Cloetta — Interim / Quarterly Report 2020

Oct 22, 2020

Interim report Q3 July–September 2020

Stockholm, 22 October 2020

"While we expect that there will be continued volatility and uncertainty due to COVID-19, I firmly believe that our strategy, combined with our strong brands and market presence, positions us well to emerge stronger from the crisis."

Henri de Sauvage-Nolting, President and CEO

Third quarter, July–September 2020

• Net sales for the quarter decreased by 9.5 per cent to SEK 1,474m (1,629), including a negative effect of 2.2 per cent due to exchange rate fluctuations.
• Sales of branded packaged products increased organically by 1.7 per cent during the quarter, comprised of 0.9 per cent for July, –0.4 per cent for August and 4.1 per cent for September.
• Sales of pick & mix declined organically by 31.4 per cent during the quarter, comprised of –27.2 per cent for July, –37.1 per cent for August and –29.6 per cent for September.

• Operating profit amounted to SEK 87m (195). Profit for the period amounted to SEK 46m (130). Operating profit, adjusted for items affecting comparability, amounted to SEK 130m (200).

• Cash flow from operating activities was SEK 313m (255).

• Net debt/EBITDA ratio was 2.6x (2.5).
• Provided that the COVID-19 restrictions do not change significantly during the fourth quarter, Cloetta expects sales of branded packaged products to be around the prior year's level and that sales of pick & mix will continue to gradually improve. Cloetta has also assessed that profitability levels will gradually get stronger, ending the year on double-digit margins.
• The Board of Directors has decided to call an Extraordinary General Meeting to resolve on a dividend of SEK 0.50 per share for the 2019 financial year.

Key ratios

		Third quarter			Nine months		Rolling 12	Full year
SEKm	Jul–Sep 2020	Jul–Sep 2019	Change, %	Jan–Sep 2020	Jan–Sep 2019	Change, %	Oct 2019– Sep 2020	2019
Net sales	1,474	1,629	–9.5¹	4,229	4,771	–11.4¹	5,951	6,493
Operating profit, adjusted	130	200	–35.0	392	527	–25.6	608	743
Operating profit margin, adjusted, %	8.8	12.3	–3.5-pts	9.3	11.0	–1.7-pts	10.2	11.4
Operating profit (EBIT)	87	195	– 55.4	341	518	–34.2	550	727
Operating profit margin (EBIT margin), %	5.9	12.0	– 6.1-pts	8.1	10.9	–2.8-pts	9.2	11.2
Profit before tax	63	175	– 64.0	260	435	– 40.2	473	648
Profit for the period	46	130	– 64.6	198	326	–39.3	370	498
Earnings per share, basic, SEK	0.16	0.45	– 64.4	0.69	1.14	–39.5	1.29	1.74
Earnings per share, diluted, SEK	0.16	0.45	– 64.4	0.69	1.14	–39.5	1.29	1.74
Net debt/EBITDA, x (Rolling 12 months)	2.6	2.5	4.0	2.6	2.5	4.0	2.6	2.2
Free cash flow	252	199	26.6	114	269	– 57.6	383	538
Cash flow from operating activities	313	255	22.7	341	406	–16.0	659	724

1 Organic growth at constant exchange rates and comparable units was –7.3 per cent for the quarter and –10.8 per cent for the first three quarters of the year. See further under Net sales on page 4.

2

Disclosures

Contact

Continued recovery in a challenging environment

Growth in branded packaged products along with continued recovery for pick & mix sales.

At Cloetta we remain focused on the safety and wellbeing of our employees, customers, and consumers. I am delighted to see that we have continued to avoid material disruptions to our supply chain and that we have been able to maintain business continuity efficiently by adapting our ways of working.

Although the measures initiated by local authorities eased during the third quarter, they continued to have an impact both on our sales channels and consumer behavior. With that said, our adjusted actions are delivering and have enabled us to grow branded packaged products. The sales of pick & mix also improved compared with the second quarter, although consumer demand still remains subdued.

While we expect that there will be continued volatility and uncertainty due to COVID-19, I firmly believe that our strategy, combined with our strong brands and market presence, positions us well to emerge stronger from the crisis.

We have strong local brands that consumers desire and we have a supply chain that has operated efficiently.

Developments during the third quarter

Sales for the quarter decreased by 9.5 per cent, of which organic growth accounted for –7.3 per cent and exchange rate differences for –2.2 per cent. Sales of branded packaged products increased organically by 1.7 per cent, driven by successful marketing and increased traffic in all channels but travel retail. Sales of pick & mix declined organically by 31.4 per cent during the quarter, mainly due to the lower consumer demand.

The decrease in the adjusted operating profit is attributable to lower gross profit from lower sales volumes as well as under-absorption of costs due to lower production. The decrease in gross profit was partially mitigated by continued strong cost control and lower costs for incentive programs of approximately SEK 45m.

Expected impact of COVID-19

Following the easing of COVID-19 restrictions, the majority of the previously closed pick & mix fixtures are now open, and consumers have also gradually returned to other sales channels than grocery stores. At the same time, the pandemic is still ongoing, and it is uncertain to what extent a second wave of restrictions may impact some of our markets.

Provided that the COVID-19 restrictions do not change significantly during the fourth quarter, we expect sales of branded packaged products to be at around the prior year's level and that sales of pick & mix will continue to gradually improve. However, we foresee a delay of several quarters before consumer demand for pick & mix returns to previous levels.

Additionally, we expect that profitability levels will gradually get stronger, ending the year on double-digit margins as a result of continued sales recovery, improved gross margins and lower indirect costs.

Well positioned for long-term growth

During the third quarter we increased the investments in our brands, which helped deliver strong growth in our branded candy and chocolate categories as well as strengthened our competitive position for the future. We continued the roll-out of the re-positioning of CandyKing to build sustainable profitability, whilst adding additional activities to regain consumer confidence in the pick & mix category. Furthermore, we built on our newly launched sustainability strategy by joining the Science Based Targets Initiative, for which we are preparing carbon footprint targets for 2025 and 2030.

During the third quarter many initiatives were taken within the scope of our VIP+ cost

program. A reorganization was initiated in Sweden to increase the profitability of the market and drive operational improvements. We also announced the closure of our nut manufacturing in Helsingborg and the decision to outsource production to a third-party supplier. Furthermore, we continued to execute initiatives for sustainable cost savings and temporary cost avoidances, delivering substantially reduced indirect costs compared to the prior year.

We continued to focus on managing our working capital, resulting in strong cash flow delivery during the quarter. This includes reducing our safety inventory levels through planned production stoppages while maintaining healthy service levels towards our customers.

Given the uncertain market conditions earlier in the year, the Board of Directors withdrew its dividend proposal. Since the consequences of the COVID-19 pandemic can now be better assessed and given Cloetta's strong balance sheet and resilient business model, the Board of Directors has now proposed a dividend of SEK 0.50 per share.

Despite a challenging year, the COVID-19 pandemic has also demonstrated the many strengths of Cloetta. We have strong local brands that consumers desire and we have a supply chain that has operated efficiently. I would especially like to thank all our employees for their strong commitment as we continue to execute our strategy, and I am convinced that Cloetta remains well positioned for long-term growth and profitability.

Henri de Sauvage-Nolting, President and CEO

Financial overview

Third quarter developments COVID-19

At Cloetta, various measures have been taken to mitigate the shortterm and long-term impact of the COVID-19 pandemic. We are monitoring the situation closely and when needed we are adapting our actions according to local government advice and regulations, whilst at the same time striving to mitigate any disruptions to our business.

Impact on risk assessment, financial position and financial performance

As a result of the current economic circumstances, Cloetta assesses that compared to last year, the risk of a negative financial impact in connection to a declining business has increased. The negative impact of current market conditions on Cloetta's business and the expected time for the situation to normalize have resulted in an increased valuation risk for goodwill and trademarks, as recognized on the balance sheet. Cloetta has updated its impairment analysis for goodwill and trademarks in the quarter, and performed a sensitivity analysis to assess the impact of potential movements of various input factors such as the long-term growth rate and the discounting factor. Cloetta performed a further analysis and assessed the impact of different scenarios, taking into consideration the uncertainties in the expected future financial performance and business recovery for the part of the business that has been impacted most. Although the impact per cash generating unit (CGU) varies, the headroom per CGU remains positive. Cloetta is therefore of the opinion that no impairment on goodwill or trademarks should be recognized. Cloetta will continue to closely monitor developments to assess the impact they have on the valuation of goodwill, trademarks and on other non-financial and financial assets going forward.

During the first three quarters of the year exchange rates have been volatile and as a result impacted Cloetta's financial performance significantly. Cloetta assesses that the risk related to volatility of exchange rates relevant to Cloetta, and the resulting financial impact, increased compared to the assessment made for 2019 year-end reporting purposes and disclosed in the Annual and Sustainability report 2019.

Although an increase in market interest rates has been noted versus year end, the interest rate risks and refinancing risks are assessed to be in line with the assessment made for 2019 year-end reporting and as disclosed in the Annual and Sustainability report 2019 for the short term. Related to the uncertainty in the market, it is Cloetta's assessment that interest rate risks and refinancing risk have increased for the medium term which might result in higher interest costs.

Government support

The authorities in the countries where Cloetta operates have taken different measures to address the financial consequences of the COVID-19 pandemic on companies. In most cases, measures are conditional and subject to change or need further clarification. In general these can be divided into measures to support short-term and medium-term liquidity impacting cash flows and measures for cost compensation impacting cash flows and results. In a number of countries Cloetta applied for support and recognized the financial impact of this insofar as it is deemed that all conditions have been, or will be met. The total amount recognized in the profit and loss account is SEK 2m in the quarter and SEK 8m in the first three quarters of the year. The received government support of SEK 1m for short-term furloughed workers in Sweden has not been recognized in the profit and loss account and will be repaid to the Swedish government in conjunction with an established dividend. The total amount of support applied for to support short-term and medium-term liquidity at the end of the quarter is SEK 10m and will be paid in the fourth quarter of 2020 or in the first quarter of 2021.

For more information on measures taken by Cloetta in relation to COVID-19, please visit www.cloetta.com.

Operating profit, adjusted SEKm

Words from the President Definitions Overview

Net sales

Net sales for the third quarter decreased by SEK 155m to SEK 1,474m (1,629) compared to the same period of last year. Organic growth was –7.3 per cent and changes in exchange rates were –2.2 per cent.

Changes in net sales, %	Jul–Sep 2020	Jan–Sep 2020
Organic growth	–7.3	–10.8
Changes in exchange rates	–2.2	–0.6
Total	–9.5	–11.4

Monthly organic sales growth, %	July 2020	August 2020	September 2020
Total	–6.6	–10.7	–4.9
Branded packaged products	0.9	–0.4	4.1
Pick & mix	–27.2	–37.1	–29.6

Gross profit

Gross profit amounted to SEK 434m (587), which equates to a gross margin of 29.4 per cent (36.0). The gross profit decrease was driven by lower sales volumes as well as under-absorption of costs due to lower production, of which SEK 35m was phased from the second quarter. The gross profit was further negatively impacted by changes in foreign exchange rates as well as by SEK 19m in one-off restructuring costs related to the closure of the Helsingborg factory.

Operating profit

Operating profit amounted to SEK 87m (195). Operating profit, adjusted for items affecting comparability, amounted to SEK 130m (200). The decrease in operating profit, adjusted, was driven by lower gross profit and increased marketing investments, partly mitigated by continued strong cost control and lower costs for incentive programs of approximately SEK 45m.

Items affecting comparability

Operating profit for the third quarter includes items affecting comparability of SEK –43m (–5), which are mainly costs related to the impairment of assets in connection to the outsourcing of the nuts manufacturing and additions to the reorganization provisions for the outsourcing of the nuts manufacturing and reorganization in Sweden.

Net financial items

Net financial items for the quarter amounted to SEK –24m (–20). Interest expenses related to external borrowings were SEK –9m (–8), exchange differences on cash and cash equivalents were SEK –11m (–8) which mainly related to the development of the Swedish and Norwegian krona against the euro during the quarter. Other financial items amounted to SEK –4m (–4). Of the total net financial items SEK 6m (–8) is non-cash in nature.

Profit for the period

Profit for the period was SEK 46m (130), which equates to basic and diluted earnings per share of SEK 0.16 (0.45).

Income tax for the period was SEK –17m (–45). The effective tax rate for the quarter was 27.0 per cent (25.7). International tax rate differences, non-deductible expenses and differences between expected and actual tax filings related to the previous year had a negative impact on the effective tax rate for the quarter.

Free cash flow

The free cash flow was SEK 252m (199). Cash flow from operating activities before changes in working capital was SEK 162m (249). The reduction compared to last year is due to lower operating profit and increased corporate income tax payments due to less availability of tax losses carried forward. The cash flow from changes in working capital was SEK 151m (6). The cash flow from investments in property, plant and equipment and intangible assets was SEK –61m (–56).

Cash flow from changes in working capital

Cash flow from changes in working capital was SEK 151m (6). The cash flow from changes in working capital was positively impacted by the decrease in inventories of SEK 162m (11) and an increase in payables amounting to SEK 112m (76) which were partly offset by an increase in receivables for an amount of SEK –123m (–81).

Cash flow from other investing activities

Cash flow from other investing activities was SEK 0m (0).

Cash flow from financing activities

Cash flow from financing activities was SEK –19m (–68). The cash flow from financing activities was related to net proceeds and repayments of loans from credit institutions and commercial papers of SEK –1m (–50) and payments of lease liabilities of SEK –18m (–18).

Developments during the year

Net sales

Net sales for the first three quarters of the year decreased by SEK 542m to SEK 4,229m (4,771) compared to the same period of last year. Organic growth was –10.8 per cent and changes in exchange rates were –0.6 per cent.

Gross profit

Gross profit amounted to SEK 1,434m (1,732), which equates to a gross margin of 33.9 per cent (36.3). The gross profit decrease was driven by lower sales volumes, under-absorption of costs due to lower production and the negative impact of changes in foreign exchange rates.

Operating profit

Operating profit amounted to SEK 341m (518). Operating profit, adjusted for items affecting comparability, amounted to SEK 392m (527). The decrease in operating profit, adjusted, was driven by lower gross profit, partly mitigated by continued strong cost control and lower costs for incentive programs of approximately SEK 45m.

Items affecting comparability

Operating profit for the first three quarters of the year includes items affecting comparability of SEK –51m (–9), which are mainly costs related to the impairment of assets in connection to the outsourcing of the nuts manufacturing and additions to the reorganization provisions for the outsourcing of the nuts manufacturing and reorganization in Sweden.

Net financial items

Net financial items for the first three quarters of the year amounted to SEK –81m (–83). Interest expenses related to external borrowings were SEK –24m (–23), exchange differences on cash and cash equivalents were SEK –44m (–32) which mainly related to the development of the Swedish and Norwegian krona against the euro during the first three quarters of the year. Other financial items amounted to SEK –13m (–28). Of the total net financial items SEK –2m (–56) is non-cash in nature.

Profit for the period

Profit for the period was SEK 198m (326), which equates to basic and diluted earnings per share of SEK 0.69 (1.14).

Income tax for the period was SEK –62m (–109). The effective tax rate for the first three quarters of the year was 23.8 per cent (25.1). International tax rate differences, non-deductible expenses and an adjustment in prior year filing positions had a negative impact on the effective tax rate.

Free cash flow

The free cash flow was SEK 114m (269). Cash flow from operating activities before changes in working capital was SEK 450m (654). The reduction compared to last year is due to lower operating profit and increased corporate income tax payments due to less availability of tax losses carried forward. The cash flow from changes in working capital was SEK –109m (–248). The cash flow from investments in property, plant and equipment and intangible assets was SEK –227m (–137).

Cash flow from changes in working capital

Cash flow from changes in working capital was SEK –109m (–248). The cash flow from changes in working capital was negatively impacted by the increase in inventories of SEK –94m (–116) and a decrease in payables for an amount of SEK –19m (89) which were partly offset by a decrease in receivables amounting to SEK 4m (–221).

Cash flow from other investing activities

Cash flow from other investing activities was SEK 0m (–144). In the first quarter of 2019 an amount of SEK –146m was related to the final settlement of the contingent earn-out consideration arising from the acquisition of Candyking Holding AB and its subsidiaries.

Cash flow from financing activities

Cash flow from financing activities was SEK –315m (–344). The cash flow from financing activities was related to net proceeds and repayments of loans from credit institutions and commercial papers of SEK –245m (–1) and payments of lease liabilities of SEK –54m (–56). Other cash flows from financing activities amounted to SEK –16m (0). In the second quarter of 2019 a net amount of SEK –287m was related to the dividend distribution.

Financial position

Consolidated equity at 30 September 2020 amounted to SEK 4,401m (4,102), which equates to SEK 15.2 (14.2) per share. Net debt at 30 September 2020 was SEK 2,285m (2,556).

Long-term borrowings totalled SEK 122m (911) and consisted of SEK 122m (113) in non-current lease liabilities, SEK 0m (800) in gross non-current loans from credit institutions, and SEK 0m (–2) in capitalized transaction costs.

Total short-term borrowings amounted to SEK 2,436m (1,904) and consisted of SEK 2,121m (1,337) in gross current loans from credit institutions, SEK 250m (500) in commercial papers, SEK 66m (67) in current lease liabilities, SEK –2m (–1) in capitalized transaction costs and accrued interest on borrowings from credit institutions and commercial papers for an amount of SEK 1m (1).

The current loans from credit institutions mature in the third quarter of 2021. The internal alignment for the refinancing of these loans has been initiated and will continue in the fourth quarter of 2020. It is the aim of Cloetta to have the refinancing formalised during the first quarter of 2021. The extension of a loan from credit institutions in the previous quarter and the improved market for commercial papers give sufficient confidence that Cloetta will be able to refinance the loans at competitive terms.

SEKm	30 Sep 2020	30 Sep 2019	31 Dec 2019
Gross non-current loans from credit institutions	–	800	800
Gross current loans from credit institutions	2,121	1,337	1,306
Commercial papers	250	500	499
Lease liabilities	188	180	204
Derivative financial instruments (non-current and current)	55	75	71
Interest payable	1	1	1
Gross debt	2,615	2,893	2,881
Cash and cash equivalents	–330	–337	– 579
Net debt	2,285	2,556	2,302

Cash and cash equivalents at 30 September 2020 amounted to SEK 330m (337). At 30 September 2020 Cloetta had an unutilized credit facility of SEK 1,269m (1,283) and the possibility to issue additional commercial papers for an amount of SEK 750m (500).

Other disclosures

Seasonal variations

Cloetta's sales and operating profit are subject to some seasonal variations. Sales in the first and second quarters are affected by the Easter holiday, depending on in which quarter it occurs. In the fourth quarter, sales are usually higher than in the first three quarters of the year, which is mainly attributable to the sale of products in Sweden in connection with the holiday season.

Employees

The average number of employees during the quarter was 2,624 (2,652). The decrease in number of employees is mainly related to changes in the Swedish organisation.

The Board's proposed dividend

In March 2020, the Board of Directors of Cloetta AB decided to withdraw its previous proposal to the Annual General Meeting of a dividend of SEK 1.00 per share, as a consequence of the uncertainty at the time due to the global outbreak of COVID-19. As the consequences of the COVID-19 pandemic now can be better assessed, and considering Cloetta's strong balance sheet and resilient business model that is cash generative even in volatile times, the Board of Directors has proposed that the general meeting resolves on a dividend to the shareholders of the company of SEK 0.50 (1.00) per share, corresponding to around

29 per cent of profit for the year. In 2018, the dividend was 60 per cent of profit for the year.

The proposed date for the record is 5 November 2020 and payment is expected to be made on 10 November 2020. The ambition is to continue using future cash flows for payment of share dividends, while at the same time providing financial flexibility for complementary acquisitions. The long-term target to distribute 40–60 per cent of profit after tax continues to apply.

Extraordinary General Meeting

The Extraordinary General Meeting of Cloetta AB will be held on Tuesday 3 November 2020. Notice of the EGM was published on 6 October 2020 at www.cloetta.com.

Events after the balance sheet date

After the end of the reporting period, no significant events have taken place that could affect the company's operations.

Examples of new launches during the third quarter

FINLAND Talvi – Chocolates with soft blueberry centers Malaco – Licorice Allsorts Malaco – Licorice mix Aakkoset – Gift boxes Sisu potku – Salty or sweet licorice with vitamin B3 and magnesium

Lonka – Soft fudge

SWEDEN

Läkerol – Raspberry licorice

Juleskum – Blueberry marshmallows Juleskum – Christmas trees with vanilla marshmallow & fruit jelly Plopp – Chocolate bars with Ahlgrens Bilar marshmallows Plopp – Chocolate bars with festive marshmallows

T R AV E L R E TA I L The Jelly Bean Factory – Festive mix

Key business priorities

Prioritized activities for achieving organic growth and a 14% operating profit margin, adjusted

We believe in the Power of True Joy Sustainability

For you, for the people and for the planet

Our three pillars

We provide choices for you

We create joyful moments through our products. We aim to meet the variety of consumer preferences.

We care about people

We support our employees, our suppliers and farmers, as well as our communities.

We reduce our environmental footprint

Our business depends on the environment. We own our responsibility for our impacts; from sourcing to packaging.

Q3 highlights

The joy of nature Community

• We're deepening our understanding of the holistic sustainability impact of switching colors and flavors to natural sources.

involvement

• We're mapping where Cloetta is involved in the local communities and finding ways to support and communicate ongoing and new efforts.

Climate action

• We committed to join the Science Based Targets initiative to develop targets for reducing our total carbon footprint.

The Board of Directors hereby gives its assurance that the interim report provides a true and fair view of the business activities, financial position and results of operations of the Group and the Parent Company, and describes the significant risks and uncertainties to which the Parent Company and the Group companies are exposed.

Stockholm, 22 October 2020 Cloetta AB (publ)

The Board of Directors

Auditor's report

Cloetta AB (publ) Org nr 556308-8144

Introduction

We have reviewed the condensed interim financial information (interim report) of Cloetta AB (publ), as of 30 September 2020 and the nine-month period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of Review

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures

performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company.

Malmö 2020-10-22

Öhrlings PricewaterhouseCoopers AB

Sofia Götmar-Blomstedt Erik Bergh Authorized Public Accountant Authorized Public Accountant Partner in charge

Financial statements in summary

Consolidated profit and loss account

		Third quarter		Nine months	Rolling 12	Full year
SEKm	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Oct 2019– Sep 2020	2019
Net sales	1,474	1,629	4,229	4,771	5,951	6,493
Cost of goods sold	–1,040	–1,042	–2,795	–3,039	–3,868	– 4,112
Gross profit	434	587	1,434	1,732	2,083	2,381
Selling expenses	–248	–244	– 698	–740	–969	–1,011
General and administrative expenses	–99	–148	–395	– 474	– 564	– 643
Operating profit	87	195	341	518	550	727
Exchange differences on cash and cash equivalents in foreign currencies	–11	– 8	– 44	–32	–31	–19
Other financial income	0	1	2	2	2	2
Other financial expenses	–13	–13	–39	– 53	– 48	– 62
Net financial items	–24	–20	–81	–83	–77	–79
Profit before tax	63	175	260	435	473	648
Income tax	–17	– 45	– 62	–109	–103	–150
Profit for the period	46	130	198	326	370	498
Profit for the period attributable to:
Owners of the Parent Company	46	130	198	326	370	498
Earnings per share, SEK
Basic1	0.16	0.45	0.69	1.14	1.29	1.74
Diluted1	0.16	0.45	0.69	1.14	1.29	1.74
Number of shares at end of period	288,619,299	288,619,299	288,619,299	288,619,299	288,619,299	288,619,299
Average number of shares (basic)1	286,633,680	286,538,416	286,576,661	286,459,847	286,567,047	286,578,395
Average number of shares (diluted)1	286,841,036	286,695,456	286,740,991	286,553,018	286,723,421	286,724,049

1 Cloetta entered into forward contracts to repurchase own shares to fulfill its future obligation to deliver the shares to the participants of the long-term share-based incentive plan. The outstanding contracts at the reporting date consist of one contract for 1,985,619 shares at a share price of SEK 24.90.

Consolidated statement of comprehensive income

		Third quarter		Nine months	Rolling 12	Full year
SEKm	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Oct 2019– Sep 2020	2019
Profit for the period	46	130	198	326	370	498
Other comprehensive income
Remeasurement of defined benefit pension plans	7	– 47	–20	–103	3	– 80
Income tax on remeasurement of defined benefit pension plans	–1	11	4	23	–2	17
Items that will never be reclassified to profit or loss for the period	6	–36	–16	–80	1	–63
Currency translation differences	40	68	42	227	– 82	103
Hedge of a net investment in a foreign operation	–11	–19	–24	– 65	17	–24
Income tax on hedge of a net investment in a foreign operation	3	4	5	13	–3	5
Items that are or may be reclassi fied to profit or loss for the period	32	53	23	175	–68	84
Total other comprehensive income	38	17	7	95	–67	21
Total comprehensive income, net of tax	84	147	205	421	303	519
Total comprehensive income for the period attributable to:
Owners of the Parent Company	84	147	205	421	303	519

Net financial items

		Third quarter		Nine months	Rolling 12	Full year
SEKm	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Oct 2019– Sep 2020	2019
Exchange differences on cash and cash equivalents in foreign currencies	–11	–8	–44	–32	–31	–19
Other financial income, third parties	0	1	1	2	1	2
Unrealized gains on single currency interest rate swaps	0	–	1	–	1	0
Other financial income	0	1	2	2	2	2
Interest expenses third-party borrowings and realized losses on single currency interest rate swaps	–9	– 8	–24	–23	–30	–29
Interest expenses, contingent earn-out considerations	–	–	–	– 4	–	– 4
Amortization of capitalized transaction costs	0	0	–1	–1	–1	–1
Unrealized losses on single currency interest rate swaps	0	2	–1	– 4	2	–1
Other financial expenses	– 4	–7	–13	–21	–19	–27
Other financial expenses	–13	–13	–39	–53	–48	–62
Net financial items	–24	–20	–81	–83	–77	–79

Condensed consolidated balance sheet

SEKm	30 Sep 2020	30 Sep 2019	31 Dec 2019
ASSETS
Non-current assets
Intangible assets	5,708	5,779	5,684
Property, plant and equipment	1,623	1,564	1,559
Deferred tax asset	25	13	9
Other financial assets	3	8	7
Total non-current assets	7,359	7,364	7,259
Current assets
Inventories	986	903	888
Other current assets	944	1,072	934
Cash and cash equivalents	330	337	579
Total current assets	2,260	2,312	2,401
TOTAL ASSETS	9,619	9,676	9,660
EQUITY AND LIABILITIES
Equity	4,401	4,102	4,197
Non-current liabilities
Long-term borrowings	122	911	939
Deferred tax liability	814	801	803
Derivative financial instruments	1	6	3
Provisions for pensions and other long-term employee benefits	522	522	499
Provisions	6	5	5
Total non-current liabilities	1,465	2,245	2,249
Current liabilities
Short-term borrowings	2,436	1,904	1,870
Derivative financial instruments	54	69	68
Other current liabilities	1,235	1,349	1,271
Provisions	28	7	5
Total current liabilities	3,753	3,329	3,214
TOTAL EQUITY AND LIABILITIES	9,619	9,676	9,660

Condensed consolidated statements of changes in equity

		Nine months	Full year
SEKm	Jan–Sep 2020	Jan–Sep 2019	2019
Equity at beginning of period	4,197	3,968	3,968
Profit for the period	198	326	498
Other comprehensive income	7	95	21
Total comprehensive income	205	421	519
Transactions with owners
Forward contract to repurchase own shares	–	– 6	– 6
Share-based payments	–1	6	3
Dividend1	–	–289	–289
Dividend on outstanding shares in forward contracts to repurchase own shares	–	2	2
Total transactions with owners	–1	–287	–290
Equity at end of period	4,401	4,102	4,197

1 The dividend paid in 2019 comprised an ordinary dividend of SEK 1.00 per share.

Condensed consolidated cash flow statement

		Third quarter		Nine months	Rolling 12	Full year
SEKm	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Oct 2019– Sep 2020	2019
Cash flow from operating activities before changes in working capital	162	249	450	654	704	908
Cash flow from changes in working capital	151	6	–109	–248	– 45	–184
Cash flow from operating activities	313	255	341	406	659	724
Cash flows from investments in property, plant and equipment and intangible assets	– 61	– 56	–227	–137	–276	–186
Cash flow from other investing activities	0	0	0	–144	0	–144
Cash flow from investing activities	–61	–56	–227	–281	–276	–330
Cash flow from operating and investing activities	252	199	114	125	383	394
Cash flow from financing activities	–19	–68	–315	–344	–333	–362
Cash flow for the period	233	131	–201	–219	50	32
Cash and cash equivalents at beginning of period	115	208	579	551	337	551
Cash flow for the period	233	131	–201	–219	50	32
Exchange difference	–18	–2	– 48	5	– 57	– 4
Total cash and cash equivalents at end of period	330	337	330	337	330	579

Condensed consolidated key figures

		Third quarter	Nine months	Rolling 12	Full year
SEKm	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Oct 2019– Sep 2020	2019
Profit
Net sales	1,474	1,629	4,229	4,771	5,951	6,493
Net sales, change, %	–9.5	5.9	–11.4	4.4	–7.3	4.4
Organic net sales, change, %	–7.3	4.3	–10.8	2.2	–7.4	2.3
Gross margin, %	29.4	36.0	33.9	36.3	35.0	36.7
Depreciation	– 64	–73	–195	–221	–264	–290
Amortization	–3	–2	– 8	– 8	–11	–11
Impairment loss other non-current assets	–10	–	–13	–	–15	–2
Operating profit, adjusted	130	200	392	527	608	743
Operating profit margin, adjusted, %	8.8	12.3	9.3	11.0	10.2	11.4
Operating profit (EBIT)	87	195	341	518	550	727
Operating profit margin (EBIT margin), %	5.9	12.0	8.1	10.9	9.2	11.2
EBITDA, adjusted	195	275	596	756	886	1,046
EBITDA	164	270	557	747	840	1,030
Profit margin, %	4.3	10.7	6.1	9.1	7.9	10.0
Financial position
Working capital	705	659	705	659	705	589
Capital expenditure	83	65	295	157	373	235
Net debt	2,285	2,556	2,285	2,556	2,285	2,302
Capital employed	7,536	7,514	7,536	7,514	7,536	7,576
Return on capital employed, % (Rolling 12 months)	7.3	9.4	7.3	9.4	7.3	10.0
Equity/assets ratio, %	45.8	42.4	45.8	42.4	45.8	43.4
Net debt/equity ratio, %	51.9	62.3	51.9	62.3	51.9	54.8
Return on equity, % (Rolling 12 months)	8.4	11.8	8.4	11.8	8.4	11.9
Equity per share, SEK	15.2	14.2	15.2	14.2	15.2	14.5
Net debt/EBITDA, x (Rolling 12 months)	2.6	2.5	2.6	2.5	2.6	2.2
Cash flow
Cash flow from operating activities	313	255	341	406	659	724
Cash flow from investing activities	– 61	– 56	–227	–281	–276	–330
Cash flow after investments	252	199	114	125	383	394
Free cash flow	252	199	114	269	383	538
Free cash flow yield (Rolling 12 months), %	5.1	6.2	5.1	6.2	5.1	5.9
Cash flow from operating activities per share, SEK	1.1	0.9	1.2	1.4	2.3	2.5
Employees
Average number of employees	2,624	2,652	2,667	2,605	2,668	2,629

Words from the President

Financial overview

Sustainability

Financial statements

Disclosures

Contact

Reconciliation of alternative performance measures key figures

		Third quarter		Nine months	Rolling 12	Full year
SEKm	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Oct 2019– Sep 2020	2019
Items affecting comparability
Acquisitions, integration and restructurings	– 43	– 5	– 51	– 6	– 58	–13
of which: impairment loss other non-current assets	–12	–	–12	–	–12	–
Other items affecting comparability	–	–	–	–3	–	–3
Items affecting comparability	–43	–5	–51	–9	–58	–16
*Corresponding line in the condensed consolidated profit and loss account:
Cost of goods sold	–19	–	–19	2	–19	2
Selling expenses	–12	–2	–12	–2	–16	– 6
General and administrative expenses	–12	–3	–20	–9	–23	–12
Total	–43	–5	–51	–9	–58	–16
Operating profit, adjusted
Operating profit	87	195	341	518	550	727
Minus: Items affecting comparability	– 43	– 5	– 51	–9	– 58	–16
Operating profit, adjusted	130	200	392	527	608	743
Net sales	1,474	1,629	4,229	4,771	5,951	6,493
Operating profit margin, adjusted, %	8.8	12.3	9.3	11.0	10.2	11.4
EBITDA, adjusted
Operating profit	87	195	341	518	550	727
Minus: Depreciation	– 64	–73	–195	–221	–264	–290
Minus: Amortization	–3	–2	– 8	– 8	–11	–11
Minus: Impairment loss other non-current assets	–10	–	–13	–	–15	–2
EBITDA	164	270	557	747	840	1,030
Minus: Items affecting comparability (excl. impairment loss other non-cur rent assets)	–31	– 5	–39	–9	– 46	–16
EBITDA, adjusted	195	275	596	756	886	1,046
Capital employed
Total assets	9,619	9,676	9,619	9,676	9,619	9,660
Minus: Deferred tax liability	814	801	814	801	814	803
Minus: Non-current provisions	6	5	6	5	6	5
Minus: Current provisions	28	7	28	7	28	5
Minus: Other current liabilities	1,235	1,349	1,235	1,349	1,235	1,271
Capital employed	7,536	7,514	7,536	7,514	7,536	7,576
Capital employed comparative period previous year	7,514	6,904	7,514	6,904	7,514	7,027
Average capital employed	7,525	7,209	7,525	7,209	7,525	7,302

Reconciliation alternative performance measures, continued

		Third quarter		Nine months	Rolling 12	Full year
SEKm	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Oct 2019– Sep 2020	2019
Return on capital employed
Operating profit (Rolling 12 months)	550	677	550	677	550	727
Financial income (Rolling 12 months)	2	3	2	3	2	2
Operating profit plus financial income (Rolling 12 months)	552	680	552	680	552	729
Average capital employed	7,525	7,209	7,525	7,209	7,525	7,302
Return on capital employed, %	7.3	9.4	7.3	9.4	7.3	10.0
Free cash flow yield
Cash flow from operating activities (Rolling 12 months)	659	694	659	694	659	724
Cash flows from investments in property, plant and equipment and intangible assets (Rolling 12 months)	–276	–185	–276	–185	–276	–186
Free cash flow (Rolling 12 months)	383	509	383	509	383	538
Number of shares	288,619,299	288,619,299	288,619,299	288,619,299	288,619,299	288,619,299
Free cash flow per share (Rolling 12 months), SEK	1.33	1.76	1.33	1.76	1.33	1.86
Market price per share, SEK	26.00	28.26	26.00	28.26	26.00	31.70
Free cash flow yield (Rolling 12 months), %	5.1	6.2	5.1	6.2	5.1	5.9
Changes in net sales
Net sales	1,474	1,629	4,229	4,771	5,951	6,493
Net sales comparative period previous year	1,629	1,538	4,771	4,572	6,417	6,218
Net sales, change	–155	91	–542	199	–466	275
Minus: Changes in exchange rates	–36	25	–26	96	7	129
Organic growth	–119	66	–516	103	–473	146
Organic growth, %	–7.3	4.3	–10.8	2.2	–7.4	2.3

Quarterly data

SEKm	Q3 2020	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019	Q1 2019	Q4 2018	Q3 2018
Profit and loss account
Net sales	1,474	1,237	1,518	1,722	1,629	1,583	1,559	1,646	1,538
Cost of goods sold	–1,040	–777	–978	–1,073	–1,042	–1,004	–993	–1,040	–979
Gross profit	434	460	540	649	587	579	566	606	559
Selling expenses	–248	–213	–237	–271	–244	–253	–243	–279	–230
General and administrative expenses	–99	–142	–154	–169	–148	–167	–159	–168	–149
Operating profit	87	105	149	209	195	159	164	159	180
Exchange differences on cash and cash equivalents in foreign currencies	–11	45	–78	13	– 8	–12	–12	4	5
Other financial income	0	1	1	0	1	0	1	1	0
Other financial expenses	–13	–14	–12	–9	–13	–18	–22	–21	–18
Net financial items	–24	32	–89	4	–20	–30	–33	–16	–13
Profit before tax	63	137	60	213	175	129	131	143	167
Income tax	–17	–29	–16	–41	–45	–32	–32	16	–35
Profit for the period	46	108	44	172	130	97	99	159	132
Profit for the period attributable to:
Owners of the Parent Company	46	108	44	172	130	97	99	159	132
Key figures
Profit
Depreciation, amortization and impairment	–77	–68	–71	–74	–75	–77	–77	–55	–58
Operating profit, adjusted	130	110	152	216	200	161	166	174	194
EBITDA, adjusted	195	178	223	290	275	238	243	229	252
EBITDA	164	173	220	283	270	236	241	214	238
Operating profit margin, adjusted, %	8.8	8.9	10.0	12.5	12.3	10.2	10.6	10.6	12.6
Operating profit margin (EBIT margin), %	5.9	8.5	9.8	12.1	12.0	10.0	10.5	9.7	11.7
Earnings per share, SEK
Basic1	0.16	0.38	0.15	0.60	0.45	0.34	0.35	0.55	0.46
Diluted1	0.16	0.38	0.15	0.60	0.45	0.34	0.35	0.55	0.46
Financial position
Share price, last paid, SEK	26.00	23.72	23.52	31.70	28.26	30.20	24.00	24.30	27.48
Return on equity, % (Rolling 12 months)	8.4	10.5	10.0	11.9	11.8	12.3	11.9	12.2	8.9
Equity per share, SEK	15.2	15.0	15.4	14.5	14.2	13.7	14.2	13.7	13.3
Net Debt/EBITDA, x (Rolling 12 months)	2.6	2.6	2.4	2.2	2.5	2.7	2.4	2.3	2.5
Cash flow
Free cash flow	252	–118	–20	269	199	–41	111	240	206
Cash flow from operating activities per share, SEK	1.1	– 0.1	0.2	1.1	0.9	–0.0	0.5	1.0	0.9

1 Cloetta entered into forward contracts to repurchase own shares to fulfill its future obligation to deliver the shares to the participants of the long-term share-based incentive plan. The outstanding contracts at the reporting date consist of one contract for 1,985,619 shares at a share price of SEK 24.90.

Reconciliation of alternative performance measures per quarter

SEKm	Q3 2020	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019	Q1 2019	Q4 2018	Q3 2018
Items affecting comparability
Acquisitions, integration and restructurings	– 43	– 5	–3	–7	– 5	1	–2	–15	–7
of which: impairment loss non-current assets	–12	–	–	–	–	–	–	–	–
Remeasurements of contingent considerations	–	–	–	–	–	–	–	0	– 6
Other items affecting comparability	–	–	–	–	–	–3	0	0	–1
Items affecting comparability*	–43	–5	–3	–7	–5	–2	–2	–15	–14
*Corresponding line in the condensed consolidated profit and loss account:
Net sales	–	–	–	–	–	–	–	0	0
Cost of goods sold	–19	0	–	–	–	3	–1	6	–1
Selling expenses	–12	0	–	– 4	–2	–	–	–	–1
General and administrative expenses	–12	– 5	–3	–3	–3	– 5	–1	–21	–12
Total	–43	–5	–3	–7	–5	–2	–2	–15	–14
Operating profit, adjusted
Operating profit	87	105	149	209	195	159	164	159	180
Minus: Items affecting comparability	– 43	– 5	–3	–7	– 5	–2	–2	–15	–14
Operating profit, adjusted	130	110	152	216	200	161	166	174	194
Net sales	1,474	1,237	1,518	1,722	1,629	1,583	1,559	1,646	1,538
Operating profit margin, adjusted, %	8.8	8.9	10.0	12.5	12.3	10.2	10.6	10.6	12.6
EBITDA, adjusted
Operating profit	87	105	149	209	195	159	164	159	180
Minus: Depreciation	– 64	–65	–66	–69	–73	–74	–74	–52	–55
Minus: Amortization	–3	–2	–3	–3	–2	–3	–3	–3	–3
Minus: Impairment loss other non-current assets	–10	–1	–2	–2	–	–	–	–	–
EBITDA	164	173	220	283	270	236	241	214	238
Minus: Items affecting comparability (excl. impairment loss other non-current assets)	–31	– 5	–3	–7	– 5	–2	–2	–15	–14
EBITDA, adjusted	195	178	223	290	275	238	243	229	252
Capital employed
Total assets	9,619	9,384	10,260	9,660	9,676	9,410	9,854	9,168	9,191
Minus: Deferred tax liability	814	798	814	803	801	792	768	754	794
Minus: Non-current provisions	6	–	–	5	5	6	6	9	6
Minus: Current provisions	28	6	7	5	7	11	19	23	5
Minus: Other current liabilities	1,235	1,124	1,437	1,271	1,349	1,239	1,407	1,355	1,482
Capital employed	7,536	7,456	8,002	7,576	7,514	7,362	7,654	7,027	6,904
Capital employed comparative period previous year	7,514	7,362	7,654	7,027	6,904	6,833	7,319	6,979	6,852
Average capital employed	7,525	7,409	7,828	7,302	7,209	7,098	7,487	7,003	6,878

Reconciliation of alternative performance measures, continued

SEKm	Q3 2020	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019	Q1 2019	Q4 2018	Q3 2018
Return on capital employed
Operating profit (Rolling 12 months)	550	658	712	727	677	662	658	660	672
Financial income (Rolling 12 months)	2	3	2	2	3	2	6	5	4
Operating profit plus financial income (Rolling 12 months)	552	661	714	729	680	664	664	665	676
Average capital employed	7,525	7,409	7,828	7,302	7,209	7,098	7,487	7,003	6,878
Return on capital employed, %	7.3	8.9	9.1	10.0	9.4	9.4	8.9	9.5	9.8
Free cash flow yield
Cash flow from operating activities (Rolling 12 months)	659	601	637	724	694	689	811	628	645
Cash flows from investments in property, plant and equipment and intangible assets (Rolling 12 months)	–276	–271	–230	–186	–185	–173	–186	–184	–182
Free cash flow (Rolling 12 months)	383	330	407	538	509	516	625	444	463
Number of shares	288,619,299	288,619,299	288,619,299	288,619,299	288,619,299	288,619,299	288,619,299	288,619,299	288,619,299
Free cash flow per share (Rolling 12 months), SEK	1.33	1.14	1.41	1.86	1.76	1.79	2.17	1.54	1.60
Market price per share, SEK	26.00	23.72	23.52	31.70	28.26	30.20	24.00	24.30	27.48
Free cash flow yield (Rolling 12 months), %	5.1	4.8	6.0	5.9	6.2	5.9	9.0	6.3	5.8
Changes in net sales
Net sales	1,474	1,237	1,518	1,722	1,629	1,583	1,559	1,646	1,538
Net sales comparative period previous year	1,629	1,583	1,559	1,646	1,538	1,472	1,562	1,643	1,505
Net sales, change	–155	–346	–41	76	91	111	–3	3	33
Minus: Changes in exchange rates	–36	–11	21	33	25	27	44	51	87
Organic growth	–119	–335	–62	43	66	84	–47	–48	–54
Organic growth, %	–7.3	–21.2	–4.0	2.6	4.3	5.7	–3.0	–3.2	–3.6

Parent company

Condensed parent company profit and loss account

		Third quarter		Nine months	Rolling 12	Full year
SEKm	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Oct 2019– Sep 2020	2019
Net sales	23	22	61	57	87	83
Gross profit	23	22	61	57	87	83
General and administrative expenses	–19	–22	– 65	– 69	–101	–105
Operating profit/loss	4	0	–4	–12	–14	–22
Net financial items	– 4	1	–15	– 6	50	59
Profit/loss before tax	0	1	–19	–18	36	37
Income tax	0	0	–1	2	– 8	– 5
Profit/loss for the period	0	1	–20	–16	28	32

Profit/loss for the period corresponds to comprehensive income for the period.

Condensed parent company balance sheet

SEKm	30 Sep 2020	30 Sep 2019	31 Dec 2019
ASSETS
Non-current assets	5,353	5,360	5,361
Current assets	9	28	99
TOTAL ASSETS	5,362	5,388	5,460
EQUITY AND LIABILITIES
Equity	3,183	3,159	3,204
Non-current liabilities
Borrowings Derivative financial instruments	137 1	934 4	935 2
Provisions	1	1	1
Total non-current liabilities	139	939	938
Current liabilities
Borrowings	1,050	500	499
Derivative financial instruments	3	3	2
Other current liabilities	987	787	817
Total current liabilities	2,040	1,290	1,318
TOTAL EQUITY AND LIABILITIES	5,362	5,388	5,460

Condensed parent company statement of changes in equity

		Nine months	Full year
SEKm	Jan–Sep 2020	Jan–Sep 2019	2019
Equity at beginning of period	3,204	3,458	3,458
Profit/loss for the period	–20	–16	32
Total comprehensive income	–20	–16	32
Transactions with owners
Share-based payments	–1	6	3
Dividend1	–	–289	–289
Total transactions with owners	–1	–283	–286
Equity at end of period	3,183	3,159	3,204

1 The dividend paid in 2019 comprised a dividend of SEK 1.00 per share.

Accounting and valuation policies, disclosures and risk factors

Accounting and valuation policies

Compliance with legislation and accounting standards

The consolidated financial statements are presented in accordance with the International Financial Reporting Standards (IFRS) established by the International Accounting Standards Board (IASB) and the interpretations issued by the IFRS Interpretations Committee (IFRIC) which have been endorsed by the European Commission for application in the EU. The applied standards and interpretations are those that were in force and had been endorsed by the EU at 1 January 2020. The consolidated interim report is presented compliant with IAS 34, Interim Financial Reporting, and in compliance with the relevant provisions in the Swedish Annual Accounts Act and the Swedish Securities Market Act. The interim report for the Parent Company has been prepared in accordance with the Swedish Annual Accounts Act

and the Swedish Securities Market Act, which are consistent with the provisions in recommendation RFR 2, Accounting for Legal Entities. For lease accounting the company makes use of the exemption under RFR2 to treat all leases as operating lease.

Basis of accounting

The same accounting policies and methods of computation are applied in the interim financial statements as in the most recent annual financial statements. Reference is made to Note 1 'General information and accounting and valuation policies of the Group' and Note 31 'Changes in accounting policies' in the annual and sustainability report 2019 at www.cloetta.com. No new standards are effective as from 1 January 2020 which have been endorsed by the EU.

Disclosures

Disaggregation of revenue from contracts with customers Cloetta generates revenues from the transfer of goods and services at a point in time and over time in the following major sales categories and performance obligations:

Disaggregation of revenue

		Third quarter		Nine months	Rolling 12	Full year
SEKm	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Oct 2019– Sep 2020	2019
Net sales
Branded packaged business	1,178	1,187	3,348	3,448	4,609	4,709
Pick & mix	296	442	881	1,323	1,342	1,784
Total	1,474	1,629	4,229	4,771	5,951	6,493

Breakdown of net sales by category

		Third quarter		Nine months	Rolling 12	Full year
%	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Oct 2019– Sep 2020	2019
Net sales
Sales of goods
Candy	58	59	59	59	59	59
Chocolate	18	17	17	17	17	17
Pastilles	12	12	12	12	12	12
Chewing gum	7	6	7	6	7	6
Nuts	3	4	3	4	3	4
Other	2	2	2	2	2	2
Total	100	100	100	100	100	100

Breakdown of net sales by country

		Third quarter		Nine months	Rolling 12	Full year
%	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Oct 2019– Sep 2020	2019
Sweden	29	31	30	31	31	31
Finland	24	21	22	21	22	21
The Netherlands	15	14	15	14	15	14
Denmark	9	10	9	10	10	10
UK	4	7	5	7	5	7
Norway	7	5	7	5	6	5
Germany	6	6	6	6	5	6
Other countries	6	6	6	6	6	6
Total	100	100	100	100	100	100

Leases

Right-of-use assets

SEKm	30 Sep 2020	30 Sep 2019	31 Dec 2019
Land and buildings	106	86	113
Transport	52	60	56
Other equipment	25	34	34
Total right-of-use assets	183	180	203

Additions to the right-of-use assets were SEK 23m (9) during the quarter and SEK 68m (20) during the first three quarters of the year. Lease liability

SEKm	30 Sep 2020	30 Sep 2019	31 Dec 2019
Current	66	67	64
Non-current (between 1 and 5 years)	119	110	135
Non-current (over 5 years)	3	3	5
Total lease liability	188	180	204

The non-current lease liability of SEK 122m (113) are reflected in the 'long-term borrowings'. The current lease liability of SEK 66m (67) are reflected in the 'short-term borrowings'.

Depreciation charge right-of-use assets

		Third quarter		Nine months	Rolling 12	Full year
SEKm	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Oct 2019– Sep 2020	2019
Land and buildings	–9	–9	–25	–26	–33	–34
Transport	–7	– 8	–23	–23	–31	–31
Other equipment	–2	–3	–7	– 8	–10	–11
Total depreciation charge right-of-use assets	–18	–20	–55	–57	–74	–76

Cloetta makes use of the exemptions under IFRS 16 for short-term leases and leases of low-value assets, except for any leases of vehicles with a remaining lease term at implementation date of less than 12 months.

For a number of lease arrangements Cloetta cannot reliably separate the lease- and non-lease elements. For these lease arrangements the non-lease elements have been included in the calculation of the right-of-use asset.

Other disclosures

	Third quarter			Nine months	Rolling 12	Full year
SEKm	Jul–Sep 2020	Jul–Sep 2019	Jan–Sep 2020	Jan–Sep 2019	Oct 2019– Sep 2020	2019	Recognized in:
Interest expense	–1	0	–2	–2	–3	–3	net financial items, in the profit and loss account
Impairment of right-of-use assets	– 4	–	– 4	–	– 4	–	cost of goods sold, in the profit and loss account
Expense relating to leases of low-value assets that are not short-term leases	0	0	0	0	0	0	cost of goods sold, selling expenses and general and administrative expenses, in the profit and loss account
Expense relating to short term leases, where no right-of-use asset has been recognized	–2	–1	– 6	– 6	–9	–9	cost of goods sold, selling expenses and general and administrative expenses, in the profit and loss account
Expense relating to variable lease payments not included in lease liabilities	– 4	– 4	–13	–9	–17	–13	cost of goods sold, selling expenses and general and administrative expenses, in the profit and loss account
Total cash outflow for leases	–17	–18	– 55	– 56	–74	–75	cash flow from operating activ ities and financing activities, in the cash flow statement

Taxes

The net effect of international tax rate differences and rate changes, changes in filing positions and non-deductible expenses impacted the effective tax rate of the Group unfavourably. Cloetta's deferred tax balances have been calculated applying the tax rates enacted or substantially enacted at the end of the reporting period.

Fair value measurement

The only items recognized at fair value after initial recognition are the interest rate swaps and forward foreign currency contracts categorized at level 2 of the fair value hierarchy in all periods presented.

The fair values of financial assets (loans and receivables) and liabilities measured at amortized cost are approximately equal to carrying amounts, with the exception of the forward contract to repurchase own shares which has a fair value of SEK 1m (asset) while the carrying amount is SEK 49m (liability). For measurement purposes, the fair value of financial assets and liabilities is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. The fair value measurements by level according to the fair value measurement hierarchy are as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (that is, derived from prices) (level 2).
• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The following table presents the carrying amounts and fair values of the Group's financial assets and liabilities, including their levels in the fair value hierarchy:

30 Sep 2020		Carrying amount				Fair value
SEKm	Mandatorily at FVTPL	Financial assets at amortized cost	Other financial liabilities at carrying value	Total	Level 1	Level 2	Level 3	Total
Financial assets
• Trade and other receivables, excluding other taxes and social security receivables and prepaid expenses and accrued income	–	817	–	817
• Forward contract to repurchase own shares	–	–	–	–	–	1	–	1
• Cash and cash equivalents	–	330	–	330
Total assets	–	1,147	–	1,147	–	1	–	1
Financial liabilities
• Loans from credit institutions	–	–	2,121	2,121
• Commercial papers	–	–	250	250
• Forward contract to repurchase own shares	–	–	49	49
• Interest rate swaps	6	–	–	6	–	6	–	6
• Lease liabilities	–	–	188	188
• Trade and other payables, exclud ing other taxes and social security payables and excluding contingent consideration	–	–	999	999
Total liabilities	6	–	3,607	3,613	–	6	–	6

31 Dec 2019		Carrying amount			Fair value
SEKm	Mandatorily at FVTPL	Financial assets at amortized cost	Other financial liabilities at carrying value	Total	Level 1	Level 2	Level 3	Total
Financial assets
• Trade and other receivables, excluding other taxes and social security receivables and prepaid expenses and accrued income	–	832	–	832
• Cash and cash equivalents	–	579	–	579
Total assets	–	1,411	–	1,411	–	–	–	–
Financial liabilities
• Loans from credit institutions	–	–	2,106	2,106
• Commercial papers	–	–	499	499
• Forward contract to repurchase own shares	–	–	65	65	–	0	–	0
• Interest rate swaps	6	–	–	6	–	6	–	6
• Lease liabilities	–	–	204	204
• Trade and other payables, exclud ing other taxes and social security payables and excluding contingent consideration	–	–	1,052	1,052
Total liabilities	6	–	3,926	3,932	–	6	–	6

30 Sep 2019	Carrying amount			Fair value
SEKm	Mandatorily at FVTPL	Financial assets at amortized cost	Other financial liabilities at carrying value	Total	Level 1	Level 2	Level 3	Total
Financial assets
• Trade and other receivables, excluding other taxes and social security receivables and prepaid expenses and accrued income	–	966	–	966
• Cash and cash equivalents	–	337	–	337
Total assets	–	1,303	–	1,303	–	–	–	–
Financial liabilities
• Loans from credit institutions	–	–	2,137	2,137
• Commercial papers	–	–	500	500
• Forward contract to repurchase own shares	–	–	65	65	–	7	–	7
• Interest rate swaps	10	–	–	10	–	10	–	10
• Lease liabilities	–	–	180	180
• Trade and other payables, exclud ing other taxes and social security payables and excluding contingent consideration	–	–	1,106	1,106
Total liabilities	10	–	3,988	3,998	–	17	–	17

The movement of financial instruments categorized at level 3 of the fair value hierarchy is specified as follows:

	Nine months	Full year
SEKm	Jan–Sep 2020	Jan–Sep 2019	2019
Opening Balance	–	142	142
Remeasurements recognized in profit or loss
– Unrealized interest on contingent considerations recognised in other finan cial expenses	–	4	4
Settlements
– Settlement via balance sheet	–	–146	–146
Closing Balance	–	–	–

On 28 April 2017 the contingent earn-out consideration arising from the acquisition of Candyking Holding AB and its subsidiaries was recognized in the amount of SEK 128m. The final earn-out consideration amounted to SEK 146m and was settled in the first quarter of 2019. No transfers between fair value hierarchy levels has occured during the financial year or the prior financial year. The fair value of financial instruments that are not traded in an active market (for example, overthe-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to determine the fair value of an instrument are observable, the instrument is included at level 2. The valuation of the instruments is based on quoted market prices, but the underlying swap amounts are based on the specific requirements of the Group. These instruments are therefore included at level 2. The fair value measurement of the contingent (earn-out) considerations requires the use of significant unobservable inputs and was thereby initially categorized at level 3. The valuation techniques and inputs used to value financial instruments are:

• Quoted market prices or dealer quotes for similar instruments.
• The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves.
• The fair value of forward foreign currency contracts is calculated using the difference between the exchange rate on the spot date with the contractually agreed upon exchange rates.
• Other techniques, such as discounted cash flow analysis, are used to determine the fair value of the remaining financial instruments.

Parent Company

Cloetta AB's primary activities include head office functions such as group-wide management and administration. The comments below refer to the period from 1 January to 30 September 2020. Net sales in the Parent Company amounted to SEK 61m (57) and referred mainly to intra-group services. Operating loss was SEK –4m (–12). Net financial items totaled SEK –15m (–6). Loss before tax was SEK –19m (–18) and loss for the period was SEK –20m (–16). Cash and cash equivalents and short-term investments amounted to SEK 0m (0).

The Cloetta share

Cloetta's class B share is listed on Nasdaq Stockholm, Mid Cap. During the period from 1 January to 30 September 2020, a total of 148,243,402 shares were traded for a combined value of SEK 3,710 m, equavalent to around 52 per cent of the total number of class B shares at the end of the period. The highest quoted bid price during the period from 1 January to 30 September 2020 was SEK 34.18 (31 January) and the lowest was SEK 21.04 (24 March). The share price on 30 September 2020 was SEK 26.00 (last price paid). During the period from 1 January to 30 September 2020, the Cloetta share decreased by 18.0 per cent while the Nasdaq OMX Stockholm PI index increased by 7.0 per cent. Cloetta's share capital at 30 Setpember 2020 amounted to 1,443,096,495. The total number of shares is 288,619,299, consisting of 5,735,249 (5,735,249) class A shares and 282,884,050 (282,884,050) class B shares, equal to a quota value of SEK 5 per share.

Shareholders

On 30 September 2020, Cloetta AB had 30,162 shareholders. The largest shareholder was AB Malfors Promotor with a holding corresponding to 38.8 per cent of the votes and 27.9 per cent of the share capital in the company. Wellington Management was the second largest shareholder with 4.1 per cent of the votes and 4.8 per cent of the share capital. The third largest shareholder was Franklin Templeton with 3.3 per cent of the votes and 3.9 per cent of the share capital.

Institutional investors held 86.5 per cent of the votes and 84.1 per cent of the share capital. Foreign shareholders held 37.0 per cent of the votes and 43.6 per cent of the share capital.

Risk factors

Cloetta is an internationally active company that is exposed to a number of market and financial risks. All identified risks are monitored continuously and, if needed, risk mitigating measures are taken to limit their impact. The most relevant risk factors are described in the annual and sustainability report 2019 and consist of industry and market-related risks, operational risks and financial risks. Compared to the annual and sustainability report which was issued on 12 March 2020, the risk-profile of Cloetta has changed in nearly all identified risk categories due to the outbreak of the COVID-19 virus. Cloetta has established a dedicated Business Continuity Team, within the Group Management Team, tasked with identifying critical changes in market, operational and financial risks. The Business Continuity Team takes proactive measures to limit the risks, or prevent them from materializing. This process takes place in close dialogue with various stakeholders.

Definitions

General	All amounts in the tables are presented in SEK millions unless otherwise stated. All amounts in brackets () represent comparative figures for the same period of the prior year, unless otherwise stated.
Margins	Definition/calculation	Purpose
Gross margin	Net sales less cost of goods sold as a percentage of net sales.	Gross margin measures production profitability.
Operating profit margin (EBIT margin)	Operating profit expressed as a percentage of net sales.	Operating profit margin is used for measuring the opera tional profitability.
Operating profit margin, adjusted	Operating profit, adjusted for items affecting comparability, as a percentage of net sales.	Operating profit margin, adjusted excludes the impact of items affecting comparability, enabling a comparison of operational profitability.
Profit margin	Profit/loss before tax expressed as a percentage of net sales.	This metric enables the profitability to be compared across locations where corporate taxes differ.
Return	Definition/calculation	Purpose
Free cash flow	Sum of the cash flow from operating activities and cash flow from investments in property, plant and equipment and intangible assets.	The free cash flow is the cash flow available to all inves tors consisting of shareholders and lenders.
Free cash flow yield	Free cash flow over the last 12 months divided by the num ber of shares at the end of the period and subsequently di vided by the market price per share at the end of the period.	This metric is an indicator of the return on investment of investors in the company.
Return on capital employed	Operating profit plus financial income as a percentage of average capital employed. The average capital employed is calculated by taking the capital employed per period end and the capital employed by period end of the comparative period in the previous year divided by two.	Return on capital employed is used to analyse profitabil ity, based on the amount of capital used. The leverage of the company is the reason that this metric is used next to return on equity, because it includes equity, but takes into account borrowings and other liabilities as well.
Return on equity	Profit from continuing operations for the period as a per centage of total equity.	Return on equity is used to measure profit generation, given the resources attributable to the owners of the Parent Company.
Capital structure	Definition/calculation	Purpose
Capital employed	Total assets less interest-free liabilities (including deferred tax).	Capital employed measures the amount of capital used and serves as input for the return on capital employed.
Equity/assets ratio	Equity at the end of the period as a percentage of total assets. The equity/assets ratio represents the amount of assets on which shareholders have a residual claim.	This ratio is an indicator of the company's leverage used to finance the firm.
Gross debt	Gross current and non-current borrowings, credit overdraft facilities, lease liabilities, derivative financial instruments and interest payable.	Gross debt represents the total debt obligation of the company irrespective of its maturity.
Net debt	Gross debt less cash and cash equivalents.	The net debt is used as an indication of the ability to pay off all debts if these became due simultaneously on the day of calculation, using only available cash and cash equivalents.
Net debt/EBITDA	Net debt at the end of the period divided by the EBITDA, adjusted, for the last 12 months, taking into consideration the annualization of EBITDA for acquired or divested companies.	The net debt/EBITDA ratio approximates the company's ability to decrease its debt. It represents the number of years it would take to pay back debt if net debt and EBITDA were held constant, ignoring the impact of cash flows from interest, tax and capital expenditure.
Net debt/equity ratio	Net debt at the end of the period divided by equity at the end of the period.	The net debt/equity ratio measures the extent to which the company is funded by debt. Because cash and overdraft facilities can be used to pay-off debt at short notice, the leverage takes into account net debt instead of gross debt.
Working capital	Total inventories and trade and other receivables adjusted for trade and other payables.	Working capital is used to measure the company's abil ity, besides cash and cash equivalents, to meet current operational obligations.
Data per share	Definition/calculation	Purpose
Cash flow from operating activities per share	Cash flow from operating activities in the period divided by the average number of shares.	The cash flow from operating activities per share measures the amount of cash the company generates per share from the revenues it brings in, irrespective of the capital investments and cash flows related to the financing structure of the company.
Earnings per share	Profit for the period divided by the average number of shares adjusted for the effect of forward contracts to repur chase own shares.	The earnings per share measures the amount of net profit that is available for payment to shareholders per share.
Equity per share	Equity at the end of the period divided by number of shares at the end of the period.	Equity per share measures the net-asset value backing up each share of the company's equity and determines if a company is increasing shareholder value over time.

Other definitions	Definition/calculation	Purpose
EBITDA	Operating profit before depreciation and amortization.	EBITDA is used to measure the cash flow generated from operating activities, eliminating the impact of financing and accounting decisions.
EBITDA, adjusted	Operating profit, adjusted for items affecting comparability, before depreciation and amortization.	EBITDA, adjusted increases the comparability of EBITDA.
Effective tax rate	Income tax as a percentage of profit before tax.	This metric enables the income tax to be compared across locations where corporate taxes differ.
Items affecting comparability	Items affecting comparability are those significant items which are separately disclosed by virtue of their size or incidence in order to enable a full understanding of the Group's financial performance. These include items such as restructurings, impact from acquisitions or divestments.	Items affecting comparability increases the comparabili ty of the Group's financial performance.
Net financial items	The total of exchange differences on cash and cash equiva lents in foreign currencies, other financial income and other financial expenses.	The net financial items reflects the company's total costs of external financing.
Net sales, change	Net sales as a percentage of net sales in the comparative period of the previous year.	Net sales, change reflects the company's realised top line growth over time.
Operating profit (EBIT)	Operating profit consists of comprehensive income before net financial items and income tax.	This metric enables the profitability to be compared across locations where corporate taxes differ, irrespective of the financing structure of the company.
Operating profit (EBIT), adjusted	Operating profit, adjusted for items affecting comparability.	EBIT, adjusted increases the comparability of EBIT.
Organic growth	Net sales, change excluding acquisition-driven growth and changes in exchanges rates.	Organic growth excludes the impact of changes in group structure and exchange rates, enabling a comparison of net sales growth over time.
Structural changes	Net sales, change resulting from changes in group structure.	Structural changes measure the contribution of changes in group structure to the net sales growth.

Glossary

Branded packaged products	Products that are mainly sold under brands and are packaged.
FVTPL	Fair Value Through Profit and Loss.
Pick & mix	Cloetta's range of candy and natural snacks that are picked by the consumers themselves.
Pick & mix concept	Cloetta's complete concept in pick & mix including products, displays and accompanying store and logistic services.

Exchange rates

SEK	30 Sep 2020	30 Sep 2019	31 Dec 2019
EUR, average	10.5682	10.5663	10.5815
EUR, end of period	10.5713	10.6958	10.4468
NOK, average	0.9829	1.0817	1.0748
NOK, end of period	0.9523	1.0809	1.0591
GBP, average	11.9404	11.9733	12.0732
GBP, end of period	11.5869	12.0757	12.2788
DKK, average	1.4171	1.4156	1.4173
DKK, end of period	1.4197	1.4326	1.3982

Financial calendar

Nathalie Redmo, Head of IR and Communication, + 46 76 696 59 40

This information is information that Cloetta AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person detailed above, at 8:00 a.m. CET on 22 October 2020.

Our purpose

"We believe in the Power of True Joy"

Business model

Cloetta's business model is to offer strong local brands in confectionery and nuts and provide effective sales and distribution to the retail trade. Together, this will ensure continued positive development of the company's leading market positions.

Sustainablity

We provide choices for you

We create joyful moments through the quality of our products. We aim to meet the variety of consumer preferences.

We care about people

We support our employees, suppliers and farmers, as well as our communities.

We improve our footprint

Our business depends on the environment. We are responsible for the impact we have from sourcing to packaging.

Long-term financial targets Strategies

• Cloetta's target is to increase organic sales at least in line with market growth.
• Cloetta's target is an EBIT margin, adjusted for items affecting comparability, of at least 14 per cent.
• Cloetta's long-term target is a net debt/EBITDA ratio of 2.5x.
• Cloetta's long-term intention is a dividend payout of 40–60 per cent of profit after tax.

Value drivers

• Strong brands and market positions in a non-cyclical market.
• Excellent availability in the retail trade with the help of a strong and effective sales and distribution organization.
• Good consumer knowledge and loyalty.
• Innovative product and packaging development.
• Effective production with high and consistent quality.

"We believe in the Power of True Joy"

Cloetta, founded in 1862, is a leading confectionery company in Northern Europe. In total, Cloetta products are sold in more than 50 countries worldwide. Cloetta owns some of the strongest brands on the market, such as Läkerol, Cloetta, Candyking, Jenkki, Kexchoklad, Malaco, Sportlife and Red Band. Cloetta has eight production units in five countries. Cloetta's class B shares are traded on Nasdaq Stockholm.

Cloetta AB (publ) • Corp. ID no. 556308-8144 • Solna Business Park, Englundavägen 7D, PO Box 6036, SE-171 06 Solna, Sweden. • Tel +46 8-52 72 88 00 • www.cloetta.com

More information about Cloetta is available at www.cloetta.com