Cloetta — Interim / Quarterly Report 2020

Jan 28, 2021

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Interim report Q4 October–December 2020

Stockholm, 28 January 2021

"Our ability to act swiftly and decisively, combined with our strong brands and resilient categories, has allowed us to navigate through this challenging market environment while maintaining focus on the future."

Henri de Sauvage-Nolting, President and CEO

Fourth quarter, October–December 2020

• Net sales for the quarter decreased by 14.9 per cent to SEK 1,466m (1,722), including a negative effect of 2.6 per cent due to exchange rate fluctuations.
• Sales of branded packaged products decreased organically by –3.6 per cent during the quarter, comprised of –1.4 per cent for October, –3.4 per cent for November, and –6.8 per cent for December.
• Sales of pick & mix declined organically by –35.9 per cent during the quarter, comprised of –38.5 per cent for October, –30.1 per cent for November, and –38.4 per cent for December.
• Operating profit amounted to SEK 121m (209). Profit for the period amounted to SEK 83m (172). Operating profit, adjusted for items affecting comparability, amounted to SEK 123m (216).
• Following the impact of COVID-19, the total pick & mix business generated a negative EBIT of approximately SEK 135m in 2020.
• Cash flow from operating activities was SEK 315m (318).
• Net debt/EBITDA ratio was 2.7 (2.2).
• The Board proposes a dividend of SEK 0.75 (0.50) per share.

Key ratios

	Fourth quarter			Full year
SEKm	Oct–Dec 2020	Oct–Dec 2019	Change, %	Jan–Dec 2020	Jan–Dec 2019	Change, %
Net sales	1,466	1,722	–14.9¹	5,695	6,493	–12.3¹
Operating profit, adjusted	123	216	– 43.1	515	743	–30.7
Operating profit margin, adjusted, %	8.4	12.5	–4.1-pts	9.0	11.4	–2.4-pts
Operating profit (EBIT)	121	209	– 42.1	462	727	–36.5
Operating profit margin (EBIT margin), %	8.3	12.1	–3.8-pts	8.1	11.2	–3.1-pts
Profit before tax	143	213	–32.9	403	648	–37.8
Profit for the period	83	172	– 51.7	281	498	– 43.6
Earnings per share, basic and diluted, SEK	0.29	0.60	– 51.7	0.98	1.74	– 43.7
Net debt/EBITDA, x (Rolling 12 months)	2.7	2.2	22.7	2.7	2.2	22.7
Free cash flow	252	269	– 6.3	366	538	–32.0
Cash flow from operating activities	315	318	– 0.9	656	724	–9.

1 Organic growth at constant exchange rates and comparable units was –12.3 per cent for the quarter and –11.2 per cent for the year. See further under Net sales on page 5.

2

Overview

Maintained focus on the future in a challenging environment

Taking actions to mitigate the impact of COVID-19 as the previous sales recovery transitioned into a new slowdown during the quarter.

Since early March, the COVID-19 pandemic has had a significant impact on our business. In this unique and challenging situation, we have managed to maintain business continuity while prioritizing the health and safety of our employees, customers, and consumers.

In connection with our third quarter report, we indicated that we may see gradually improved pick & mix sales and profitability levels, provided that the COVID-19 situation did not change significantly. However, our sales channels as well as consumer behavior were impacted due to the subsequent second wave of the pandemic, and the sales recovery seen during the third quarter instead transitioned into a new slowdown.

Given the worsening situation we have taken various measures to mitigate the impact. Our ability to act swiftly and decisively, combined with our strong brands and resilient categories, has allowed us to navigate through this challenging market environment while maintaining focus on the future.

Developments during the fourth quarter

Sales for the quarter decreased by –14.9 per cent, of which organic growth accounted for –12.3 per cent and exchange rate differences for –2.6 per cent. Sales of branded packaged products decreased organically by –3.6 per cent, as an increased demand from grocery stores was more than offset by a decline in other sales channels such as entertainment and travel retail that have either closed or seen a reduction in the number of shoppers. Sales of pick & mix declined organically by –35.9 per cent during the quarter, driven by a lower in-store activation and consumer demand.

The decrease in the adjusted operating profit is attributable to lower sales volumes as well as under-absorption of costs due to lower production. The operating profit was further impacted by increased marketing investments, more than offset by continued strong cost control.

Agility in challenging times

This has been a year defined by the COVID-19 pandemic, with many related challenges. I am pleased that despite this we have managed to maintain focus on the future by keeping the momentum in the execution of our strategy. We have continued to implement new pricing as well as accelerated several cost-saving initiatives. To support our growth agenda, we have increased our marketing investments behind our key brands, whilst improving our media efficiency. During the year we also launched our new sustainability agenda.

Since disclosing the loss generated by the Swedish pick & mix business two years ago, we have taken a number of margin-enhancing initiatives which would have brought the Swedish pick & mix business to break-even by the end of this year. This would have been a first step towards building sustainable profitability. However, given the significant volume loss due to COVID-19 the effect has been delayed by around one year. Furthermore, as COVID-19 has impacted sales significantly across all markets, and with the high share of fixed costs in the pick & mix business model, the total Cloetta pick & mix business generated a negative EBIT of approximately SEK 135m in 2020, compared to a profit in 2019. Rebuilding our volumes is critical for recovering the profitability in pick & mix.

To actively rebuild the volumes, we have successfully worked with our customers to ensure that the previously closed pick & mix fixtures remain open. The next step is to support our customers to fully reinstate consumer activation as the suppressing effect of the pandemic gradually eases. In 2021, we will accelerate the launch of the upgraded CandyKing offering, with increased emphasis on hygiene, to regain the consumer confidence. Consequently, during the quarter we have also renegotiated and extended a number of pick & mix contracts to become profitable.

During the quarter, our VIP+ cost program continued to deliver reduced SG&A costs, including through the execution of the previously announced reorganization in Sweden. Since 2019 the VIP+ cost program has enabled more than SEK 130m in reduced SG&A costs, half of which are one-off savings due to COVID-19 and lower volumes. Approximately SEK 30m of the cost savings has been reinvested into strengthening our brands and marketing capabilities. We will continue to drive our VIP+ cost program in 2021 to improve our underlying cost structure.

We delivered strong cash flow in the quarter, as the shortfall in operating profit was offset by favorable working capital movements. This, combined with the solid financing of our business operations, enables the Board to propose a dividend of SEK 0.75 (0.50) per share for 2020, bringing the average dividend for 2019 and 2020 combined within our target range. The proposal takes into consideration current market conditions and a continued priority to retain a solid balance sheet.

We remain focused on growing Cloetta organically, in line with or better than the market, and at the same time reaching an EBIT margin, adjusted, of at least 14 per cent. Looking ahead, we will continue to pursue our strategy whilst adjusting our implementation plans to a constantly changing market environment. I am confident that Cloetta remains well positioned to continue to create value.

Henri de Sauvage-Nolting, President and CEO

Financial overview

Fourth quarter developments 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 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 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 2019, 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 various measures to address the financial consequences of the COV-ID-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 1m in the quarter and SEK 9m in the year. In conjunction with the dividend payout in the fourth quarter of 2020, 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 was repaid in January 2021 to the Swedish government. The total amount of support applied for to support short-term and medium-term liquidity at the end of the quarter is SEK 8m and will be paid in the first quarter of 2021.

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

n 2019 n 2020

Operating profit, adjusted

Definitions

Monthly organic sales growth, %	JAN	FE B	MAR	APR	MA Y	JUN	JUL	AUG	SEP	OCT	NOV	DEC
Total	–3.9	2.7	–10.0	–25.4	–27.6	–10.1	–6.6	–10.7	–4.9	–11.9	–10.4	–14.7
Branded packaged products	–6.5	2.0	–2.9	–3.6	–16.6	1.5	–0.9	–0.4	4.1	–1.4	–3.4	–6.8
Pick & mix	3.8	4.4	–27.9	–70.5	–60.2	–41.1	–27.2	–37.1	–29.6	–38.5	–30.1	–38.4

Net sales

Net sales for the fourth quarter decreased by SEK 256m to SEK 1,466m (1,722) compared to the same period of last year. Organic growth was –12.3 per cent and changes in exchange rates was –2.6 per cent.

Changes in net sales, %	Oct–Dec 2020	Jan–Dec 2020
Organic growth	–12.3	–11.2
Changes in exchange rates	–2.6	–1.1
Total	–14.9	–12.3

Monthly organic sales growth, %	October 2020	November 2020	December 2020
Total	–11.9	–10.4	–14.7
Branded packaged products	–1.4	–3.4	–6.8
Pick & mix	–38.5	–30.1	–38.4

Gross profit

Gross profit amounted to SEK 543m (649), which equates to a gross margin of 37.0 per cent (37.7). The gross profit decrease was driven by lower sales volumes as well as under-absorption of costs due to lower production.

Operating profit

Operating profit amounted to SEK 121m (209). Operating profit, adjusted for items affecting comparability, amounted to SEK 123m (216). The decrease in operating profit, adjusted, was driven by lower gross profit and increased marketing investments, partly offset by continued strong cost control.

Items affecting comparability

Operating profit for the fourth quarter includes items affecting comparability of SEK –2m (–7) that are mainly related to costs for restructuring.

Net financial items

Net financial items for the quarter amounted to SEK 22m (4). Interest expenses related to external borrowings were SEK –8m (–6), exchange differences on cash and cash equivalents were SEK 34m (13) 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 (–3). Of the total net financial items SEK 59m (23) is non-cash in nature.

Profit for the period

Profit for the period was SEK 83m (172), which equates to basic and diluted earnings per share of SEK 0.29 (0.60).

Income tax for the period was SEK –60m (–41). The effective tax rate for the quarter was 42.0 per cent (19.2) and was negatively impacted by the revaluation of deferred tax balances in the Netherlands

as a result of a reversal of the previously enacted corporate income tax rate decrease. Excluding this revaluation effect the effective tax rate would have been slightly above last year's effective tax rate for the quarter. Furthermore, international tax rate differences, non-deductible expenses and an adjustment in prior year filing positions had a negative impact on the effective tax rate for the quarter.

Free cash flow

The free cash flow was SEK 227m (269). Cash flow from operating activities before changes in working capital was SEK 168m (254). 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 147m (64). The cash flow from investments in property, plant and equipment and intangible assets was SEK –63m (–49).

Cash flow from changes in working capital

Cash flow from changes in working capital was SEK 147m (64). The cash flow from changes in working capital was positively impacted by the decrease in inventories of SEK 4m (3) and a decrease in receivables amounting to SEK 180m (133) which were partly offset by the decrease in payables for an amount of SEK –37m (–72).

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 –161m (–18). The cash flow from financing activities was related to the dividend distribution of SEK -143m (0) and payments of lease liabilities of SEK –18m (–18).

Developments during the year

Net sales

Net sales for the year decreased by SEK 798m to SEK 5,695m (6,493) compared to last year. Organic growth was –11.2 per cent and changes in exchange rates was –1.1 per cent.

Gross profit

Gross profit amounted to SEK 1,977m (2,381), which equates to a gross margin of 34.7 per cent (36.7). 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 462m (727). Operating profit, adjusted for items affecting comparability, amounted to SEK 515m (743). 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.

Items affecting comparability

Operating profit for the year includes items affecting comparability of SEK –53m (–16) which are mainly costs related to the impairment of assets in connection to the outsourcing of nuts manufacturing and Disclosures

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Overview

additions to the reorganization provisions for the outsourcing of nuts manufacturing and reorganization in Sweden.

Net financial items

Net financial items for the year amounted to SEK –59m (–79). Interest expenses related to external borrowings were SEK –32m (–29), exchange differences on cash and cash equivalents were SEK –10m (–19) which mainly related to the development of the Swedish and Norwegian krona against the euro during the year. Other financial items amounted to SEK –17m (–31). Of the total net financial items SEK 57m (–33) is non-cash in nature.

Profit for the year

Profit for the year was SEK 281m (498), which equates to basic and diluted earnings per share of SEK 0.98 (1.74).

Income tax for the period was SEK –122m (–150). The effective tax rate for the year was 30.3 per cent (23.1) and was negatively impacted by the revaluation of deferred tax balances in the Netherlands as a result of a reversal of the previously enacted corporate income tax rate decrease. Excluding this revaluation effect the effective tax rate would have been slightly below last year's effective tax rate for the year. Furthermore, international tax rate differences, non-deductible expenses and an adjustment in prior year filing positions had a negative impact on the effective tax rate for the year.

Free cash flow

The free cash flow was SEK 366m (538). Cash flow from operating activities before changes in working capital was SEK 618m (908). 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 38m (–184). The cash flow from investments in property, plant and equipment and intangible assets was SEK –290m (–186).

Cash flow from changes in working capital

Cash flow from changes in working capital was SEK 38m (–184). The cash flow from changes in working capital was positively impacted by a decrease in receivables amounting to SEK 184m (–88) partly offset by the negative impact due to the increase in inventories of SEK –90m (–113) and the increase in payables for an amount of SEK –56m (17).

Cash flow from other investing activities

Cash flow from other investing activities was SEK 1m (–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 –476m (–362). The cash flow from financing activities was related to the dividend distribution of SEK –143m (–287), net proceeds and repayments of loans from credit institutions and commercial papers of SEK –245m (–1) and payments of lease liabilities of SEK –72m (–74). Other cash flows from financing activities amounted to SEK –16m (0).

Financial position

Consolidated equity at 31 December 2020 amounted to SEK 4,179m (4,197), which equates to SEK 14.5 (14.5) per share. Net debt at 31 December 2020 was SEK 2,139m (2,302).

Long-term borrowings totaled SEK 111m (939) and consisted of SEK 112m (140) in non-current lease liabilities, SEK 0m (800) in gross non-current loans from credit institutions, and SEK –1m (–1) in capitalized transaction costs.

Total short-term borrowings amounted to SEK 2,368m (1,870) and consisted of SEK 2,054m (1,306) in gross current loans from credit institutions, SEK 250m (499) in commercial papers, SEK 64m (64) in current lease liabilities, SEK –1m (–0) 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 process to refinance these loans was started in the third quarter of 2020. It is the aim of Cloetta to have the refinancing formalized during the first quarter of 2021. The extension of a loan from credit institutions in the second quarter of 2020 and the improved market for commercial papers give sufficient confidence that Cloetta will be able to refinance the loans at competitive terms.

SEKm	31 Dec 2020	31 Dec 2019
Gross non-current loans from credit institutions	–	800
Gross current loans from credit institutions	2,054	1,306
Commercial papers	250	499
Lease liabilities	176	204
Derivative financial instruments (non-current and current)	54	71
Interest payable	1	1
Gross debt	2,535	2,881
Cash and cash equivalents	–396	– 579
Net debt	2,139	2,302

Cash and cash equivalents at 31 December 2020 amounted to SEK 396m (579). At 31 December 2020 Cloetta had an unutilized credit facility of SEK 1,204m (1,254) 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 2,606 (2,688). The decrease in number of employees is mainly related to changes in the Swedish organization.

The Board's proposed dividend

For the financial year 2020 the Board of Directors of Cloetta AB proposes to distribute a dividend to the shareholders of SEK 0.75 (0.50) per share for the 2020 financial year corresponding to around 77 per cent of profit for the year. For the financial year 2019 the dividend was 29 per cent of profit for the year and paid out in the fourth quarter of 2020. This brings the average dividend for 2019 and 2020 combined within the target range.

The proposed date for the record is 8 April 2021 and payment is expected to be made on 13 April 2021.

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.

Annual General Meeting

The Annual General Meeting of Cloetta AB will be held on Tuesday 6 April 2021. Notice of the AGM will be published in March 2021 and will also be available 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.

Key business priorities

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

Disclosures

We believe in the Power of True Joy Sustainability

For you, for the people and for the planet.

We provide choices for you We care about people We create joyful moments We support our employees, Our three pillars

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

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.

Q4 highlights

• Assessing sustainability impact of switching colors and flavors to non-artificial sources

• Extending agreement to support shea farmers
• 2-year pilot project with Rainforest Alliance on living income for cocoa farmers

Joy from nature Partnerships Sustainable sourcing

• New supplier code of conduct
• Strong progress on PlantPack

Contact

Cloetta Interim Report Q4 2020

Disclosures

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, 28 January 2021

Cloetta AB (publ)

Mikael Norman Board Chairman

Mikael Aru Member of the Board

Patrick Bergander Member of the Board

Camilla Svenfelt Member of the Board

Alan McLean Raleigh Member of the Board

Lena Grönedal

Employee Board member

Henri de Sauvage-Nolting President and CEO

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

Lottie Knutson Member of the Board

Mikael Svenfelt Member of the Board

Mikael Ström Employee Board member Words from the President

Financial overview

Overview

Financial statements in summary

Consolidated profit and loss account

		Fourth quarter	Full year
SEKm	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Net sales	1,466	1,722	5,695	6,493
Cost of goods sold	–923	–1,073	–3,718	– 4,112
Gross profit	543	649	1,977	2,381
Selling expenses	–253	–271	–951	–1,011
General and administrative expenses	–169	–169	– 564	– 643
Operating profit	121	209	462	727
Exchange differences on cash and cash equivalents in foreign currencies	34	13	–10	–19
Other financial income	1	0	3	2
Other financial expenses	–13	–9	– 52	– 62
Net financial items	22	4	–59	–79
Profit before tax	143	213	403	648
Income tax	– 60	– 41	–122	–150
Profit for the period	83	172	281	498
Profit for the period attributable to:
Owners of the Parent Company	83	172	281	498
Earnings per share, SEK
Basic and diluted1	0.29	0.60	0.98	1.74
Number of shares at end of period	288,619,299	288,619,299	288,619,299	288,619,299
Average number of shares (basic)1	288,633,680	286,538,416	286,590,993	286,578,395
Average number of shares (diluted)1	286,887,866	286,743,427	286,805,203	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.

Contact

Consolidated statement of comprehensive income

	Fourth quarter		Full year
SEKm	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Profit for the period	83	172	281	498
Other comprehensive income
Remeasurement of defined benefit pension plans	10	23	–10	– 80
Income tax on remeasurement of defined benefit pension plans	–2	– 6	2	17
Items that will never be reclassified to profit or loss for the period	8	17	–8	–63
Currency translation differences	–235	–124	–193	103
Hedge of a net investment in a foreign operation	77	41	53	–24
Income tax on hedge of a net investment in a foreign operation	–16	– 8	–11	5
Items that are or may be reclassified to profit or loss for the period	–174	–91	–151	84
Total other comprehensive income	–166	–74	–159	21
Total comprehensive income, net of tax	–83	98	122	519
Total comprehensive income for the period attributable to:
Owners of the Parent Company	– 83	98	122	519

Net financial items

	Fourth quarter		Full year
SEKm	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Exchange differences on cash and cash equivalents in foreign currencies	34	13	–10	–19
Other financial income, third parties	1	0	2	2
Unrealized gains on single currency interest rate swaps	0	0	1	0
Other financial income	1	0	3	2
Interest expenses third-party borrowings and realized losses on single currency interest rate swaps	– 8	– 6	–32	–29
Interest expenses, contingent earn-out considerations	–	–	–	– 4
Amortization of capitalized transaction costs	–1	0	–2	–1
Unrealized losses on single currency interest rate swaps	1	3	–	–1
Other financial expenses	– 5	– 6	–18	–27
Other financial expenses	–13	–9	–52	–62
Net financial items	22	4	–59	–79

Condensed consolidated balance sheet

SEKm	31 Dec 2020	31 Dec 2019
ASSETS
Non-current assets
Intangible assets	5,563	5,684
Property, plant and equipment	1,560	1,559
Deferred tax asset	20	9
Other financial assets	3	7
Total non-current assets	7,146	7,259
Current assets
Inventories	952	888
Other current assets	763	934
Cash and cash equivalents	396	579
Total current assets	2,111	2,401
TOTAL ASSETS	9,257	9,660
EQUITY AND LIABILITIES
Equity	4,179	4,197
Non-current liabilities
Long-term borrowings	111	939
Deferred tax liability	837	803
Derivative financial instruments	0	3
Provisions for pensions and other long-term employee benefits	512	499
Provisions	5	5
Total non-current liabilities	1,465	2,249
Current liabilities
Short-term borrowings	2,368	1,870
Derivative financial instruments	54	68
Other current liabilities	1,167	1,271
Provisions	24	5
Total current liabilities	3,613	3,214
TOTAL EQUITY AND LIABILITIES	9,257	9,660

Condensed consolidated statements of changes in equity

	Full year
SEKm	Jan–Dec 2020	Jan–Dec 2019
Equity at beginning of period	4,197	3,968
Profit for the period	281	498
Other comprehensive income	–159	21
Total comprehensive income	122	519
Transactions with owners
Forward contract to repurchase own shares	–	– 6
Share-based payments	3	3
Dividend1	–144	–289
Dividend on outstanding shares in forward contracts to repurchase own shares	1	2
Total transactions with owners	–140	–290
Equity at end of period	4,179	4,197

1 The dividend paid in 2020 comprosed a dividend of SEK 0,50 per share. The dividend paid in 2019 comprised a dividend of SEK 1,00 per share.

Condensed consolidated cash flow statement

	Fourth quarter		Full year
SEKm	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Cash flow from operating activities before changes in working capital	168	254	618	908
Cash flow from changes in working capital	147	64	38	–184
Cash flow from operating activities	315	318	656	724
Cash flows from investments in property, plant and equipment and intangible assets	– 63	– 49	–290	–186
Cash flow from other investing activities	1	0	1	–144
Cash flow from investing activities	–62	–49	–289	–330
Cash flow from operating and investing activities	253	269	367	394
Cash flow from financing activities	–161	–18	–476	–362
Cash flow for the period	92	251	–109	32
Cash and cash equivalents at beginning of period	330	337	579	551
Cash flow for the period	92	251	–109	32
Exchange difference	–26	–9	–74	– 4
Total cash and cash equivalents at end of period	396	579	396	579

Overview

Definitions

Condensed consolidated key figures

	Fourth quarter		Full year
SEKm	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Profit
Net sales	1,466	1,722	5,695	6,493
Net sales, change, %	–14.9	4.6	–12.3	4.4
Organic net sales, change, %	–12.3	2.6	–11.2	2.3
Gross margin, %	37.0	37.7	34.7	36.7
Depreciation	–70	– 69	–265	–290
Amortization	–2	–3	–10	–11
Impairment loss other non-current assets	0	–2	–13	–2
Operating profit, adjusted	123	216	515	743
Operating profit margin, adjusted, %	8.4	12.5	9.0	11.4
Operating profit (EBIT)	121	209	462	727
Operating profit margin (EBIT margin), %	8.3	12.1	8.1	11.2
EBITDA, adjusted	196	290	792	1,046
EBITDA	193	283	750	1,030
Profit margin, %	9.8	12.4	7.1	10.0
Financial position
Working capital	540	589	540	589
Capital expenditure	77	78	372	235
Net debt	2,139	2,302	2,139	2,302
Capital employed	7,224	7,576	7,224	7,576
Return on capital employed, % (Rolling 12 months)	6.3	10.0	6.3	10.0
Equity/assets ratio, %	45.1	43.4	45.1	43.4
Net debt/equity ratio, %	51.2	54.8	51.2	54.8
Return on equity, % (Rolling 12 months)	6.7	11.9	6.7	11.9
Equity per share, SEK	14.5	14.5	14.5	14.5
Net debt/EBITDA, x (Rolling 12 months)	2.7	2.2	2.7	2.2
Cash flow
Cash flow from operating activities	315	318	656	724
Cash flow from investing activities	– 62	– 49	–289	–330
Cash flow after investments	253	269	367	394
Free cash flow	252	269	366	538
Free cash flow yield (Rolling 12 months), %	5.2	5.9	5.2	5.9
Cash flow from operating activities per share, SEK	1.1	1.1	2.3	2.5
Employees
Average number of employees	2,606	2,688	2,653	2,629

Reconciliation of alternative performance measures key figures

	Fourth quarter	Full year
SEKm	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Items affecting comparability
Acquisitions, integration and restructurings	–2	–7	– 53	–13
of which: impairment loss other non-current assets	1	–	–11	–
Other items affecting comparability	–	–	–	–3
Items affecting comparability	–2	–7	–53	–16
*Corresponding line in the condensed consolidated profit and loss account:
Cost of goods sold	0	–	–19	2
Selling expenses	0	– 4	–12	– 6
General and administrative expenses	–2	–3	–22	–12
Total	–2	–7	–53	–16
Operating profit, adjusted Operating profit	121	209	462	727
Minus: Items affecting comparability	–2	–7	– 53	–16
Operating profit, adjusted	123	216	515	743
Net sales	1,466	1,722	5,695	6,493
Operating profit margin, adjusted, %	8.4	12.5	9.0	11.4
EBITDA, adjusted
Operating profit	121	209	462	727
Minus: Depreciation	–70	– 69	–265	–290
Minus: Amortization	–2	–3	–10	–11
Minus: Impairment loss other non-current assets	0	–2	–13	–2
EBITDA	193	283	750	1,030
Minus: Items affecting comparability (excl. impairment loss other non-current assets)	–3	–7	– 42	–16
EBITDA, adjusted	196	290	792	1,046
Capital employed
Total assets	9,257	9,660	9,257	9,660
Minus: Deferred tax liability	837	803	837	803
Minus: Non-current provisions	5	5	5	5
Minus: Current provisions	24	5	24	5
Minus: Other current liabilities	1,167	1,271	1,167	1,271
Capital employed	7,224	7,576	7,224	7,576
Capital employed comparative period previous year	7,576	7,027	7,576	7,027
Average capital employed	7,400	7,302	7,400	7,302

Disclosures

Reconciliation alternative performance measures, continued

		Fourth quarter	Full year
SEKm	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Return on capital employed
Operating profit (Rolling 12 months)	462	727	462	727
Financial income (Rolling 12 months)	3	2	3	2
Operating profit plus financial income (Rolling 12 months)	465	729	465	729
Average capital employed	7,400	7,302	7,400	7,302
Return on capital employed, %	6.3	10.0	6.3	10.0
Free cash flow yield
Cash flow from operating activities (Rolling 12 months)	656	724	656	724
Cash flows from investments in property, plant and equipment and intangible assets (Rolling 12 months)	–290	–186	–290	–186
Free cash flow (Rolling 12 months)	366	538	366	538
Number of shares	288,619,299	288,619,299	288,619,299	288,619,299
Free cash flow per share (Rolling 12 months), SEK	1.27	1.86	1.27	1.86
Market price per share, SEK	24.52	31.70	24.52	31.70
Free cash flow yield (Rolling 12 months), %	5.2	5.9	5.2	5.9
Changes in net sales
Net sales	1,466	1,722	5,695	6,493
Net sales comparative period previous year	1,722	1,646	6,493	6,218
Net sales, change	–256	76	–798	275
Minus: Changes in exchange rates	– 44	33	–70	129
Organic growth	–212	43	–728	146
Organic growth, %	–12.3	2.6	–11.2	2.3

Quarterly data

SEKm	Q4 2020	Q3 2020	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019	Q1 2019	Q4 2018
Profit and loss account
Net sales	1,466	1,474	1,237	1,518	1,722	1,629	1,583	1,559	1,646
Cost of goods sold	–923	–1,040	–777	–978	–1,073	–1,042	–1,004	–993	–1,040
Gross profit	543	434	460	540	649	587	579	566	606
Selling expenses	–253	–248	–213	–237	–271	–244	–253	–243	–279
General and administrative expenses	–169	–99	–142	–154	–169	–148	–167	–159	–168
Operating profit	121	87	105	149	209	195	159	164	159
Exchange differences on cash and cash equivalents in foreign currencies	34	–11	45	–78	13	– 8	–12	–12	4
Other financial income	1	0	1	1	0	1	0	1	1
Other financial expenses	–13	–13	–14	–12	–9	–13	–18	–22	–21
Net financial items	22	–24	32	–89	4	–20	–30	–33	–16
Profit before tax	143	63	137	60	213	175	129	131	143
Income tax	–60	–17	–29	–16	–41	–45	–32	–32	16
Profit for the period	83	46	108	44	172	130	97	99	159
Profit for the period attributable to:
Owners of the Parent Company	83	46	108	44	172	130	97	99	159
Key figures
Profit
Depreciation, amortization and impairment	–72	–77	–68	–71	–74	–75	–77	–77	–55
Operating profit, adjusted	123	130	110	152	216	200	161	166	174
EBITDA, adjusted	196	195	178	223	290	275	238	243	229
EBITDA	193	164	173	220	283	270	236	241	214
Operating profit margin, adjusted, %	8.4	8.8	8.9	10.0	12.5	12.3	10.2	10.6	10.6
Operating profit margin (EBIT margin), % Earnings per share, SEK	8.3	5.9	8.5	9.8	12.1	12.0	10.0	10.5	9.7
Basic and diluted1	0.29	0.16	0.38	0.15	0.60	0.45	0.34	0.35	0.55
Financial position
Share price, last paid, SEK	24.52	26.00	23.72	23.52	31.70	28.26	30.20	24.00	24.30
Return on equity, % (Rolling 12 months)	6.7	8.4	10.5	10.0	11.9	11.8	12.3	11.9	12.2
Equity per share, SEK	14.5	15.2	15.0	15.4	14.5	14.2	13.7	14.2	13.7
Net Debt/EBITDA, x (Rolling 12 months)	2.7	2.6	2.6	2.4	2.2	2.5	2.7	2.4	2.3
Cash flow
Free cash flow	252	252	–118	–20	269	199	–41	111	240
Cash flow from operating activities per share, SEK	1.1	1.1	– 0.1	0.2	1.1	0.9	–0.0	0.5	1.0

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	Q4 2020	Q3 2020	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019	Q1 2019	Q4 2018
Items affecting comparability
Acquisitions, integration and restructurings	–2	–43	– 5	–3	–7	– 5	1	–2	–15
of which: impairment loss non-current assets	1	–12	–	–	–	–	–	–	–
Remeasurements of contingent considerations	–	–	–	–	–	–	–	–	0
Other items affecting comparability	–	–	–	–	–	–	–3	0	0
Items affecting comparability*	–2	–43	–5	–3	–7	–5	–2	–2	–15
*Corresponding line in the condensed consolidated profit and loss account:
Net sales	–	–	–	–	–	–	–	–	0
Cost of goods sold	0	–19	0	–	–	–	3	–1	6
Selling expenses	0	–12	0	–	– 4	–2	–	–	–
General and administrative expenses	–2	–12	– 5	–3	–3	–3	– 5	–1	–21
Total	–2	–43	–5	–3	–7	–5	–2	–2	–15
Operating profit, adjusted
Operating profit	121	87	105	149	209	195	159	164	159
Minus: Items affecting comparability	–2	–43	– 5	–3	–7	– 5	–2	–2	–15
Operating profit, adjusted	123	130	110	152	216	200	161	166	174
Net sales	1,466	1,474	1,237	1,518	1,722	1,629	1,583	1,559	1,646
Operating profit margin, adjusted, %	8.4	8.8	8.9	10.0	12.5	12.3	10.2	10.6	10.6
EBITDA, adjusted
Operating profit	121	87	105	149	209	195	159	164	159
Minus: Depreciation	–70	–64	–65	–66	–69	–73	–74	–74	–52
Minus: Amortization	–2	–3	–2	–3	–3	–2	–3	–3	–3
Minus: Impairment loss other non-current assets	0	–10	–1	–2	–2	–	–	–	–
EBITDA	193	164	173	220	283	270	236	241	214
Minus: Items affecting comparability (excl. impairment loss other non-current assets)	–3	–31	– 5	–3	–7	– 5	–2	–2	–15
EBITDA, adjusted	196	195	178	223	290	275	238	243	229
Capital employed
Total assets	9,257	9,619	9,384	10,260	9,660	9,676	9,410	9,854	9,168
Minus: Deferred tax liability	837	814	798	814	803	801	792	768	754
Minus: Non-current provisions	5	6	–	–	5	5	6	6	9
Minus: Current provisions	24	28	6	7	5	7	11	19	23
Minus: Other current liabilities	1,167	1,235	1,124	1,437	1,271	1,349	1,239	1,407	1,355
Capital employed	7,224	7,536	7,456	8,002	7,576	7,514	7,362	7,654	7,027
Capital employed comparative period previous year	7,576	7,514	7,362	7,654	7,027	6,904	6,833	7,319	6,979
Average capital employed	7,400	7,525	7,409	7,828	7,302	7,209	7,098	7,487	7,003

Reconciliation of alternative performance measures, continued

SEKm	Q4 2020	Q3 2020	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019	Q1 2019	Q4 2018
Return on capital employed
Operating profit (Rolling 12 months)	462	550	658	712	727	677	662	658	660
Financial income (Rolling 12 months)	3	2	3	2	2	3	2	6	5
Operating profit plus financial income (Rolling 12 months)	465	552	661	714	729	680	664	664	665
Average capital employed	7,400	7,525	7,409	7,828	7,302	7,209	7,098	7,487	7,003
Return on capital employed, %	6.3	7.3	8.9	9.1	10.0	9.4	9.4	8.9	9.5
Free cash flow yield
Cash flow from operating activities (Rolling 12 months)	656	659	601	637	724	694	689	811	628
Cash flows from investments in property, plant and equipment and intangible assets (Rolling 12 months)	–290	–276	–271	–230	–186	–185	–173	–186	–184
Free cash flow (Rolling 12 months)	366	383	330	407	538	509	516	625	444
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	1.27	1.33	1.14	1.41	1.86	1.76	1.79	2.17	1.54
Market price per share, SEK	24.52	26.00	23.72	23.52	31.70	28.26	30.20	24.00	24.30
Free cash flow yield (Rolling 12 months), %	5.2	5.1	4.8	6.0	5.9	6.2	5.9	9.0	6.3
Changes in net sales
Net sales	1,466	1,474	1,237	1,518	1,722	1,629	1,583	1,559	1,646
Net sales comparative period previous year	1,722	1,629	1,583	1,559	1,646	1,538	1,472	1,562	1,643
Net sales, change	–256	–155	–346	–41	76	91	111	–3	3
Minus: Changes in exchange rates	– 44	–36	–11	21	33	25	27	44	51
Organic growth	–212	–119	–335	–62	43	66	84	–47	–48
Organic growth, %	–12.3	–7.3	–21.2	–4.0	2.6	4.3	5.7	–3.0	–3.2

Parent company

Condensed parent company profit and loss account

		Fourth quarter	Full year
SEKm	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Net sales	18	26	79	83
Gross profit	18	26	79	83
General and administrative expenses	–16	–36	– 81	–105
Operating profit/loss	2	–10	–2	–22
Net financial items	65	65	50	59
Profit before tax	67	55	48	37
Income tax	–10	–7	–11	– 5
Profit for the period	57	48	37	32

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

Condensed parent company balance sheet

SEKm	31 Dec 2020	31 Dec 2019
ASSETS
Non-current assets	5,354	5,361
Current assets	77	99
TOTAL ASSETS	5,431	5,460
EQUITY AND LIABILITIES
Equity	3,100	3,204
Non-current liabilities
Borrowings	137	935
Derivative financial instruments	–	2
Provisions	1	1
Total non-current liabilities	138	938
Current liabilities
Borrowings	1,050	499
Derivative financial instruments	3	2
Other current liabilities	1,140	817
Total current liabilities	2,193	1,318
TOTAL EQUITY AND LIABILITIES	5,431	5,460

Condensed parent company statement of changes in equity

	Full year
SEKm	Jan–Dec 2020	Jan–Dec 2019
Equity at beginning of period	3,204	3,458
Profit for the period	37	32
Total comprehensive income	37	32
Transactions with owners
Share-based payments	3	3
Dividend 1	–144	–289
Total transactions with owners	–141	–286
Equity at end of period	3,100	3,204

1 The dividend paid in 2020 comprosed a dividend of SEK 0,50 per share. 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

	Fourth quarter		Full year
SEKm	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Net sales
Branded packaged products	1,179	1,261	4,527	4,709
Pick & mix	287	461	1,168	1,784
Total	1,466	1,722	5,695	6,493

Breakdown of net sales by category

	Fourth quarter		Full year
%	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Net sales
Candy	60	60	59	59
Chocolate	18	17	17	17
Pastilles	12	12	12	12
Chewing gum	5	6	7	6
Nuts	3	3	3	4
Other	2	2	2	2
Total	100	100	100	100

Breakdown of net sales by country

	Fourth quarter		Full year
%	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Sweden	33	33	31	31
Finland	22	20	22	21
The Netherlands	13	14	15	14
Denmark	10	13	9	10
The UK	4	6	5	7
Norway	6	5	6	5
Germany	6	4	6	6
Other countries	6	5	6	6
Total	100	100	100	100

Leases

Right-of-use assets

SEKm	31 Dec 2020	31 Dec 2019
Land and buildings	95	113
Transportation	52	56
Other equipment	23	34
Total right-of-use assets	170	203

Additions to the right-of-use assets were SEK 14m (29) during the quarter and SEK 82m (49) during the year.

Lease liability

SEKm	31 Dec 2020	31 Dec 2019
Current	64	64
Non-current (between 1 and 5 years)	110	135
Non-current (over 5 years)	2	5
Total lease liability	176	204

The non-current lease liability of SEK 112m (140) are reflected in the 'long-term borrowings'. The current lease liability of SEK 64m (64) are reflected in the 'short-term borrowings'.

Depreciation charge right-of-use assets

		Fourth quarter	Full year
SEKm	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019
Land and buildings	–9	– 8	–34	–34
Transportation	–7	– 8	–30	–31
Other equipment	–2	–3	–9	–11
Total depreciation charge right-of-use assets	–18	–19	–73	–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

		Fourth quarter	Full year
SEKm	Oct–Dec 2020	Oct–Dec 2019	Jan–Dec 2020	Jan–Dec 2019	Recognized in:
Interest expense	–1	–1	–3	–3	net financial items, in the profit and loss account
Impairment of right-of-use assets	0	–	– 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	–1	0	–1	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	–3	– 8	–9	cost of goods sold, selling expenses and general and administrative expenses, in the profit and loss account
Expense relating to variable lease pay ments not included in lease liabilities	– 4	– 4	–17	–13	cost of goods sold, selling expenses and general and administrative expenses, in the profit and loss account
Total cash outflow for leases	–19	–19	–75	–75	cash flow from operating activities and financing activities, in the cash flow statement

Disclosures

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 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 2m (liability) 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:

31 Dec 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	–	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, exclud ing other taxes and social security payables and excluding contingent consideration	–	–	982	982
Total liabilities	5	–	3,511	3,516	–	7	–	7

Disclosures

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
• Single currency 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

Overview

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

	Full year
SEKm	Jan–Dec 2020	Jan–Dec 2019
Opening Balance	–	142
Remeasurements recognized in profit or loss
– Unrealized interest on contingent considerations recognised in other financial expenses	–	4
Settlements
– Settlement via balance sheet	–	–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 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 fair value measurement of the contingent (earnout) considerations requires the use of significant unobservable inputs and was thereby initially categorized within 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 31 December 2020. Net sales in the Parent Company amounted to SEK 79m (83) and relate mainly to intra-group services. Operating loss was SEK -2m (-22). Net financial items totaled SEK 50m (59). Profit before tax was SEK 48m (37) and profit for the period was SEK 37m (32). 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 31 December 2020, a total of 228,523,961 shares were traded for a combined value of SEK 5,581m, equivalent to around 81 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 31 December 2020 was SEK 34.18 (31 January) and the lowest was SEK 20.48 (4 November). The share price on 31 December 2020 was SEK 24.52 (last price paid). During the period from 1 January to 31 December 2020, the Cloetta share decreased by 22.6 per cent while the Nasdaq OMX Stockholm PI index increased by 12.9 per cent. Cloetta's share capital at 31 December 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 31 December 2020, Cloetta AB had 34 859 shareholders. The largest shareholder was AB Malfors Promotor with a holding corresponding to 39.2 per cent of the votes and 28.4 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 Dimensional Fund Advisors with 2.6 per cent of the votes and 3.1 per cent of the share capital. Institutional investors held 84.0 per cent of the votes and 81.1 per cent of the share capital. Foreign shareholders held 35.3 per cent of the votes and 41.6 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 due to the outbreak of the COVID-19 virus on nearly all identified risk categories. 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	31 Dec 2020	31 Dec 2019
EUR, average	10.4880	10.5815
EUR, end of period	10.0343	10.4468
NOK, average	0.9757	1.0748
NOK, end of period	0.9584	1.0591
GBP, average	11.7868	12.0732
GBP, end of period	11.1613	12.2788
DKK, average	1.4070	1.4173
DKK, end of period	1.3485	1.3982

Financial calendar

• 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.

• effective sales and distribution organization.
• •Good consumer knowledge and loyalty.
• •Innovative product and packaging development.
• •Effective production with high and consistent quality.

Disclosures

Definitions

Disclosures

"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