Cloetta — Interim / Quarterly Report 2021

Cloetta

– a leading confectionery company in Northern Europe.

Q2 Cloetta Interim Report Q2 2021 overview

Sustainability F i n a n c i a l statements

Rebound in sales and improved profitability

Strong rebound in both segments, with sales of Branded packaged products back at pre-pandemic levels and good progress on Pick & mix profitability.

Even though the Covid-19 pandemic is still ongoing, the world is gradually opening up as an increasing number of people have been vaccinated and restrictions are being eased. The impact of the pandemic on consumer behaviour and our sales channels is nevertheless still being felt to some extent.

However, our focus on marketing and innovation enabled us to deliver strong growth for Branded packaged products in the quarter, bringing sales back up to 2019 levels. Demand for chocolate and candy bags was high while sales of pastilles and chewing gum remained suppressed compared to 2019 levels. Pick & mix sales grew by 80 per cent, although still being below pre-pandemic levels. We stepped -up our marketing investments whilst continuing to improve our profitability, including bringing Pick & mix back to break-even.

We are pleased to see the continued increase of shoppers in our sales channels. At the same time, we see greater uncertainty due to the recent rises in input costs, such as raw material and freight costs. We will continue to pursue our strategy whilst taking the necessary actions to successfully navigate this market environment.

Second quarter development

Sales for the quarter increased by 14.8 per cent, of which organic growth accounted for 18.2 per cent and exchange rate differences for –3.4 per cent. Sales of Branded packaged products increased organically by 7.3 per cent, driven by successful marketing and innovation, as well as increased traffic in most channels. Sales of Pick & mix increased organically by 79.6 per cent during the quarter, driven by the re-opening of pick & mix shelves, more consumer activations and growing consumer confidence.

The increase in the adjusted operating profit is attributable to higher sales volumes and continued margin-enhancing initiatives, partly offset by significantly higher marketing investments. Last year, the operating profit was favourably impacted by the phasing of supply chain costs of approximately SEK 35m between the second and the third quarter.

Well positioned to deliver on long-term targets

Maintaining a sharp focus on innovation to improve consumer experiences is a key driver for profitable growth. During the quarter we increased our marketing investments with around SEK 30m compared to last year to support the rebound in sales and our strong new product innovations such as fruit-based candy and Kexchoklad Vegan. Currently, approximately 15 per cent of Cloetta's sales are from vegan products.

We also continued our efforts to re-build volumes and made good progress on our journey to create sustainable profitability within Pick & mix. During the quarter, the new premium CandyKing concept was successfully piloted or launched in multiple countries. Most grocery and high street stores in the United Kingdom, as well as in the other markets, are now back to normal operations, although leisure parks and cinemas are not expected to open until the third quarter.

During the quarter, we shared our sustainability agenda externally, and we continued to increase the focus on this priority internally, for instance through the launch of a competence development program called the Sustainability Academy. We have also progressed in setting our targets in line with the Science Based Targets initiative, with each market and department being heavily involved.

I am pleased to see that our efficiency programs continue to deliver according to plan, with progress made in both the Perfect Factory and VIP+ cost Program during the quarter. We are now live with our new maintenance system in the first factory. This will improve our preventive maintenance leading to increased reliability and lower costs for the supply network. The system will be implemented across all plants by the end of 2022.

"We are pleased to see the continued increase of shoppers in our sales channels. At the same time, we see greater uncertainty due to the recent rises in input costs, such as raw material and freight costs."

We are also preparing pricing and looking at other measures to mitigate the recent rises in input costs.

With respect to cash, in the quarter we delivered a healthy free cash flow and also successfully finalised the refinancing started during the second half of 2020.

In conclusion, we have delivered a solid quarter with a rebound in sales and improved profitability, while also increasing our marketing investments to strengthen our brands. Looking ahead, I am confident that pursuing our strategy will ensure we remain well positioned to deliver on our long-term targets.

Henri de Sauvage-Nolting President and CEO

Financial overview

Second quarter development Covid-19

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

Compared to the annual and sustainability report which was issued on 15 March 2021, the risk-profile of Cloetta has not significantly changed although the ongoing Covid-19-pandemic continues to affect the business performance of Cloetta.

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

Net sales

Net sales for the second quarter increased by SEK 183m to SEK 1,420m (1,237) compared to the same period of last year. Organic growth was 18.2 per cent and the impact of changes in exchange rates was –3.4 per cent.

Changes in net sales, %	Apr–Jun 2021	Jan–Jun 2021
Organic growth	18.2	5.9
Changes in exchange rates	–3.4	–3.6
Total	14.8	2.3

Monthly organic sales growth, %	April 2021	May 2021	June 2021
Total	11.7	30.8	14.0
Branded packaged products	0.7	17.8	5.0
Pick & mix	85.4	111.0	55.9

Gross profit

Gross profit amounted to SEK 527m (460), which equates to a gross margin of 37.1 per cent (37.2). The gross profit increase was driven by higher sales volumes and continued margin-enhancing initiatives. Last year, the gross profit was favourably impacted by the phasing of supply chain costs of approximately SEK 35m between the second and the third quarter.

Operating profit

Operating profit amounted to SEK 139m (105). Operating profit, adjusted for items affecting comparability, amounted to SEK 140m (110). The operating profit increase was driven by higher gross profit, partly offset by around SEK 30m in higher marketing investments.

Items affecting comparability

Operating profit for the second quarter includes items affecting comparability of SEK –1m (–5) that are related to costs for restructuring.

Net financial items

Net financial items for the quarter amounted to SEK –17m (32). Interest expenses related to external borrowings were SEK –8m (–8), exchange differences on cash and cash equivalents were SEK–6m (45) which mainly related to the development of the Swedish and Norwegian krona and the Great Britain pound against the euro during the quarter. Other financial items amounted to SEK –3m (–5). Of the total net financial items SEK 25m (39) is non-cash in nature.

Profit for the period

Profit for the period was SEK 96m (108), which equates to basic and diluted earnings per share of SEK 0.33 (0.38). Income tax for the period was SEK –26m (–29).

The effective tax rate for the quarter was 21.3 per cent (21.2).

Free cash flow

The free cash flow was SEK 102m (–118). Cash flow from operating activities before changes in working capital was SEK 160m (122). The improvement compared to last year is mainly due to the higher operating profit. The cash flow from changes in working capital was SEK 6m (–161).

The cash flow from investments in property, plant and equipment and intangible assets was SEK –64m (–79).

Cash flow from changes in working capital

Cash flow from changes in working capital was SEK 6m (–161). The cash flow from changes in working capital was positively impacted by the decrease in inventories for an amount of SEK 5m (–72) and an increase in payables of SEK 6m (–276) partly offset by an increase in receivables amounting to SEK –5m (187).

Cash flow from other investing activities Cash flow from other investing activities was SEK 1m (0).

Cash flow from financing activities

Cash flow from financing activities was SEK –242m (–389). The cash flow from financing activities was related to the dividend distribution of SEK –215m (0), payments of lease liabilities of SEK –18m (–18) and net proceeds and repayments of loans from credit institutions and commercial papers including transaction costs of SEK –8m (–355). Other cash flows from financing activities amounted to SEK–1m (–16). overview

Operating profit, adjusted

Development during the year

Net sales

Net sales for the first half of the year increased by SEK 63m to SEK 2,818m (2,755) compared to the same period of last year. Organic growth was 5.9 per cent and the impact of changes in exchange rates was –3.6 per cent.

Gross profit

Gross profit amounted to SEK 992m (1,000), which equates to a gross margin of 35.2 per cent (36.3). The gross profit decrease was driven by last year's phasing of supply chain costs of approximately SEK 35m between the second and the third quarter. This was partly offset by higher volume and various margin-enhancing initiatives in Pick & mix.

Operating profit

Operating profit amounted to SEK 246m (254). Operating profit, adjusted for items affecting comparability, amounted to SEK 251m (262). The operating profit decrease was driven by lower gross profit.

Items affecting comparability

Operating profit for the first half of the year includes items affecting comparability of SEK –5m (–8) that are related to costs for restructuring.

Net financial items

Net financial items for the first half of the year amounted to SEK 3m (–57). Interest expenses related to external borrowings were SEK –16m (–15), exchange differences on cash and cash equivalents were SEK 25m (–33) which mainly related to the development of the Swedish and Norwegian krona and the Great Britain pound against the euro during the first half of the year. Other financial items amounted to SEK –6m (–9). Of the total net financial items SEK 4m (–8) is non-cash in nature.

Profit for the period

Profit for the period was SEK 202m (152), which equates to basic and diluted earnings per share of SEK 0.70 (0.53). Income tax for the period was SEK –47m (–45).

The effective tax rate for the period was 18.9 per cent (22.8) and was positively impacted by the utilisation of unrecognised tax losses carried forward in one of the countries. International tax rate differences, non-deductible expenses and an adjustment in prior year filing position had a negative impact on the effective tax rate for the first half of the year.

Free cash flow

The free cash flow was SEK 113m (–138). Cash flow from operating activities before changes in working capital was SEK 285m (288). The cash flow from changes in working capital was SEK –62m (–260).

The cash flow from investments in property, plant and equipment and intangible assets was SEK –110m (–166).

Cash flow from changes in working capital

Cash flow from changes in working capital was SEK –62m (–260). The cash flow from changes in working capital was negatively impacted by the increase in receivables for an amount of SEK –122m (127) partly offset by a decrease in inventories of SEK 33m (–256) and the increase in payables amounting to SEK 27m (–131).

Cash flow from other investing activities Cash flow from other investing activities was SEK 3m (0).

Cash flow from financing activities

Cash flow from financing activities was SEK –259m (–296). The cash flow from financing activities was related to the dividend distribution of SEK –215m (0), payments of lease liabilities of SEK –36m (–36) and net proceeds and repayments of loans from credit institutions and commercial papers including transaction costs of SEK –7m (–244). Other cash flows from financing activities amounted to SEK –1m (–16).

Financial position

Consolidated equity at 30 June 2021 amounted to SEK 4,297m (4,323), which equates to SEK 14.9 (15.0) per share. Net debt at 30 June 2021 was SEK 2,193m (2,492).

Long-term borrowings totaled SEK 2,151m (2,236) and consisted of SEK 2,064m (2,112) in gross non-current loans from credit institutions, SEK 92m (124) in non-current lease liabilities and SEK –5m (0) in capitalised transaction costs.

Total short-term borrowings amounted to SEK 304m (314) and consisted of SEK 250m (249) in commercial papers, SEK 57m (65) in current lease liabilities, SEK –3m (–1) in capitalised transaction costs and accrued interest on borrowings from credit institutions and commercial papers for an amount of SEK 0m (1).

the president

overview

SEKm	30 Jun 2021	30 Jun 2020	31 Dec 2020
Gross non-current loans from credit institutions	2,064	2,112	–
Gross current loans from credit institutions	–	–	2,054
Commercial papers	250	249	250
Lease liabilities	149	189	176
Derivative financial instruments (non current and current)	2	56	54
Interest payable	–	1	1
Gross debt	2,465	2,607	2,535
Cash and cash equivalents	–272	–115	–396
Net debt	2,193	2,492	2,139

Cash and cash equivalents at 30 June 2021 amounted to SEK 272m (115). At 30 June 2021 Cloetta had an unutilised credit facility of SEK 607m (1,259) and the possibility to issue additional commercial papers for an amount of SEK 750m (750).

Performance by business segment

Cloetta has identified the "Branded packaged products" business and the "Pick & mix" business as its operating segments.

The chief operating decision-maker (CODM), which is the CEO and President of the Group, primarily uses external net sales and operating profit, adjusted for items affecting comparability, to assess the performance of its operating segments. Net financial items and income tax are not allocated to segments, as these types of activities are driven by the central treasury department and central tax department respectively.

No segment information is provided to or assessed by the CODM on assets and liabilities and therefore these are not separately disclosed.

Information related to each reportable segment (business segment) is set out below. For more information regarding the determination of reportable segments reference is made to page 24.

Business segments

The Cloetta Group comprises two segments: "Branded packaged products" and "Pick & mix". The Pick & mix net sales and adjusted operating profit relate to Cloetta's complete offering in pick & mix including products, displays and accompanying store and logistic services. All other activities within the Cloetta Group are reflected in the "Branded packaged products" segment.

Apr–Jun 2021 SEKm	Branded packaged products	Pick & mix	Total	Jan–Jun 2021 SEKm

Operating profit, adjusted	136	4	140	Operating profit, adjusted
Items affecting comparability			–1	Items affecting comparability

Apr–Jun 2021 SEKm	Branded packaged products	Pick & mix	Total	Jan–Jun 2021 SEKm	Branded packaged products	Pick & mix	Total
Net sales	1,097	323	1,420	Net sales	2,198	620	2,818
Operating profit, adjusted	136	4	140	Operating profit, adjusted	271	–20	251
Items affecting comparability			–1	Items affecting comparability			– 5
Operating profit			139	Operating profit			246
Net financial items			–17	Net financial items			3
Profit before tax			122	Profit before tax			249
Income tax			–26	Income tax			–47
Profit for the period			96	Profit for the period			202

	Branded				Branded
Apr–Jun 2020 SEKm	packaged products	Pick & mix	Total	Jan–Jun 2020 SEKm	packaged products	Pick & mix	Total
Net sales	1,052	185	1,237	Net sales	2,170	585	2,755
Operating profit, adjusted	169	–59	110	Operating profit, adjusted	344	–82	262
Items affecting comparability			– 5	Items affecting comparability			– 8
Operating profit			105	Operating profit			254
Net financial items			32	Net financial items			–57
Profit before tax			137	Profit before tax			197
Income tax			–29	Income tax			–45
Profit for the period			108	Profit for the period			152

	Jan–Jun 2020 SEKm	Branded packaged products	Pick & mix	Total

	adjusted	344	–82	262
– 5	Items affecting comparability			– 8

overview

F i n a n c i a l statements

Segment Branded packaged products

Second quarter development Net Sales

Net sales for the second quarter increased by SEK 45m to SEK 1,097m (1,052) compared to the same period of last year for branded packaged products. Organic growth was 7.3 per cent.

Operating profit, adjusted

Operating profit, adjusted for items affecting comparability, amounted to SEK 136m (169). The decrease in adjusted operating profit was driven by increased marketing investments. Last year, the adjusted operating profit was favourably impacted by the phasing of supply chain cost between the second and the third quarter.

Development during the year

Net Sales

Net sales for the first half of the year increased by SEK 28m to SEK 2,198m (2,170) compared to the same period of last year for branded packaged products. Organic growth was 4.9 per cent.

Operating profit, adjusted

Operating profit, adjusted for items affecting comparability, amounted to SEK 271m (344). The decrease in adjusted operating profit was driven by increased marketing investments and last year's phasing of supply chain costs between the second and the third quarter.

Segment Pick & mix

Second quarter development Net Sales

Net sales for the second quarter increased by SEK 138m to SEK 323m (185) compared to the same period of last year. Organic growth was 79.6 per cent.

Operating profit, adjusted

Operating profit, adjusted for items affecting comparability, amounted to SEK 4m (–59). The increase in adjusted operating profit was driven by significantly higher sales volumes and continued margin-enhancing initiatives.

Development during the year Net Sales

Net sales for the first half of the year quarter increased by SEK 35m to SEK 620m (585) compared to the same period of last year. Organic growth was 9.7 per cent.

Operating profit, adjusted

Operating profit, adjusted for items affecting comparability, amounted to SEK –20m (–82). The improvement of adjusted operating profit was driven by various margin-enhancing initiatives.

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 2,609 (2,675). The decrease in number of employees is mainly related to changes in the Swedish organisation and the outsourcing of the manufacturing of nuts.

Events after the balance sheet date

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

Key business priorities

Prioritised activities for achieving organic growth and a 14% adjusted operating profit margin.

Sustainability

We believe in the Power of True Joy

Opportunities for creating a positive impact within A Sweeter Future

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 improve our planet footprint

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

Q2 highlights

Innovations to last

Assessing further alternative ingredients that meet vegan requirements
•Launch of fruit-based candy

Learning together

Launched the Sustainability Academy, an internal competence development program
Employee survey completed

Climate footprint baseline

Calculated product climate footprint as a pilot
Development of supplier engagement program towards more sustainable sourcing

W o r d s f r o m the president Overview F i n a n c i a l overview Sustainability F i n a n c i a l statements Disclosures Definitions Contact

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, 16 July 2021

Cloetta AB (publ)

Mikael Norman Board Chairman

Mikael Aru Member of the Board

Alan McLean Raleigh Member of the Board

Patrick Bergander Member of the Board

Camilla Svenfelt Member of the Board

Lena Grönedal Employee Board member

Lottie Knutson Member of the Board

Mikael Svenfelt Member of the Board

Mikael Ström Employee Board member

The information in this interim report has not been reviewed by the company's auditors.

Henri de Sauvage-Nolting President and CEO

Examples of new launches during the second quarter

Finland

TV MIX SALMIAKKI – Mixed bag with salmiac and salty wine gum AAKKOSET – Real fruit, Mixed bag with garden fruits AAKKOSET – Real fruit, Mixed bag with tropical fruits JENKKI CHEWING GUM – Chewing gum with sweet liquorice JENKKI CHEWING GUM – Chewing gum with caramel/mint MYNTHON – Pastilles with grapefruit MYNTHON – Pastilles with blackcurrants

Sweden JULISKUM – Raspberries & pineapple MALACO – Real fruit, Gott&Blandat - Tropiskt MALACO – Real fruit, Gott&Blandat - Bär och frukt PLOPP – Chokladboll

Denmark & Norway JULISKUM – Raspberries & pineapple MINIFLIPPER – Skum med choklad och lakritssmak

statements

Financial statements in summary

Consolidated profit and loss account

		Second quarter		6 months	Rolling 12	Full year
SEKm	Apr–Jun 2021	Apr–Jun 2020	Jan–Jun 2021	Jan–Jun 2020	Jul 2020– Jun 2021	Jan–Dec 2020
Net sales	1,420	1,237	2,818	2,755	5,758	5,695
Cost of goods sold	– 893	–777	–1,826	–1,755	–3,789	–3,718
Gross profit	527	460	992	1,000	1,969	1,977
Selling expenses	–242	–213	– 453	– 450	–954	–951
General and administrative expenses	–146	–142	–293	–296	– 561	– 564
Operating profit	139	105	246	254	454	462
Exchange differences on cash and cash equivalents in foreign
currencies	– 6	45	25	–33	48	–10
Other financial income Other financial expenses	2 –13	1 –14	3 –25	2 –26	4 – 51	3 – 52

Net financial items	–17	32	3	–57	1	–59
Profit before tax	122	137	249	197	455	403
Income tax	–26	–29	– 47	– 45	–124	–122
Profit for the period	96	108	202	152	331	281
Profit for the period attributable to: Owners of the Parent Company	96	108	202	152	331	281
Earnings per share, SEK Basic and diluted1	0.33	0.38	0.70	0.53	1.15	0.98
Number of shares at end of period Average number of shares (basic)1 Average number of shares (diluted)1	288,619,299 286,960,980 287,136,929	288,619,299 286,557,259 286,792,494	288,619,299 286,798,234 287,006,996	288,619,299 286,547,838 286,801,891	288,619,299 286,715,281 286,888,226	288,619,299 286,590,993 286,805,203

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 sharebased incentive plan. The contract has been settled at the end of the reporting period.

Consolidated statement of comprehensive income

		Second quarter		6 months	Rolling 12	Full year
SEKm	Apr–Jun 2021	Apr–Jun 2020	Jan–Jun 2021	Jan–Jun 2020	Jul 2020– Jun 2021	Jan–Dec 2020
Profit for the period	96	108	202	152	331	281
Other comprehensive income
Remeasurement of defined benefit pension plans	11	–9	71	–27	88	–10
Income tax on remeasurement of defined benefit pension plans	–3	1	–15	5	–18	2
Items that will never be reclassified to profit or loss for the period	8	–8	56	–22	70	–8
Currency translation differences	– 69	–284	42	2	–153	–193
Hedge of a net investment in a foreign operation	18	78	– 6	–13	60	53
Income tax on hedge of a net investment in a foreign operation	– 4	–17	1	2	–12	–11
Items that are or may be reclassi fied to profit or loss for the period	–55	–223	37	–9	–105	–151
Total other comprehensive income	–47	–231	93	–31	–35	–159
Total comprehensive income, net of tax	49	–123	295	121	296	122
Total comprehensive income for the period attributable to:
Owners of the Parent Company	49	–123	295	121	296	122

Net financial items

		Second quarter		6 months	Rolling 12	Full year
SEKm	Apr–Jun 2021	Apr–Jun 2020	Jan–Jun 2021	Jan–Jun 2020	Jul 2020– Jun 2021	Jan–Dec 2020
Exchange differences on cash and cash equivalents in foreign currencies	–6	45	25	–33	48	–10
Other financial income, third parties	0	0	0	1	1	2
Unrealised gains on single currency interest rate swaps	2	1	3	1	3	1
Other financial income	2	1	3	2	4	3
Interest expenses third-party borrowings and realised losses on single currency interest rate swaps	– 8	– 8	–16	–15	–33	–32
Amortisation of capitalised transaction costs	–1	–1	–2	–1	–3	–2
Unrealised losses on single currency interest rate swaps	–	–1	–	–1	1	–
Other financial expenses	– 4	– 4	–7	–9	–16	–18
Other financial expenses	–13	–14	–25	–26	–51	–52
Net financial items	–17	32	3	–57	1	–59

Condensed consolidated balance sheet

SEKm	30 Jun 2021	30 Jun 2020	31 Dec 2020
ASSETS
Non-current assets
Intangible assets	5,593	5,684	5,563
Property, plant and equipment	1,555	1,612	1,560
Deferred tax asset	26	10	20
Derivative financial instruments	0	–	–
Other financial assets	5	2	3
Total non-current assets	7,179	7,308	7,146
Current assets
Inventories	925	1,141	952
Other current assets	893	820	763
Derivative financial instruments	0	–	–
Cash and cash equivalents	272	115	396
Total current assets	2,090	2,076	2,111
TOTAL ASSETS	9,269	9,384	9,257
EQUITY AND LIABILITIES
Equity	4,297	4,323	4,179
Non-current liabilities
Long-term borrowings	2,151	2,236	111
Deferred tax liability	872	798	837
Derivative financial instruments	–	3	0
Provisions for pensions and other long-term employee benefits	442	527	512
Provisions	1	–	5
Total non-current liabilities	3,466	3,564	1,465
Current liabilities
Short-term borrowings	304	314	2,368
Derivative financial instruments	3	53	54
Other current liabilities	1,188	1,124	1,167
Provisions	11	6	24
Total current liabilities	1,506	1,497	3,613
TOTAL EQUITY AND LIABILITIES	9,269	9,384	9,257

Condensed consolidated statements of changes in equity

		6 months	Full year
SEKm	Jan–Jun 2021	Jan–Jun 2020	Jan–Dec 2020
Equity at beginning of period	4,179	4,197	4,197
Profit for the period	202	152	281
Other comprehensive income	93	–31	–159
Total comprehensive income	295	121	122
Transactions with owners
Forward contract to repurchase own shares	48	–	–
Share-based payments	–10	5	3
Dividend1	–216	–	–144
Dividend on outstanding shares in forward contracts to repurchase own shares	1	–	1
Total transactions with owners	–177	5	–140
Equity at end of period	4,297	4,323	4,179

1 The dividend paid in 2021 comprised a dividend of SEK 0.75 (0.50) per share.

Condensed consolidated cash flow statement

		Second quarter		6 months	Rolling 12	Full year
SEKm	Apr–Jun 2021	Apr–Jun 2020	Jan–Jun 2021	Jan–Jun 2020	Jul 2020– Jun 2021	Jan–Dec 2020
Cash flow from operating activities before changes in working capital	160	122	285	288	615	618
Cash flow from changes in working capital	6	–161	– 62	–260	236	38
Cash flow from operating activities	166	–39	223	28	851	656
Cash flows from investments in property, plant and equipment and intangible assets	– 64	–79	–110	–166	–234	–290
Cash flow from other investing activities	1	0	3	0	4	1
Cash flow from investing activities	–63	–79	–107	–166	–230	–289
Cash flow from operating and investing activities	103	–118	116	–138	621	367
Cash flow from financing activities	–242	–389	–259	–296	–439	–476
Cash flow for the period	–139	–507	–143	–434	182	–109
Cash and cash equivalents at beginning of period	444	619	396	579	115	579
Cash flow for the period	–139	– 507	–143	– 434	182	–109
Exchange difference	–33	3	19	–30	–25	–74
Total cash and cash equivalents at end of period	272	115	272	115	272	396

16 F i n a n c i a l W o r d s f r o m the president Overview F i n a n c i a l

Sustainability Disclosures Definitions Contact

Condensed consolidated key figures

		Second quarter		6 months	Rolling 12	Full year
SEKm	Apr–Jun 2021	Apr–Jun 2020	Jan–Jun 2021	Jan–Jun 2020	Jul 2020– Jun 2021	Jan–Dec 2020
Profit
Net sales	1,420	1,237	2,818	2,755	5,758	5,695
Net sales, change, %	14.8	–21.9	2.3	–12.3	– 5.7	–12.3
Organic net sales, change, %	18.2	–21.2	5.9	–12.6	–2.8	–11.2
Gross margin, %	37.1	37.2	35.2	36.3	34.2	34.7
Depreciation	– 61	– 65	–123	–131	–257	–265
Amortisation	–2	–2	– 5	– 5	–10	–10
Impairment loss other non-current assets	–1	–1	–1	–3	–11	–13
Operating profit, adjusted	140	110	251	262	504	515
Operating profit margin, adjusted %	9.9	8.9	8.9	9.5	8.8	9.0
Operating profit (EBIT)	139	105	246	254	454	462
Operating profit margin (EBIT margin), %	9.8	8.5	8.7	9.2	7.9	8.1
EBITDA, adjusted	204	178	380	401	771	792
EBITDA	203	173	375	393	732	750
Profit margin, %	8.6	11.1	8.8	7.2	7.9	7.1
Segments Branded packaged products
Net sales	1,097	1,052	2,198	2,170	4,555	4,527
Operating profit, adjusted	136	169	271	344	596	669
Operating profit margin, adjusted %	12.4	16.1	12.3	15.9	13.1	14.8
Pick & mix
Net sales	323	185	620	585	1,203	1,168
Operating profit, adjusted	4	– 59	–20	– 82	–92	–154
Operating profit margin, adjusted %	1.2	–31.9	–3.2	–14.0	–7.6	–13.2

Financial position
Working capital Capital expenditure	605 71	848 120	605 121	848 212	605 281	540 372
Net debt	2,193	2,492	2,193	2,492	2,193	2,139
Capital employed	7,197	7,456	7,197	7,456	7,197	7,224
Return on capital employed, % (Rolling 12 months)	6.3	8.9	6.3	8.9	6.3	6.3
Equity/assets ratio, %	46.4	46.1	46.4	46.1	46.4	45.1
Net debt/equity ratio, %	51.0	57.6	51.0	57.6	51.0	51.2
Return on equity, % (Rolling 12 months)	7.7	10.5	7.7	10.5	7.7	6.7
Equity per share, SEK	14.9	15.0	14.9	15.0	14.9	14.5
Net debt/EBITDA, x (Rolling 12 months)	2.8	2.6	2.8	2.6	2.8	2.7
Cash flow
Cash flow from operating activities	166	–39	223	28	851	656
Cash flow from investing activities	– 63	–79	–107	–166	–230	–289
Cash flow after investments	103	–118	116	–138	621	367
Free cash flow	102	–118	113	–138	617	366
Free cash flow yield (Rolling 12 months), %	8.4	4.8	8.4	4.8	8.4	5.2
Cash flow from operating activities per share, SEK	0.6	– 0.1	0.8	0.1	2.9	2.3
Employees
Average number of employees	2,609	2,675	2,605	2,684	2,613	2,653

Reconciliation of alternative performance measures key figures

		Second quarter		6 months	Rolling 12	Full year
SEKm	Apr–Jun 2021	Apr–Jun 2020	Jan–Jun 2021	Jan–Jun 2020	Jul 2020– Jun 2021	Jan–Dec 2020
Items affecting comparability
Acquisitions, integration and restructurings	–1	– 5	– 5	– 8	– 50	– 53
of which: impairment loss other non-current assets	–	–	–	–	–11	–11
Items affecting comparability	–1	–5	–5	–8	–50	–53
*Corresponding line in the condensed consolidated profit and loss account:
Cost of goods sold	0	0	0	0	–19	–19
Selling expenses	–	0	–	0	–12	–12
General and administrative expenses	–1	– 5	– 5	– 8	–19	–22
Total	–1	–5	–5	–8	–50	–53
Operating profit, adjusted
Operating profit	139	105	246	254	454	462
Minus: Items affecting comparability	–1	– 5	– 5	– 8	– 50	– 53
Operating profit, adjusted	140	110	251	262	504	515
Net sales	1,420	1,237	2,818	2,755	5,758	5,695
Operating profit margin, adjusted, %	9.9	8.9	8.9	9.5	8.8	9.0

EBITDA, adjusted
Operating profit	139	105	246	254	454	462
Minus: Depreciation	– 61	– 65	–123	–131	–257	–265
Minus: Amortisation	–2	–2	– 5	– 5	–10	–10
Minus: Impairment loss other non-current assets	–1	–1	–1	–3	–11	–13
EBITDA	203	173	375	393	732	750
Minus: Items affecting comparability (excl. impairment loss other
non-current assets)	–1	– 5	– 5	– 8	–39	– 42
EBITDA, adjusted	204	178	380	401	771	792
Capital employed
Total assets	9,269	9,384	9,269	9,384	9,269	9,257
Minus: Deferred tax liability	872	798	872	798	872	837
Minus: Non-current provisions	1	–	1	–	1	5
Minus: Current provisions	11	6	11	6	11	24
Minus: Other current liabilities	1,188	1,124	1,188	1,124	1,188	1,167
Capital employed	7,197	7,456	7,197	7,456	7,197	7,224
Capital employed comparative period
previous year	7,456	7,362	7,456	7,362	7,456	7,576
Average capital employed	7,327	7,409	7,327	7,409	7,327	7,400

Reconciliation alternative performance measures, continued

		Second quarter		6 months	Rolling 12	Full year
SEKm	Apr–Jun 2021	Apr–Jun 2020	Jan–Jun 2021	Jan–Jun 2020	Jul 2020– Jun 2021	Jan–Dec 2020
Return on capital employed
Operating profit (Rolling 12 months)	454	658	454	658	454	462
Financial income (Rolling 12 months)	4	3	4	3	4	3
Operating profit plus financial income (Rolling 12 months)	458	661	458	661	458	465
Average capital employed	7,327	7,409	7,327	7,409	7,327	7,400
Return on capital employed, %	6.3	8.9	6.3	8.9	6.3	6.3
Free cash flow yield
Cash flow from operating activities (Rolling 12 months)	851	601	851	601	851	656
Cash flows from investments in property, plant and equipment and intangible assets (Rolling 12 months)	–234	–271	–234	–271	–234	–290
Free cash flow (Rolling 12 months)	617	330	617	330	617	366
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	2.14	1.14	2.14	1.14	2.14	1.27
Market price per share, SEK	25.54	23.72	25.54	23.72	25.54	24.52
Free cash flow yield (Rolling 12 months), %	8.4	4.8	8.4	4.8	8.4	5.2
Changes in net sales
Net sales	1,420	1,237	2,818	2,755	5,758	5,695
Net sales comparative period previous year	1,237	1,583	2,755	3,142	6,106	6,493
Net sales, change	183	–346	63	–387	–348	–798
Minus: Changes in exchange rates	– 43	–11	–99	10	–179	–70
Organic growth	226	–335	162	–397	–169	–728
Organic growth, %	18.2	–21.2	5.9	–12.6	–2.8	–11.2

19 F i n a n c i a l

Quarterly data

SEKm	Q2 2021	Q1 2021	Q4 2020	Q3 2020	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019
Profit and loss account
Net sales	1,420	1,398	1,466	1,474	1,237	1,518	1,722	1,629	1,583
Cost of goods sold	–893	–933	–923	–1,040	–777	–978	–1,073	–1,042	–1,004
Gross profit	527	465	543	434	460	540	649	587	579
Selling expenses	–242	–211	–253	–248	–213	–237	–271	–244	–253
General and administrative expenses	–146	–147	–169	–99	–142	–154	–169	–148	–167
Operating profit	139	107	121	87	105	149	209	195	159
Exchange differences on cash and
cash equivalents in foreign currencies	– 6	31	34	–11	45	–78	13	– 8	–12
Other financial income	2	1	1	0	1	1	0	1	0
Other financial expenses	–13	–12	–13	–13	–14	–12	–9	–13	–18
Net financial items	–17	20	22	–24	32	–89	4	–20	–30
Profit before tax	122	127	143	63	137	60	213	175	129
Income tax	–26	–21	–60	–17	–29	–16	–41	–45	–32
Profit for the period	96	106	83	46	108	44	172	130	97
Profit for the period attributable to:
Owners of the Parent Company	96	106	83	46	108	44	172	130	97
Key figures
Profit
Depreciation, amortisation and impairment	– 64	–65	–72	–77	–68	–71	–74	–75	–77
Operating profit, adjusted	140	111	123	130	110	152	216	200	161
EBITDA, adjusted	204	176	196	195	178	223	290	275	238
EBITDA	203	172	193	164	173	220	283	270	236
Operating profit margin, adjusted %	9.9	7.9	8.4	8.8	8.9	10.0	12.5	12.3	10.2
Operating profit margin (EBIT margin), %	9.8	7.7	8.3	5.9	8.5	9.8	12.1	12.0	10.0
Earnings per share, SEK
Basic and diluted1	0.33	0.37	0.29	0.16	0.38	0.15	0.60	0.45	0.34
Segments
Branded packaged products
Net sales	1,097	1,101	1,179	1,178	1,052	1,118	1,261	1,187	1,130
Operating profit, adjusted	136	135	171	154	169	175	207	189	167
Operating profit margin, adjusted %	12.4	12.3	14.5	13.1	16.1	15.7	16.4	15.9	14.8

Pick & mix
Net sales	323	297	287	296	185	400	461	442	453
Operating profit, adjusted	4	–24	–48	–24	–59	–23	9	11	– 6
Operating profit margin, adjusted %	1.2	–8.1	–16.7	–8.1	–31.9	–5.8	2.0	2.5	–1.3
Financial position
Share price, last paid, SEK	25.54	25.56	24.52	26.00	23.72	23.52	31.70	28.26	30.20
Return on equity, % (Rolling 12 months)	7.7	7.8	6.7	8.4	10.5	10.0	11.9	11.8	12.3
Equity per share, SEK	14.9	15.3	14.5	15.2	15.0	15.4	14.5	14.2	13.7
Net Debt/EBITDA, x (Rolling 12 months)	2.8	2.8	2.7	2.6	2.6	2.4	2.2	2.5	2.7
Cash flow
Free cash flow	102	11	252	252	–118	–20	269	199	–41
Cash flow from operating activities per share, SEK	0.6	0.2	1.1	1.1	– 0.1	0.2	1.1	0.9	–0.0

Reconciliation of alternative performance measures per quarter

SEKm	Q2 2021	Q1 2021	Q4 2020	Q3 2020	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019
Items affecting comparability
Acquisitions, integration and restructurings	–1	– 4	–2	–43	– 5	–3	–7	– 5	1
of which: impairment loss non-current assets	–	–	1	–12	–	–	–	–	–
Other items affecting comparability	–	–	–	–	–	–	–	–	–3
Items affecting comparability*	–1	–4	–2	–43	–5	–3	–7	–5	–2
*Corresponding line in the condensed consolidated profit and loss account:
Cost of goods sold	0	–	0	–19	0	–	–	–	3
Selling expenses	–	–	0	–12	0	–	– 4	–2	–
General and administrative expenses	–1	– 4	–2	–12	– 5	–3	–3	–3	– 5
Total	–1	–4	–2	–43	–5	–3	–7	–5	–2
Operating profit. adjusted
Operating profit	139	107	121	87	105	149	209	195	159
Minus: Items affecting comparability	–1	– 4	–2	–43	– 5	–3	–7	– 5	–2
Operating profit, adjusted	140	111	123	130	110	152	216	200	161
Net sales	1,420	1,398	1,466	1,474	1,237	1,518	1,722	1,629	1,583
Operating profit margin, adjusted, %	9.9	7.9	8.4	8.8	8.9	10.0	12.5	12.3	10.2
EBITDA, adjusted
Operating profit	139	107	121	87	105	149	209	195	159
Minus: Depreciation	– 61	–62	–70	–64	–65	–66	–69	–73	–74
Minus: Amortisation	–2	–3	–2	–3	–2	–3	–3	–2	–3
Minus: Impairment loss other non-current assets	–1	–	0	–10	–1	–2	–2	–	–
EBITDA	203	172	193	164	173	220	283	270	236
Minus: Items affecting comparability (excl. impairment loss other non-current assets)	–1	– 4	–3	–31	– 5	–3	–7	– 5	–2
EBITDA, adjusted	204	176	196	195	178	223	290	275	238

Capital employed
Total assets	9,269	9,497	9,257	9,619	9,384	10,260	9,660	9,676	9,410
Minus: Deferred tax liability	872	868	837	814	798	814	803	801	792
Minus: Non-current provisions	1	–	5	6	–	–	5	5	6
Minus: Current provisions	11	28	24	28	6	7	5	7	11
Minus: Other current liabilities	1,188	1,190	1,167	1,235	1,124	1,437	1,271	1,349	1,239
Capital employed	7,197	7,411	7,224	7,536	7,456	8,002	7,576	7,514	7,362
Capital employed comparative period previous year	7,456	8,002	7,576	7,514	7,362	7,654	7,027	6,904	6,833
Average capital employed	7,327	7,707	7,400	7,525	7,409	7,828	7,302	7,209	7,098

Reconciliation of alternative performance measures, continued

SEKm	Q2 2021	Q1 2021	Q4 2020	Q3 2020	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019
Return on capital employed
Operating profit (Rolling 12 months)	454	420	462	550	658	712	727	677	662
Financial income (Rolling 12 months)	4	3	3	2	3	2	2	3	2
Operating profit plus financial income (Rolling 12 months)	458	423	465	552	661	714	729	680	664
Average capital employed	7,327	7,707	7,400	7,525	7,409	7,828	7,302	7,209	7,098
Return on capital employed, %	6.3	5.5	6.3	7.3	8.9	9.1	10.0	9.4	9.4
Free cash flow yield
Cash flow from operating activities (Rolling 12 months)	851	646	656	659	601	637	724	694	689
Cash flows from investments in property, plant and equipment and intangible assets (Rolling 12 months)	–234	–249	–290	–276	–271	–230	–186	–185	–173
Free cash flow (Rolling 12 months)	617	397	366	383	330	407	538	509	516
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	2.14	1.38	1.27	1.33	1.14	1.41	1.86	1.76	1.79
Market price per share, SEK	25.54	25.56	24.52	26.00	23.72	23.52	31.70	28.26	30.20
Free cash flow yield (Rolling 12 months), %	8.4	5.4	5.2	5.1	4.8	6.0	5.9	6.2	5.9
Changes in net sales
Net sales	1,420	1,398	1,466	1,474	1,237	1,518	1,722	1,629	1,583
Net sales comparative period previous year	1,237	1,518	1,722	1,629	1,583	1,559	1,646	1,538	1,472
Net sales, change	183	–120	–256	–155	–346	–41	76	91	111
Minus: Changes in exchange rates	– 43	–56	–44	–36	–11	21	33	25	27
Organic growth	226	–64	–212	–119	–335	–62	43	66	84
Organic growth, %	18.2	–4.2	–12.3	–7.3	–21.2	–4.0	2.6	4.3	5.7

Parent company

Condensed parent company profit and loss account

		Second quarter		6 months	Rolling 12	Full year
SEKm	Apr–Jun 2021	Apr–Jun 2020	Jan–Jun 2021	Jan–Jun 2020	Jul 2020– Jun 2021	Jan–Dec 2020
Net sales	23	16	35	38	76	79
Gross profit	23	16	35	38	76	79

General and administrative expenses	–25	–22	– 53	–46	– 88	– 81
Operating loss	–2	–6	–18	–8	–12	–2

Net financial items	– 5	–9	– 8	–11	53	50
Profit/loss before tax	–7	–15	–26	–19	41	48

Income tax	1	–1	5	–1	– 5	–11
Profit/loss for the period	–6	–16	–21	–20	36	37

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

Q2 Cloetta Interim Report Q2 2021 Financial stat em en ts

Condensed parent company balance sheet

SEKm	30 Jun 2021	30 Jun 2020	31 Dec 2020
ASSETS
Non-current assets	5,360	5,356	5,354
Current assets	83	80	77
TOTAL ASSETS	5,443	5,436	5,431
EQUITY AND LIABILITIES
Equity	2,853	3,189	3,100

Non-current liabilities
Borrowings	931	936	137
Derivative financial instruments	–	2	–
Provisions	1	1	1
Total non-current liabilities	932	939	138
Current liabilities
Borrowings	250	249	1,050
Derivative financial instruments	2	3	3
Other current liabilities	1,406	1,056	1,140
Total current liabilities	1,658	1,308	2,193
TOTAL EQUITY AND LIABILITIES	5,443	5,436	5,431

Condensed parent company statement of changes in equity

		6 months	Full year
SEKm	Jan–Jun 2021	Jan–Jun 2020	Jan–Dec 2020
Equity at beginning of period	3,100	3,204	3,204
Profit/loss for the period	–21	–20	37
Total comprehensive income	–21	–20	37
Transactions with owners
Share-based payments	–10	5	3
Dividend1	–216	–	–144
Total transactions with owners	–226	5	–141
Equity at end of period	2,853	3,189	3,100

1 The dividend paid in 2021 comprised a dividend of SEK 0.75 (0.50) per share.

W o r d s f r o m the president Overview F i n a n c i a l

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, 2021. 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 except for the changes in segment reporting as described below. 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 2020 at www.cloetta.com. No new standards are effective as from 1 January 2021 which have been endorsed by the EU.

Disclosures

Segment reporting

In the years after the acquisition of the Candyking Group in 2017, the Pick & mix business became a significant part of Cloetta's total business with its own focus, operational organisation, management responsibilities and reporting flows. Following the changes in the business, also the management structure of the Group evolved with the introduction of a Chief Pick & mix Officer (CPMO) responsible for the

development of the Pick & mix business and a Chief Marketing Officer (CMO) being responsible for the marketing of the Branded packaged business. Both officers are members of the executive committee and are accountable within their own business lines and report directly to the President and CEO.

In Q1 2021, Cloetta has reassessed the operating segments with an increased focus on the impact of the changes in the organisation as indicated above. The reassessment has been performed with the intention to come to a sustainable structure taking into account the current organisation, operating model and initiated initiatives related to the direction of the company.

In the assessment it has been considered that both the Branded packaged business and the Pick & mix business have their own specific characteristics. Both business lines generate their own external revenues and incur expenses and for both business lines a different company wide business and investment strategy has been developed and is in place.

The character of the more profitable Branded packaged business requires investments in the brands (A&P) with consumer visibility (traditional- and social media) to generate long term strength of our own brands, leading to value creation for the company. Cloetta manufactures nearly all products sold in this business in its own production facilities.

The much lower margin Pick & mix business is predominantly a wholesale business where Cloetta sells its own products and its competitors' products to retailers under their own private brand or under the CandyKing concept. The Pick & mix business is driven by volumes and requires investments in the pick & mix concept including investments in the fixtures in which the products are offered to the consumer.

Operating segments have been identified in accordance with the guidance provided in IFRS 8 paragraph 5–10.

The overall focus on revenues, profitability, and strategy specifically for the Branded packaged products business versus the Pick & mix business is reflected as such in Cloetta's external financial reporting and this split is aligned with the interest of Cloetta's investors.

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

		Second quarter		6 months	Rolling 12	Full year
SEKm	Apr–Jun 2021	Apr–Jun 2020	Jan–Jun 2021	Jan–Jun 2020	Jul 2020– Jun 2021	Jan–Dec 2020
Net sales
Branded packaged products	1,097	1,052	2,198	2,170	4,555	4,527
Pick & mix	323	185	620	585	1,203	1,168
Total	1,420	1,237	2,818	2,755	5,758	5,695

Breakdown of net sales by category

		Second quarter		6 months	Rolling 12	Full year
%	Apr–Jun 2021	Apr–Jun 2020	Jan–Jun 2021	Jan–Jun 2020	Jul 2020– Jun 2021	Jan–Dec 2020
Net sales
Candy	61	58	60	59	60	59
Chocolate	17	18	18	17	18	17
Pastilles	11	12	11	12	11	12
Chewing gum	6	7	6	7	6	7
Nuts	3	3	3	3	3	3
Other	2	2	2	2	2	2
Total	100	100	100	100	100	100

Breakdown of net sales by country

		Second quarter		6 months	Rolling 12	Full year
%	Apr–Jun 2021	Apr–Jun 2020	Jan–Jun 2021	Jan–Jun 2020	Jul 2020– Jun 2021	Jan–Dec 2020
Sweden	31	32	31	31	31	31
Finland	22	22	21	22	22	22
The Netherlands	15	16	14	15	14	15
Denmark	8	9	9	9	9	9
The UK	6	4	5	5	5	5
Norway	6	7	8	5	7	6
Germany	6	4	6	6	6	6
Other countries	6	6	6	7	6	6
Total	100	100	100	100	100	100

26 Disclosures Sustainability F i n a n c i a l

Overview F i n a n c i a l overview

Leases

Right-of-use assets
SEKm	30 Jun 2021	30 Jun 2020 31 Dec 2020

Land and buildings	84	105	95
Transportation	52	55	52
Other equipment	12	28	23

Total right-of-use assets	148	188	170

Additions to the right-of-use assets were SEK 7m (40) during the quarter and SEK 10m (45) during the first half of the year.

Lease liability

SEKm	30 Jun 2021	30 Jun 2020 31 Dec 2020
Current	57	65	64
Non-current (between 1 and 5 years)	91	120	110
Non-current (over 5 years)	1	4	2
Total Lease liability	149	189	176

The non-current lease liability of SEK 92m (124) is reflected in the 'long-term borrowings'. The current lease liability of SEK 57m (65) is reflected in the 'short-term borrowings'.

Depreciation charge right-of-use assets

	Second quarter			6 months	Rolling 12	Full year
SEKm	Apr–Jun 2021	Apr–Jun 2020	Jan–Jun 2021	Jan–Jun 2020	Jul 2020– Jun 2021	Jan–Dec 2020
Land and buildings	–11	– 8	–18	–16	–36	–34
Transportation	–7	– 8	–14	–16	–28	–30
Other equipment	–1	–3	–3	– 5	–7	–9
Total depreciation charge right-of use assets	–19	–19	–35	–37	–71	–73

Other disclosures

	Second quarter			6 months	Rolling 12	Full year
SEKm	Apr–Jun 2021	Apr–Jun 2020	Jan–Jun 2021	Jan–Jun 2020	Jul 2020– Jun 2021	Jan–Dec 2020	Recognised in:
Interest expense	0	0	–1	–1	–3	–3	net financial items, in the profit and loss account
Impairment of right-of-use assets	–	–	–	–	– 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	–1	–1	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 recognised	0	–2	–2	– 4	– 6	– 8	cost of goods sold, selling expenses and general and administrative expenses, in the profit and loss account
Expense relating to vari able lease payments not included in lease liabilities	– 4	– 5	– 8	–9	–16	–17	cost of goods sold, selling expenses and general and administrative expenses, in the profit and loss account
Total cash outflow for leases	–19	–18	–37	–37	–75	–75	cash flow from operating activities and financing activities, in the cash flow statement

27 Disclosures Sustainability F i n a n c i a l

Overview F i n a n c i a l overview

Taxes

The net effect of international tax rate differences, 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 recognised at fair value after initial recognition are the interest rate swaps categorised within 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.

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 Jun 2021	Carrying amount				Fair value
SEKm	Mandatorily at FVTPL	Financial assets at amortised 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	–	778	–	778
• Single currency interest rate swaps	0	–	–	–	–	0	–	0
• Cash and cash equivalents	–	272	–	272
Total assets	0	1,050	–	1,050	–	0	–	0
Financial liabilities
• Loans from credit institutions	–	–	2,064	2,064
• Commercial papers	–	–	250	250
• Single currency interest rate swaps	3	–	–	3	–	3	–	3
• Lease liabilities	–	–	149	149
• Trade and other payables, excluding other taxes and social security payables and excluding contingent consideration	–	–	1,038	1,038
Total liabilities	3	–	3,501	3,504	–	3	–	3

28 Disclosures Sustainability F i n a n c i a l

Overview F i n a n c i a l

Definitions Contact

31 Dec 2020		Carrying amount			Fair value
SEKm	Mandatorily at FVTPL	Financial assets at amortised 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	–	663	–	663
• Cash and cash equivalents	–	396	–	396
Total assets	–	1,059	–	1,059	–	–	–	–

Financial liabilities
• Loans from credit institutions	–	–	2,054	2,054
• Commercial papers	–	–	250	250
• Forward contract to repurchase own shares	–	–	49	49	–	2	–	2
• Single currency interest rate swaps	5	–	–	5	–	5	–	5
• Lease liabilities	–	–	176	176
• Trade and other payables, excluding other taxes and social security payables and excluding contingent consideration	–	–	982	982
Total liabilities	5	–	3,511	3,516	–	7	–	7

30 Jun 2020		Carrying amount			Fair value
SEKm	Mandatorily at FVTPL	Financial assets at amortised 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	–	707	–	707
• Cash and cash equivalents	–	115	–	115
Total assets	–	822	–	822	–	–	–	–

Financial liabilities
• Loans from credit institutions	–	–	2,112	2,112
• Commercial papers	–	–	249	249
• Forward contract to repurchase own shares	–	–	49	49	–	3	–	3
• Single currency interest rate swaps	7	–	–	7	–	7	–	7
• Lease liabilities	–	–	189	189
• Trade and other payables, excluding other taxes and social security payables and excluding contingent consideration	–	–	892	892
Total liabilities	7	–	3,491	3,498	–	10	–	10

Sustainability F i n a n c i a l

29 Disclosures statements

Definitions Contact

No transfers between fair value hierarchy levels has occurred 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 within 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 within level 2. 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 June 2021. Net sales in the Parent Company amounted to SEK 35m (38) and relate mainly to intra-group services. Operating loss was SEK –18m (–8). Net financial items totaled SEK –8m (–11). Loss before tax was SEK –26m (–19) and loss for the period was SEK –21m (–20). 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 June 2021, a total of 116,034,632 shares were traded for a combined value of SEK 2,900m, equivalent to around 41 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 June 2021 was SEK 27.52 (21 May) and the lowest was SEK 22.02 (28 January). The share price on 30 June 2021 was SEK 25.54 (last price paid). During the period from 1 January to 30 June 2021, the Cloetta share increased by 4.2 per cent while the Nasdaq OMX Stockholm PI index increased by 19.3 per cent. Cloetta's share capital at 30 June 2021 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 June 2021, Cloetta AB had 36,234 shareholders. The largest shareholder was AB Malfors Promotor with a holding corresponding to 39,8 per cent of the votes and 29,1 per cent of the share capital in the company. La Financière de l'Echiquier was the second largest shareholder with 2.8 per cent of the votes and 3.3 per cent of the share capital. The third largest shareholder was Dimensional Fund Advisors with 2.6 per cent of the votes and 3.0 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 2020 and consist of industry and market-related risks, operational risks and financial risks.

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, adjusted	Operating profit, adjusted for items affecting comparability, as a percentage of net sales.	Adjusted operating profit margin excludes the impact of items affecting comparability, enabling a comparison of operational profitability.
Operating profit margin (EBIT margin)	Operating profit expressed as a percentage of net sales.	Operating profit margin is used for measuring the 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 investors consisting of shareholders and lenders.
Free cash flow yield	Free cash flow of the last 12 months divided by the number of shares at the end of the period and consequently divided by the market price per share at the end of the period.	This metric is an indicator for 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 annualisation 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.

the president

Disclosures Definitions Contact

Other definitions	Definition/calculation	Purpose
Amortisation	Amortisation of intangible assets except for amortisation on software which is included in "Depreciation".	Amortisation deviates from depreciation where amorti sation has the purpose to spread capitalised expenses over the useful lifetime of these expenses.
Depreciation	Depreciation of property, plant and equipment and amorti sation of software.	Depreciation deviates from amortisation where depreci ation has the purpose to spread the cost of a non current asset over the useful lifetime of these assets.
EBITDA	Operating profit before depreciation, amortisation and impairments of other non-current assets.	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, amortisation and impairments of other non-current assets.	Adjusted EBITDA 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 comparability of the Group's financial performance.
Net financial items	The total of exchange differences on cash and cash equiv alent 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, irrespec tive the financing structure of the company.
Operating profit (EBIT), adjusted	Operating profit adjusted for items affecting comparability.	Operating profit, adjusted increases the comparability of operating profit.
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 on 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 Jun 2021	30 Jun 2020	31 Dec 2020
EUR, average	10.1350	10.6685	10.4880
EUR, end of period	10.1110	10.4948	10.0343
NOK, average	0.9969	0.9895	0.9757
NOK, end of period	0.9940	0.9618	0.9584
GBP, average	11.6979	12.1924	11.7868
GBP, end of period	11.7837	11.5020	11.1613
DKK, average	1.3628	1.4293	1.4070
DKK, end of period	1.3597	1.4082	1.3485