 Climate & energy 11 Packaging materials 12 Transportation & logistics 13 Circularity, resources and waste 14 Water stewardship (in/out) 15 Local community (incl. impact economic/ investments, social & cultural) 16 Partnerships 17 Responsible communication/information (labeling & marketing) 18 Consumer health & wellbeing, incl. product safety & responsible drinking 19 Business integrity, incl. code of conduct 20 Economic impact & tax 21 Governance 22 Data security/privacy & cyber security 23 Risk management & mitigation High Corporate social responsibility ROYAL UNIBREW Annual Report 2022 71 Country-by- country key figures - IFRS, 2022 Number of employees average Tot a l employee remuneration DKKm Revenues from third party sales DKKm Revenues from intragroup transactions with other tax jurisdictions, DKKm Balance of intercompany debt DKKm Profit/loss before tax DKKm Tangible assets other than cash DKKm Corporate income tax paid on a cash basis, DKKm Calculated local tax on profit (loss) DKKm Denmark 1,249 722 3,980 737 7 983 1,695 144 165 Finland 749 362 2,958 98 1 676 1,240 142 134 Norway 166 219 1,495 - 1,390 79 800 7 -10 Italy 185 109 1,042 428 462 29 315 3 12 France 133 80 343 104 671 20 171 - -15 Latvia 372 68 389 145 0 25 154 0 7 Lithuania 342 64 480 126 54 -6 205 2 0 Estonia 33 8 76 0 59 -12 24 - - Others 136 92 724 0 247 -9 289 6 1 3,365 1,724 11,487 1,638 2,891 1,785 4,893 304 294 * Includes Canada, Sweden, UK and US * Includes Canada, Sweden, UK and US Borne by the Company Country-by-country key figures - IFRS, 2022 Excise duties DKKm VAT DKKm Personal taxes & social security contributions DKKm Corporate taxes DKKm Tot a l DKKm Denmark 250 675 266 144 1,335 Finland 2,105 739 82 142 3,069 Norway 1,093 618 50 7 1,768 Italy 182 203 45 3 432 France 4 - - - 4 Latvia 107 73 26 0 207 Lithuania 158 65 - 2 225 Estonia 0 16 3 - 19 Others 154 121 24 6 304 4,053 2,510 496 304 7,363 Collected by the company Creating jobs and delivering prosperity in the communities in which Royal Unibrew operates are our tangible contributions to society. Providing transparent disclosures also for tax is anchored in our business integrity. Royal Unibrew operates in a number of predominately European countries and is therefore subject to both national and international tax rules. Royal Unibrew follows the OECD principles for transfer pricing disclosures and documentation and use external advisors to prepare the documentation. We always enter an open and constructive dialog with the tax authorities, and we are pleased to report that we were not involved in any instances of non-compliance with tax legisla- tion in 2022. In 2022, Royal Unibrew paid DKK 7.4 billion (2021: DKK 5.4 billion) in taxes, excise duties and VAT. Excise duties, VAT and some taxes are collected on behalf of the tax authorities in countries where we operate. Total tax contribution (country-by-country) Royal Unibrew seeks to comply with all tax legislation to its business operations, and we have prepared the country-by- country tax disclosure based on the GRI 207 tax guideline. Tax Corporate social responsibility ROYAL UNIBREW Annual Report 2022 72 KPI 2030 #1 Partner of choice for customers as sustainable beverage supplier We want to be the preferred partner for our customers with a broad portfolio of tasty products for any occasion and the most relevant innovations for our consumers. We aim to: • S upport consumers in making healthy, nutritious and sustainable choices • Become circular by engaging consumers and customers • B e actively involved in the local communities where we are present • Encourage responsible drinking Health & nutrition In the market circularity Local engagement Our consumers & customers Key areas Corporate social responsibility Our consumers & customers 73ROYAL UNIBREW Annual Report 2022 Health & nutrition We believe in consumer choice. We want to help consumers make healthier or nutritious choices by always providing an alternative to regular beverages (i.e., sugary drinks, alcoholic drinks, etc.). Moreover, we want to provide transparency for the consumer when choosing beverages. Royal Unibrew is aware of the global challenges formulated by WHO regarding overweight, obesity and the associated risks of cardiovascular diseases, cancer and diabetes as well as risk of alcohol abuse that are linked to excess consumption of food and beverages. We are not only aware of these global challenges, but we also work to reduce the challenges. We strive to offer our consumers and customers sustainable enjoyment through a broad variety of beverages, comple- menting the occasion whether the individuals find themselves at a music venue, dining with family and friends, exercising, traveling or at other occasions. Therefore, we develop, launch and supply a broad portfolio of products from regular alcohol and calorie content to no/low alcohol, sugar and calorie content to provide choice and, of course, clearly declared to provide transparency. Our aim is to offer a no/low alter- native in all categories and in all our markets to enable our customers to offer healthier choices to the consumers. Royal Unibrew also wants to lead the development of healthy and nutritious products not only by offering new products and outperforming market growth but also by investing in more information and communication about the products. During recent years, Royal Unibrew has introduced more no/ low sugar alternatives compared to regular products, e.g., in the soft drink and water categories as well as the energy drinks category. The volume of no sugar products increased by 8% from 2018 to 2022, while regular products increased by 6% in the same period, which indicates that our short-term 2022 target (a balanced launch of regular vs no and low) as well as our 2030 target (no/low growing faster than average of the portfolio) are working. In addition, the calorie content of the portfolio was reduced by 2% per 100 ml during the same period. The launch of 0.0% and low alcohol containing products (beer, cider and RTD) increased in 2022. The no/low alcoholic segment increased by 26% from 2018 to 2022 compared to a total of 1.6% decrease for regular and strong alcohol containing products in the same period, which indicates that our 2022 target of increasing the number of beverages with 0.0% and low alcohol as well as our 2030 target of no/low volumes growing faster than average of the portfolio will be met. Together with the acquisition of Solera Beverage Group, the acquisition of Hansa Borg Bryggerier has brought volume to our portfolio of wine and spirits. Both categories are still relatively immature compared to the no/low alcohol cate- gory; nevertheless, we will apply our strategy to grow these categories. Key initiatives • Offer no/low alternatives in all categories • R educe sugar/kcal/alcohol per serving • Promote responsible drinking We continued our non-bar concept at several venues where we served non-alcoholic beers for lunch. In addition, we launched an initiative together with Madbillet called “FrokostFesten” where consumers get a ticket to a lunch meal accompanied by a non-alcoholic beer. This initiative demonstrates that non- alcoholic beers are more than an alternative to regular beers but also an active choice for both foodies, beer connoisseurs, business people and locals. Corporate social responsibility Health & nutrition ROYAL UNIBREW Annual Report 2022 74 Royal Unibrew holds a strong position within the zero-calorie, zero-sugar segment for carbonated soft drinks. To maintain and nurture our solid position in this category, we engage with consumers in several ways. For example, our iconic Danish brand Faxe Kondi realized a flavor competition, “Can of the Match”, with only zero sugar beverages included in the competition. Because of the acquisitions of Solera Beverage Group and Hansa Borg Bryggerier the net revenue split between non-alcoholic and alcoholic beverages has shifted to 48% of net revenue coming from non-alcoholic beverages and the remaining 52% from alcoholic beverages. Measurements for Royal Unibrew’s goal to be THE PREFERRED CHOICE for sustainability have not yet been finalized. However, the findings of an analysis conducted by Kantar Gallup in both Latvia and Lithuania, which encompass 101 brands/companies, show that Royal Unibrew has been assessed as the most sustainable company in these geogra- phies. In Denmark, Royal Unibrew was ranked #11 in a similar survey carried out by Gradient. Our goal of allocating 40% of our marketing budget to sustainability (no/low, organic, responsible, environment, etc.) shows a positive trend, as we spend more than 40% of our marketing spend on sustaina- bility in 2022. Royal Unibrew received five notifications regarding violation of labeling requirements in 2022. Due to our diligent manage- ment of product safety, including staying on top of food alerts, we only experienced eight withdrawals in total (microbiology) and three recalls (microbiology) in 2022. All beverages were recalled. Responsible drinking Our commitments to responsible marketing and products are unambiguous, and it is our responsibility to prioritize quality over quantity for products containing alcohol. Royal Unibrew had no incidents of non-compliance with marketing codes or regulations related to either advertising or promotion, including advertising to youth and other suscep- tible consumers in any of our markets. We support a large variety of sports and health initiatives, such as ice hockey and basketball, through our 0.0% alcohol brands and water brands in both regional and local spon- sorships. Promotion of responsible drinking is an integrated part of our strategy and, therefore, integrated in national campaigns of 0.0% brands as well as initiatives in association with our trade associations. We conducted several initiatives to support responsible drinking during 2022. In the Baltic countries, we promoted responsible drinking in On-Trade via new beer coasters with warning signs “Don‘t drink and drive” and bar displays stating “If you drive, choose non-alcoholic beer”. In Denmark, we continued our non-bar concept at several venues where we served non-alcoholic beers for lunch. We launched an initiative together with Madbillet called “FrokostFesten” where consumers get a ticket to a lunch meal accompanied by a non-alcoholic beer. This initiative demonstrates that non-al- coholic beers are more than an alternative to regular beers but also an active choice for both foodies, beer connoisseurs, business people and locals. Corporate social responsibility ROYAL UNIBREW Annual Report 2022 75 In the market circularity We want to become circular across the value chain by engaging consumers and customers. We will close the loop on packaging materials, reduce the strain on resources and lower our footprint. Today, all Royal Unibrew’s primary packaging materials include information on either deposit return or labels on recycling. Some of the secondary packaging contain this information as well. It is our objective to expand the product information not only to include information on packaging materials but also to include information on sustainability from the entire value chain no later than 2030. However, information is not enough in itself to reduce our footprint from packaging materials. As for the well-functioning deposit return systems (DRS), there are generally very high return rates, e.g., +90% in Denmark, Finland, Norway, and Lithu- ania. Today, the remaining <10% is collected through the general waste infrastructure. Therefore, we will step up on engaging consumers in closing the loop, enabling food grade material for recycling. Recycling campaigns are currently run together with the deposit return systems in the aforementioned markets, and it is our plan to conduct campaigns on waste reduction and circularity in large markets by 2025 to increase consumer awareness on recycling. This also applies to our customers where awareness and handling of secondary packaging, espe- cially in export markets, must be improved. In 2022, we implemented several initiatives. An example is application of our guidelines on point of sale materials (POS) in the Baltic countries. In line with our policies, we have estab- lished specific requirements regarding materials, ethics and engagement. The latter is related to using POS as an agent for nudging consumers to make sustainable choices as for waste sorting, responsible drinking, reuse of cups, etc. In addition, Royal Unibrew has increased the use of reusable (washable) cups in Denmark reaching a penetration of approximately 8% in 2022, substituting single use cups at various events. In Norway, we introduced r-PET cups in collaboration with other breweries. The r-PET cups were collected by the DRS at festi- vals and other festive events during the year. These initiatives alone reduce virgin plastics by 20 tons. We will continue our efforts in 2023. Key initiatives • Reduce food waste • E ngage consumers in closing the loop on packaging materials • D evelop infrastructure In Norway, we introduced r-PET cups together with other breweries. The r-PET cups were collected by the DRS at festivals and other festive events during the year. Corporate social responsibility In the market circularity ROYAL UNIBREW Annual Report 2022 76 Local engagement Local engagement is deeply rooted in Royal Unibrew’s DNA. We want to be present in the local communities with our local brands and products and actively engage with our consumers and customers through our support of local activities. As a strong regional multi-beverage company, it is in our D NA to engage not only in the local societies surrounding our premises, sports clubs, employees’ families, but also in our brand communities in collaboration with our customers, other business partners and NGOs. We strive to provide successful brands that people trust. Therefore, we have always been committed to contributing positively wherever we operate and are connected. We believe that it is our responsibility as a global company to drive, develop and support sustainability efforts through relevant touch points. Sourcing of local ingredients and development of local products are examples of our local engagement. Royal Unibrew has several ongoing engagements with local sports clubs, local music scenes, city festivals, etc. We want to make these interactions sustainable. This also applies for music festivals and large sports events where we participate. The initiatives encompass an introduction of organic beverages (beers, soft drinks and ciders/RTDs) and sponsorships with 0.0% beer and supporting preservation of freshwater in Finland and Latvia. In Latvia, we cooperate with WWF (World Wildlife Fund) on physical remediation of rivers and education of the society at large. In addition, we foster excellence in West Africa by providing children the right to education through spon - sorship, and we encourage music lessons for underprivileged c hildren as well as training of young music entrepreneurs in France and support for rock talents in Denmark. We view these activities as a way to give back to society. Our goal is that at least 50% of our engagements include sustainability elements by 2030, and for large events we are even more ambitious with 70% already in 2025. Key initiatives • Drive sustainability in local communities, organizations, and NGOs • Empower local players • D evelop local products Amsterdam Brewery Co. Ltd. in Toronto, Canada, is a proud partner of Bikes Without Borders. Bikes Without Borders provides bicycles and bike-related solutions to empower individuals in marginalized communities through mobility. The target group is refugees and other low-income families in the Toronto area as well as impoverished people in the Third World. Amsterdam Brewery has a full functional bicycle workshop at the brewery to facilitate the work of Bikes Without Borders. Supporting local businesses in general is another important undertaking for Royal Unibrew. In 2022, we continued to engage in activating consumers using our platforms and chan- nels together with various customers. For example, the Ceres B ar Supporter in Italy as well as virtual as well as physical beer tasting events supporting local microbreweries in Denmark. Local sourcing is an additional element. In France and Italy, we celebrated the craftmanship of the producers, especially the young farmers, of the high-quality citrus fruits from Corsica and Sicily sourced for our products. Royal Unibrew ceased all business activities in Russia imme - diately after the invasion of Ukraine on February 24, 2022. In a ll our markets, we stepped up on support to Ukraine either directly by donations of beverages or funds or indirectly by job offerings and provision of physical premises for training of Ukrainian refugees. Corporate social responsibility Local engagement ROYAL UNIBREW Annual Report 2022 77 Principles for reducing CO 2 emission from production are: 1 2 3 4 Reduce energy consumption/increase energy efficiency Invest in transformation of thermal energy to electrical energy Actively invest in or push for additionally renewable energy in the grid Either source renewable energy power or biogas or buy accredited certificates (short- to medium-term) KPI 2030 50% Reduction in supply chain emissions (scope 1,2,3) compared to 2019 We want to be THE PREFERRED CHOICE for the future, and it is our ambition to be one of the most sustainable beverage companies globally. We will convert our energy consumption to renewable energy in the entire value chain, and we will work with our partners on reducing CO 2 emissions and reducing use of resources by enhancing a circular mindset. All this while contributing to society. By the end of 2022, we submitted our emissions reduction targets to the Science Based Target initiative (SBTi) for official validation, which emphasize that we are committed not only to decarbonize in line with the goals of the Paris Agreement, but also to deliver transparent and verified data on our progress. We will reach our targets by: • Increasing use of renewable energy • I mplementing circularity • Engaging with our entire value chain Renewable energy sources Product circularity Supplier roadmap Our products Key areas Corporate social responsibility Our products ROYAL UNIBREW Annual Report 2022 78 Renewable energy sources We will increase our renewable energy use toward 2030 starting from our own production and gradually increase demands on suppliers. Royal Unibrew has set ambitious targets for the reduction of carbon emissions. With regard to our own production (scope 1 and 2), we aim at being carbon emission free in 2025, and for the entire supply chain (scope 1, 2 and 3) we want to reduce our footprint by at least 50% in 2030. We have decided on several initiatives to achieve these ambitious targets, but we also acknowledge that implementation of new, not yet available, technologies are crucial to succeed. An important activity in 2022 has been to map our CO 2 emis- sions for the entire scope 3. Moreover, to submit our scope 1, 2 and 3 targets for verification by SBTi. Our current target of 50% reduction in CO 2 emission for scope 1, 2 and 3 have been supplemented with a target for scope 3 alone – with a 50% reduction in absolute emissions in 2030 compared to 2019. The target encompasses more than 85% of our scope 3 emis- sions. With the new scope 3 target, we are stepping further up on our decarbonization ambitions. For scope 1 and 2, our current target is 100% reduction in 2025 excluding logistics and biogenic emissions. We have added a sub-target fully aligned with the SBTi requirements, which includes our own logistics and eventually biogenic emissions, of 60% absolute reduction in 2030 compared to 2019. With these additional targets, we are on the 1.5°C trajectory for scope 1, 2 and 3. As a beverage company, we are dependent on agricultural raw materials; therefore, we are still working on our FLAG science- based targets (Forest, Land and Agriculture) and net-zero targets. The former will be submitted in 2023. Royal Unibrew’s principles for decarbonization are unchanged. Drivers are efficiency improvements, transition from fossil fuels to renewable energy or adding renewables to the grid. Royal Unibrew has further developed a road map for decar- bonization and established a firm road map for energy effi- Key initiatives • Transform and electrify production • D emand renewable energy in the supply chain • O ptimize energy and water consumption • Submitting targets for verification by the Science Based Target initiative 19% RAW MATERIALS 67 mkg 10% BREWERIES 38 mkg 13% DISTRIBUTION 48 mkg 7% REFRIGERATION 24 mkg 45% PACKAGING 161 mkg 6% MALT I NG 22 mkg Emissions throughout the life cycle Proportion of greenhouse gas emissions in each stage of the life cycle of our products. Corporate social responsibility Renewable energy sources ROYAL UNIBREW Annual Report 2022 79 ciencies. We now have a catalog of best practices, feasibility studies and a range of approved capex projects to support the transition. This ambition encompasses full integration of our latest acquisitions and expansion of our partnerships. Despite the geopolitical challenges and the associated supply chain challenges, our sustainability journey continues. Our transition towards a fossil free future continues relentlessly with more efficiency projects at our sites and bio-based or electrical heat production. Moreover, we continue our focus on more renewable power through own installations or PPA in combination with certificates. Due to supply security, we did, however, temporarily switch from natural gas to oil at our site in Faxe, Denmark, Kalnapilis, Lithuania, and Bergen, Norway. Today, 23% of Royal Unibrew’s CO 2 footprint from scope 1 and 2, excl. logistics, is renewable energy covered by RECs (Renewable Energy Certificates). We will gradually phase out RECs and replace with either our own renewable energy projects or PPAs (Power Purchase Agreements). Projects reducing approximately 71% of our carbon footprint (26.5 million kgCO 2 ) from our production are progressing or planned for the period of 2022 to 2024. We have projects running at our largest productions sites. In Faxe, Denmark, a solar park delivers renewable energy corresponding to approximately 40% of the power consumption at our produc- tion facility in Faxe. At our Lahti site in Finland, we are trans- forming our fossil-based thermal energy to 100% bio-based energy utilizing our spent grain from production and biogas from a nearby landfill. The biogas plant and solar park will be inaugurated in Q1 2023. We will also install heat pumps in Faxe, reducing the thermal energy consumption by more than 30%, as well as photovoltaics in the Baltic countries and Italy. Furthermore, projects to transition from fossil-based to bio-based fuel, from thermal energy to electrical, and installa- tion of solar panels fully implemented by 2024 are planned in at all markets. In addition, we continue the purchase of RECs (Renewable Energy Certificates), but we still need to identify options to reduce the remaining 29% of our carbon footprint from our production that primarily derives from fossil-based thermal energy. CO 2 footprint for packaging materials (excluding end-of-life) and distribution (outbound) increased from 2021 to 2022. 13% organically for packaging material due to temporary stock building and on distribution by 7% organically primarily due to increased sales. The carbon footprint for our production was reduced by 42% (organic), measured as kg CO 2 per produced volume, from the base year 2015 to 2022. We more than achieved our short- term target of 30% reduction in 2022 compared to 2015. Between 2021 and 2022, the kg CO 2 per produced volume increased with 6.5%. Thus, the efficiency of our production was reduced mainly due to the temporary switch from natural gas to oil in Denmark with poorer efficiency and larger CO 2 footprint. Reducing CO 2 from logistics Transportation is an area where sustainable technologies, especially for heavy duty transportation, are still rather imma- ture. CO 2 from production kg CO 2 /hl Total energy consumption kWh/hl Total water consumption hl/hl 33 35 37 39 41 0.0 0.9 1.8 2.7 3.6 4.5 2018 2021 202220202019 2018 2021 202220202019 0 100 200 300 17.5 18.5 19.5 20.5 21.5 31.0 32.4 33.8 35.2 36.6 38.0 2.90 2.97 3.04 3.11 3.18 3.25 2018 2021 202220202019 CO 2 from production (mkg) (kg CO 2 /hl) Energy consumption (mkWh) (kWh/hl) Water consumption (mhl) (hl/hl) Corporate social responsibility ROYAL UNIBREW Annual Report 2022 80 The acquisition of Amsterdam Brewery Co. Ltd. in Canada supports a significant reduction of our CO 2 footprint, as we reduce the transportation needs for products sold in North America. The project’s potential corresponds to a 8% CO 2 reduction. We are working on implementing more local license productions to reduce our footprint further. We are conducting several projects to optimize distribution both within our own fleet as well as with our forwarders. This includes combining optimal locations for distribution hubs with proximity to alternative transportation lanes. In Finland, we have tested both electric and biogas trucks in the secondary distribution, and the results are very promising. In Norway, malt is transported by rail, and approximately 50% of wine from Italy is by rail transport as well. Wine is increasingly transported by sea. The majority of our forklifts, stablers, etc., are powered by renewables today. We have installed charging stations at our sites and privately at our employees' homes to support their choice of electrical vehicles (EV) or hybrid cars. Approximately 18% of our company cars are currently EV or hybrid. Water remains a priority Water is our most important raw material; therefore, water preservation and water quality are key to us. Our waste- water is treated before emission to meet the requirements. Reducing water consumption remains a priority, and our consumption of water per hl has remained unchanged from 2021 to 2022. The water intensity from 2015 to 2022 has been reduced 9%, organically. Royal Unibrew’s production facilities are not located in extremely high water stressed areas except from one small site in Estonia. Withdrawal of water in low and medium low water stressed areas constitutes approximately 52% of the total water consumption. We only use municipal or own well water at our sites. We have several projects aiming at preserving freshwater ecosystems. One is at the Lake Vesijärvi close to our brewery in Lahti. Another project is in Latvia, where Royal Unibrew together with WWF educate society at large and work on river restoration projects, which includes removal of dams to restore the flow and protect the ecosystem of the rivers, which also benefits biodiversity. Biogas facility at Hartwall OY in Finland Corporate social responsibility ROYAL UNIBREW Annual Report 2022 81 Investing in and maintaining sustainable economic activities in line with the six environmental objectives of the EU Taxonomy are at the core of our strategy The EU Taxonomy is an EU classification system for environ- mentally sustainable economic activities. It aims to help the EU scale up sustainable investments by requiring compa- nies to report the share of their revenue, capital and opera- tional expenditure allocated to environmentally sustainable economic activities. The taxonomy also presents an oppor- tunity for Royal Unibrew to disclose our revenue and invest- ments generally accepted as sustainable. The taxonomy regulation establishes a common classification system for environmentally sustainable economic activities covering six environmental objectives: climate change miti- gation; climate change adaptation; the sustainable use and protection of water and marine resources; the transition to a circular economy; pollution prevention and control and the protection and restoration of biodiversity and ecosystems. To date, reporting has targeted the first two environmental objectives. Pending finalization of the Environmental Dele- gated Acts for the remaining four. The taxonomy stipulates mandatory reporting requirements to identify business activi- ties ”in scope”, i.e., eligible activities and assessing whether the activities are aligned with the associated technical screening criteria. In 2022, Royal Unibrew further developed and executed our EU Taxonomy process and procedure, screening the technical annex of the climate change adaptation and mitigation to identify activities of our operations that fall under the scope of the legislation regardless of size. First step is to establish eligibility and second step is to assess alignment with the criteria if eligible. The EU Taxonomy is a framework that evolves over time, and with the technical screening criteria of the second delegated act still to be applied, we expect that both our taxonomy eligibility and alignment will increase in the future. We will reassess the KPIs on an annual basis. Turnover Our screening shows that our main revenue generating activities are not currently covered in the EU Taxonomy under the Delegated Act 2021/2139. Nonetheless, the future energy production, e.g., generated from our solar park in Faxe from 2023 is explicitly covered in the criteria and will be included in our 2023 disclosures, if material (see page 98). The turnover KPI covers net turnover derived from products or services, including intangibles, associated with taxonomy eligible business activities. Capital expenditure Our screening shows that 1.7% of our capital expenditure is eligible under the Delegated Act 2021/2139. If the acquisi- tions were excluded in the calculation of capex, the result would be 5.7%. The eligible activities are energy production, water treatment and elements of transportation. EU Taxonomy Royal Unibrew is still in the process of establishing all the required alignment documentation together with our suppliers, service providers and contractors. Presently, we disclose eligible capex. We strive to close the gap and document alignment further in 2023. Capital expenditures cover expenditures on purchases of products from taxono- my-aligned suppliers. Operational expenditure Our screening shows that 5.8% of our operational expenditure is eligible under the Delegated Act 2021/2139. The eligible activities are associated with energy production, water treat- ment and elements of transportation. Operational expenditure covers the proportion of operating expenditure related to assets or processes associated with economic activities that qualify as environmentally sustain- able. Eligibility 2022 0.0% of revenue 1.7% of capex 5.8% of Opex Alignment 2022 0.0% of revenue 0.0% of capex 0.0% of Opex See page 98 for further details Corporate social responsibility Tax and EU Taxonomy ROYAL UNIBREW Annual Report 2022 82 Product circularity We want to become circular across the value chain by engaging with our suppliers. We will close the loop on packaging materials, reduce the strain on resources and reduce our footprint. In the beverage industry, product circularity depends to a high degree on closing the loop on packaging materials (primary, secondary and tertiary) but also to ensure loss and waste reduction in general. The elements are to remove, reduce, reuse and recycle materials. Avoiding downcycling of food-grade packaging material such as r-PET for non-food applications is another element. The food safety requirements for primary packaging materials (e.g., glass bottles, PET bottles and cans) are stringent, as it is vital that we protect our products. The entire packaging system, including bottles, crates, trays and wraps, ensures there is no harm to our products during distribution. There- fore, packaging is also key for product protection and avoid- ance of food waste. Royal Unibrew is applying all the circular principles for our packaging materials. We are on track for our overall goal of 100% reusable, recyclable, or recycled materials in 2025. However, we are slowing down the conversion rate due to technical challenges and limited availability of certain mate- rials at a reasonable cost. This effect will be more pronounced in 2023. In principle, we use only mono materials today. Mono materials can easily be separated, sorted and recy- cled in clean fractions, such as glass, PET, carton, aluminum, etc. However, our juice portfolio and bag-in-box concept for soft drinks and wine, contributing approximately 4% of sales volume in 2022, are currently provided in more complex laminated materials. While the recyclability of these materials may be improved in the next couple of years, we will also be looking at alternatives. We continuously cooperate with our suppliers on reducing the weight of materials balancing food safety, transportation stability and environmental requirements. Over a 10–12-year period, reductions in PET, aluminum and recently cardboard material, represent a reduction of 8,600-ton CO 2 per year. In 2022, we did not drive major downgauging initiatives. Key initiatives • Eliminate unnecessary packaging (incl. plastics) • Source recycled packaging materials • R educe food and packaging material loss and waste Reducing food loss Cooperation with customers and Too Good to Go in Denmark and Norway reduced beverage loss of more than 200,000 bottles in 2022, and the initiatives continue in 2023. Target % recycled material Realized 2021 Realized 2022 Tar get 2022 Tar get 2025 r- Corrugated cardboard 84 98 >90 100 r- Paper labels 77 92 >90 100 r- Shrink film 32 68 100 r-PET 48 64 >30 100 Corporate social responsibility Product circularity ROYAL UNIBREW Annual Report 2022 83 2018 2021 20 2220202019 0 2 4 6 8 10 12 14 60 65 70 75 80 85 90 Waste generation Total waste (mkg) % Recycled waste Total waste % recycled waste We take our producer responsibility very seriously. Our sector has been characterized by the operation of reusable or recy- clable packaging systems also historically; therefore, we have a firm foundation for new requirements on packaging and packaging waste in the EU. We will continue our support to DRS in our largest markets to increase the return rate further. In addtion, we will look for solutions to avoid packaging waste in other markets with more immature systems. We continue to challenge our packaging systems for markets where waste infrastructures or deposit return systems are poor or non-ex- isting. Circularity is also applied to loss and waste in our produc- tion and downstream in sales. Today, 88% of our waste from production is recycled. By-product from the brewing process is utilized 100% as food, feed or biogas. Losses at our production sites are at a more or less constant level but influenced by changes in product mix at the individual facility. On average, more than 90% of the packaging materials are collected in our markets with deposit return systems. Thus, our industry is characterized by a rooted circular mindset. In 2023, we will step up on data disclosure. Corporate social responsibility ROYAL UNIBREW Annual Report 2022 84 Supplier road map We engage with our entire value chain to reduce carbon emissions and minimize negative environmental and social impact. A large share of our footprint (environmental and social) is outside our own direct control. Therefore, we engage and cooperate with our supply chain to reduce the footprint and, moreover, to increase supply chain transparency. More than 90% of our CO 2 footprint is in scope 3 where purchased goods, such as agricultural based raw materials and pack- aging materials, account for 62%. Our target is a 50% reduction of CO 2 emissions in our entire supply chain by 2030, and no later than 2023 all of Royal Unibrew’s critical suppliers must have signed our respon- sible procurement principles and an agreement with a defined road map to reduce their carbon footprint (60% has signed in 2022). This in combination with the current general consensus on possible technological advances in the relevant sectors before 2030 make us confident that the target is realistic. Royal Unibrew recognizes that responsible sourcing is a journey where improvements are achieved through collab- oration with suppliers. In 2022, the Transparency Act in Norway, up-coming EU legislation on due diligence as well as the requirements of the Nordic monopolies triggered further Key initiatives • Further develop responsible procurement principles • Implement road map for CO 2 reduction in transportation, packaging, agriculture and sales refrigeration • B ecome nature positive: Establish targets and initiatives for biodiversity review of our policies and procedures but also a review of the tools we apply. Our Business Integrity Policy together with our Code of Conduct specify requirements for human rights, biodiversity, climate and other environmental issues. Supported by our supply chain management procedures, we believe that we have a robust system based on due diligence, risk assessment and periodic review of supplier performance. Our risk-based approach to supplier management triggers self-assessment questionnaires as well as audits, if the supplier due diligence indicates elevated risks, e.g., risk of human rights violations. We are currently testing and using several different data manage- ment tools to support and document our supply chain. The acquisition of Solera Beverage Group has increased our focus on potential impacts of traded goods, which is also underlined by the CO 2 footprint established under scope 3 purchased goods and services. Therefore, we are in the process of establishing a specific road map with 100% value chain transparency as the aspiration. The majority of direct materials and services are currently sourced in Europe (80%). Royal Unibrew has always cooperated closely with suppliers and other partners to improve our products as well as our production and process performance. To reach our targets, Corporate social responsibility Supplier road map ROYAL UNIBREW Annual Report 2022 85 it is pivotal, on the one hand, that we build on these well-es- tablished relations and work hard to strengthen them further. On the other hand, it is vital that we identify and establish new partnerships for sustainable development. Biodiversity is material International organizations, NGOs, business communities and legislators are increasingly articulating biodiversity and loss thereof as a major challenge at the same magnitude as climate. There is a growing consensus that biodiversity is affected by not only climate, but also pollution, land use/water use change and resource exploitation. New legislation such as the EU Taxonomy and the CSR Directive address biodiversity like several initia- tives such as the Science Based Targets for Nature (SBTN) and Taskforce on Nature-related Financial Disclosures (TNFD). This is also reflected in Royal Unibrew’s updated materiality assess- ment from 2022 that now includes biodiversity. Royal Unibrew is dependent on agricultural raw materials, such as barley, sugar and corn, primarily sourced locally, but also forest-based pack- aging materials, such as cardboard, carton and paper. Concepts such as nature positive and methods such as regenerative agriculture aim at combining cause, effect and impact. In 2022, Royal Unibrew initiated a review of our physical locations in the context of nature protected areas or protected species under the umbrella of Natura 2000. The review demonstrated that we are not located in Natura 2000 areas. We went "wild" at our head office in Faxe by growing a belt of insect friendly plants while respecting food safety hygiene requirements. In 2023, we will formulate targets and implement initiatives to support biodiversity. Corporate social responsibility 86ROYAL UNIBREW Annual Report 2022 KPI 2030 80% Of employees are Royal Unibrew ambassadors In order to achieve our business strategy of becoming THE PREFERRED CHOICE, we must attract, build and retain talented people at all levels and in all markets in which we operate. We will evaluate our success on the basis of our long-term business results, our engagement survey and our ability to place key talent in critical positions. The main strategic pillars and priorities of Royal Unibrew’s people strategy: • To be the preferred workplace • T o secure a safety and sustainability culture • To develop tomorrow’s talents while building on existing competencies to support our aspiration for growth • Design the organization to win tomorrow’s business Our people Proudest employees Sustainability culture Safety culture Key areas Corporate social responsibility Our people ROYAL UNIBREW Annual Report 2022 87 Z o o m i n g o u t Z o o m i n g i n B r a v e r y R o l e m o d e l i n g T e a m p l a y Proudest employees We aspire to have the proudest employees in the industry by fostering a winning culture. We strive to cultivate the proudest employees, as they are the foundation for Royal Unibrew’s success and progress. Our performance builds on our deeply rooted culture, strong experience and know-how within the beverage industry. We continuously ensure that our leadership model accom- modates our strategic ambitions to deliver future growth, nurturing a sustainable culture and providing a healthy working environment. To become THE PREFERRED CHOICE for our people, we have launched Royal Unibrew’s Leadership Expectations, strengthened our performance management and revisited our initiatives within, e.g., organizational develop- ment, engagement surveys and digitalization of processes. During 2022, we launched and expanded Royal Unibrew's Leadership Expectations, which is a framework developed to support our leaders in performing effective leadership in line with Royal Unibrew’s culture and values. The framework supports our leaders in acting as role models by demon- strating proper behavior in line with the values and expec- tations of Royal Unibrew while pursuing and achieving our shared ambition to be THE PREFERRED CHOICE. Local empowerment is at the core of our business model; hence, the ownership and commitment to fuel implementation of Royal Unibrew's Leadership Expectations is locally anchored. We will continuously work on communication, activation and Key initiatives • Expanding leadership framework • A ccelerating performance-, talent- and development initiatives • D igitalizing human capital processes • Organizational development Strengthened HR agenda As the Royal Unibrew Group is on a rapid growth journey, the need for alignment and sparring within HR across the Group is increasing. Therefore, the HR agenda has been strengthened to design and drive the HR strategy and to foster HR related synergies within especially recruitment, talent management and career management. Royal Unibrew’s Leadership Expectations Zooming out • Long-term view • Focus on what moves the needle • Capability planning • Vision-to-action • Consumer orientation Team p l ay • Team above oneself • Collaboration and inclusion • Setting team up for success • Having fun Zooming in • Agility • Empowerment • Expectations alignment • Operational execution • Customer passion Bravery • Entrepreneurial mindset • Breakthrough thinking • Winning culture • Daring bigger bets Role modeling • Integrity • Business ethics • Self-development • Caring and helping Corporate social responsibility Proudest employees ROYAL UNIBREW Annual Report 2022 88 implementation of the leadership framework in order to move the needle from intention to impact. We have tightened key talent management processes in all our business units, including regular performance reviews, development planning and formal mechanisms, to promote a feedback culture. The performance management process has been digitalized to provide our leaders with a support tool to steer their performance conversations and track previous dialogs supporting the employee’s development. To improve overall employee experience, we have acceler- ated digitalization of human capital processes on our human resources information system. Our performance manage- ment, employee master data and recruitment processes have become digital during the past year and will continue to be of high priority in 2023. Attracting, developing and retaining talented people remain key to our success, and we continue to invest in leadership development to ensure organizational readiness and hereby successful strategy execution. Leaders have participated in leadership trainings covering the following: work with Royal Unibrew's Leadership Expectations, sustainable leadership of setting meaningful objectives, getting tangible levers on building high quality connections, and how to implement diversity, equity and inclusion in their leadership in pursuit of being THE PREFERRED CHOICE. The voluntary employee turnover decreased significantly from 20.6% in 2018 to 13.9% in 2020, however, in 2021 there was a slight increase in turnover to 15.0% from where the turnover increased to 17.1% in 2022. Hence, the turnover curve reflects the trends in the job market and the effects of the COVID-19 pandemic. The 2022 turnover rates for our largest markets have remained at the same level, except from Finland where the turnover has decreased. Leave of absence due to non-work related illness has decreased from 3.8% in 2021 to 3.6% in 2022. We will continue to measure engagement both for short-term changes and long-term trends across results from past years. Currently, we measure engagement every second year. The 2021 engagement index score increased marginally from 4.0 to 4.1. Going forward, we will measure engagement annually, which will enable us to monitor the changes more closely, while integrating a digital tool that allows us to create pulse survey follow-up depending on local action plans. This will help the organization to zoom in on specific areas in where we need to focus on creating the highest engagement. Corporate social responsibility 89ROYAL UNIBREW Annual Report 2022 Sustainability culture Our strong commitment to a 100% sustainable culture at all levels and in all markets is reflected in our ambitious KPIs and our Executive Incentive Program. Core to the business strategy is our fundamental belief that the diversity in Royal Unibrew will create extraordinary and sustainable business results through our approach to local markets, local products and people. We continue to focus on driving a sustainable culture by assessing and monitoring the organizational health, including employee turnover, sick leave, safety culture, diversity, equality and inclusion. Again in 2023, we set ambitious sustainability KPIs as part of the executive incentive programs to emphasize and reflect our strong commitment to sustainability, and we strive to implement sustainability KPIs in all incentive programs for leaders in Royal Unibrew. Traditionally, the beverage industry is male dominated. However, we aspire to achieve a more balanced gender representation. Specifically, our target is at least 40% of underrepresented gender across the Group by 2025. The action plan to achieve this target is based on three elements: attraction, retention and inclusion. As a vital part of this plan, we will hold all parts of our business accountable for the development – also across functional areas. Key initiatives • Clear commitment and direction from the top • New role as Group DE&I in Group HR • A cquiring more differentiated data on the full DE&I area in Royal Unibrew • I ntegrating diversity, equality and inclusion in human capital processes and policies In alignment with our key initiatives set in 2020, our policies (a harassment free environment policy, a diversity, equality and inclusion policy (DE&I), a human rights and no discrim- ination policy) have been codified in accordance with the Universal Declaration of Human Rights (UDHR) with the prin- ciples set out by the International Labor Organization (ILO), the UN Guiding Principles, the Ten Principles of the UN Global Compact and relevant UN Sustainable Development Goals. Our DE&I policy is our commitment to ensure a diverse work- force, an inclusive workplace with equal opportunities and leadership valuing DE&I. For the international management team, we see a down- ward trend for female representation - partly an effect of the recent acquisitions of Hansa Borg Bryggerier and Amsterdam Brewery Co. Ltd. - which emphasizes the need for continuous push within the area, finding new ways to achieve critical mass of diverse talents and to retain the talents in an ever- changing and challenging business environment. An analysis of our employee data shows that some of our locations have bigger success than others in attracting and retaining e.g. female talent. We will investigate what drive these results during 2023. Because of our belief in and commitment to developing a sustainable and diverse culture, Royal Unibrew has decided to add a position in Group HR dedicated to diversity, equity and CSR topics are introduced in Finland through the “Better Mornings” initiative. Here customers and employees are invited to monthly presentations and discussions on CSR related topics, such as non-alcoholic trends. “Better Mornings” is an example of how CSR topics can be a synergetic drive together with our customers. Corporate social responsibility Sustainability culture ROYAL UNIBREW Annual Report 2022 90 inclusion. Our ambition is to increase female representation at executive levels. Likewise, we want to build and enforce a workplace harassment policy. Essential in the future will be to drive leadership accountability and capability building to realize these opportunities. Royal Unibrew continues to implement employee master data across functional areas and still larger geographies providing further insights to relevant focus areas for diversity. It will improve our ability to make a change where it will have the largest effect. Employees by gender, Int. management teams Gender % 2022 2021 2020 2019 2018 Female 28 29 33 32 31 Male 72 71 67 68 69 The gender distribution is impacted by acquisitions. Adjusting for acqui- sitions the distribution would be equal to 2021. Corporate social responsibility 91ROYAL UNIBREW Annual Report 2022 61 17 7 7 8 Beer CSD Water Cider/RTD Juice Malt Energy Wine & spirits 35 35 2022 Root causes % Behavior Lack of Procedure Lack of barrier No assessed yet Lack of Personal Protective Equipment Safety culture We are committed to maintaining and continuously improving our employees’ safety at work. Our employees’ safety at work is of highest priority. There- fore, we are committed to continuously improving our preventive measures to avoid employees being injured and/ or worn out. We recognize that one accident is one too many, and we continue to focus on mitigating risks by allo- cating more resources and sharing best practices across the Group. As we aim for zero lost time incidents, we have conducted behavior-based safety campaigns in several markets. In addition, we have worked on communicating safety aspects to enhance incident prevention, not only concentrating on lost time incidents, but also on safety observations and near- misses. Improving root cause assessments for preventive measures have been in focus as well. We did not have any fatal accidents among our employees or contractors during the year, but we were involved in an incident where a pedestrian was hit by one of our trucks and sadly passed away as a result of the inflicted injuries. We reduced the frequency of incidents by 2% compared to 2021 resulting in 11.1 incidents per 1 million working hours in 2022. However, we had a 4% organic increase, which means Key initiatives • Behavior-based safety campaign and training in several markets • Safety and stress prevention included in the engagement survey • Increased investment in health and safety in production 2018 2021 20 2220202019 0 14 28 42 56 70 0 4 8 12 16 Lost time incidents Accidents per million working hours LTI Lost time incident frequency (LTIF) we did not reach our short-term target of 40% reduction of the LTI frequency in 2022 compared to 2018. There is no doubt that our efforts are paying off, but we need to improve. The severity rate measured as lost days per 1 million working hours has decreased significantly since 2019, measured organically by 59%. Behavior and lack of codified procedures account for almost 80% of our lost time incidents in 2022, whereas lack of physical barrier and use of PPE account for 14%. This distribution between root causes is constant over time. Royal Unibrew is continuously conducting job safety analyses to remove or reduce physical, chemical, biological, ergonomic or mental risks from the workplace, but as the latest root-cause assessment indicates, we can still improve in this area. Corporate social responsibility Safety culture ROYAL UNIBREW Annual Report 2022 92 Scope of reporting Our ESG data covers the performance of all operating enti- ties in the period of January 1 – December 31, 2022. Data is reported according to financial scope, including all sites in which Royal Unibrew has a majority share, unless otherwise stated. Pure sales offices, restaurants and terminals except for the one in Faxe, Denmark, are not included in the 2022 scope, as the environmental footprint is considered insignificant. However, we are working on integrating these in the future. Data from newly acquired companies is included from the date of the acquisition being completed. When acquiring a new company, our sustainability strategy and targets are applied in accordance with the KPIs of the Group. In 2022, we have included Hansa Borg Bryggerier and Amsterdam Brewery Co. Ltd. Nørrebro Bryghus acquired on December 30, 2022, is not yet included. Reporting and data governance Data is reported according to our internal data reporting procedure securing validation of the data. Relevant business units submit monthly or annual data on environmental, social and governance KPIs and indica- tors. Data is collected and reviewed internally before being consolidated on Group level. An explanation for deviations of more than 5% must be provided for any data point that has changed compared to previous year’s data. The responsibility for applying the proper procedures for data validation and checks in line with the reporting manual lies with the business units. We have set up requirements for data documentation, and we have assigned a data responsible for all business units. When ESG data is submitted, the general-/country manager must review and sign-off that data is accurate, has been controlled and that documentation is provided. ESG highlights and ratios accounting principles Corporate social responsibility ROYAL UNIBREW Annual Report 2022 93 Data and indicators Our data collection process serves to ensure adherence to the requirements of the Danish Financial Statements Act § 99a, b, and d, the UN Global Compact Communication on Progress, Nasdaq ESG Reporting Guide and the EU Taxonomy. We consider key ESG indicators and global frameworks such as the GRI, SASB, UN Guiding Principles and the SDGs. Indicator Description Unit PRODUCTION FIGURES Production sites Total number of production sites within the Group. Number Production volume Total volume of beverages produced within the Group. million hl CO 2 EMISSIONS Scope 1 Direct CO 2 emissions occurring from all sources owned or controlled by the company. Emissions are calculated in alignment with the GHG Protocol and SBTi by use of local emission factors sourced from International Energy Agency (IEA) and DEFRA. When calculating our KPIs, logistics and biogenic emissions are exclud- ed. million kgCO 2 Scope 2 (location- and market-based) Indirect CO 2 emissions from purchased energy sources. Emissions are calculated according to the location- and market-based method in alignment with the GHG Protocol and SBTi by use of local emission factors from IEA. million kgCO 2 Scope 3 Corporate value chain CO 2 emissions have been calculated in alignment with the GHG Protocol and SBTi. More than 85% of the value chain emissions of scope 3 is included in the SBTi target. We will recalculate at least every third year. Current data covers 2021 and 2019, where the latter represents our base year. Primary drivers of the scope 3 emissions are purchased goods and services, downstream transportation and distribution and use of sold products. million kgCO 2 ENVIRONMENT & CLIMATE Energy consumption Total energy consumption covers purchased electricity, purchased green tariff electricity, natural gas, oil and purchased heat/steam/cooling. GWh Water consumption Total water consumption is the portion of water withdrawn and consumed by the Group not returned to the original water source after being withdrawn. Sources can be own wells/ground water, city water etc. million hl Wastewater discharged Total amount of wastewater discharged is the portion of water returned to the water source after being withdrawn. Water is emitted for public wastewater treat- ment, onsite treatment followed by discharge to river or lake or onsite treatment followed by discharge to public sewer. million hl Corporate social responsibility ROYAL UNIBREW Annual Report 2022 94 Indicator Description Unit Solid waste Total weight of waste, including recycled waste, hazardous waste, waste for landfill and household waste collected by the municipality and incinerated. Non-haz- ardous waste is defined by the national legislation at the point of generation. million kg Percentage of recycled waste Percentage recycled waste covers waste materials reprocessed into products, materials or substances whether for the original or other purposes. Types of recy- cled waste are defined by national legislation. Most common types of recycled waste are plastic, paper, glass, metal, electronics and certain organic materials. % RELATIVE PRODUCTION FIGURES Energy Energy consumption per total hectoliter of beverages produced indicates the energy efficiency of the production relative to the total energy consumption. kWh/hl CO 2 Total amount of CO 2 equivalent emitted (scope 1 and scope 2 excluding logistics and biogenic emissions) per hectoliter of beverage produced. It indicates the efficiency of the production relative to the total CO 2 emissions. kg CO 2 /hl Water Total amount of water withdrawn and consumed per hectoliter of beverage produced measures the water efficiency of the production. hl/hl Waste Total amount of waste from production per hectoliter of total beverage produced measures the waste efficiency of the production. kg/hl OUR CONSUMERS & CUSTOMERS No/low The no/low KPI encompasses no and low categories compared to regular and strong categories, such as beer and RTD/cider (alcohol) and CSD, energy drinks and water (non-alcoholic), growing faster than average of the portfolio and faster than market (YoY). The calculation is based on actual sales volumes of the Group compared to market data delivered from Nielsen and other market data analysts. Volume #1 Partner of choice The KPI of becoming the #1 Partner of choice for customers (On-Trade and Off-trade) as sustainable beverage supplier by 2030. Measured locally where products are sold based on market data, local surveys and other recognized benchmarks. Number Marketing spend The KPI of 40% of our marketing budget allocated to brands or campaigns with a sustainability position by 2025. Underlying data for calculations is the share of the total marketing spend such as no/low categories, local community, organic, underprivileged groups and more. % OUR PRODUCTS 100% carbon emission free in scope 1 and 2 excluding logistics Becoming carbon emission free in scope 1 and 2 across all production sites by 2025. The scope does not include logistics or biogenic emissions. Data is based on inputs from scope 1+2 calculations. % 50% reduction in supply chain emissions Reducing our footprint by at least 50% reduction in supply chain emissions (scope 1, 2 and 3) in 2030 from our base year 2019. Data is based on inputs from the scope 1, 2, 3 calculations. % Corporate social responsibility ROYAL UNIBREW Annual Report 2022 95 Indicator Description Unit 100% recycled, recyclable, or reusable packaging The KPI of 100% recycled, recyclable or reusable packaging is linked to circularity principles. The KPI is calculated based on primary packaging material data from suppliers and the distribution of packaging materials in the sales volume, Amsterdam Brew- ery Co. Ltd. is not included in 2022. % OUR PEOPLE 100% safety culture The KPI consists of two factors: Reduction of lost time incidents per one million working hours compared to 2018, and harassment measured in our employee engagement survey. % 80% of employees are Royal Unibrew ambassadors The KPI is based on the results of our employee engagement survey. To achieve the target, the result of the survey should indicate that > 80% of the employees on average will recommend others to work at Royal Unibrew. % 100% sustainability culture The KPI is based on the results of our employee engagement survey. Three underlying requirements must be met to achieve a 100 % sustainability culture: > 80% of employees are proud of working at Royal Unibrew > 80% of employees say that Royal Unibrew is focusing on sustainability > 80% of employees are involved in sustainability work % PEOPLE WELL-BEING & DEVELOPMENT OCCUPATIONAL HEALTH & SAFETY Total number of lost-time incidents (LTIs) Total number of workplace incidents resulting in lost time. Number Lost time incident frequency The number of incidents resulting in lost time per 1 million working hours. Frequency Lost day rate Lost days rate indicates the severity of incidents. It is the total number of workdays lost per 1 million working hours. Frequency Fatalities The number of work-related fatal accidents of permanent, fixed term or temporary employees. Number Corporate social responsibility ROYAL UNIBREW Annual Report 2022 96 Indicator Description Unit EMPLOYEE ENGAGEMENT Employee turnover Employee turnover ratio covers both voluntary and involuntary leavers. Retirees are included as involuntary leavers. Employee turnover ratio is calculated per average FTEs during the year. % Leave of absence due to illness (not work-related) Absence is defined as time lost due to an employees’ illness excluding leave such as parental leave, leave due to occupational injuries or diseases, etc. Measured as number of days away per total number of working days. % DIVERSITY PERCENTAGE OF EMPLOYEES BY GENDER, TOTAL Women/men Percentage of women (men) employees in the Group irrespective of job function. Measured as the number of total women (men) FTE per total FTE. % EMPLOYEES BY GENDER, INT. MANAGEMENT TEAMS Women/men Diversity in the international management team. Reported in accordance with current and future Danish legislation on gender diversity in the upper management level. Measured as the number of women (men) employees in international management per total number of members in international management. % Corporate social responsibility ROYAL UNIBREW Annual Report 2022 97 The EU Taxonomy is an EU classification system establishing a list of environmentally sustainable economic activities. It aims to help the EU scale up sustainable investments by requiring companies to report the share of their turnover, capital and operational expenditure (CapEx and OpEx) associated with environmentally sustainable economic activities. The EU Taxonomy regulation establishes a common classi- fication system for environmentally sustainable economic activities covering six environmental objectives: • C limate change mitigation • Climate change adaptation • T he sustainable use and protection of water and marine resources • T he transition to a circular economy • Pollution prevention and control • T he protection and restoration of biodiversity and ecosys- tems The EU Taxonomy’s currently published environmental objec- tives on climate change mitigation and climate change adap- tion do not directly apply to our sector, however we expect increasing eligibility and alignment going forward, as the food EU Taxonomy accounting principles and beverage sector is considered eligible for two of the objectives of the second Delegated Act, i.e., circular economy and biodiversity. Eligibility and alignment In the 2021 annual report, we disclosed that we did not have any eligible activities but reserved the right to investigate further once the guidelines from the European Commission had been finalized. In 2022, we performed a deeper analysis to identify activities that fall under the scope of the current legislation, regardless of their size. First step being establishment of eligibility and second step assessing alignment with the criteria. Royal Unibrew assessed the technical screening criteria of the activities one-by-one to verify compliance with the align- ment criteria. On the minimum social safeguards, we applied our Supplier Code of Conduct, which refers to our Policy on Business Ethics and is aligned with the OECD Guide- lines for Multinational Enterprises, Universal Declaration of Human rights, International Labor Organization Standards, UN Global Compact, UN Guiding Principles on Business and Human Rights and UN Sustainable Development Goals. We are working on further implementation of our supply chain management to ensure compliance with the minimum safe- guards in our entire supply chain. Determining the DNSH criteria (Do No Significant Harm) involved contacting suppliers, asking them to verify and docu- ment that the activity adheres to the requirements. However, as we were unable to secure adequate documentation we are not currenlty able to claim alignment. Corporate social responsibility ROYAL UNIBREW Annual Report 2022 98 Substantial contribution criteria DNSH criteria Economic activities Code(s) Absolute turnover mDKK Proportion of turnover % Climate change mitigation % Climate change adaptation % Water and marine resources % Circular economy % Pollution % Biodiversity and ecosystems % Climate change mitigation Y/N Climate change adaptation Y/N Water and marine resources Y/N Circular economy Y/N Pollution Y/N Biodiversity and ecosystems Y/N Minimum safeguards Y/N Taxonomy-aligned proportion of turnover, year 2022 % Taxonomy-aligned proportion of turnover, year 2021 % Category (enabling activity) E Category (transitional activity) T A ELIGIBLE ACTIVITIES A.1 Eligible taxonomy-aligned activities Turnover of eligible taxonomy -aligned activities (A.1) 0 0% 0% N/A A.2 Eligible not taxonomy-aligned activities Electricity generation using solar photovoltaic tecnology 4.1 0 0% Turnover of eligible not taxonomy -aligned activities (A.2) 0 0% Total (A.1+A.2) 0 0% 0% N/A B NON-ELIGIBLE ACTIVITIES Turnover of non-eligible activities (B) 11,487 100% Total (A+B) 11,487 100% Proportion of turnover from products or services associated with taxonomy-aligned economic activities - disclosure covering 2022 Turnover Our screening shows that our core (beverage)-gen- erating activities are not currently covered in the EU Taxonomy under the Delegated Act 2021/2139. We note that our solar park in Faxe is explicitly covered in the criteria and classified within 4.1 Electricity generation using solar photovoltaic technology, but it has not generated any turnover in 2022. The total turnover (denominator) is the same as revenue reported in the income statement in the consolidated financial statements. Corporate social responsibility ROYAL UNIBREW Annual Report 2022 99 Substantial contribution criteria DNSH criteria Economic activities Code(s) Absolute turnover mDKK Proportion of turnover % Climate change mitigation % Climate change adaptation % Water and marine resources % Circular economy % Pollution % Biodiversity and ecosystems % Climate change mitigation Y/N Climate change adaptation Y/N Water and marine resources Y/N Circular economy Y/N Pollution Y/N Biodiversity and ecosystems Y/N Minimum safeguards Y/N Taxonomy-aligned proportion of CapEx, year 2022 % Taxonomy-aligned proportion of CapEx, year 2021 % Category (enabling activity) E Category (transitional activity) T A ELIGIBLE ACTIVITIES A.1 Eligible taxonomy-aligned activities CapEx of eligible taxonomy-aligned activities (A.1) 0 0% 0% N/A A.2 Eligible not taxonomy-aligned activities Electricity generation using solar photovoltaic technology 4.1 23 1.0% Installation and operation of electric heat pumps 4.16 1 0% Construction, extension and operation of water collection, treatment and supply systems 5.1 7 0.3% Transport by motorbikes, passenger cars and light commercial vehicles 6.5 2 0.1% Installation, maintenance and repair of energy efficiency equipment 7.3 5 0.2% Installation, maintenance and repair of charging stations for electric vehicles in buildings and parking spaces attached to buildings 7.4 0 0% CapEx of eligible not taxonomy -aligned activities (A.2) 38 1.7% Total (A.1+A.2) 38 1.7% 0% N/A B NON-ELIGIBLE ACTIVITIES CapEx of non-eligible activities (B) 2,201 98.3% Total (A+B) 2,239 100% Proportion of CapEx from products or services associated with taxonomy-aligned economic avtivities - disclosure covering year 2022 Capital expenditure (CapEx) Our screening shows that 1.7% of our capital expenditure is eligible under the Delegated Act 2021/2139. The eligible activities are energy produc- tion, water treatment and elements of transporta- tion and our taxonomy-eligible CapEx is related to investments in solar panels and upgrading our water treatment systems. Royal Unibrew is still in the process of establishing all the required alignment documentation together with our suppliers, service providers and contrac- tors. In 2023, we will strive to close the gap in order to be able to report this as aligned CapEx. Capital expenditure cover expenditure on purchases of products from taxonomy-aligned suppliers (the numerator). Total CapEx (denominator) includes additions to property, plant and equipment, intangible assets (excluding goodwill), and right-of-use assets, including additions resulting from business combi- nations. Corporate social responsibility ROYAL UNIBREW Annual Report 2022 100 Substantial contribution criteria DNSH criteria Economic activities Code(s) Absolute turnover mDKK Proportion of turnover % Climate change mitigation % Climate change adaptation % Water and marine resources % Circular economy % Pollution % Biodiversity and ecosystems % Climate change mitigation Y/N Climate change adaptation Y/N Water and marine resources Y/N Circular economy Y/N Pollution Y/N Biodiversity and ecosystems Y/N Minimum safeguards Y/N Taxonomy-aligned proportion of OpEx, year 2022 % Taxonomy-aligned proportion of OpEx, year 2021 % Category (enabling activity) E Category (transitional activity)T A ELIGIBLE ACTIVITIES A.1 Eligible taxonomy-aligned activities OpEx of eligible taxonomy-aligned activities (A.1) 0 0% 0% N/A A.2 Eligible not taxonomy-aligned activities Installation and operation of electric heat pumps 4.16 0 0% Construction, extension and operation of water collection, treatment and supply systems 5.1 3 1.1% Transport by motorbikes, passenger cars and light commercial vehicles 6.5 11 3.8% Installation, maintenance and repair of energy efficiency equipment 7.3 1 0.4% Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings) 7.4 0 0.2% Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings 7.5 1 0.2% OpEx of eligible not taxonomy-aligned activities (A.2) 16 5.8% Total (A.1+A.2) 16 5.8% 0% N/A B NON-ELIGIBLE ACTIVITIES OpEx of non-eligible activities (B) 266 94.2% Total (A+B) 282 100% Proportion of OpEx from products or services associated with taxonomy-aligned economic avtivities - disclosure covering year 2022 Operational expenditure (OpEx) Our screening shows that 5.8% of our operational expenditure is eligible under the Delegated Act 2021/2139. The eligible activities are associated with energy production, water treatment and elements of transportation and our taxonomy- eligible OpEx is related to service of our water treatment systems, electric vehicles and equipment and electric charging stations on the facilities. Operational expenditure covers the proportion of operating expenditure related to assets or processes associated with economic activities that qualify as environmentally sustainable (the numerator). Total OpEx (denominator) relates to direct non-cap- italized costs that relate to research and develop- ment, building renovation measures, short-term leases, maintenance and repair, and any other direct expenditures relating to the day-to-day servicing of items of property plant and equipment by the undertaking or third party to whom activities are outsourced that are necessary to ensure the continued and effective functioning of such assets. Double counting None of our activities contribute to multiple objec- tives. For the CapEx and OpEx allocations, we have identified the economic activities in the Climate Delegated Act and mapped these with relevant purchases. Thereby, we ensure that no CapEx or OpEx are double-counted. Corporate social responsibility ROYAL UNIBREW Annual Report 2022 101 → Management’s Statement on the Annual Report Independent auditor’s report Signatures and statements Signatures and statements Signatures and statements ROYAL UNIBREW Annual Report 2022 102 Managements statement The Board of Directors and the Executive Management have today considered and approved the annual report of Royal Unibrew A/S for 2022. The Annual Report 2022 is prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure require- ments for annual reports of listed companies. In our opinion, the consolidated financial statements and the parent company’s financial statements give a true and fair view of the Royal Unibrew Group’s and the parent company’s assets, liabilities and financial position at December 31, 2022, and of the results of the Royal Unibrew Group’s and the parent compa- ny’s operations and cash flows for the financial year 2022. In our opinion, the Management review contains a fair review of the develop- ment of the Royal Unibrew Group's and the parent company's operations and financial matters, the results for the year and of the Royal Unibrew Group's and the parent company’s financial position, together with a description of the significant risks and uncertainties facing the Royal Unibrew Group and the parent company. In our opinion, the Annual Report of the Royal Unibrew Group and the parent company for the financial year January 1 - December 31, 2022, with the file name ROYAL-2022-12-31.zip, is prepared, in all material respects, in accord- ance with the ESEF Regulation. We recommend that the Annual Report 2022 will be adopted at the Annual General Meeting. Faxe, March 1, 2023 Executive Management Lars Jensen Lars Vestergaard President & CEO C FO Board of Directors Peter Ruzicka J ais Valeur Chair Deputy Chair Martin Alsø Torben Carlsen Heidi Kleinbach-Sauter Claus Kærgaard Michael Nielsen Christian Sagild Catharina Stackelberg-Hammarén Management's statement on the Annual Report Signatures and statements ROYAL UNIBREW Annual Report 2022 103 Independent auditors report Independent auditor's report To the shareholders of Royal Unibrew A/S Opinion We have audited the consolidated financial statements and the parent financial statements of Royal Unibrew A/S for the financial year 1 January – 31 December 2022, page 102-171, which comprise the income statement, statement of compre- hensive income, balance sheet, statement of changes in equity, cash flow statement and notes, including a summary of significant accounting policies, for the Group as well as for the Parent. The consolidated financial statements and the parent financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act. In our opinion, the consolidated financial statements and the parent financial statements give a true and fair view of the Group’s and the Parent’s financial position at 31 December 2022, and of the results of their operations and cash flows for the financial year 1 January – 31 December 2022 in accord- ance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act. Our opinion is consistent with our audit book comments issued to the Audit Committee and the Board of Directors. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional require- ments applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements and the parent financial statements section of this auditor’s report. We are independent of the Group in accordance with the International Ethics Stand- ards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. To the best of our knowledge and belief, we have not provided any prohibited non-audit services as referred to in Article 5(1) of Regulation (EU) No 537/2014. We were appointed auditors of Royal Unibrew A/S for the first time on 28 April 2021 for the financial year 2021. We have been reappointed annually by decision of the general meeting for a total contiguous engagement period of two years up to and including the financial year 2022. Statement on the management commentary Management is responsible for the management commentary, page 6-101.. Our opinion on the consolidated financial statements and the parent financial statements does not cover the management commentary, and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements and the parent financial statements, our responsi- bility is to read the management commentary and, in doing so, consider whether the management commentary is materially inconsistent with the consolidated financial statements and the parent financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. Moreover, it is our responsibility to consider whether the management commentary provides the information required under the Danish Financial Statements Act. Based on the work we have performed, we conclude that the management commentary is in accordance with the consoli- dated financial statements and the parent financial statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement of the management commentary. Signatures and statements ROYAL UNIBREW Annual Report 2022 104 Key audit matters How our audit addressed the key audit matter Revenue recognition There are a significant number of transactions and contracts with customers. Sales contracts with customers are relatively complex with discounts and agreements with marketing contribu- tions etc. This introduces an inherent risk to revenue recognition. Therefore we have considered this a key audit matter. Reference is made to note 5 in the consolidated financial statements. For the purpose of our audit, the procedures we carried out included the following: • We have considered the appropriateness of the Group’s revenue recognition policy and assessed the compli- ance with IFRS 15 Revenue from Contracts with Customers. • We have evaluated the systems and key controls, designed and implemented by Management, related to revenue recognition. • We have discussed with Management the key judgements related to recognition, measurement and classifica- tion of net revenue and marketing cost etc. • In addition, we have performed substantive procedures. We have reviewed significant and complex customer contracts and the development in discounts and the treatment of marketing contribution to ensure that accounting policies are applied correctly. • We have performed journal-entries testing and verification of proper cut-off at year-end. • In addition, we have assessed whether the disclosures; note 5 in the consolidated financial statements, meet the requirements of IFRS. Acquisition of Hansa Borg Bryggerier On 25 May 2022, the Group acquired the remaining 75% of shares in Hansa Borg Bryggerier. The acquisition, including the required purchase price allocation and step-up gain, had a significant impact on the consolidated financial statements. The purchase price allocation is based on a number of management judgments and estimates related to meas- urement of all acquired net assets at fair value, including intangible assets and land and buildings. Due to the significant impact on the consolidated financial statements and management judgments and assump- tions, we have considered this a key audit matter. Reference is made to note 24 in the consolidated financial statements. For the purpose of our audit, the procedures we carried out included the following: • We have assessed the purchase price allocation made, including assessing whether the assumptions and estimates made by Management are reasonable and documented. Focus of our assessment has been placed on identification and recognition of intangible assets as well as the fair value of land and buildings. • We have reconciled the purchase price allocation to supporting documentation, including share purchase agreements, calculations of fair value of the land and buildings and intangibles, and audited opening balances. • In assessing the assumptions and estimates as well as the fair value calculations, we have involved our internal valuation specialists. • In addition, we have assessed the appropriateness of the disclosures; note 24 Business combinations. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements and the parent financial statements for the financial year 1 January 2022 – 31 December 2022. These matters were addressed in the context of our audit of the consolidated financial statements and the parent financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Signatures and statements ROYAL UNIBREW Annual Report 2022 105 Management's responsibilities for the consolidated financial statements and the parent financial statements Management is responsible for the preparation of consoli- dated financial statements and parent financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and addi- tional requirements of the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of consolidated financial statements and parent financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements and the parent financial statements, Management is responsible for assessing the Group’s and the Parent’s ability to continue as a going concern, for disclosing, as applicable, matters related to going concern, and for using the going concern basis of accounting in preparing the consolidated financial statements and the parent financial statements unless Management either intends to liquidate the Group or the Entity or to cease operations, or has no realistic alternative but to do so. Auditor's responsibilities for the audit of the consolidated financial statements and the parent financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements and the parent financial statements as a whole are free from mate- rial misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and these parent financial statements. As part of an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements and the parent financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appro- priate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Parent’s internal control. • E valuate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. • C onclude on the appropriateness of Management’s use of the going concern basis of accounting in preparing the consolidated financial statements and the parent financial statements, and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's and the Parent’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements and the parent financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the Entity to cease to continue as a going concern. • E valuate the overall presentation, structure and content of the consolidated financial statements and the parent financial statements, including the disclosures in the notes, and whether the consolidated financial statements and the parent financial statements represent the underlying transactions and events in a manner that gives a true and fair view. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. Signatures and statements ROYAL UNIBREW Annual Report 2022 106 We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any signifi- cant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a state- ment that we have complied with relevant ethical require- ments regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and, where appli- cable, safeguards put in place and measures taken to eliminate threats. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial state- ments and the parent financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regula- tion precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on compliance with the ESEF Regulation As part of our audit of the consolidated financial statements and the parent financial statements of Royal Unibrew A/S we performed procedures to express an opinion on whether the annual report for the financial year 1 January – 31 December 2022, with the file name ROYAL-2022-12-31.zip, is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation), which includes require- ments related to the preparation of the annual report in XHTML format and iXBRL tagging of the consolidated financial state- ments including notes. Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: • The preparing of the annual report in XHTML format; • T he selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for financial information required to be tagged using judgement where necessary; • Ensuring consistency between iXBRL tagged data and the consolidated financial statements presented in human readable format; and • F or such internal control as Management determines necessary to enable the preparation of an annual report that is compliant with the ESEF Regulation. Our responsibility is to obtain reasonable assurance on whether the annual report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of proce- dures selected depend on the auditor’s judgement, including the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include: • Testing whether the annual report is prepared in XHTML format; • O btaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; • E valuating the completeness of the iXBRL tagging of the consolidated financial statements including notes; • E valuating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; • E valuating the use of anchoring of extension elements to elements in the ESEF taxonomy; and • R econciling the iXBRL tagged data with the audited consoli - dated financial statements . In our opinion, the annual report of Royal Unibrew A/S for the financial year 1 January – 31 December 2022, with the file name ROYAL-2022-12-31.zip, is prepared, in all material respects, in compliance with the ESEF Regulation. Copenhagen, 1 March 2023 Deloitte Statsautoriseret Revisionspartnerselskab Business Registration No 33 96 35 56 Lars Siggaard Hansen Eskild Nørregaard Jakobsen State-Authorised Public Accountant State-Authorised Public Accountant mne32208 mne11681 Signatures and statements ROYAL UNIBREW Annual Report 2022 107 Consolidated nancial statements Consolidated financial statements 2022 ROYAL UNIBREW Annual Report 2022 108ROYAL UNIBREW Annual Report 2022 108 Consolidated income statement Consolidated income statement Consolidated statement of comprehensive income for January 1 - December 31 mDKK Note 2022 2021 Net profit for the year 1,491 1,298 Other comprehensive income Items that may be reclassified to the income statement Exchange adjustment of foreign group enterprises 6 6 Value adjustment of hedging instruments 22 5 Tax on value adjustment of hedging instruments 10 -3 -2 Tot a l 25 9 Items that may not be reclassified to the income statement Actuarial gain on pension schemes 3 3 Tax on actuarial gain on pension schemes 0 0 Tot a l 3 3 Other comprehensive income after tax 28 12 Total comprehensive income 1,519 1,310 Comprehensive income for the year is attributable to: Equity holders of Royal Unibrew A/S 1,520 1,311 Non-controlling interests -1 -1 Total comprehensive income for the year 1,519 1,310 for January 1 - December 31 mDKK Note 2022 2021 Net revenue 5 11,487 8,746 Production costs 7 -6,618 -4,490 Gross profit 4,869 4,256 Sales and distribution expenses 7 -2,926 -2,189 Administrative expenses 7 -427 -415 Earnings before interest and tax (EBIT) 1,516 1,652 Income after tax from investments in associates 13 2 37 Gain on remeasurements of investments in associates 360 0 Financial income 8 10 7 Financial expenses 9 -103 -49 Profit before tax 1,785 1,647 Tax on the profit for the year 10 -294 -349 Net profit for the year 1,491 1,298 Profit for the year is attributable to: Equity holders of Royal Unibrew A/S 1,492 1,299 Non-controlling interests -1 -1 Net profit for the year 1,491 1,298 Earnings per share (DKK) 17 23.1 26.5 Diluted earnings per share (DKK) 17 23.1 26.5 * Earnings per share (EPS) and diluted earnings per share are adjusted for gain on remeasurements of investments in asso- ciates (DKK 360 million) in 2022. Had no adjustment been made, earnings per share (EPS) and diluted earnings per share would have been 30.5 in 2022. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 109 Con income statement Sales and earnings Sales and earnings Volumes, net revenue and gross profit 2022 2021 Change, % Volumes, beverages (mhl) 13.4 12.3 9% Net Revenue (mDKK) 11,487 8,746 31% Gross Profit (mDKK) 4,869 4,256 14% Volumes for 2022 show an aggregated sale of 13.4 million hectoliters of beverages, equaling a growth over 2021 of 9% of which 1% was organic growth. Net revenue for 2022 increased by 31% and amounted to DKK 11,487 million compared to DKK 8,746 million in 2021. Organic revenue growth amounted to 11% in 2022 compared to 12% in 2021. Gross profit increased DKK 613 million, or 14%, compared to 2021 and amounted to DKK 4,869 million. The gross margin was 6 percentage points lower than the 2021 margin mainly due to the high inflation. Expenses 2022 2021 Change, % Sales and distribution expenses (mDKK) 2,926 2,189 34% Administrative expenses (mDKK) 427 415 3% Sales and distribution expenses for 2022 was DKK 737 million higher than the 2021 figure and amounted to DKK 2,926 million compared to DKK 2,189 million for 2021. Administrative expenses for 2022 showed a DKK 12 million increase compared to 2021 and amounted to DKK 427 million compared to DKK 415 million for 2021. 4,000 6,000 8,000 10,000 12,000 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 10,000 11,000 12,000 13,000 14,000 Volumes (thl) Net revenue (mDKK) 11,487 mDKK in net revenue AN INCREASE OF 31% COMPARED TO 2021 Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 110 Sales and earnings EBITDA, EBIT and financials 2022 2021 Change, % EBITDA (mDKK) 1,997 2,020 -1% Amortization and depreciation -481 -368 -31% EBIT (mDKK) 1,516 1,652 -8% Net interest expenses -93 -42 -121% Gain on remeasurements of investments in associates 360 100% Income after tax from investments 2 37 -95% Earnings before interest, tax, depreciation and amortization (EBITDA) for 2022, calculated as EBIT DKK 1,516 million (2021: DKK 1,652 million) adding depreciation and amortization of DKK 481 million (2021: DKK 368 million) showed a DKK 23 million decrease and amounted to DKK 1,997 million compared to DKK 2,020 million in 2021. EBIT for 2022 amounted to DKK 1,516 million, DKK 136 million lower than the 2021 figure. The slightly negative development in both EBITDA and the EBIT are primarily attributable to the inflationary environment experienced in 2022 partly offset positively by acquisitions. The EBIT margin for 2022 was 13.2% compared to 18.9% in 2021. Net interest expenses increased from DKK 42 million in 2021 to DKK 93 million in 2022. The increase on a net basis is mainly due to the higher debt, which is linked to the acquisitions. In 2022 DKK 360 million was recog- nized as a non-cash tax-free profit in connection with the revaluation of the 25% ownership that Royal Unibrew had in Hansa Borg Bryggerier before acquiring the remaining 75% in 2022. Profit and earnings per share 2022 2021 Change, % Profit before tax (mDKK) 1,785 1,647 8% Tax on profit (mDKK) -294 -349 16% Net profit (mDKK) 1,491 1,298 15% Earnings per share (DKK) 23.1 26.5 -13% Profit before tax for 2022 was DKK 138 million above the 2021 figure and amounted to DKK 1,785 million compared to DKK 1,647 million for 2021, equivalent to an increase of 8%. 2018 2019 2020 2021 2022 0 500 1,000 1,500 2,000 2,500 5 10 15 20 25 30 EBITDA and EBITDA margin (mDKK) (%) EBITDA EBITDA margin 2018 2019 2020 2021 2022 300 500 700 900 1,100 1,300 1,500 1,700 0 5 10 15 20 25 EBIT and EBIT margin (mDKK) (%) EBIT EBIT margin Tax on the profit for 2022 was an expense of DKK 294 million and corresponds to an effective tax rate of 16.5% on the profit excluding income after tax from investments in associates and gain on remeasurements of investments in associates. The net profit for 2022 amounted to DKK 1,491 million, which is DKK 193 million above the 2021 figure, equivalent to an increase of 15%. The earnings per share decreased in 2022 to DKK 23.1 per share compared to 26.5 for in 2021, equivalent to an decrease of 13%. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 111 Consolidated Balance sheet Consolidated balance sheet Assets at December 31 mDKK Note 2022 2021 NON-CURRENT ASSETS Intangible assets 11 7,558 5,861 Property, plant and equipment 12 3,680 2,734 Investments in associates 13 99 153 Other non-current investments 14 79 23 Non-current assets 11,416 8,771 CURRENT ASSETS Inventories 15 1,213 780 Receivables 16 1,500 1,188 Prepayments 131 89 Cash and cash equivalents 214 86 Current assets 3,058 2,143 Assets 14,474 10,914 Liabilities and Equity at December 31 mDKK Note 2022 2021 EQUITY Share capital 17 100 98 Other reserves 1,567 719 Retained earnings 2,763 1,805 Proposed dividend 728 708 Equity contributable to equity holders of Royal Unibrew A/S 5,158 3,330 Non-controlling interests 0 12 Equity 5,158 3,342 LIABILITIES Non-current liabilities Deferred tax 18 1,011 747 Mortgage debt 3, 20 1,009 1,003 Credit institutions 3, 20 2,677 1,995 Other payables 9 26 Non-current liabilities 4,706 3,771 Current liabilities Mortgage debt 3, 20 2 14 Credit institutions 3, 20 986 610 Trade payables 3 1,934 1,721 Provisions 11 11 Corporation tax 10 8 18 Other payables 19 1,669 1,427 Current liabilities 4,610 3,801 Liabilities 22 9,316 7,572 Liabilities and equity 14,474 10,914 Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 112 Con Balance sheet and nancial position Balance sheet and financial position Balance sheet Royal Unibrew’s balance sheet 2022 amounted to DKK 14,474 million, which is DKK 3,560 million above the 2021 figure. The increase is mainly caused by the acquisitions in 2022 as well as a general higher activity level compared with 2021 resulting in an increase in receivables, inventory and payables. Invested capital increased by DKK 3,002 million from 2021 to 2022. ROIC excluding goodwill calculated on a running 12 month basis decreased to 22%. ROIC including goodwill decreased by 6 percentage points to 13%, impacted by the increased goodwill from acquisitions. In 2022, the equity ratio amounted to 36% equaling an increase of 5 percentage points compared to 2021. Equity at the end of December 2022 amounted to DKK 5,158 million compared with DKK 3,342 million at December 2021. The increase of DKK 1,816 million comprised mainly from the positive comprehensive income of DKK 1,519 million (2021: DKK 1,310 million), capital increase of DKK 822 million (2021: DKK 0 million) partly reduced by distribution to shareholders of DKK 992 million (2021: DKK 1,239 million) by way of dividend and share buy-backs. Net interest-bearing debt increased in 2022 with DKK 924 million from DKK 3,536 million at December 31, 2021, to DKK 4,460 million at December 31, 2022. The increase in net interest-bearing debt is linked to the acquisi- tions in 2022 and share buy-backs. The net interest-bearing debt to EBITDA ratio (running 12 months) was 2.2x (2021: 1.7x), which is well within the range of corporate target of not exceeding 2.5x. Net working capital amounted to a negative of DKK 770 million at the end of December 2022 compared with a negative DKK 1,102 million at the end of 2021. The increase in funds tied in working capital of DKK 329 million (DKK 2021: decrease of DKK 227 million) is mainly a result of a general higher activity level and acquisistions compared with 2021. 2018 2019 2020 2021 2022 0 3,000 6,000 9,000 12,000 2018 2019 2020 2021 2022 -1,500 -1,000 -500 0 500 2018 2019 2020 2021 2022 0 10 20 30 40 ROIC excl goodwill ROIC incl goodwill Net working capital (mDKK) ROIC (%) Invested capital (mDKK) 5.2 bnDKK in equity Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 113 Consolidated Cash ow statement Consolidated cash flow statement for January 1 - December 31 mDKK Note 2022 2021 Net profit for the year 1,491 1,298 Adjustments for non-cash operating items 21 506 726 Change in working capital -480 104 Received financial income 3 7 Paid financial expenses -79 -49 Financial expenses related to leasing -2 -1 Corporation tax paid -304 -332 Cash flows from operating activities 1,135 1,753 Dividends received from associates 27 21 Sale of property, plant and equipment 6 16 Purchase of property, plant and equipment 12 -475 -426 Acqusition of enterprises 24 -275 -1,218 Purchase of intangible assets and fixed asset investment -27 3 Sale of intangible assets and fixed asset investment 0 Cash flows from investing activities -744 -1,604 mDKK Note 2022 2021 Debt financing: Proceeds from borrowings 20 2,450 1,253 Repayment of borrowings 20 -1,594 -92 Repayment on lease facilities 20 -116 -68 Dividends paid to shareholders -692 -653 Dividend to minority shareholders 0 -4 Acquisition of shares for treasury -300 -582 Cash flows from financing activities -252 -146 Change in cash and cash equivalents 139 3 Cash and cash equivalents at 1 January 86 81 Exchange adjustment -11 2 Cash and cash equivalents at December 31 214 86 Free cash flow Net cash from operating activities 1,135 1,753 Net cash used in investing activities -442 -389 Payment of lease liabilities -116 -68 Free cash flow 577 1,296 Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 114 Con Cash ow Cash flow Cash flow statement Cash flows from operating activities for 2022 amounted to DKK 1,135 million (2021: DKK 1,753 million) comprising DKK 1,997 million (2021: DKK 2,024 million) of profit for the period adjusted for non-cash operating items, negative working capital cash flow of DKK 480 million (2021: a positive DKK 104 million), net interest paid of DKK 78 million (2021: DKK 43 million) and taxes paid of DKK 304 million (2021: DKK 332 million). The free cash flow for 2022 amounted to DKK 577 million, which was a decrease of DKK 719 million compared to 2021. Cash flows from operating activities and dividend from associates showed a DKK 612 million decrease compared to the 2021 figures, and net investments in property, plant and equipment showed a DKK 59 million increase. Further repayment on lease facilities decreased by DKK 48 million. Net interest bearing debt NIBD/EBITDA running 12 months Due to IFRS-15 restatement, the net revenue figures for 2020 and 2021 are not comparable with 2018-2019 2018 2019 2020 2021 2022 0 1,000 2,000 3,000 4,000 5,000 0.0 0.5 1.0 1.5 2.0 2.5 2018 2019 2020 2021 2022 0 300 600 900 1,200 1,500 2018 2019 2020 2021 2022 0.0 1.5 3.0 4.5 6.0 NIBD and NIBD/EBITDA (mDKK) Free cash flow (mDKK) 577 mDKK free cash ow DECREASE OF 719 MDKK COMPARED TO 2021 Investments in % of net revenue (%) Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 115 Consolidated Statement of changes in equity Consolidated statement of changes in equity for January 1 - December 31, 2022 mDKK Share capital Share premium account Translation reserve Hedging reserve Total other reserves Retained earnings Proposed dividend for the year Parents company share of equity Minority share Tot a l Equity at December 31, 2021 98 753 -47 13 719 1,805 708 3,330 12 3,342 Changes in equity in 2022 Net profit for the year 0 1,492 1,492 -1 1,491 Other comprehensive income 6 22 28 3 31 31 Tax on other comprehensive income 0 -3 -3 -3 Total comprehensive income 0 0 6 22 28 1,492 0 1,520 -1 1,519 Capital increase 2 1,061 1,061 1,063 1,063 Capital increase adjustment to fair value -241 -241 -241 -241 Minority's share of sold business 0 11 11 -11 0 Dividends paid to shareholders 0 -692 -692 -692 Dividend on treasury shares 0 16 -16 0 0 Acquisition of shares for treasury 0 -300 -300 -300 Transfer of treasury shares as acquisition of enterprises 0 467 0 467 467 Proposed dividend 0 -728 728 0 0 Total shareholders 2 820 0 0 820 -534 20 308 -11 297 Total changes in equity in 2022 2 820 6 22 848 958 20 1,828 -12 1,816 Equity at December 31, 2022 100 1,573 -41 35 1,567 2,763 728 5,158 0 5,158 The share capital at December 31, 2022, amounts to DKK 100,400,000 (2021: DKK 97,600,000) and is distributed in shares of DKK 2 each. Proposed dividend for the year amounts to DKK 14.50 per share (2021: DKK 14.50 per share) based on the share capital December 31, 2022 Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 116 Consolidated statement of changes in equity for January 1 - December 31, 2021 mDKK Share capital Share premium account Translation reserve Hedging reserve Total other reserves Retained earnings Proposed dividend for the year Parents company share of equity Minority share Tot a l Equity at December 31, 2020 99 761 -53 8 716 1,827 666 3,308 24 3,332 Changes in equity in 2021 Net profit for the year 0 1,299 1,299 -1 1,298 Other comprehensive income 6 5 11 3 14 14 Tax on other comprehensive income 0 -2 -2 -2 Total comprehensive income 0 0 6 5 11 1,300 0 1,311 -1 1,310 Dividends paid to shareholders 0 -653 -653 -4 -657 Dividend on treasury shares 0 13 -13 0 0 Acquisition of shares for treasury 0 -582 -582 -582 Proposed dividend 0 -708 708 0 0 Capital reduction -1 -8 -8 9 0 0 Share-based payments 0 4 4 4 Minority share transactions 0 -56 -56 -7 -63 Tax on changes in equity, shareholders 0 -2 -2 -2 Total shareholders -1 -8 0 0 -8 -1,322 42 -1,289 -11 -1,300 Total changes in equity in 2021 -1 -8 6 5 3 -22 42 22 -12 10 Equity at December 31, 2021 98 753 -47 13 719 1,805 708 3,330 12 3,342 Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 117 Con Notes contents Notes to consolidated financial statements Descriptive notes 1 Basis of preparation of consolidated financial statements ........................ 119 2 Significant accounting estimates and judgments...... 121 3 Financial risk management ................................ 122 4 Derivatives .................................................... 124 5 Segment reporting and revenue .......................... 125 Notes referring to income statement, balance sheet and cash flow statement 6 Staff expenses ............................................... 127 7 Expenses broken down by nature ........................ 128 8 Financial income ............................................. 130 9 Financial expenses .......................................... 130 10 Tax on the profit for the year ................................131 11 Intangible assets ............................................ 131 12 Property, plant and equipment ............................ 134 13 Investments in associates ................................. 136 14 Other fixed asset investments ............................ 137 15 Inventories ................................................... 138 16 Receivables ................................................... 138 17 Equity and basis of earnings/cash flow per share .... 139 18 Deferred tax ................................................... 141 19 Other current payables ...................................... 141 20 Debts .......................................................... 142 21 Cash flow statement ........................................ 143 Other notes 22 Contingent liabilities and securites ....................... 143 23 Related parties ............................................... 143 24 Acqusition of enterprises .................................. 144 25 Events after the reporting period ......................... 149 Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 118 Con Note 1 Note 1 Basis of preparation of consolidated financial statements BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS Royal Unibrew A/S is a limited liability company registered in Denmark. The financial statements for the period January 1 - December 31, 2022, presented in the Annual Report 2022 comprise both consolidated financial statements of Royal Unibrew A/S and its subsidiaries (Group) and separate Parent Company Financial State- ments. The financial statements of Royal Unibrew for 2022 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional Danish disclosure requirements for financial statements, of the Danish Statutory Order on Adoption of IFRS issued pursuant to the Danish Financial Statements Act. The Board of Directors and the Executive Management considered and adopted the Annual Report of Royal Unibrew A/S for 2022 on March 1, 2023. The Annual Report will be submitted for adoption by the shareholders of Royal Unibrew A/S at the Annual General Meeting on April 27, 2023. The financial statements are presented in Danish kroner (DKK). § Significant accounting policies This section describes the general accounting policies applied by Royal Unibrew. A detailed description of the accounting policies applied and critical estimates made with respect to specific reported amounts is presented in the relevant notes. The purpose of this is to create full transparency of the disclosed amounts by providing a total description of the relevant accounting policy, the critical estimates and the numerical information for each note. The description of accounting policies in the notes constitutes part of the overall description of Royal Unibrew's accounting policies. Accounting policies are unchanged from last year. New and amended standards and interpretations that have not yet taken effect Management has assessed the impact of new or amended and revised accounting standards and interpre- tations (IFRS) issued by the IASB and IFRSs endorsed by the European Union effective on or after January 1, 2022. It is assessed that application of amendments effective from January 1, 2022, has not had a material impact on the consolidated financial statements for 2022. Furthermore, management does not anticipate any significant impact on future periods from the adoption of these amendments. Consolidated financial statements The consolidated financial statements comprise Royal Unibrew A/S (the Parent Company) and enterprises in which the Parent Company exercises control (subsidiaries). Enterprises in which the Group holds between 20% and 50% of the votes and exercises significant influence but not control are classified as associates. The consolidated financial statements are prepared on the basis of financial statements of all Group enterprises prepared under the Group's accounting policies by combining accounting items of a uniform nature. Elimina- tion is made of intercompany income and expenses, unrealized intercompany profits and losses, balances and shareholdings. Comparative figures are not adjusted for newly acquired, sold or wound-up enterprises. Acquired enterprises are recognized as of the date of acquisition. Enterprises disposed of are recognized in the consolidated income statement up until the date of disposal. Non-controlling interest's share of profit/loss for the year and of the equity in subsidiaries are included as part of Royal Unibrew's profit and equity, respectively; nevertheless, presented as separate items. Translation policies For each of the reporting entities of the Group, a functional currency is determined. The functional currency is the currency of the primary economic environment in which the reporting entity operates. Transactions in other currencies than the functional currency are transactions in foreign currencies. Transactions in other currencies than the functional currency are initially translated into Danish kroner (DKK) at the exchange rates at the dates of transaction. Receivables, payables and other monetary items in foreign currencies that are not settled at the balance sheet date are translated at the exchange rates at the balance sheet date. Exchange adjustments arising due to differences between the transaction date rates and the rates at the dates of payment or the rates at the balance sheet date, respectively, are recognized in financial income and expenses in the income statement. Property, plant and equipment and intangible assets, inventories and other non-monetary asset purchase in foreign currencies and measured at historical cost are translated at the transaction date rates. On recognition in the consolidated financial statements of enterprises with another functional currency than Danish kroner (DKK), income statements are translated at average annual exchange rates. Balance sheet items are translated at the exchange rates at the balance sheet date. Exchange adjustments arising on the translation of the opening balance sheet items of foreign enterprises at exchange rates at the balance sheet date and on the translation of income statements from average exchange rates to exchange rates at the balance sheet date are recognized in other comprehensive income. Similarly, Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 119 Note 1 Basis of preparation of consolidated financial statements (continued) exchange adjustments arising due to changes made directly in equity of foreign enterprises are recognized in other comprehensive income. On recognition in the consolidated financial statements of associates with a functional currency that differs from the presentation currency of the Parent Company, the share of results for the year is translated at average exchange rates, and the share of equity including goodwill is translated at the exchange rates at the balance sheet date. Exchange adjustments arising on the translation of the share of the opening equity of foreign asso- ciates at exchange rates at the balance sheet date and on the translation of the share of results for the year from average exchange rates to exchange rates at the balance sheet date are recognized in other comprehen- sive income; likewise, classified in equity under a separate translation reserve. Reporting under the ESEF regulation The Annual Report is prepared using a combination of the XHTML format and tagging of the primary consoli- dated financial statements using iXBRL tags and in accordance with the ESEF Taxonomy, which is included in the ESEF regulation. It is developed based on the IFRS Taxonomy published by the IFRS Foundation. The line items in the consolidated financial statements are tagged to elements in the ESEF Taxonomy. For financial line items that are not directly defined in the ESEF Taxonomy, an extension to the taxonomy has been created. Extensions are anchored to elements in the ESEF Taxonomy, except for extensions that are subtotals. The Annual Report submitted to the Danish Financial Supervisory Authority (the Officially Appointed Mecha- nism) is included in the zip file ROYAL-2022-12-31.zip. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 120 Con Note 2 Note 2 Significant accounting estimates and judgments In connection with the preparation of the parent company Annual Report and consolidated financial state- ments, management makes estimates and judgments as to how recognition and measurement of revenue, assets and liabilities should take place based on the accounting policies applied. When determining the possible impact from climate risks on the financial reporting, management has assessed that the effect of climate related risks do not significantly impact estimates and assumptions. Likewise, is it not estimated to have any significant accounting impact. Judgments as an element in significant accounting policies The calculation of carrying amounts of certain assets and liabilities requires judgment as to how assets and liabilities should be classified in the financial statements, and how future events will affect the value of these assets and liabilities at the balance sheet date. In connection with the financial reporting for 2022, the judg- ments presented in the list to the right have been considered material affecting the related items as described in relevant notes. Critical accounting estimates Management's estimates are based on assumptions which management considers reasonable, but which are inherently uncertain and unpredictable. In connection with the financial reporting for 2022, the following critical estimates have been made as described in the notes, see list to the right. Accounting policies, judgments as an element in significant accounting policies as well as critical accounting estimates are described in the notes. Note Derivative financial instruments 4 Segment reporting and revenue 5 Share-based payments 6 Expenses 7 Financial income 8 Financial expenses 9 Corporation tax 10 Intangible assets 11 Property, plant and equipment 12 Investments in associates 13 Other fixed asset investments 14 Inventories 15 Receivables 16 Equity 17 Deferred tax 18 Deposit returnable packaging 19 Debts 20 Cash Flow Statement 21 Purchase Price Allocation (PPA) 24 Legends Significant accounting policies Judgments as an element in significant accounting policies Critical accounting estimates § § § § § § § § § § § § § § § § § § § § Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 121 Con Note 3 Note 3 Financial risk management The Group's financial risks are managed centrally according to the Treasury Policy approved by the Board of Directors, which includes guidelines for handling of currency-, interest rate-, liquidity- and credit risks. Commodity risks are also managed centrally according to the Commodity Risk Policy approved by the Board of Directors. Currency risk Royal Unibrew is exposed to currency risks derived from the geographic spread of the Group's business activities. This currency exposure is reflected through the activities in the subsidiaries and the Parent Company's export activities where cash flows are earned in foreign currencies, and in connection with the purchase of raw materials primarily in EUR and USD, including purchases which involve an indirect USD risk on the part of the purchase price related to the raw material element. Purchases are in all materiality performed in the currencies in which the Group has income, which results in a total reduction of the currency risk. Furthermore, the translation of loans to/from subsidiaries as well as the Group's net debt are subject to currency risk where these are not established in DKK. The above describes Royal Unibrew's transaction risks, which are hedged actively according to the Treasury Policy. EUR is not hedged as the risk is considered too immaterial due to Denmark's fixed exchange rate policy toward EUR. The objective is to reduce negative effects on the Group's profit and cash flows (cf. note 4). The risk is therefore monitored and hedged continually. The Group's cash flows are primarily in EUR, USD, CAD, GBP, SEK and NOK. The total gross currency risk (before hedging) on the balance sheet items was calculated on December 31, 2022. The following table shows the sensitivity to a positive change in the rates on December 31, 2022, with all other variables unchanged. A negative change has a corresponding effect merely with the sign reversed. Royal Unibrew's translation risks relate primarily to US (USD), Canada (CAD), UK (GBP), Norway (NOK), Sweden (SEK), France, Italy, Finland, Latvia, Estonia as well as Lithuania (EUR). The translation risk related to Royal Unibrew's investments in foreign subsidiaries is, as a general rule, not hedged. Financial risks such as the loss of competitive strength due to long-term exchange rate changes are not hedged by financial instruments but are included in Royal Unibrew's strategic considerations and risk management. Interest rate risk Royal Unibrew's interest rate is related to interest bearing assets and liabilities which is primarily denominated in DKK and EUR. Interest rate changes will affect the market value of fixed-interest loans as well as interest payments on floating-rate liabilities. Debt is established only in currencies in which the Group has commercial activities. In Royal Unibrew’s assessment, the key interest rate risk is related to the immediate effect of interest rate changes on the Group's interest expenses and Royal Unibrew focuses only secondarily on changes in the market value of the debt. It is the Group's policy to limit the effect of interest rate changes on profit and cash flows while, within this framework, also achieving the lowest possible financing cost within this framework. In accordance with the Treasury Policy at least 30% of the loan portfolio must be at fixed rate. At the end of 2022, 33% (2021: 45%) of the mortgage and bank debt was with fixed interest rate and hedged with interest rates swaps, having a duration between 2-6 years (2021: 3-7 years). Change in the interest rate of one percentage point will affect the Group's interest expenses by approx. +/- DKK 25 million (2021: approx. +/- DKK 14 million) and the interest expenses of the Parent Company by approx. +/- DKK 29 million (2021: approx. +/- DKK 13 million). Credit risks The Group’s credit risks relate primarily to receivables and counterparty risks. The Group's counterparty risks comprise both derive from commercial and financial risks. The commercial counterparty risk relates primarily to business agreements with a built-in element of firm rate/price. The financial counterparty risk relates to hedging agreements and net bank deposits. The financial counterparty risk is actively reduced by distributing bank deposits with banks in accordance with the credit rating criteria determined in the Treasury Policy. Royal Unibrew seeks to limit risks relating to credit granting to customers in export markets through extensive use of insurance cover and other types of hedging of payments. Where effective hedges cannot be established, Royal Unibrew has established procedures for approval of such risks. The credit risk is generally higher related to customers in the On-Trade sales channel than in the Off-Trade channel. This difference in credit risk is addressed through various approval procedures and credit granting conditions for customers in the two sales mDKK Change Earnings impact before tax 2022 Earnings impact before tax 2021 Equity impact 2022 Equity impact 2021 EUR 0.1% -0.3 -0.6 -0.3 -0.6 USD 10% 5.5 5.1 5.5 5.1 GBP 10% -2.1 -1.3 -2.1 -1.3 CAD 10% 21.2 3.0 21.2 3.0 NOK 10% 132.9 64.3 132.9 64.3 SEK 10% -0.6 0.0 -0.6 0.0 Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 122 channels. The current geopolitical and macroeconomic situation has increased the risks in Europe. In Finland, risks on major single receivables from customers are reduced through sale of the receivables factoring DKK 423 million (2021: DKK 386 million). Credit risks related to trade receivables are reduced by setting off accrued bonus. On December 31, 2022, accrued bonus amounts to DKK 236 million (2021: DKK 243 million) set off against trade receivables. The maximum credit risk corresponds to the carrying amount of the financial assets. Liquidity risks It is Group policy that cash resources should be adequate to meet the expected liquidity requirements in the current and next financial year. The cash resources may be bank deposits, short-term bonds and committed credit facilities. The long-term liquidity risks are managed by having loans with different durations, and by having a target for the minimum average duration of the loan portfolio. It is the Group policy to renegotiate loan facilities in timely manner. Royal Unibrew refinanced the main credit facility in 2022 of DKK 4 billion with a 5 year maturity with additional 2 years extension options. At the end of 2022, mortgage debt amounted to DKK 1,011 million (2021: DKK 1,017 million) with an average time to maturity of 13.9 years (2021: 12.8 years). Debt to credit institutions comprises drawn committed bank credit facilities and long term loan with an agreed time to maturity between 2 to 6 years (2021: 2 to 7 years). Capital management Royal Unibrew wants to ensure structural and financial flexibility as well as competitive power. To ensure this, continuous assessment is performed to determine the appropriate capital structure of Royal Unibrew. It is the target that the Group's net interest-bearing debt should not exceed 2.5 x EBITDA. The target for dividend payout ratio is 40-60% of the profit. At the operational level, continuous efforts are directed at optimizing working capital. Subject to adequate capacity and capability, investments in production facilities will be limited to replacement of individual components, related to specific products or to optimization of selected processes as well as maintenance. Commodity risks The commodity risks relate primarily to the purchasing of cans (aluminum), malt (barley), hops and packaging materials (cardboard) as well as energy. The commodity risks are actively hedged commercially and financially in accordance with the Group's Commodity Risk Policy. The objective of managing Royal Unibrew's commodity risks is to achieve a smooth and time-differentiated effect of commodity price increases, which is primarily achieved by entering into fixed-price agreements with the relevant suppliers, including energy. As regards to the Group's purchase of cans, financial contracts have Note 3 Financial risk management (continued) been performed to hedge the risk of aluminum price increases. Exchange rate changes with respect to the settlement currency of aluminum (USD) are an element of the overall currency risk management. The most significant part of purchases for the next 12 months has, in accordance with the Commodity Risk Policy, been hedged by entering into supplier agreements and financial contracts. A +/-10% change in the price of aluminum on the unhedged position will have an effect on the income statement of approx. +/- DKK 12 million (2021: DKK 13 million). Financial liabilities 12/31 2022 Group mDKK Contractual cash flows Maturity < 1 year Maturity > 1 year < 5 years Maturity > 5 years Carrying amount Non-derivative financial instruments: Financial debt, gross 4,907 970 2,854 1,083 4,304 Leasing 390 118 196 76 370 Trade payables 1,934 1,934 1,934 Other payables 721 712 9 721 Tot a l 7,952 3,734 3,059 1,159 7,329 The debt is classified as "debt at amortized cost". 12/31 2021 Group mDKK Contractual cash flows Maturity < 1 year Maturity > 1 year < 5 years Maturity > 5 years Carrying amount Non-derivative financial instruments: Financial debt, gross 3,495 577 1,931 987 3,362 Leasing 268 91 146 31 260 Trade payables 1,721 1,721 1,721 Other payables 598 572 26 598 Tot a l 6,082 2,961 2,103 1,018 5,941 The debt is classified as "debt at amortized cost". Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 123 Con Note 4 Note 4 Derivatives Currency, commodity and interest rate risks and use of derivative financial instruments Hedging of currency, commodity and interest rate risk The risk is managed by entering into derivatives, such as forward contracts and swaps. On December 31, 2022, the Group had short-term FX contracts covering the balance sheet exposure end of 2022 in USD, CAD, NOK, SEK and GBP. The Group actively hedges the commodity risk related to aluminum. At the end of 2022, the Group has hedged 64% (2021: 63%) of the consumption within the coming 12 month. The interest rate swaps hedge the interest rate exposure on the mortgage debt in Denmark and Finland. Hedge effectiveness is assessed on a regular basis by comparing changes in the value and timing of the under- lying exposure with the value and timing of the designated hedging transaction. Derivative financial instruments entered into hedge expected future transactions and qualifying as hedge accounting under IFRS 9. Group mDKK 2022 2021 Period Deferred gain (+) / loss (-) Deferred gain (+) / loss (-) Forward contracts: USD 0 - 1 year 0 0 CAD 0 - 1 year 1 0 GBP 0 - 1 year 0 0 NOK 0 - 1 year 5 4 SEK 0 - 1 year 0 0 Tot a l 6 4 Commodity hedge: Mainly aluminum 0 - 1 year -12 8 Tot a l -12 8 Interest rate swaps: Mortgage and bank loans 3 year 51 5 Total hedging instruments 45 17 The fair value of the hedging instruments is included in current liabilities under other payables. The derivative financial instruments applied in 2022 and 2021 may all be classified as level-2 instruments in the IFRS Fair Value Hierarchy. The determined fair value of derivative financial instruments is based on observable market data such as yield curves or forward rates. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 124 Con Note 5 Realized hedging transactions in the income statement mDKK 2022 2021 Realized hedging transactions are included in the income statement as follows: Production costs include foreign currency and commodity hedges of 6 -38 Financial income and expenses include currency, commodity and interest rate hedges of -4 1 Tot a l 2 -37 § Derivative financial instruments Derivative financial instruments are initially recognized in the balance sheet at fair value and are subsequently remeasured at their fair values. Positive and negative fair values of derivative financial instruments are included as other receivables and other payables, respectively. Changes in the fair values of derivative financial instruments that are designated and qualify as fair value hedges of a recognized asset or a recognized liability are recognized in the income statement as are any changes in the value of the hedged asset or the hedged liability. Changes in the fair values of derivative financial instruments that are designated and qualify as hedges of future cash flows are recognized in other comprehensive income. Income and expenses relating to such hedging transactions are transferred from other comprehensive income on realization of the hedged item and are recog- nized in the same entry as the hedged item. For derivative financial instruments which do not meet the criteria for hedge accounting, changes in fair values are recognized on a current basis in financial income and expenses in the income statement. Note 4 Derivatives (continued) Note 5 Segment reporting and revenue The Group’s results break down as follows on segments: mDKK Northern Europe Western Europe International Un- allocated Tot al 2022 Net revenue 8,943 1,353 1,191 0 11,487 Amortization and depreciation 394 52 34 1 481 Impairment 0 Earnings before interest and tax (EBIT) 1,247 157 128 -16 1,516 Sales (million hectoliters) 10.4 1.6 1.4 13.4 mDKK Northern Europe Western Europe International Un- allocated Tot al 2021 Net revenue 6,605 1,168 973 0 8,746 Amortization and depreciation 294 47 26 1 368 Impairment 0 Earnings before interest and tax (EBIT) 1,249 242 183 -22 1,652 Sales (million hectoliters) 9.7 1.3 1.3 12.3 Effective January 1, 2022, segments have changed from Western Europe, Baltic Sea and International to Northern Europe, Western Europe and International. This is consistent with the Group’s internal management and reporting structure. The changed segmentation and the impact on segment information for 2021 and 2022 is disclosed above. Segment assets, segment liabilities and related disclosures are not provided to management on a regular basis and will therefore not be disclosed going forward. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 125 Note 5 Segment reporting and revenue (continued) Geographically, revenue and non-current assets break down as follows: 2022 2021 2022 2021 mDKK Net revenue Net revenue Non- current assets Non- current assets Denmark 3,169 2,814 1,930 1,769 Finland 2,958 2,569 3,447 3,372 Norway 1,495 277 2,271 25 Other countries 3,865 3,086 3,768 3,605 Tot a l 11,487 8,746 11,416 8,771 The geographic breakdown is based on the geographic location of the Group's external customers and comprises countries that individually account for more than 10% of the Group's net revenue as well as the country in which the Group is headquartered. No single customer accounts for revenue in excess of 10% of the Group's net revenue. Revenue by category mDKK 2022 2021 Beer revenue 3,557 2,848 Other beverages 7,805 5,750 Other revenue 125 148 Total revenue 11,487 8,746 § Segment reporting The primary activity of the Group is sale of beverages, and we consider the Senior Leadership Team to be the operating decision-making body, as all significant decisions regarding business development and direction are taken in this team. Information reported to this team for the dual purpose of resource allocation and assess- ment of segment performance is focused on geographical markets. Segment performance is evaluated on the basis of operating profit (EBIT) consistent with the consolidated financial statements. Other items below EBIT are managed at Group level and are not allocated to business segments. Items allocated both by direct and indirect computation comprise production costs and administrative expenses, which are allocated by indirect computation based on allocation keys determined on the basis of the market’s drain on key resources. Administrative expenses incurred in the group functions of the Parent Company are partly allocated. Assets comprise the non-current assets that are directly or indirectly used in connection with activities in the markets. Net revenue Net revenue from the sale of goods is recognized in the income statement at the point in time where the control of goods and products is transferred to the customer, which is generally upon delivery, and if revenues can be measured reliably and are expected to be received. Net revenue from contracts with customers is measured at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods. Net revenue is measured exclusive of VAT and net of discounts as well as excise duties collected on behalf of third parties. The Group gives various discounts and fees depending on the nature of the customer and business. Discounts comprise unit price reductions as well as contributions to promotional activities and product promo- tion based on volumes or value of purchases. The discounts are either granted as deductions from the invoice amount or earned as a bonus paid at the end of the bonus period. All types of discounts granted are recognized in net revenue. The Group considers whether contracts include other promises that constitute separate performance obliga- tions and to which a portion of the transaction price needs to be allocated. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 126 Con Note 6 Note 6 Staff expenses Staff expenses are included in production costs, sales and distribution expenses as well as administrative expenses, staff expenses break down as follows: mDKK 2022 2021 Fixed salaries to Executive Management 14 13 Severance payment 0 0 Short-term bonus scheme for Executive Management 2 6 Long-term share based bonus scheme for Executive Management -1 4 Remuneration of Executive Management 15 23 Remuneration of Board of Directors 5 5 20 28 Wages and salaries 1,426 1,123 Contributions to pension schemes 159 128 1,585 1,251 Other social security expenses 56 33 Other staff expenses 63 54 Tot a l 1,724 1,366 Average number of employees 3,365 2,890 The complete Remuneration Policy and Remuneration Report for the Board of Directors and the Executive Management are disclosed at the Company’s website. Share-based payment Executive Management Board Share price at grant date Total fair value at time of grant Number DKK DKK thousand Conditional shares 2021 19,081 645 7,380 Outstanding at January 1, 2022 19,081 Exercised 0 Conditional shares 2022 programme (Exe Mgt) 18,576 720 8,150 Conditional shares 2022 programme (SVP, VP and selected key employees) 27,196 595 12,000 Anti-dilution adjustment 4,924 Outstanding at December 31, 2022 69,777 Exercisable at December 31, 2022 0 2022 2021 Restricted shares Remaining term to maturity Restricted shares Remaining term to maturity Number Months Number Months Conditional shares 2021 programme (Exe Mgt) 19,543 12 19,081 24 Conditional shares 2022 programme (Exe Mgt) 23,038 24 Conditional shares 2022 programme (SVP, VP and selected key employees) 27,196 24 Outstanding at December 31, 2022 69,777 19,081 Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 127 Con Note 7 Note 6 Staff expenses (continued) Comment Royal Unibrew has established a share based Long-Term Incentive Plan (LTIP) for the Executive Management, SVPs, VPs and selected key employees. The program is designed to align the interests of Royal Unibrew’s Exec- utive Management, employees and shareholders and to retain and reward the employees for dedicated and focused achievements of the company’s strategy and long-term objectives aligned with shareholders’ interests. The LTIP implies the grant of a number of Performance Share Units (PSUs). The PSUs granted in 2021 and 2022 to each participant will vest within 0-100% of the granted PSUs depending on achievement of the defined KPIs during the period. In order to exercise the PSUs the employee must still be employed at the excise date. The KPIs in the LTIP programs for Executive Management granted in 2021 and 2022 have four targets: Organic EBIT growth in 2022 (45%), accumulated free cash flow (15%), ESG performance to peers (15%) and share price development (25%). Royal Unibrew A/S launched a new share based Long-Term Incentive Plan (LTIP) for selected key employees (SVPs, VPs and selected key employees) with the following targets: organic EBIT growth (50%), accumulated free cash flow (25%) and CSR rating relative to peers (25%). § Share-based payments The Group only has schemes classified as equity-settled schemes. Conditional shares are measured at fair value at the time of granting, and they are recognized in staff expenses in the income statement over the vesting period. The counter item is recognized directly in equity. At the initial recognition of the conditional shares, the number of shares expected to vest is estimated. Subse- quently, the estimate of the number of restricted shares is revised so that the total recognition is based on the estimated number of shares allotted. Share-based payments In determining fair value, conditions and terms related to the conditional shares are taken into account. The market value of the program applying to 2021 covering the performance period 2021-2023 for Executive Management was approximately DKK 7 million. The market value of the program applying to 2022 covering the performance period 2022-2024 for Executive Management was approximately DKK 8 million. The new program established in 2022 for SVPs, VPs and selected key employees covering the performance period 2022-2024 had a market value at grant of approximately DKK 12 million. The market value has been charged to the income statement on an estimated straight-line basis over the vesting period, corresponding to the rate at which the conditions for the allotment of the shares was expected to be met. Note 7 Expenses broken down by nature mDKK 2022 2021 Aggregated by function Production costs 6,618 4,490 Sales and distribution expenses 2,926 2,189 Administrative expenses 427 415 Tot a l 9,971 7,094 Break down by nature as follows: Raw materials and consumables 5,564 3,639 Wages, salaries and other staff expenses 1,724 1,366 Operating and maintenance expenses 371 272 Distribution expenses and carriage 837 671 Sales and marketing expenses 711 591 Bad trade debts -3 2 Administrative cost 286 185 Amortization, depreciation and gain/loss on sale 481 368 Tot a l 9,971 7,094 Total amortization, depreciation and gain/loss on sale are included in the following items in the income statement: Production costs 223 181 Sales and distribution expenses 246 167 Administrative expenses 12 20 Tot a l 481 368 Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 128 Note 7 Expenses broken down by nature (continued) mDKK 2022 2021 Fee to auditors elected at the general assembly Fee for the audit of the Annual Report: Deloitte 7 3 PWC 1 Tot a l 7 4 Deloitte fee for non-audit services: Other assurance services 1 0 Other assistance 1 1 Tot a l 2 1 * Fees for other assistance than statutory audit of the financial statements provided by Deloitte primarily comprise services relating to financial due diligence. Comment The increase in audit fee of DKK 4 million is mainly due to an increase in legal entities as a consequence of the acquisition of Hansa Borg Bryggerier AS and Solera Beverage Group. § Expenses Production costs Production costs comprise direct and indirect expenses incurred to manufacture the finished goods repre- senting revenue for the year, including expenses for raw materials and consumables purchases, salaries and wages, renting and leasing as well as depreciation of and impairment losses on plant and machinery. Production costs also include development costs that do not meet the criteria for capitalization. Sales and distribution expenses Sales and distribution expenses comprise expenses for distribution and sales campaigns relating to goods sold during the year, including expenses for sales personnel, marketing, depreciation and amortization as well as losses on trade receivables. Furthermore, depreciation and amortization of intangible assets are included. Administrative expenses Administrative expenses comprise expenses for management and administration of the Group, including expenses for administrative personnel, management, office supplies and insurance. Leases Under IFRS 16, the Group assesses whether a contract is or contains a lease based on following definitions: • fulfillment of the arrangement was dependent on the use of a specific asset or assets; and • the arrangement had conveyed a right to use the asset. An arrangement conveyed the right to use the asset if one of the following was met: • the purchaser had the ability or right to operate the asset while obtaining or controlling more than an insig- nificant amount of the output; • the purchaser had the ability or right to control physical access to the asset while obtaining or controlling more than an insignificant amount of the output; or • facts and circumstances indicated that it was remote that other parties would take more than an insig- nificant amount of the output, and the price per unit was neither fixed per unit of output nor equal to the current market price per unit of output. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 129 Con Note 8-9 Note 9 Financial expenses mDKK 2022 2021 Finance costs Mortgage debt 5 6 Credit institutions 52 27 Leasing 3 2 Finance costs on liabilities at amortized cost 60 35 Other financial expenses 20 1 Exchange adjustments Cash at bank and external loans 3 Trade receivables 0 Trade payables 1 1 Forward contracts 22 9 Tot a l 103 49 § Financial income and expenses Financial income and financial expenses comprise interest, capital gains and losses on investments, balances and transactions in foreign currencies, amortization of financial assets and liabilities, fair value adjustments of derivative financial instruments that do not qualify as hedge accounting as well as extra payments and repay- ment under the on-account taxation scheme, etc. Note 8 Financial income mDKK 2022 2021 Finance income Trade receivables 0 0 Other financial income 4 0 Interest tax-exempt 0 Exchange adjustments Trade receivables 1 2 Trade payables 2 5 Cash at bank and external loans 1 0 Loans to associates 2 0 Forward contracts 0 Tot a l 10 7 Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 130 Con Note 10-11 Note 10 Tax on the profit for the year mDKK 2022 2021 Tax on the taxable income for the year 305 334 Adjustment of previous year -4 6 Adjustment of deferred tax -7 9 Tot a l 294 349 which breaks down as follows: Tax on profit for the year 294 349 Tax on other comprehensive income 3 2 Tax on changes in equity, shareholders -3 -2 Tot a l 294 349 Current Danish tax rate 22.0 22.0 Adjustment of previous year -0.2 0.3 Income after tax from associates and gain on remeasurements -4.2 -0.5 Effect on tax rate of permanent differences 0.3 0.5 Differences in effective tax rates of foreign subsidiaries -1.4 -1.1 Effective tax rate 16.5 21.2 § Tax on the profit for the year Tax for the year consists of current tax for the year and movements in deferred tax for the year. The tax attribut- able to the profit for the year is recognized in the income statement and other comprehensive income, respec- tively, whereas the tax attributable to equity entries is recognized directly in equity. The effective tax rate is significantly impacted by the remeasurement on the 25% shareholding in Hansa Borg Bryggerier AS. The Parent Company is jointly taxed with its Danish subsidiaries. The Danish current tax for the year is allocated to the jointly taxed Danish enterprises in proportion to their taxable incomes (full allocation with credit for tax losses). § Corporation tax Current tax liabilities are recognized in the balance sheet as calculated tax on the expected taxable income for the year adjusted for tax on taxable incomes for previous years and for tax paid on account. Note 11 Intangible assets mDKK Goodwill Trademarks Distribution rights Customer relations Tot a l Cost at January 1, 2022 3,038 2,486 234 354 6,112 Exchange adjustment -47 -17 -10 -74 Addition by acquisition 1,001 810 7 27 1,845 Cost at December 31, 2022 3,992 3,279 241 371 7,883 Amortization and impairment losses at January 1, 2022 -7 -6 -103 -135 -251 Exchange adjustment 0 Reversal of depreciation of disposals 0 Amortization for the year -15 -59 -74 Impairment for the year 0 Amortization and impairment losses at December 31, 2022 -7 -6 -118 -194 -325 Carrying amount at December 31, 2022 3,985 3,273 123 177 7,558 Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 131 mDKK Goodwill Trademarks Distribution rights Customer relations Tot a l Cost at January 1, 2021 2,290 1,940 233 153 4,616 Exchange adjustment 8 2 1 3 14 Addition by acquisition 740 544 198 1,482 Cost at December 31, 2021 3,038 2,486 234 354 6,112 Amortization and impairment losses at January 1, 2021 -7 -6 -88 -107 -208 Exchange adjustment -1 -1 Reversal of depreciation of disposals 0 Amortization for the year -14 -28 -42 Impairment for the year 0 Amortization and impairment losses at December 31, 2021 -7 -6 -103 -135 -251 Carrying amount at December 31, 2021 3,031 2,480 131 219 5,861 Comment Goodwill and trademarks with indefinite useful lives relating to Hartwall (Finland), Solera and Hansa Borg Bryg- gerier (Norway) and Est. Geyer Fréres (France) represent more than 10% of the total value of goodwill and trademarks. § Goodwill Goodwill is initially recognized in the balance sheet at cost. Subsequently, goodwill is measured at cost less accumulated impairment losses. The carrying amount of goodwill is allocated to the Group's cash-generating units (countries) at the time of acquisition. The determination of cash-generating units is based on management structure and internal finan- cial management. § Trademarks, distribution rights and customer relations Trademarks, distribution rights and customer relations are initially recognized in the balance sheet at cost. Subsequently, distribution rights and customer relations are measured at cost less accumulated amortization and less any accumulated impairment losses. Distribution rights are amortized on a straight-line basis over their estimated useful lives, that is, maximum 20 years. Customer relations are amortized on a straight-line basis over their estimated useful lives, maximum 5 years. Trademarks are not amortized as they are all well-established, old and profitable trademarks which customers are expected to continue demanding unabatedly, and which management is not planning to stop selling and marketing. Goodwill and trademarks with indefinite useful lives are not amortized but tested at least annually for impair- ment. It is the Group's strategy to maintain trademarks and their value. Impairment test of goodwill and trademarks As in 2021, the impairment test in 2022 did not show any impairment losses. The carrying amount of goodwill and trademarks with indefinite useful lives at December 31, 2022, is related to the cash-generating operational units and breaks down as follows: mDKK Goodwill Trademarks To ta l Share 2022 Northern Europe 2,928 2,287 5,215 72% Western Europe 963 876 1,839 25% International 94 110 204 3% Tot a l 3,985 3,273 7,258 100% * The most significant value relates to Finland, Norway, Sweden and France. Note 11 Intangible assets (continued) Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 132 The recoverable amount is based on value in use, which is calculated by means of expected net cash flows on the basis of budgets and forecasts for 2023-2027, approved by management, as well as estimated market driven discount rates and growth rates. In 2022, the consumption in the markets in which Royal Unibrew operates was generally impacted by the macroeconomic uncertainty due to the war in Ukraine. Royal Unibrew been compelled to deal with high inflation and historically high energy prices, which have adversely impacted our cost base. The consumption in the markets in which Royal Unibrew operates has expected to develop positively and we continue to win market shares across geographies. We will build on our positive organic volume and revenue growth, as well through partnerships and acquisitions. This, together with further developing the businesses acquired in recent years, continued focus on exploiting commercial opportunities and innovation following the consumer trends, Royal Unibrew expects to gain market shares, and consequently, increase the revenue and earnings from the core brands and business areas. EBIT margins are expected to increase in all regions through continuous focus on value management, investments in IT capabilities and continuous efficiency improvements and synergies from acquisitions. The key assumptions for the calculation of recoverable amount are shown below. Northern Europe Western Europe International Growth rate 2024-2027 2.7-13.3% 9.4-18.4% 17.8-17.8% Growth rate on terminal value 0.8-0.8% 0.6-0.8% 1.6-1.6% Discount rate pre tax 6.5-8.1% 6.9-8.0% 26.5-26.5% The forecasted results approved by management are based on previously achieved results and expected market developments (see above). The average growth rates applied are in accordance with management's expectations considering industry conditions in the individual markets. The discount rates applied are before tax and reflect current specific risks in the individual market. External consultants have advised how to determine the discounts rates. In Northern Europe, the highest point of the range indicated for the discount rate relates to Norway. In Western Europe, the lowest point of the range indicated for the growth rates of terminal value and discount rate relates to Italy. The assumptions applied by management are inherently subject to uncertainty and unpredictability. Reasonably probable changes will not lead to recognition of impairment losses, why no sensitivity analysis has been disclosed. mDKK Goodwill Trademarks To ta l Share 2021 Northern Europe 2,068 1,604 3,672 67% Western Europe 963 876 1,839 33% Tot a l 3,031 2,480 5,511 100% * The most significant value relates to Finland and France. The recoverable amount is based on value in use, which is calculated by means of expected net cash flows on the basis of budgets and forecasts for 2022-2026 approved by Management as well as estimated market driven discount rates and growth rates. The consumption in the markets in which Royal Unibrew operate is generally expected to regain the negative impact from COVID-19 from and including Q2 2022. In Northern Europe and Western Europe, consumption of Royal Unibrew's beverage categories is, in addition to the assumed absence of negative COVID-19 effects from Q2 2022, expected to be at the same level as in 2021 but changing towards high value products in the coming years. Through further developing the businesses acquired in recent years, continued focus on exploiting commercial opportunities and innovation following the consumer trends, Royal Unibrew expects to gain market shares and consequently increase the revenue and earnings from the core brands and business areas. EBIT margins are expected to increase toward historic levels through continuous focus on value management, continuous efficiency improvements and synergies from acquisitions. The key assumptions for the calculation of recoverable amount are shown below. 2021 Northern Europe Western Europe Growth rate 2023-2026 5.6-5.8% 11.0-15.1% Growth rate on terminal value 1.0-1.0% 1.0-1.0% Discount rate pre tax 6.2-6.8% 6.1-6.8% Note 11 Intangible assets (continued) Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 133 Con Note 12 The forecasted results approved by management are based on previously achieved results and expected market developments assuming no negative impact from COVID-19 as from Q2 2022 (see above). The average growth rates applied are in accordance with management's expectations taking into account industry condi- tions in the individual markets. The discount rates applied are before tax and reflect current specific risks in the individual market. External consultants have advised how to determine the discounts rates. In Western Europe, the highest point of the range indicated for the discount rate relates to Italy. In Northern Europe, the lowest point of the range indicated for the growth rates of terminal value and discount rate relates to Finland. The assumptions applied by management are inherently subject to uncertainty and unpredictability. Reason- ably probable changes will not lead to recognition of impairment losses, why no sensitivity analysis has been disclosed. § Impairment The carrying amounts of intangible assets and property, plant and equipment are reviewed on an annual basis to determine whether impairment has incurred other than that expressed by normal amortization and deprecia- tion. If so, the asset is written down to the higher of net selling price and value in use. Goodwill and other assets for which a value in use cannot be determined, as the asset does not on an individual basis generate future cash flows, are reviewed for impairment together with the group of assets (cash-generating units) to which they are attributable. The carrying amount of goodwill and trademarks with indefinite useful lives is tested for impairment at least on an annual basis together with the other non-current assets of the cash-generating unit to which goodwill has been allocated. Subsequently, it is written down to recoverable amount in the income statement if the carrying amount exceeds the recoverable amount. The carrying amount of financial assets measured at cost or amortized cost is written down for impairment if the net present value is lower than the carrying amount, due to changed expected net payments. Intangible assets In relation to trademarks, management makes an annual judgment to determine whether the current market situation has reduced the value or affected the useful life of the trademarks, including whether past estimates of indefinite useful lives may be maintained. An annual impairment test is made of the values recognized in the financial statements of goodwill and trade- marks assessed to have indefinite lives, which are therefore not amortized. For a description of the discount rates and growth rates applied in connection with the impairment test of goodwill and trademarks as well as other assumptions of the impairment test, reference is made to the above note. Note 11 Intangible assets (continued) Note 12 Property, plant and equipment mDKK Land and buildings Plant and machinery Other fixtures and fittings, tools and equipment Property, plant and equipment in progress Leasing of property, plant and equipment Total other property, plant and equipment Cost at January 1, 2022 1,929 2,694 1,122 254 430 6,429 Exchange adjustment -23 -15 0 1 -5 -42 Adjustment previous year -3 20 17 Additions 24 169 166 116 197 672 Additions by acquisitions 434 218 40 31 723 Disposals -1 -72 -56 -58 -187 Transfers for the year 12 113 52 -179 2 0 Cost at December 31, 2022 2,375 3,104 1,344 192 597 7,612 Depreciation, revaluation and impair- ment losses at January 1, 2022 -850 -1,907 -760 0 -178 -3,695 Exchange adjustment 7 1 0 0 8 Adjustment previous year 3 -20 -17 Depreciation for the year -53 -142 -121 -97 -413 Reversal of depreciation of assets sold 0 72 69 44 185 Depreciation, revaluation and impairment losses at December 31, 2022 -896 -1,973 -832 0 -231 -3,932 Carrying amount at December 31, 2022 1,479 1,131 512 192 366 3,680 Leasing of property, plant and equipment: Cost at December 31, 2022 343 254 597 Depreciation, revaluation and impair- ment losses at December 31, 2022 -109 -122 -231 Carrying amount per asset type 234 132 366 Land and buildings at a carrying amount of DKK 1,026 million have been provided as security for mortgage debt of DKK 1,008 million. Contracts for the delivery of property, plant and equipment in 2023 or later have been entered into only to an immaterial extent. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 134 Note 12 Property, plant and equipment (continued) mDKK Land and buildings Plant and machinery Other fixtures and fittings, tools and equipment Property, plant and equipment in progress Leasing of property, plant and equipment Total other property, plant and equipment Cost at January 1, 2021 1,851 2,579 1,072 147 296 5,945 Exchange adjustment 0 0 1 1 Adjustment previous year 31 31 Additions 34 76 108 208 151 577 Additions by acquisitions 0 9 9 41 59 Disposals -2 -29 -95 -58 -184 Transfers for the year 46 28 27 -101 0 0 Cost at December 31, 2021 1,929 2,694 1,122 254 430 6,429 Depreciation, revaluation and impair- ment losses at January 1, 2021 -807 -1,784 -753 0 -146 -3,490 Exchange adjustment 0 0 0 0 Adjustment previous year -33 -33 Depreciation for the year -45 -119 -99 -76 -339 Reversal of depreciation of assets sold 2 29 92 44 167 Depreciation, revaluation and impairment losses at December 31, 2021 -850 -1,907 -760 0 -178 -3,695 Carrying amount at December 31, 2021 1,079 787 362 254 252 2,734 Leasing of property, plant and equipment: Cost at December 31, 2021 203 227 430 Depreciation, revaluation and impair- ment losses at December 31, 2021 -77 -101 -178 Carrying amount per asset type 126 126 252 Land and buildings at a carrying amount of DKK 977 million have been provided as security for mortgage debt of DKK 1,003 million. Contracts for the delivery of property, plant and equipment in 2022 or later have been entered into only to an immaterial extent. § Property, plant and equipment Land and buildings, plant and machinery and other fixtures and fittings, tools and equipment are measured at cost less accumulated depreciation and less any accumulated impairment losses. Depreciation is calculated on a straight-line basis over the useful lives of the assets. Profits and losses on the disposal of property, plant and equipment are calculated as the difference between the sales sum less the expenses necessary to make the sale and the carrying amount at the time of sale. Profits or losses were immaterial in both 2021 and 2022 and have been recognized in the income statement as an adjust- ment to depreciation in production costs, sales or distribution expenses or administrative expenses, respectively. The expected useful lives of the assets remain unchanged from 2021 and are as follows: Buildings and installations 25-40 years Leasing of property, plant and equipment over the term of the lease Plant and machinery 10-15 years Other fixtures and fittings, tools and equipment 5-8 years Vehicles 4-5 years IT hardware and software 3 years Returnable packaging 3-10 years Management reviews its estimate of the useful lives of property, plant and equipment annually. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 135 Con Note 13 Note 13 Investments in associates mDKK Investments in associates Cost at January 1, 2022 76 Addition by acquisition 75 Reclassification -28 Cost at December 31, 2022 123 Value adjustments at January 1, 2022 77 Exchange adjustment -6 Dividend, net -27 Share of profit for the year 2 Other comprehensive income 0 Reclassification -70 Value adjustments at December 31, 2022 -24 Carrying amount at December 31, 2022 99 Cost at January 1, 2021 76 Cost at December 31, 2021 76 Value adjustments at January 1, 2021 55 Exchange adjustment 6 Dividend, net -21 Share of profit for the year 37 Other comprehensive income 0 Value adjustments at December 31, 2021 77 Carrying amount at December 31, 2021 153 Royal Unibrew's share of: mDKK 2022 2021 Profit from continuing operations for the year 2 37 Other comprehensive income 0 0 Comprehensive income 2 37 Total carrying amount at December 31 of the Group's total investments in associates, share of equity 99 153 § Investments in associates in the consolidated financial statements Investments in associates are measured in the balance sheet at the proportionate share of the net asset value of the enterprises calculated under the accounting policies of the Group with deduction or addition of the proportionate share of unrealized intercompany profits and losses and with addition of the carrying amount of goodwill. Associates with a negative net asset value are measured at DKK 0. If the Group has a legal or constructive obli- gation to cover the negative balance of the associate, this obligation is recognized in liabilities. The proportionate share of the results of associates is recognized in the income statement of the Group after adjusting for impairment losses on goodwill and eliminating the proportionate share of unrealized intercompany gains and losses. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 136 Con Note 14 Note 14 Other fixed asset investments mDKK Other investments Other receivables Total other fixed asset investments Cost at January 1, 2022 66 8 75 Exchange adjustment 0 -4 -4 Additions by acquisition 61 1 62 Additions 0 0 0 Disposals -6 -6 Cost at December 31, 2022 121 5 127 Value adjustments at January 1, 2022 -52 0 -52 Exchange adjustment 0 4 4 Disposals 0 Revaluations and impairment losses for the year 0 Value adjustments at December 31, 2022 -52 4 -48 Carrying amount at December 31, 2022 69 9 79 Cost at January 1, 2021 64 8 73 Exchange adjustment 0 Additions by acquisition 2 2 Additions 0 Disposals 0 Cost at December 31, 2021 66 8 75 Value adjustments at January 1, 2021 -52 -52 Value adjustments at December 31, 2021 -52 0 -52 Carrying amount at December 31, 2021 14 8 23 § Other investments Other investments classified as fair value through profit and loss are recognized in non-current assets at fair value at the trading date and at estimated fair value calculation on the basis of market data and recognized valuation methods as regards unlisted securities. Unrealized value adjustments are recognized in other compre- hensive income except for impairment losses and reversal of impairment losses which are recognized in finan- cial income and expenses in the income statement. Upon realization, the accumulated value adjustment recog- nized in other comprehensive income is transferred to financial income and expenses in the income statement. Other investments may be classified as level-3 instruments. § Other receivables Other receivables under fixed asset investments held to maturity are initially recognized at fair value and are subsequently measured at amortized cost or an estimated lower value at the balance sheet date. Other investments In connection with the presentation of the 2011 financial statements, management estimated the fair value of its investment (48% of the share capital) in the Polish brewery company Perla Browary Lubelskie S.A. at DKK 0 due to governance issues. Since 2011, management has maintained its fair value estimate of DKK 0 as these issues have not subsequently been resolved. The consolidated financial statements of Perla Browary Lubelskie S.A. for 2021 (2022 not yet available) have been prepared on the basis of Polish accounting law and show a profit after tax of PLN 32 million (DKK 51 million) and equity of PLN 405 million (DKK 643 million). The fair value measurement of the investment in Perla Browary Lubelskie S.A. is classified in level 3 of the IFRS Fair Value Hier- archy. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 137 Con Note 15-16 Note 15 Inventories mDKK 2022 2021 Raw materials and consumables 399 262 Work in progress 40 26 Finished goods and goods for resale 774 492 Inventories 1,213 780 Inventories Indirect production costs are recognized in the value of work in progress and finished goods at DKK 28 million (2021: DKK 26 million). Write down of inventories amounted to DKK 26 million (2021: DKK 16 million). § Inventories Inventories are measured at the lower of cost under the FIFO method and net realizable value of individual product groups. The net realizable value of inventories is calculated at the amount of future sales revenues expected to be generated by inventories at the balance sheet date in the process of normal operations and determined allowing for marketability, obsolescence and development in expected sales sum with deduction of calculated selling expenses. The cost of raw materials, consumables, goods for resale and purchased finished goods comprise invoiced price plus expenses directly attributable to the acquisition. The cost of work in progress and finished goods comprise the cost of materials and direct labor with addition of indirect production costs. Indirect production costs comprise the cost of indirect materials and labor as well as maintenance and depreciation of and impairment losses on the machinery, factory buildings and equipment used in the manufacturing process as well as costs of factory administration and management. Note 16 Receivables mDKK 2022 2021 Trade receivables 1,360 1,123 Other receivables 140 65 Receivables 1,500 1,188 Receivables are classified as "assets measured at amortized cost" under IFRS 9. Trade receivables fall due as follows: mDKK Not due and prepaid bonus Due 1-15 days Due 16-90 days Due > 90 days Tot a l 2022 Trade receivables 1,287 59 38 39 1,423 Impairment provision -27 -1 -7 -28 -63 Trade receivables after impairment 1,260 58 31 11 1,360 Impairment provision % *** -2.1% -1.7% -18.4% -71.8% -4.4% Impairment provision, beginning of year -50 Impairment realized during the year 3 Impairment provision for the year -16 Tot a l -63 * Lifetime expected credit loss ** Hereof mDKK 18 (1.4%) relates to prepaid bonus *** Historical average loss rate is < 1% Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 138 Con Note 17 Note 16 Receivables (continued) mDKK Not due and prepaid bonus Due 1-15 days Due 16-90 days Due > 90 days Tot a l 2021 Trade receivables 1,009 84 32 48 1,173 Impairment provision -28 - -6 -16 -50 Trade receivables after impairment 981 84 26 32 1,123 Impairment provision % *** -2.8% 0.0% -18.8% -33.3% -4.3% Impairment provision, beginning of year -49 Impairment realized during the year 1 Impairment provision for the year -2 Tot a l -50 * Lifetime expected credit loss ** Hereof mDKK 17 (1.7%) relates to prepaid bonus *** Historical average loss rate is < 1% Receivable Other current receivables all fall due for payment in 2023. § Receivables Trade receivables and contract assets are measured at amortized cost less allowance for lifetime expected credit losses. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. An allowance for lifetime expected credit losses for trade receivables is recognized on initial recognition. Trade receivables and contract assets are written off when all possible options have been exhausted and there is no reasonable expectation of recovery. The cost of allowances for expected credit losses and write-offs for trade receivables are included in sales and distribution costs. Note 17 Equity and basis of earnings/cash flow per share Treasury shares held by the Parent Company: Number Nom. Value in mDKK % of capital Portfolio at January 1, 2022 880,874 3 1.8 Additions, net 490,335 1 1.0 Shares used as payment -794,257 -2 -1.6 Capital reduction 0 Portfolio at December 31, 2022 576,952 2 1.2 The Group holds no other treasury shares. Portfolio at January 1, 2021 658,365 2 1.3 Additions, net 772,509 2 1.6 Capital reduction -550,000 -1 -1.1 Portfolio at December 31, 2021 880,874 3 1.8 The share capital has been paid in full. Basis of calculation of earnings and cash flow per share 2022 2021 The Parent Company shareholders' share of profit for the year amounted to (mDKK) 1,492 1,299 The average number of treasury shares amounted to (number, DKK 2 each) 718,348 707,880 The average number of shares in circulation amounted to (number) 48,886,875 48,344,203 The average number of shares in circulation incl restricted shares amounted to (number) 48,956,652 48,363,284 Cost of share buy-backs during the year (mDKK) 300 582 The share capital has been fully paid. Diluted earnings and cash flow per share have been calculated on the basis of the Parent Company shareholders' share of profit/loss for the year. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 139 Note 17 Equity and basis of earnings/cash flow per share (continued) Comment Shares were bought back during the year as an element in the optimization of the Company's capital structure. It is the intention to cancel the bought-back shares to the extent that they are not to be used for share-based payment to the Executive Management. § Equity / Proposed dividend Dividend is recognized as a liability at the time of adoption at the Annual General Meeting. Dividend distribution for the year proposed by management is disclosed as a separate equity item. § Treasury shares Treasury shares acquired by the Parent Company or subsidiaries are recognized at cost directly in equity under retained earnings. Where treasury shares are subsequently sold, any consideration is also recognized directly in equity. Dividend on treasury shares is recognized directly in equity under retained earnings. § Share premium account Share premium account comprises amounts in excess of the nominal share capital paid up by shareholders in connection with capital increases. § Translation reserve The translation reserve in the consolidated financial statements comprises exchange adjustments arising on the translation of the financial statements of foreign enterprises from their functional currencies into the presenta- tion currency (DKK) of the Group. Upon full or partly realization of the net investment in the foreign enterprises, exchange adjustments are recog- nized in the income statement. The translation reserve was reset at January 1, 2004 in accordance with IFRS 1. § Hedging reserve The hedging reserve comprises changes to fair values of derivative financial instruments that are designated and qualify as cash flow hedges of future transactions. On realization, the hedging instrument is recognized in the income statement in the same item as the hedged transaction. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 140 Con Note 18-19 Note 18 Deferred tax mDKK 2022 2021 Deferred tax at January 1 747 554 Change in deferred tax for the year -7 9 Deferred tax, no income statement effect for the year 4 4 Change in deferred tax by acqusitions 275 171 Exchange adjustments -9 2 Adjustment of previous year 1 7 Deferred tax at December 31 1,011 747 Expected realization within 1 year -40 -33 Deferred tax relates to: Intangible assets 770 610 Property, plant and equipment 267 154 Current assets 5 7 Non current liabilities -1 -17 Current liabilities -30 -7 Tot a l 1,011 747 § Deferred tax Deferred tax is recognized in respect of all temporary differences between the carrying amounts and the tax base of assets and liabilities except for temporary differences arising at the time of acquisition that do not affect the profit for the year or the taxable income and temporary differences concerning goodwill. In cases where the computation of the tax base may be made according to alternative tax rules, deferred tax is meas- ured on the basis of the intended use of the asset or settlement of the liability. Deferred tax assets are recognized at the value at which they are expected to be realized, either by elimination in tax on future earnings or by set-off against deferred tax liabilities. Deferred tax is measured on the basis of the tax rules and tax rates expected under the legislation at the balance sheet date to be effective when the deferred tax crystallizes as current tax. In the balance sheet, set-off is made between deferred tax assets and deferred tax liabilities within the same legal tax entity and jurisdiction. Note 19 Other current payables mDKK 2022 2021 VAT, excise duties, etc 852 746 Other payables 712 572 Deposit, returnable packaging 105 109 Total other current payables 1,669 1,427 Deposit, returnable packaging is specified as follows: Balance at January 1 109 111 Adjustment for the year -4 -2 Balance at December 31 105 109 Comment The change in the deposit on returnable packaging for the year reflects the net exchange with customers of returnable packaging for the year less estimated wastage of returnable packaging in circulation. The payable relating to deposit on returnable packaging is calculated on the basis of the estimated total pack- aging volume less packaging held in inventory. § Deposit on returnable packaging Plastic crates, bottles and kegs in circulation and held in inventory are recognized in property, plant and equip- ment, and the obligation to repay the deposit when the packaging in circulation is taken back on inventory is recognized in other payables. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 141 Con Note 20 Note 20 Debts mDKK 2022 2021 Mortgage debt 1,011 1,017 Credit institutions 3,663 2,605 Other debts 3,620 3,192 Debts 8,294 6,814 Changes to interest-bearing debts mDKK 12/31 2021 Additions by acquisitions Repayment New facilities Non-cash adjustment 12/31 2022 Interest-bearing long-term debts 2,812 0 -1,079 1,700 3,433 Interest-bearing short-term debts 550 24 -515 750 62 871 Total interest-bearing debt, mortgage and credit institutions 3,362 24 -1,594 2,450 62 4,304 Interest-bearing long-term leasing debt 186 2 -42 109 -2 253 Interest-bearing short-term leasing debt 74 29 -74 88 0 117 Total interest-bearing leasing debt 260 31 -116 197 -2 370 Tot a l 3,622 55 -1,710 2,647 60 4,674 * leasing debt is included in the balance sheet as "Credit institutions" mDKK 12/31 2020 Additions by acquisitions Repayment New facilities Non-cash adjustment 12/31 2021 Interest-bearing long-term debts 2,042 0 -31 801 0 2,812 Interest-bearing short-term debts 79 0 -61 452 80 550 Total interest-bearing debt, mortgage and credit institutions 2,121 0 -92 1,253 80 3,362 Interest-bearing long-term leasing debt 82 41 0 63 0 186 Interest-bearing short-term leasing debt 71 0 -68 71 0 74 Total interest-bearing leasing debt 153 41 -68 134 0 260 Tot a l 2,274 41 -160 1,387 80 3,622 * Leasing debt is included in the balance sheet as "Credit institutions" § Debts Mortgage loans and loans from credit institutions are re cognized initially at fair values. Subsequently, the finan- cial obligations are measured at amortized cost equal to the capitalized value using the effective interest method; the difference between the proceeds and the nominal value is recognized in financial income and expenses in the income statement over the loan period. Other debts, comprising trade payables, payables to subsidiaries and associates, VAT, excise duties, etc. as well as other payables are measured at amortized cost, substantially corresponding to the nominal debt. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 142 Con Note 21-22 Note 21 Cash flow statement Adjustments for non-cash operating items: mDKK 2022 2021 Financial income -10 -7 Financial expenses 103 49 Amortization and impairment of intangible assets 74 42 Depreciation of property, plant and equipment 413 339 Tax on the profit for the year 294 349 Income from investments in associates -2 -37 Gain on remeasurements of investments in associates -360 Profit and loss from sale of property, plant and equipment (see note 12 regarding leasing part) -6 -13 Share-based payments and remuneration 0 4 Other adjustments 0 Tot a l 506 726 § Cash flow statement The consolidated cash flow statement is presented under the indirect method based on the net profit for the year. The statement shows cash flows for the year, changes for the year in cash and cash equivalents as well as the Group’s cash and cash equivalents at the beginning and end of the year. Cash flows from operating activities are calculated as the net profit/loss for the year adjusted for non-cash operating items, changes in working capital, financial income and financial expenses, and corporation tax paid. Cash flows from investing activities comprise acquisitions and disposals of property, plant and equipment and fixed asset investments as well as dividend received from associates. Cost is measured inclusive of expenses necessary to make the acquisition and sales prices after deduction of transaction expenses. Cash flows from financing activities comprise changes to the amount or composition of the Group’s share capital, payment of dividend as well as borrowing and repayment of interest-bearing debt. Cash and cash equivalents include securities with a maturity of less than 3 months that can readily be turned into cash and are only subject to an insignificant risk of value changes. Note 22 Contingent liabilities and securities mDKK 2022 2021 Third-party guarantees 83 47 Security No security has been provided in respect of loan agreements with credit institutions. As regards security for loan agreements with mortgage credit institutes, reference is made to note 12. Contingent liabilities The outcome of pending legal actions is not expected to have any material impact on the financial position of the Group. Note 23 Related parties Related parties comprise the Board of Directors and the Executive Management as well as associates, see the sections on Board of Directors and Executive Management on page 55 and Group structure on page 170. No shareholder exercises control. The following transactions have been made with related parties: mDKK 2022 2021 Revenue Sales to associates 19 18 Financial income and expenses Dividends received from associates 27 21 Executive Management Remuneration paid 16 19 Debt re cash-based bonus schemes 2 7 Debt re share-based bonus scheme 3 4 Board of Directors Remuneration 5 5 Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 143 Con Note 24 mDKK Trademarks 698 Distribution rights 7 Customer relations 27 Property, plant and equipment 629 Inventories 143 Receivables 238 Prepayments 29 Deferred tax -244 Debt including leasing -34 Trade payables -101 Other payables -499 Acquired net assets 893 Goodwill 903 Estimated fair value of the business 1,796 Acquired cash at bank and in hand 138 Total acquisition price 1,934 Transfer of: Issue of new shares 821 Treasury shares 467 Cash 163 Total consideration, 75% shareholding 1,451 Number of employees 296 The receivables acquired include trade receivables of a fair value of DKK 180 million corresponding to the gross amount receivable according to contract. Note 24 Acquisitions of enterprises Acquisition in 2022 Acquisition of full ownership of Hansa Borg Bryggerier On January 7, 2022, Royal Unibrew A/S entered into an agreement to acquire the remaining 75% of Hansa Borg Bryggerier, of which Royal Unibrew already had 25% ownership, resulting in a 100% ownership of the company. The acquisition was completed on May 25, 2022. Hansa Borg Bryggerier is Norway’s second largest brewery and beverage company with four breweries and one bottling plant throughout the country and products ranging from beers to ciders, carbonated soft drinks, water and wines for the Norwegian market. Together with Solera Beverage Group, which Royal Unibrew acquired in September 2021, Hansa Borg Bryggerier is strategically very important for our Norwegian business as it in combination with Solera will create a strong player with a very strong beverage portfolio in Norway and thereby strengthen our multi beverage presence. The transaction is based on an enterprise value (at signing) of NOK 3.3 billion. With the share price at closing (587) the final enterprise value for 100% of the company was NOK 2.6 billion (DKK 1.9 billion) Hansa Borg Bryg- gerier is expected to generate normalized full-year revenue in 2022 of around NOK 1.4 billion with a normalized EBITDA of around NOK 210 million, resulting in an acquisition multiple (EV/EBITDA) of 12.4 times at closing. The already owned 25% of Hansa Borg Bryggerier was revalued in connection with the transaction, resulting in a non-cash tax-free remeasurement of DKK 360 million. According to the agreement, 10% of the payment, corresponding to NOK 224 million (DKK 162 million), was paid in cash, while the remaining 90% of the payment was paid in Royal Unibrew shares (2,194,257 shares). The acquisition price exceeded the fair value of the acquired assets, liabilities and contingent liabilities. The difference is the expected value of synergies and future growth opportunities. Synergies are not recognized separately from goodwill. Goodwill is not eligible for tax depreciation. Royal Unibrew A/S has incurred transaction costs relating to the acquisitions of approx. DKK 5 million for finan- cial and legal advisors in connection with the realization of the transaction. The costs are recognized as admin- istrative expenses and split equally in 2021 and 2022. The acquisition has been included in the consolidated financial statements of Royal Unibrew as of the date of acquisition. Royal Unibrew has made the following calculation of the fair value of the acquired net assets and of goodwill at the time of the acquisition: Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 144 Note 24 Acquisitions of enterprises (continued) Acquisition in 2022 Acquisition of Amsterdam Brewery Co. Ltd. On July 15, 2022, Royal Unibrew entered into an agreement to acquire 100% of the Toronto-based company Amsterdam Brewery Co. Ltd. Although the acquisition was completed September 15, 2022, however, the purchase price allocation is considered provisional due to the fact that the transaction was closed on September 15, 2022, leaving limited time to identify and determine fair value of assets acquired and liabilities assumed. The Canadian based company is a large-scale craft brewery with a potential to increase both capabilities and capacities during the coming years. Moreover, the acquisition will support future growth of Royal Unibrew in the Americas region by adding capacity in Canada, which is also close to our US business. Over time we, expect to serve most of Canada and partly US from Amsterdam Brewery Co. Ltd., which will reduce transportation costs and our CO 2 footprint. The acquisition is based on an enterprise value of DKK 241 million on a debt free basis. The company has normalized revenue of around CAD 34 million (around DKK 200 million) and a normalized EBITDA of around CAD 5 million (around DKK 28 million). Royal Unibrew A/S has incurred transaction costs relating to the acquisitions of approximately DKK 2 million for financial and legal advisors in connection with the realization of the transaction. The costs are recognized as administrative expenses in 2022. The acquisition has been included in the consolidated financial statements of Royal Unibrew as of the date of acquisition. Royal Unibrew has made the following preliminary calculation of the fair value of the acquired net assets and of goodwill at the time of acquisitions: mDKK Intangibles 103 Property, plant and equipment 83 Inventories 22 Receivables 8 Prepayments 8 Deferred tax -25 Debt including leasing -21 Trade payables -11 Other payables -24 Acquired net assets 143 Goodwill 98 Estimated fair value of the business 241 Acquired cash at bank and in hand 0 Cash consideration 241 Number of employees 247 Baldersbrønde Bryggeri A/S (Nørrebro Bryghus) On December 30, 2022, Royal Unibrew acquired 100% of the shares in Baldersbrønde Bryggeri A/S (Nørrebro Bryghus) in Denmark. With the acquisition, Royal Unibrew take over an exciting range of organic craft beers, adding to Royal Unibrew's portfolio of craft beers strengthening Royal Unibrew's position in Copenhagen. Group impact If the acquisitions had occurred on January 1, 2022, consolidated pro-forma revenue and EBITDA for the period ended December 31, 2022, of the combined Group would have been approximately DKK 12,111 million (2021 DKK 9,756 million) and DKK 2,069 million (2021 DKK 2,141 million), respectively. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 145 Note 24 Acquisitions of enterprises (continued) Acquisition in 2021 A Finnish micro brewery On February 11, 2021, Royal Unibrew's Finnish subsidiary, Hartwall, acquired the assets in Helsinki brewery, which further strengthens Hartwall's flexibility and dedication to local craft and specialty beer. Bryggeri Helsinki will continue as an entrepreneur-driven brewery restaurant. A Danish brewery and a soft drink company On April 29, 2021, Royal Unibrew entered into an agreement to acquire 100% of the shares in the Danish compa- nies Bryggeriet S.C. Fuglsang A/S and Mineralvandsfabrikken Frem A/S. The acquisition was completed on April 29, 2021. The companies are primarily doing business in the southern part of Jutland based on local, well-known beer- and CSD brands with a 150 year history. The companies were merged with Royal Unibrew at the closing date, and fully integrated into Royal Unibrew's systems. A Estonian micro brewery On September 14, 2021, Royal Unibrew's Estonian subsidiary, Royal Unibrew Eesti, acquired 100% of the shares in Tanker Brewery. The acquisition will strengthen the local footprint in the Estonian market through an authentic super premium local beer brand and support full scale multi-beverage strategy implementation in the region. Transaction costs and consolidation Royal Unibrew A/S has incurred transaction costs relating to the acquisitions of approx. DKK 1 million for legal advisors in connection with the realization of the three transactions. The costs are recognized as administrative expenses in 2021. The three acquisitions have been included in the consolidated financial statements of Royal Unibrew as of the date of each acquisition. Royal Unibrew has made the following calculation of the fair value of the acquired net assets and of goodwill at the time of acquisitions: mDKK Intangibles 33 Property, plant and equipment 19 Inventories 21 Receivables 15 Prepayments 1 Deferred tax -1 Trade payables -4 Other payables -9 Acquired net assets 75 Goodwill 11 Estimated fair value of the businesses 86 Acquired cash at bank and in hand -40 Cash consideration 47 Number of employees 70 The receivables acquired include trade receivables of a fair value of DKK 8 million corresponding to the gross amount receivable according to contract. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 146 Note 24 Acquisitions of enterprises (continued) Acquisition in 2021 Acquisition of MC Energy (A French energy drinks brand) On July 1, 2021, Royal Unibrew's French subsidiary, Etablissement Geyer-Fréres S.A, entered into an agreement to acquire the French beverage company MC Energy S.A.S. The acquisition was completed on July 7, 2021. MC Energy owns the energy brand Crazy Tiger that holds a 11% volume market share in the French Off-Trade market. The acquisition marks the entry into one of the categories where we see strong growth opportunities across markets and, at the same time, adds a new category to our French business. The acquisition is the next step in developing the French business toward a multi-niche market. MC Energy was acquired from three French entrepreneurs at an enterprise value of around DKK 610 million (EUR 82 million) on a debt free basis. The acquisition was financed with existing credit facilities. MC Energy has around 25 employees. Royal Unibrew A/S has incurred transaction costs relating to the acquisitions of approximately DKK 2 million for financial and legal advisors in connection with the realization of the transaction. The costs are recognized as administrative expenses in 2021. The acquisition has been included in the consolidated financial statements of Royal Unibrew as of the date of acquisition, and MC Energy was merged into Etablissement Geyer-Fréres in 2021. Royal Unibrew has made the following calculation of the fair value of the acquired net assets and of goodwill at the time of the acquisition: mDKK Trademarks 392 Property, plant and equipment 3 Inventories 6 Receivables 19 Prepayments 0 Deferred tax -98 Trade payables -13 Other payables -7 Acquired net assets 302 Goodwill 290 Estimated fair value of the businesses 592 Acquired cash at bank and in hand 17 Cash consideration 609 Number of employees 25 The receivables acquired include trade receivables of a fair value of DKK 19.3 million corresponding to the gross amount receivable according to contract. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 147 Note 24 Acquisitions of enterprises (continued) Acquisition in 2021 Acquisition of Solera Beverage Group On July 1, 2021, Royal Unibrew's Norwegian subsidiary, Royal Unibrew Norge AS, entered into an agreement to acquire 100% of the shares in Solera Beverage Group. The acquisition was completed on September 17, 2021. Solera Beverage Group is a leading pan-Nordic importer and distributor of a portfolio of strong leading inter- national wines, beers, carbonated soft drinks and other beverages. The company operates in Norway, Sweden and Finland, and therefore adds Norway and Sweden to Royal Unibrew’s geographic footprint as well as it strengthens the offering in Finland. Solera Beverage Group was acquired from the private equity fund, CapMan, at an enterprise value of around DKK 770 million (NOK 1.1 billion) on a debt free basis. The acquisition was financed with existing credit facilities. Solera Beverage Group has around 150 employees and generates normalized revenue (excluding positive COVID-19 effects) of around DKK 1.3 billion and an EBITDA of around DKK 70 million. Royal Unibrew A/S has incurred transaction costs relating to the acquisitions of approximately DKK 14 million for financial and legal advisors in connection with the realization of the transaction. The costs are recognized as administrative expenses in 2021. The acquisition has been included in the consolidated financial statements of Royal Unibrew as of the date of acquisition. Royal Unibrew has made the following calculation of the fair value of the acquired net assets and of goodwill at the time of the acquisition: mDKK Trademarks 146 Customer relations 185 Property, plant and equipment 40 Inventories 155 Receivables 255 Prepayments 29 Deferred tax -71 Trade payables -193 Other payables -387 Acquired net assets 159 Goodwill 439 Estimated fair value of the businesses 598 Acquired cash at bank and in hand 120 Cash consideration 718 Number of employees 150 The receivables acquired include trade receivables of a fair value of DKK 249.5 million corresponding to the gross amount receivable according to contract. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 148 Con Note 25 Note 24 Acquisitions of enterprises (continued) Acquisition in 2021 Acquisition of Aqua d'Or Mineral Water A/S (A Nordic Water Company) On November 16, 2021, Royal Unibrew entered into an agreement to acquire 100% of the shares in Aqua d'Or Mineral Water A/S from Danone. As announced in company announcement no. 46/2022 published October 24, 2022, Royal Unibrew’s acquisition of Aqua d’Or from Danone will not be completed. The parties have determined that they will not be able to fulfill the closing conditions and the parties have therefore agreed that the deal will not materialize. § Business combinations As for acquisition of new enterprises the purchase method is applied, under which the identifiable assets and liabilities of newly acquired enterprises are measured at fair value at the time of acquisition. Upon business combinations, positive differences between cost and fair value of identifiable assets and liabili- ties acquired are recognized as goodwill in intangible assets. At the time of acquisition, goodwill is allocated to the cash-generating units that subsequently form the basis of impairment tests. Goodwill and fair value adjust- ments in connection with the acquisition of a foreign enterprise with a functional currency that differs from the presentation currency of the Group are treated as assets and liabilities belonging to the foreign entity and are translated to the functional currency of the foreign entity at the exchange rates at the dates of transaction. Gains or losses on disposal of subsidiaries and associates are calculated as the difference between the sales sum and the carrying amount of net assets at the time of sale (including the carrying amount of goodwill) net of expected expenses and adjusted for exchange adjustments previously recognized in equity. Note 25 Events after the reporting period No events have occurred in the period from the balance sheet date until the presentation of the financial state- ments that materially affect the assessment of the consolidated financial statements. Recognition of acquisition of enterprises In 2022 Royal Unibrew acquired three businesses, Hansa Borg Bryggerier, Amsterdam Brewery co Ltd. and Baldersbrønde Bryggeri, by purchasing shares in the companies. The businesses assets, liabilities and contin- gent liabilities have been recognized under the purchase method in the financial statements of Royal Unibrew. The key assets of the businesses are goodwill, trademarks, customer relations, property, plant and equipment, inventories, receivables, deferred tax and payables. Especially regarding the intangible assets acquired, there are no efficient markets to be used to determine fair value. Therefore, management has made an estimate in connection with the calculation of the fair value of the acquired assets and liabilities at the date of acquisition and has allocated the purchase price on that basis. Consolidated nancial statements ROYAL UNIBREW Annual Report 2022 149 Parent Company Annual Report Parent Company Annual Report 2022 Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 150ROYAL UNIBREW Annual Report 2022 150 ROYAL UNIBREW Annual Report 2022 151 Parent Income statement Parent company income statement Statement of comprehensive income for January 1 - December 31 mDKK Note 2022 2021 Net profit for the year 1,571 1,206 Other comprehensive income Items that may be reclassified to the income statement Value adjustment of hedging instruments, end of year 12 2 Tax on other comprehensive income 7 -3 -2 Tot a l 9 0 Items that may not be reclassified to the income statement Other comprehensive income after tax 9 0 Total comprehensive income 1,580 1,206 for January 1 - December 31 mDKK Note 2022 2021 Net revenue 4,692 4,197 Production costs 3,4 -2,730 -2,209 Gross profit 1,962 1,988 Sales and distribution expenses 3,4 -1,025 -872 Administrative expenses 3,4 -214 -255 EBIT 723 861 Dividends received from subsidiaries and associates 565 550 Gain on sale of investments in associates 460 Financial income 5 62 17 Financial expenses 6 -71 -36 Profit before tax 1,739 1,392 Tax on the profit for the year 7 -168 -186 Net profit for the year 1,571 1,206 Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 152 Parent Balance sheet Parent company balance sheet Assets at December 31 mDKK Note 2022 2021 NON-CURRENT ASSETS Intangible assets 9 409 413 Property, plant and equipment 10 1,407 1,271 Investments in subsidiaries 11 5,703 4,424 Investments in associates 11 67 77 Receivables from subsidiaries 12 2,661 1,316 Other non-current investments 12 7 8 Non-current assets 10,254 7,509 CURRENT ASSETS Inventories 13 343 226 Receivables 14 573 445 Receivables from subsidiaries 230 56 Corporation tax 9 0 Prepayments 36 16 Cash at bank and in hand 27 0 Current assets 1,218 743 Assets 11,472 8,252 Liabilities and Equity at December 31 mDKK Note 2022 2021 EQUITY Share capital 15 100 98 Other reserves 1,591 759 Retained earnings 2,548 1,525 Proposed dividend 728 708 Equity 4,967 3,090 LIABILITIES Non-current liabilities Deferred tax 16 206 168 Mortgage debt 2, 19 733 735 Credit institutions 2, 19 2,483 1,502 Other payables 7 24 Non-current liabilities 3,429 2,429 Current liabilities Mortgage debt 2, 19 2 4 Credit institutions 2, 19 894 554 Trade payables 2 780 713 Payables to subsidiaries 2 1,188 1,184 Corporate tax 0 3 Other current payables 17 212 275 Current liabilities 3,076 2,733 Liabilities 20 6,505 5,162 Liabilities and equity 11,472 8,252 Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 153 Parent Cash ow statement Parent company cash flow statement for January 1 - December 31 mDKK Note 2022 2021 Net profit for the year 1,571 1,206 Adjustments for non-cash operating items 18 -678 -195 Change in working capital -274 296 Received financial income 62 0 Paid financial expenses -71 -21 Corporation tax paid -144 -179 Cash flows from operating activities 466 1,107 Dividends received from associates 1,025 550 Sale of property, plant and equipment 2 8 Corporation tax paid, sale of project development properties 0 0 Purchase of property, plant and equipment -281 -299 Acquisition of enterprises -252 -3 Purchase/-sale of intangible assets and fixed asset investment -18 0 Cash flows from investing activities 476 256 mDKK Note 2022 2021 Debt financing: External financing 1,323 823 Repayment on lease facilities -35 -28 Change in financing of subsidiaries -1,211 -933 Dividends to minority shareholders 0 -5 Dividends paid to shareholders -708 -666 Dividend on treasury shares 16 13 Acquisition of shares for treasury -300 -582 Cash flows from financing activities -915 -1,378 Change in cash and cash equivalents 27 -15 Cash and cash equivalents at 1 January 0 15 Exchange adjustment 0 0 Cash and cash equivalents at December 31 27 0 Free cash flow Net cash from operating activities 466 1,107 Net cash used in investing activities 746 259 Repayment on lease facilities -35 -28 Free cash flow 1,177 1,338 Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 154 Parent Statement of changes in equity Parent company statement of changes in equity for January 1 - December 31, 2022 mDKK Share capital Share premium account Hedging reserve Total other reserves Retained earnings Proposed dividend for the year To ta l Equity at December 31, 2021 98 753 6 759 1,525 708 3,090 Changes in equity in 2022 Profit for the year 0 1,571 1,571 Other comprehensive income 12 12 0 12 Tax on other comprehensive income 0 -3 -3 Total comprehensive income 0 0 12 12 1,568 0 1,580 Capital increase 2 1,061 1,061 1,063 Capital increase adjustment to fair value -241 -241 -241 Dividends paid to shareholders 0 -692 -692 Dividend on treasury shares 0 16 -16 0 Acquisition of shares for treasury 0 -300 -300 Transfer of treasury shares as acquisition of enterprise 0 467 467 Proposed dividend 0 -728 728 0 Total shareholders 2 820 0 820 -545 20 297 Total changes in equity in 2022 2 820 12 832 1,023 20 1,877 Equity at December 31, 2022 100 1,573 18 1,591 2,548 728 4,967 Share premium account, hedging reserve and retained earnings may be applied for distribution of dividend to the Parent Company shareholders. The share capital at December 31, 2022 amounts to DKK 100,400,000 and is distributed on shares of DKK 2 each. Proposed dividend for the year is DKK 14.50 per share (2021: DKK 14.50 per share), based on the share capital 12/31-2022. Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 155 Parent company statement of changes in equity for January 1 - December 31, 2021 mDKK Share capital Share premium account Hedging reserve Total other reserves Retained earnings Proposed dividend for the year To ta l Equity at December 31, 2021 99 761 4 765 1,558 666 3,088 Changes in equity in 2021 Profit for the year 0 1,206 1,206 Other comprehensive income 2 2 0 2 Tax on other comprehensive income 0 -2 -2 Total comprehensive income 0 0 2 2 1,204 0 1,206 Liability upon acquisition 0 29 29 Dividends paid to shareholders 0 -653 -653 Dividend on treasury shares 0 13 -13 0 Acquisition of shares for treasury 0 -582 -582 Proposed dividend 0 -708 708 0 Capital reduction -1 -8 -8 9 0 Share-based payments 0 4 4 Tax on changes in equity, shareholders 0 -2 -2 Total shareholders -1 -8 0 -8 -1,237 42 -1,204 Total changes in equity in 2021 -1 -8 2 -6 -33 42 2 Equity at December 31, 2021 98 753 6 759 1,525 708 3,090 Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 156 Parent Notes contents Notes to Parent Company Annual Report Descriptive notes 1 Basis of preparation of Parent Company Annual Report........................... 157 2 Financial risk management ................................ 158 Notes referring to income statement, balance sheet and cash flow statement 3 Staff expenses ................................................158 4 Expenses broken down by type .......................... 159 5 Financial income ............................................. 159 6 Financial expenses .......................................... 160 7 Tax on the profit for the year............................... 160 8 Realized hedging transactions ............................ 160 9 Intangible assets ............................................ 161 10 Property, plant and equipment ............................ 162 11 Investments in subsidiaries and associates............. 163 12 Receivables from subsidiaries and other fixed asset investments ............................ 164 13 Inventories ................................................... 164 14 Receivables ....................................................165 15 Share capital ..................................................165 16 Deferred tax .................................................. 166 17 Other current payables ..................................... 166 18 Cash flow statement ........................................ 166 19 Debts ...........................................................167 Other notes 20 Contingent liabilities, security and other liabilities ..... 167 21 Related parties ............................................... 168 22 Events after the reporting period ......................... 168 Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 157 Parent Note 1 Note 1 Basis of preparation of Parent Company Annual Report BASIS OF PREPARATION § Significant accounting policies The parent company's accounting policies remain unchanged from last year. Significant accounting policies are identical to those applied by the Royal Unibrew Group except for those mentioned below. Reclassification is according to consolidated note 1. Translation policies Exchange adjustment of balances regarded as part of the total net investment in enterprises with another functional currency than DKK is recognized in financial income and expenses in the Parent Company income statement. New and amended standards and interpretations that have taken effect Reference is made to note 1 to the Consolidated Financial Statements. Critical judgments and accounting estimates In connection with the preparation of the Parent Company and Consolidated Financial Statements, Manage- ment makes estimates and judgments as to how recognition and measurement of assets and liabilities should take place based on the accounting policies applied. Judgments as an element in significant accounting policies The calculation of carrying amounts of certain assets and liablities requires judgment as to how assets and liabilities should be classified in the Financial Statements and how future events will affect the value of these assets and liabilities at the balance sheet date. In connection with the financial reporting for 2022, the following judgments have been made materially affecting the related items as described in relevant notes, see list to the right. Critical accounting estimates Management's estimates are based on assumptions which Management considers reasonable but which are inherently uncertain and unpredictable. In connection with the financial reporting for 2022, the following critical estimates have been made as described in relevant notes, see list to the right. Accounting policies, judgments as an element in significant accounting policies as well as critical accounting estimates are described in the consolidated notes. Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 158 Parent Note 2-3 Note 2 Financial risk management Financial liabilities 12/31 2022 Parent mDKK Contractual cash flows Maturity < 1 year Maturity > 1 year < 5 years Maturity > 5 years Carrying amount Non-derivative financial instruments: Financial debt, gross 4,535 963 2,809 763 4,017 Financial debt, subsidiaries 1,188 1,188 0 1,188 Leasing 97 32 53 12 95 Trade payables 780 780 0 780 Other payables 170 170 0 0 170 Tot a l 6,770 3,133 2,862 775 6,250 The debt is classified as "debt at amortized cost". The fair value of the total debt is assessed to equal carrying amount. 12/31 2021 Parent mDKK Contractual cash flows Maturity < 1 year Maturity > 1 year < 5 years Maturity > 5 years Carrying amount Non-derivative financial instruments: Financial debt, gross 2,814 550 1,395 869 2,698 Financial debt, subsidiaries 1,184 1,184 1,184 Leasing 100 28 58 14 97 Trade payables 713 713 713 Other payables 234 210 24 234 Tot a l 5,045 2,685 1,477 883 4,926 The debt is classified as "debt at amortized cost". The fair value of the total debt is assessed to equal carrying amount. For a description of the parent company's and the Group's currency, interest rate, credit, commodity and other risks as well as capital management, reference is made to note 2 related to the Consolidated Financial Statements. Note 3 Staff expenses Staff expenses are included in production costs, sales and distribution expenses as well as administrative expenses and break down as follows: mDKK 2022 2021 Fixed salaries to Executive Management 14 13 Severance payment 0 0 Ordinary bonus scheme for Executive Management 2 6 Share-based payments to Executive Management (conditional) -1 4 Remuneration of Executive Management 15 23 Remuneration of Board of Directors 5 5 Total remuneration 20 28 Wages and salaries 590 557 Contributions to pension schemes 61 52 Total wages, salaries and contribution to pension schemes 651 609 Other social security expenses 9 6 Other staff expenses 30 23 Tot a l 710 666 Average number of employees 1,229 1,100 Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 159 Parent Note 4-5 Note 4 Expenses broken down by type mDKK 2022 2021 Production costs 2,730 2,209 Sales and distribution expenses 1,025 872 Administrative expenses 214 255 Tot a l 3,969 3,336 Break down by nature as follows: Raw materials and consumables 2,245 1,780 Wages, salaries and other staff expenses 710 666 Operating and maintenance expenses 164 141 Distribution expenses and carriage 269 232 Sales and marketing expenses 282 259 Bad trade debts -5 2 Office supplies, etc. 134 110 Amortization and depreciation 170 146 Tot a l 3,969 3,336 Total amortization and depreciation are included in the following items in the income statement: Production costs 105 86 Sales and distribution expenses 58 49 Administrative expenses 7 11 Tot a l 170 146 mDKK 2022 2021 Fee to auditors Fee for the audit of the Annual Report Deloitte 1 1 Tot a l 1 1 Deloitte: Other assurance services 1 0 Other assistance 1 1 Tot a l 2 1 * Fees for other services than statutory audit of the financial statements provided by Deloitte Statsautoriseret Revisionspartnerskab primarily comprise services relating to financial due diligence. Note 5 Financial income mDKK 2022 2021 Finance income Cash at bank and in hand 3 1 Trade receivables 0 Receivables from subsidiaries 54 8 Exchange adjustments Cash at bank and in hand and external loans 3 Trade receivables 4 Loans from subsidiaries 2 4 Tot a l 62 17 Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 160 Parent Note 6-8 Note 6 Financial expenses mDKK 2022 2021 Finance costs Mortgage debt 5 4 Credit institutions 33 18 Other financial expenses 10 2 Leasing 1 1 Exchange adjustments Cash at bank and in hand and external loans 3 Forward contracts 22 8 Tot a l 71 36 Note 7 Tax on the profit for the year mDKK 2022 2021 Tax on the taxable income for the year 133 182 Adjustment of previous year -1 1 Adjustment of deferred tax 36 3 Tot a l 168 186 Which breaks down as follows: Tax on profit for the year 168 186 Tax on other comprehensive income 3 2 Tax on equity entries -3 -2 Tot a l 168 186 Current Danish tax rate 22.0 22.0 Dividends received from subsidiaries and associates and gain of sale on invest- ments in associates -13.7 -8.7 Effect on tax rate of permanent differences 1.5 0.1 Adjustment of previous year -0.1 0.0 Effective tax rate 9.7 13.4 Note 8 Realized hedging transactions mDKK 2022 2021 Realized hedging transactions are included in the income statement as follows: Net revenue includes currency hedges 0 Production costs include foreign currency and commodity hedges 4 23 Financial income and expenses include currency, commodity and interest rate hedges -3 0 Tot a l 1 23 Reference is made to note 4 related to the consolidated financial statements for a description of hedging poli- cies. Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 161 Parent Note 9 Note 9 Intangible assets mDKK Goodwill Trademarks Distribution rights Customer relations Tot a l Cost at January 1, 2022 227 173 0 21 421 Disposals 0 Additions by acquisition 0 Cost at December 31, 2022 227 173 0 21 421 Amortization and impairment losses at January 1, 2022 0 -3 0 -5 -8 Reversal depreciation of disposals 0 Amortization for the year -4 -4 Amortization and impairment losses at December 31, 2022 0 -3 0 -9 -12 Carrying amount at December 31, 2022 227 170 0 12 409 mDKK Goodwill Trademarks Distribution rights Customer relations Tot a l Cost at January 1, 2021 227 173 0 9 409 Disposals 1 1 Additions by acquisition 11 11 Cost at December 31, 2021 227 173 0 21 421 Amortization and impairment losses at January 1, 2021 0 -3 0 -3 -6 Reversal depreciation of disposals 0 Amortization for the year -2 -2 Amortization and impairment losses at December 31, 2021 0 -3 0 -5 -8 Carrying amount at December 31, 2021 227 170 0 16 413 § Trademarks Trademarks are not amortized as they are all well-established, old and profitable trademarks which customers are expected to continue demanding unabatedly, other things being equal, and which management is not plan- ning to stop selling and promote. Reference is made to note 11 related to the consolidated financial statements for a description of impairment test. Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 162 Parent Note 10 Note 10 Property, plant and equipment mDKK Land and buildings Plant and machinery Other fixtures and fittings, tools and equipment Property, plant and equipment in progress Leasing of property, plant and equipment Total other property, plant and equipment Cost at January 1, 2022 831 1,417 595 194 171 3,208 Additions 18 101 104 58 33 314 Adjustments previous years -3 -3 Disposals -1 -68 -52 -20 -141 Transfers for the year 32 63 47 -142 0 Cost at December 31, 2022 880 1,510 694 110 184 3,379 Depreciation, revaluation and impairment losses at January 1, 2022 -441 -1,028 -392 0 -76 -1,937 Depreciation for the year -17 -61 -63 -35 -176 Adjustments previous years 3 3 Reversal of depreciation and impairment of assets sold 0 69 50 20 139 Depreciation, revaluation and impairment losses at December 31, 2022 -458 -1,017 -405 0 -91 -1,971 Carrying amount at December 31, 2022 422 493 289 110 93 1,407 Leasing of property, plant and equipment: Cost at December 31, 2022 72 112 184 Depreciation, revaluation and impairment losses at December 31, 2022 -39 -52 -91 Carrying amount per asset type 33 60 93 Land and buildings including plant and machinery at a carrying amount of DKK 417 million have been provided as security for mortgage debt of DKK 733 million. mDKK Land and buildings Plant and machinery Other fixtures and fittings, tools and equipment Property, plant and equipment in progress Leasing of property, plant and equipment Total other property, plant and equipment Cost at January 1, 2021 755 1,363 560 120 125 2,923 Additions 30 36 71 160 62 359 Additions by acquisition 7 7 Disposals -4 -61 -16 -81 Transfers for the year 46 15 25 -86 0 Cost at December 31, 2021 831 1,417 595 194 171 3,208 Depreciation, revaluation and impairment losses at January 1, 2021 -426 -975 -403 0 -63 -1,867 Depreciation for the year -15 -57 -50 -29 -151 Reversal of depreciation and impairment of assets sold 4 61 16 81 Depreciation, revaluation and impairment losses at December 31, 2021 -441 -1,028 -392 0 -76 -1,937 Carrying amount at December 31, 2021 390 389 203 194 95 1,271 Leasing of property, plant and equipment: Cost at December 31, 2021 65 106 171 Depreciation, revaluation and impairment losses at December 31, 2021 -29 -47 -76 Carrying amount per asset type 36 59 95 Land and buildings including plant and machinery at a carrying amount of DKK 384 million have been provided as security for mortgage debt of DKK 734 million. Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 163 Parent Note 11 Note 11 Investments in subsidiaries and associates mDKK Investments in subsidiaries Investments in associates Cost at January 1, 2022 4,513 77 Additions 1,279 18 Disposals -28 Cost at December 31, 2022 5,792 67 Impairment losses at January 1, 2022 -89 Impairment losses at December 31, 2022 -89 0 Carrying amount at December 31, 2022 5,703 67 Cost at January 1, 2021 4,477 77 Additions 36 Disposals Cost at December 31, 2021 4,513 77 Impairment losses at January 1, 2021 -89 0 Impairment losses at December 31, 2021 -89 0 Carrying amount at December 31, 2021 4,424 77 § Dividend on investments in subsidiaries and associates Dividend on investments in subsidiaries and associates is recognized in the parent company's income statement in the financial year in which dividend is declared. § Investments in subsidiaries and associates in the parent company financial statements Investments in subsidiaries and associates are measured at cost and tested in the event of indication of impair- ment. Where cost exceeds the recoverable amount, the investment is written down to its lower recoverable amount. § Estimate The carrying amount of investments in subsidiaries is tested to identify any impairment in case there is an indi- cation that the investment may be impaired. Reference is made to note 11 related to the consolidated financial statements. Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 164 Parent Note 12-13 Note 12 Receivables from subsidiaries and other fixed asset investments mDKK Receivables from subsidiaries Other investments Other receivables Total other fixed asset investments Cost at January 1, 2022 1,316 55 5 60 Exchange adjustment -65 0 Additions 1,410 0 Disposals -1 -1 Cost at December 31, 2022 2,661 55 4 59 Revaluations and impairment losses at January 1, 2022 0 -52 0 -52 Revaluations and impairment losses at December 31, 2022 0 -52 0 -52 Carrying amount at December 31, 2022 2,661 3 4 7 Cost at January 1, 2021 60 55 5 60 Exchange adjustment 20 0 Additions 1,236 0 Disposals 0 Cost at December 31, 2021 1,316 55 5 60 Revaluations and impairment losses at January 1, 2021 0 -52 0 -52 Revaluations and impairment losses at December 31, 2021 0 -52 0 -52 Carrying amount at December 31, 2021 1,316 3 5 8 Note 13 Inventories mDKK 2022 2021 Raw materials and consumables 155 93 Work in progress 18 12 Finished goods and goods for resale 170 121 Total inventories 343 226 Inventories Indirect production costs are recognized in the value of work in progress and finished goods at DKK 16 million (2021: DKK 12 million). Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 165 Parent Note 14-15 Note 14 Receivables mDKK 2022 2021 Trade receivables 532 418 Other receivables 41 27 Receivables 573 445 Receivables are classified as "assets measured at amortized cost" under IFRS 9. Trade receivables fall due as follows: mDKK Not due and prepaid bonus Due 1-15 days Due 16-90 days Due > 90 days Tot a l 2022 Trade receivables 513 11 10 4 538 Impairment provision -1 - -1 -4 -6 Trade receivables after impairment 512 11 9 0 532 Impairment provision % ** -0.2% 0.0% 10.0% 100.0% -1.1% Impairment provision, beginning of year -12 Impairment realized during the year 1 Impairment provision for the year 5 Tot a l -6 * Lifetime expected credit loss ** Historical average loss rate is < 1% mDKK Not due and prepaid bonus Due 1-15 days Due 16-90 days Due > 90 days Tot a l 2021 Trade receivables 375 26 26 3 430 Impairment provision -6 - -3 -3 -12 Trade receivables after impairment 369 26 23 - 418 Impairment provision % -1.6% 0.0% -11.5% -100.0% -2.8% Impairment provision, beginning of year -12 Impairment realized during the year 1 Impairment provision for the year -1 Tot a l -12 * Lifetime expected credit loss ** Historical average loss rate is < 1% Note 15 Share capital Reference is made to note 17 related to the consolidated financial statements. Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 166 Parent Note 16-18 Note 16 Deferred tax mDKK 2022 2021 Deferred tax at January 1 168 159 Change in deferred tax for the year 36 3 Deferred tax, no income effect for the year 2 4 Addition by acquisition 0 1 Adjustment of previous year 0 1 Deferred tax at December 31 206 168 Due within 1 year -11 -9 Deferred tax relates to: Intangible assets 32 36 Property, plant and equipment 130 110 Fixed asset investments 18 18 Current assets 33 12 Current liabilities -7 -8 Tot a l 206 168 Note 17 Other current payables mDKK 2022 2021 VAT, excise duties, etc 27 39 Other payables 163 210 Deposit, returnable packaging 22 26 Total other current payables 212 275 Deposit, returnable packaging is specified as follows: Balance at January 1 26 29 Adjustment for the year -4 -3 Balance at December 31 22 26 Comment The change in the deposit on returnable packaging for the year reflects the net exchange with customers of returnable packaging for the year less estimated wastage of returnable packaging in circulation. Note 18 Cash flow statement Adjustments for non-cash operating items: mDKK 2022 2021 Dividend received from subsidiaries and associates -1,025 -550 Financial income -62 -17 Financial expenses 71 36 Amortization and impairment of intangible assets 4 2 Depreciation of property, plant and equipment (see note 10 re leasing part) 176 151 Tax on the profit for the year 168 186 Profit and loss from sale of property, plant and equipment -10 -7 Share-based payments and remuneration 0 4 Tot a l -678 -195 Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 167 Parent Note 19-20 Note 19 Debts Changes to interest-bearing debts mDKK 12/31 2021 Payment Additions 12/31 2022 Interest-bearing long-term debts 2,167 -714 1,700 3,153 Interest-bearing short-term debts 1,715 -417 754 2,052 Total interest-bearing debt, mortgage and credit institutions 3,882 -1,131 2,454 5,205 Interest-bearing long-term leasing debt 69 -7 1 63 Interest-bearing short-term leasing debt 28 -28 32 32 Total interest-bearing leasing debt 97 -35 33 95 Tot a l 3,979 -1,166 2,487 5,300 mDKK 12/31 2020 Payment Additions 12/31 2021 Interest-bearing long-term debts 1,345 0 822 2,167 Interest-bearing short-term debts 1,129 -15 602 1,715 Total interest-bearing debt, mortgage and credit institutions 2,474 -15 1,424 3,882 Interest-bearing long-term leasing debt 38 -3 34 69 Interest-bearing short-term leasing debt 25 -25 28 28 Total interest-bearing leasing debt 63 -28 62 97 Tot a l 2,537 -43 1,486 3,979 Note 20 Contingent liabilities, security and other liabilities mDKK 2022 2021 Guarantees Guarantees relating to subsidiaries 312 682 Tot a l 312 682 Third-party guarantees 11 11 Security No security has been provided in respect of the Group's loan agreements with credit institutions. As regards security for loan agreements with mortgage credit institutes, reference is made to note 10. Contingent liabilities The outcome of pending legal actions is not expected to have any material impact on the financial position of the parent company or the Group. Parent Company Annual Report ROYAL UNIBREW Annual Report 2022 168 Parent Note 21-22 Note 21 Related parties Related parties comprise the Board of Directors and the Executive Managment as well as subsidiaries and asso- ciates. See the sections on Board of Directors and Executive Management on page 55 and Group structure on page 170. No shareholder exercises control. The following transactions have been made with related parties: mDKK 2022 2021 Revenue Sales to subsidiaries 777 681 Sales to associates 19 18 Costs Purchases from subsidiaries 141 123 Financial income and expenses Dividends received from associates 27 21 Dividends received from subsidiaries 538 529 Gain on sale of investments in associates 460 0 Interest received from subsidiaries 54 8 Executive Management Remuneration paid 16 19 Debt re cash-based bonus schemes 2 7 Debt re share-based bonus schemes 3 4 Board of Directors Remuneration 5 5 Intercompany balances on December 31 Loans to subsidiaries 2,661 1,316 Receivables from subsidiaries 230 56 Financial debts subsidiaries 1,188 1,184 Capital contributed to subsidiaries Guarantees and securities Guarantee for subsidiaries 312 682 Note 22 Events after the reporting period No events have occurred in the period from the balance sheet date until the presentation of the financial statements that materially affect the assessment of the parent company's financial state- ments. Parent Company Annual Report → Group structure • Quarterly financial highlights and ratios (Group) Definitions of financial highlights and ratios • Disclaimer Other information Other information Other information ROYAL UNIBREW Annual Report 2022 169169 Group structure Segment Country Ownership Currency Capital Parent company Royal Unibrew A/S, Denmark DKK 100,400,000 NORTHERN EUROPE Subsidiaries Aktieselskabet Cerekem International Ltd. Denmark 100% DKK 1,000,000 The Curious Company A/S Denmark 100% DKK 550,000 Nohrlund ApS Denmark 100% DKK 103,030 Baldersbrønde Bryggeri A/S Denmark 100% DKK 12,000,000 Solera Sweden AB Sweden 100% SEK 150,000 Albani Sverige AB Sweden 100% SEK 305,000 Multibev AB Sweden 100% SEK 100,000 Prime Wine Sweden AB Sweden 100% SEK 117,700 Mondo Wine Sweden AB Sweden 100% SEK 100,000 Solera Spirits and Beers AB Sweden 100% SEK 100,000 Solera Sales AB Sweden 100% SEK 50,000 Cuveco AB Sweden 100% SEK 100,000 Royal Unibrew Norge AS Norway 100% NOK 9,000,000 Solera Norge AS Norway 100% NOK 6,000,000 Engelstad Spirits AS Norway 100% NOK 30,000 Einar A. Engelstad AS Norway 100% NOK 100,000 Orbis Wines AS Norway 100% NOK 30,000 Eurowine AS Norway 100% NOK 101,000 Best Cellars AS Norway 100% NOK 1,000,000 Stenberg & Blom AS Norway 100% NOK 100,000 Winehouse Norway AS Norway 100% NOK 30,000 Segment Country Ownership Currency Capital Bottleneck Holding AS Norway 100% NOK 100,000 Top Cellars Wine Import AS Norway 100% NOK 30,000 Urban Beverages AS Norway 100% NOK 110,000 Multibev AS Norway 100% NOK 100,000 Sommelier AS Norway 100% NOK 200,000 Solera Uteliv AS Norway 100% NOK 100,000 Craft Drinks AS Norway 100% NOK 30,000 Vinkilden AS Norway 100% NOK 45,580 Cuveco AS Norway 100% NOK 100,000 Bacchus Wines AS Norway 100% NOK 30,000 Hansa Borg Bryggerier AS Norway 100% NOK 1,000,000 Nøgne Ø AS Norway 100% NOK 320,000 Olden Brevatn AS Norway 100% NOK 30,000 Vinestor AS Norway 100% NOK 2,222,000 Vinum AS Norway 100% NOK 900,000 Vinarius AS Norway 100% NOK 920,000 Plus Vini AS Norway 100% NOK 1,600,000 B & R Wine AS Norway 100% NOK 1,002,000 Servco AS Norway 100% NOK 100,000 Trulli Wines AS Norway 100% NOK 100,000 Vinestor Sweden AB Sweden 100% SEK 1,002,000 OMA Vin AS Norway 50% NOK 30,000 Divini AS Norway 100% NOK 1,500,000 Innvino AS Norway 100% NOK 200,000 AB Kalnapilio-Tauro Grupe Lithuania 100% EUR 1,153,337 Royal Unibrew Service UAB Lithuania 100% EUR 43,500 * not audited as not mandatory audit Activity Production, sales and distribution Sales and distribution Holding company Other Group structure Other information ROYAL UNIBREW Annual Report 2022 170 Segment Country Ownership Currency Capital OY Hartwall Ab Finland 100% EUR 13,240,140 Lapin Kulta Oy Finland 100% EUR 16,819 SIA "Cido Grupa" Latvia 100% EUR 1,117,054 SIA Lacplesa Alus Latvia 100% EUR 102,844 SIA Bauskas Alus Latvia 100% EUR 932,064 Tanker Brewery Estonia 100% EUR 163,405 Associates Grønlandskonsortiet I/S Denmark 50% DKK Nuuk Imeq A/S Greenland 32% DKK 38,000,000 Rebæl ApS Denmark 25% DKK 67,227 WESTERN EUROPE Subsidiaries Ceres S.p.A Italy 100% EUR 206,400 Terme di Crodo S.r.l. Italy 100% EUR 19,000,000 Etablissement Geyer-Fréres S.A France 100% EUR 159,687 INTERNATIONAL Subsidiaries Ferell sp. z.o.o. Poland 100% PLN 120,200 Segment Country Ownership Currency Capital Supermalt UK Ltd. UK 100% GBP 9,700,000 Vitamalt (West Africa) Ltd. UK 100% GBP 10,000 Royal Unibrew Nigeria Ltd. Nigeria 100% NGN 10,000,000 The Danish Brewery Group Inc. USA 100% USD 100,000 Bruce Ashley Group Inc. Canada 100% CAD 1,865,100 Amsterdam Brewery Co. Ltd. Canada 100% CAD 17,600,100 * not audited as not mandatory audit Activity Production, sales and distribution Sales and distribution Holding company Other Other information ROYAL UNIBREW Annual Report 2022 171 Quarterly financial highlights and ratios (Group) Quarterly nancial highlights and ratios Q1 Q2 Q3 Q4 mDKK (unaudited) 2022 2021 2022 2021 2022 2021 2022 2021 Sales (million hectoliters) 2.7 2.5 3.8 3.4 3.8 3.4 3.1 3.0 Income statement Net revenue 2,162 1,605 3,211 2,300 3,296 2,434 2,818 2,407 EBITDA 317 318 623 609 612 697 445 397 EBITDA margin (%) 14.7 19.8 19.4 26.5 18.6 28.6 15.8 16.5 Earnings before interest and tax (EBIT) 209 229 511 521 489 596 307 306 EBIT margin (%) 9.7 14.3 15.9 22.7 14.8 24.5 10.9 12.7 Result after tax from investments in associates -4 1 355 14 6 13 5 9 Financial income and expenses -10 -7 -15 -9 -22 -9 -46 -17 Profit before tax 195 223 851 526 474 600 265 298 Net profit for the period 154 177 772 417 381 474 184 230 Balance sheet Non-current assets 8,780 7,031 11,143 7,123 11,363 8,591 11,416 8,771 Total assets 11,335 8,618 14,651 9,101 14,479 10,836 14 ,474 10,914 Equity 3,442 3,320 4,574 2,889 4,919 3,284 5,158 3,342 Net interest-bearing debt 4,012 2,448 4,416 2,618 4,364 3,398 4,460 3,536 Net working capital -566 -682 -1,080 -990 -2,181 -1,027 -770 -1,102 Invested capital 8,064 6,172 9,815 5,908 10,149 7,226 10,451 7,449 Cash flows From operating activities -283 -15 845 900 479 619 94 249 From investing activities -76 -87 -176 -115 -175 -68 -131 -187 Free cash flow -359 -102 669 785 304 551 -37 62 Financial ratios (%) Free cash flow as a percentage of net revenue -17 -6 21 34 9 23 -1 3 Cash conversion -233 -58 87 188 80 116 -20 27 Net interest-bearing debt/EBITDA* 2.0 1.6 2.2 1.3 2.2 1.7 2.2 1.7 Equity ratio 30 39 31 32 34 30 36 31 Ratios comprised by the "Recommendations and Financial Ratios" issued by the Chartered Financial Analyst Society Denmark's Committee for Accounting standards have been calculated according to the recommendations. Definitions of financial highlights and ratios are provided on page 173. * running 12 months Other information ROYAL UNIBREW Annual Report 2022 172 Definitions of financial highlights and ratios Denitions of nancial highlights and ratios EBITDA Earnings before interest, tax, depreciation, amortization and impairment losses as well as profit from sale of property, plant and equipment and amortization of intangible assets. EBITDA margin EBITDA as a % of net revenue. EBIT Earnings before interest and tax. EBIT margin EBIT as a percentage of net revenue. Net interest-bearing debt Mortgage debt and debt to credit institutions less cash at bank and in hand, interest-bearing current investments and receivables. Net working capital Inventories + receivables - current liabilities except for corporation tax receivable/payable as well as mortgage debt and debt to credit institutions. Invested capital Equity + minority interests + provisions + net interest-bearing debt - finan- cial assets. Investing activities, cash flow Dividend received from associates, purchase net of sale of property, plant and equipment less acquisitions and net proceed from intangible assets and fixed assets investments. Investing activities, free cash flow Dividend received from associates, purchase net of sale of property, plant and equipment less net cash used in investing activities excluding acquisitions and net proceed from intangible assets and fixed assets investments. Free cash flow Cash flow from operating activities less investing activities. Earnings per share Parent company shareholders' share of profit for the year/average number of shares in circulation. Net cash used in investing activities The sum of dividend received from associates, sale and purchase of property, plant and equipments. Diluted earnings per share Parent company shareholders' share of profit for the year/average number of shares in circulation including restricted shares "in-the-money". Free cash flow per share Free cash flow from operating activities/average number of shares in circulation. Dividend per share Proposed dividend per share. Return on invested capital including goodwill (ROIC) EBIT net of tax as a percentage of average invested capital. Return on invested capital excluding goodwill (ROIC) EBIT net of tax as a percentage of average invested capital excluding goodwill. Free cash flow as a percentage of net revenue Free cash flow as a percentage of net revenue. Capex as a percentage of net revenue Purchase net of sale of property, plant and equipment plus repayment on lease facilities as a percentage of net revenue. Cash conversion Free cash flow as a percentage of net profit for the year. Net interest-bearing debt/ EBITDA before special items The ratio of net interest-bearing debt at year end to EBITDA. Equity ratio Equity at year end as a percentage of total assets. Return on equity (ROE) Consolidated profit after tax as a percentage of average equity. Dividend payout ratio (DPR) Dividend calculated for the full share capital as a percentage of the parent company shareholders' share of net profit for the year. Organic growth Growth adjusted for acquisitions and divestments, and measured in local currencies. Other information ROYAL UNIBREW Annual Report 2022 173 Disclaimer Disclaimer This annual report contains forward-looking statements, including statements about the Group’s sales, revenue, earnings, spending, margins, cash flows, inventories, products, actions, plans, strate- gies, objectives and guidance with respect to the Group’s future operating results. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words or phrases like believe, anticipate, expect, estimate, intend, plan, project, will be, will continue, likely to result, could, may, might, or any variations of such words or other words with similar mean- ings. Any such statements involve known and unknown risks, esti- mates, assumptions and uncertainties that could cause the Group’s actual results, performance or industry results to differ materially from the results expressed or implied in such forward-looking statements. Royal Unibrew assumes no obligation to update or adjust any such forward-looking statements (except for as required under the disclosure requirements for listed companies) to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements. Some important risk factors that may have direct bearing on the Group’s actual results include, but are not limited to: economic and political uncertainty (including interest rates and exchange rates), financial and regulatory developments, development in the demand for the Group’s products, introduction of and demand for new products, changes in the competitive environment and the industry in which the Group operates, changes in consumer preferences, increasing industry consolidation, the availability and pricing of raw materials and packaging materials, cost of energy, production- and distribution-related issues, information technology failures, breach or unexpected termination of contracts, price reductions resulting from market-driven price reductions, determination of fair value in the opening balance sheet of acquired entities, litigation, pandemic, environmental issues and other unforeseen factors. New risk factors may emerge in the future, which the Group cannot predict. Furthermore, the Group cannot assess the impact of each factor on the Group’s business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Accordingly, forward-looking statements should not be relied on as prediction of actual results. Other information ROYAL UNIBREW Annual Report 2022 174 Design and production: Noted Royal Unibrew A/S Faxe Alle 1 DK-4640 Faxe Tel +45 56 77 15 00 CVR No.: 41 95 67 12 Financial year: January 1 – December 31 Registered municipality: Faxe Homepage: www.royalunibrew.com E-mail: [email protected] Annual reportAuditor's report on audited financial statementsParsePort XBRL Converter2022-01-012022-12-312021-01-012021-12-31529900D69KFL8IAP8Q63Royal Unibrew A/SReporting class DDKFaxe2022-03-01529900D69KFL8IAP8Q6341956712Royal Unibrew A/SFaxe Allé 14640 FaxeOpinionBasis for 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