Fiskars Oyj Abp

Good day ladies and gentlemen, welcome here to Helsinki. We'll present the Fiskars third quarter 2021 results here at the webcast. My name is Kristian Tammela, I'm director of investor relations here at Fiskars. Today we'll go through the results in a normal way, with the exception and I'm glad to say that we have our new CFO Jussi Siitonen with us today for the first time. We'll go through his presentation in a while, but before that, we'll hand over to our CEO, Natalie Ahlström. Without further ado, I'll go ahead, Natalie.

Thank you, and also welcome from my side. It's really a joy to be here today and talk about our fantastic Q3. This shows the strong execution mode that we have ongoing now in Fiskars Group. This was the sixth consecutive growth quarter for us. Quarter after quarter, we have shown that we are growing. At the same time, this is an all-time high Q3 in net sales for Fiskars Group. We see Vita is driving a strong performance, and Terra and Crea are holding up against strong comparison figures last year. One reason for our competitive advantage where we continue to grow is that our supply chain has been able to successfully mitigate the global dynamics in the supply chain and being able to serve our customers. We upgraded our outlook in the beginning of October. You've seen that, which shows that we have a strong year ahead of us. And then we have update on the ongoing programs that is already a few days ago. We are ending now the programs they are delivering. And now it's also time for us to go forward and focus on growth. So this again is an example of we are executing what we say we are going to do. But let's take a look at our net sales. Our net sales, as said, grew again, yet again. Net sales are up 10% versus last year and 17% versus 2019, which shows that we are doing fundamental steps to drive the growth. This also shows that we have a strong, well-balanced portfolio that's delivering quarter after quarter, despite the market dynamics in the world. We are growing in all brands, all channels and also in most markets. We will come back to that in Jose's part. Then looking at our portfolio and how that is going. If we look at year to date, Vita is growing 25%, Terra 5% and Crea 4%. So these are strong performances across the board in our business. Then looking how does that translate to our profit. If we look at the profit for Q3, that's a little bit under last year's record Q3 2020. At the same time, if we look at 2019 performance, this Q3 is 2.8x better than our Q3 in 2019. 8x better performance in profit now compared to 2019, which shows the fundamental transformation of the company. This can also be seen here on the right side with our rolling 12 performance level, where we now have started to show a solid performance level on a higher level with the profit. One key success factor, only one, but one significant key success factor is the English and crystal brands turnaround that we are enjoying of now this year. That business is starting to turn around well. Then looking at the Outlook, what we have and the updated outlook of 160 to 170 million for the whole year, that shows that 2021 will be the record year for Fiskars Group. We have been able to mitigate the supply chain risks and also outlook for the quarters to come is solid from a supply chain point of view. Of course, seasonality will play some uncertainty here because we see that the consumer behavior of shopping for the holiday season is changing a bit. Consumers are shopping a bit ahead of the year and also there might be pull pull forwards from Q1 to Q4. So far, we have not seen that. And of course, cost inflation continues to be present in our business, and Jussi will also talk about that more. Throughout the year, I've spoken about the store closures. We still have a lot of stores closed in Australia. So this is the thing that fluctuates with the pandemic. Stores are closed. Anyway, our strong performance in Q3 shows that despite our physical stores being closed in certain markets, we are able to deliver growth, which shows also the power of the omnichannel, the direct-to-consumer approach we have. We continue to invest in the business as well and already last time in Q2 I spoke about the investments in digital. Now we have more than 50 positions open in digital to support our growth. This is about digital content, digital marketing, data analytics, user interfaces and so on. totally new capabilities that we are building on for the future. So significant investments for the growth in the future. We also invest in consumer experience. I will soon show an example of that. And then in a few weeks, the 9th of November, we have the capital markets day where we will really dig into the growth levers in our growth strategy. But now a few examples from Q3. In Q3, we announced in September our partnership with Moomin. This is a partnership where we've acquired a minority stake in rights and brands, part of Moomin characters, which enables our growth journey, not only in the Nordics and Japan, but also in the future in China. And also, this is an example of the way of doing partnerships and growing together with strong partners globally. Moomin Day was another successful example from this quarter in August, where we sold out in 20 minutes very large quantities of Moomin mugs, which also shows the power of the brand. Then on the Crea side, on the crafting side, we have here a picture of the Fiskars tool shop, what we've done in the US together with our big customer, Joanne. And this is the consumer experience example showing, surround the consumer, what it looks like when we also invest in the experience in the physical stores. And this together with Joanne in the US. Then on sustainability. Sustainability is in the core of what we are doing. It is all about who we are. Sustainability. And here are just some examples of how we are advancing on the sustainability journey. On waste to landfill, we have in 2021 been able to reduce 42% of waste to landfill in only one year. Then compared to our base year 2017, we've already reduced 90% of our waste to landfill. So we are focusing and delivering on the impact for sustainability as well. Another example is Our mission against throwaway culture, where we've increased the amount of products made of 100% recycled material. And today, 2021 compared to last year, we have 112% more products made out of recycled material in our portfolio. So step by step, we know what we want to do and we execute and go forward. with performance, with growth and sustainability. And with that, I hand over to Jussi.

Thank you, Natalia, and hello everyone also on my behalf. I start first with our Q3 P&L, some highlights there. The good thing is that we continued improving our gross margin. So gross margin went up 90 basis point now in Q3. And this is the third quarter in a row when we continue improving our gross margin. Why it's so important for us is that that's the key driver of our healthy profitability. Having said that, in Q3 we had roughly 11 million of input cost inflation in our cost of goods coming both from raw materials and logistics. And as you can see, we were able to mitigate that one. Then on expenses side, we were up versus last year, mainly due to the fact that we continued investing in those growth building blocks. We continue to invest in distribution, footprint expansion, in D2C, in digital. These are all now partly already in our Q3 OPEXs. Then at the same time, we need to remember that in Q3 last year, we still have some tails of those COVID-related savings. So I would say that EBITDA was almost flat versus last year. However, that EBITDA is a bit mixed package. So Vita was strongly up. That was then partly offset by Terra and CREA. Then when it comes to these other segments, there were many seasonal shifts between Q2 and Q3, but the fundamentals are unchanged in that segment. Then diving a bit deeper, the Viitta result there. So Viitta, as Natalie mentioned, strongly up 20% versus last year, 14% versus 2019. It came from the most of the brands and nearly all the markets, except Australia, where almost 20% of our store capacity were closed. Our own e-commerce also performed well in Viitta, and especially this Moomin day was this kind of nice one-off in this particular quarter. When it comes to EBITDA, I said 12 million up versus last year, and 17 million up versus 2019. That's a combination of many good things. So we see a gross margin improvement in Viitsa. We see also that these programs that we have put in place, they are now yielding. ECB was one good example of that kind of positive factors that we had there. Moving then to Terra, so net sales was flattish versus last year, and 17% up versus 2019. Net sales increased in continental Europe, as well as in Finland, but it was then fully offset by Americas, where we had negative top line development, partly related to our watering business there. EBITDA was down 6 million versus last year, and the input cost inflation were hitting in our Q3 P&L. The mitigation actions we have put in place and are putting in place in Terra, they are correcting the situation, but it was more like timing difference between the quadrants. Then on CREA, so net sales up 11% versus last year, and 30% up versus 2019. Growth came from continental Europe and into Nordics, and it was partly offset by decrease what we had in Americas. On EBITDA, we were approximately 2 million down versus last year. It was mainly due to those raw material and logistic cost what we had in CREA. Then moving to countries, this is mainly a summary of what I already said. In Europe, we were roughly 18% up, came from practically all the countries, most of the channels what we have in Europe. America's down 4.5 million, driven by Terra and Ancreia. And then APAC was 19% up, strong growth in China. And then that's followed by Japan, and especially Japan was very much e-comm driven growth, what we had there. In Australia, where over 40 stores were closed, you can see that that was the impact why Australia was down. So that was about the sales and profitability. Then moving to cash flow. So Q3 free cash flow, 39.5 million there, down 59 million versus last year, driven by networking capital and changes, especially inventory. So you can see that we invested a lot in inventories. They were 42 million up versus last year. Total liquidity, however, is solid. So cash and unused facilities, 367 million at the end of Q3. On balance sheet on capital employed there, trade working capital up 62 million driven by inventories. However, the total capital employed was down 35 million there, and that together with our long-term net sales growth, sorry, last 12 months net sales growth, last 12 months profitability improvement there, they were both driving up our return on capital employed. So we can say that our growth is not only profitable, but it's also asset efficient. And also balance sheet further strengthened. What you can see here, our net debt equity down to 17%. Our net debt continue going down. And bearing in mind our historical pattern there, that typically Q4 cash flow is one of the strongest ones. This trend should continue now. Then a couple of words about those programs that we have in place. So the targeted cost savings of 37 million from those two programs will be realized. We are very confident on that one. And some signs of those positive impacts are already in our P&L. You can see that in ECB, you can see that especially in Vita overall. Total one of what we forecasted for those two programs was originally 70 million. You might remember that we took it down to 65 in Q2. And now in Q3, a couple of days ago, we just sent a stock exchange release saying that we took it further down now by 20 million. So overall, the planned one-offs for those two programs, 45 million, out of which 34 million is already in our books, which means that roughly 10 million is expected to materialize now in Q4. That was pretty much about it.

Great. Then we have time for some questions, and I could just start with the ones that we have already gotten so far. So starting off with the supply chain, so what are the main things contributing to what you have been able to handle the supply chain distributions well in Q3, and how is the visibility on this matter going forward? Maybe that goes to Natalie then.

Yeah, thank you, and thanks for the good question. Really, we see our ability to supply and our ability to serve as a competitive advantage and also one of the key contributors for the good performance Q3. The reasons behind we have been able to do it is we have actively already since last Christmas, actually, when we saw that the global supply chain situation becomes what it is today, been as a team working and also forecasting as well as we can. And maybe you can say a bit, taking calculated risks in what we are ordering because we have long supply chain leads from all over the world. At the same time, scale helps. Scale helps also for us in the congested ports in the US and also being able to drive that forward with our big box partners in the US. Then about the visibility for that, We have quite good visibility for the next quarters on the global supply chain side.

Great, thanks. Then touching on the same matter, so as the energy prices have increased so much, so what's kind of the impact from that? How do you see that? Can maybe you answer that?

Yeah, it's a bit two-folded question here. When it comes to energy prices or energy cost here in Finland, I would say we are fully heads. So therefore, for the next 12 months, we are in quite good position there. In our Central European factories, of course, we are exposed to that one. Having said that, we go through the mitigation actions there through own internal efficiency improvement and then by pricing to mitigate the negatives.

Thank you. Then a question regarding CREA. CREA has performed well in Q3 and do you expect this good trend to continue going forward? Natalie.

In Crea, yes, Crea has performed well and is up year to date in nice figures. Looking at Crea going forward, it's a two-story. We have the cooking that's performing very well and going forward. Then with scissors, adult scissors in the US, we're a bit challenged, but full focus on getting also the growth speed up there.

Great. Then could you describe the actions taken in the English and crystal business? Why is it now performing so well after many years of challenges? Natalie.

It's a combination of many things, as Jussi was saying, the programs are really supporting on the cost efficiency. At the same time, we've had a very focused cadence, detailed plans on the transformation of English and crystal living. And now we are delivering on that. So it's very focused effort.

Great. Then a question regarding the investments now. So you're investing a lot on IT and digitalization and recruiting new personnel. At the same time, you say cost savings in IT are coming in from 2022. How does this logic work? Maybe Jussi can take that.

Well, of course, what we are running is OPEX Fluidity here. We continue investing in the ones which are supporting our strategic road levers there, be it D2C, be it digital. At the same time, we go through this kind of OPEX, which is not supporting the top-line growth or profitability, and there we continue at very brutal, or let's say, very stable OPEX development.

Great. Just let's see if we have any other questions on the line. If not, we'll thank you for your time and attention and get back to you in a few weeks in the Capital Markets Day.