Fiskars Oyj Abp

Hello and welcome to Fisgar Group's Q2 2022 results webcast. My name is Essi Lipponen. I'm the investor relations director. I'm here with our president and CEO, Natalie Ahlström, and our CFO, Jussi Siitonen. As usual, We will first hear about the quarter highlights from Nathalie and Jussi. And after that, we have plenty of time for your questions. You can type in your questions in the chat during the presentation and also after it. Without any further ado, Nathalie, please go ahead.

Thank you, Jessi. And it's really a pleasure to be here today to talk about our first half and Q2. We're really happy to be here talking about it. Starting with the highlights of Q2, this was our ninth consecutive growth quarter. This shows that we are on a transformation and we are delivering on the growth. Net sales in Q2 grew 7.7%. So we have a strong growth foundation in place. We also show that the growth we delivered is broad-based. We have a well-balanced portfolio. In Q1, we talked a lot about the bumpy road ahead of us. And yes, it was a bumpy road. We had a constant inflation that is now partially mitigate, shown also in the EBIT. And the actions that we put in place during Q2 are fully then going to show in second half. But it's been a bumpy road and we weathered it. And where we are happy is that then when you compare first half in totality versus last year's first half, we are at par. At the same time, despite the bumpy road and the environment we are living in, we are able to continue to invest in our growth fundamentals so that we can future-proof the company going forward and continue to execute our growth strategy. So we still have the firepower to continue to invest. And with that, we keep our outlook unchanged for the full year. It is a dynamic world, but we have a lot of things in our hands. And as I said, we are a company in transformation. And we have a broad base of growth pockets in the company. Looking at the net sales, here we really see that the growth came from all business areas. It came from the brands, from regions and channels, and this makes the performance so solid because we have so many places where the broad-based growth comes from. Then resulting in this comparable 7.7 net sales growth in Q2 and for the first half, 10.6% growth. That, of course, is then translating into the profit. And here we can also see in the Q2 performance on profit that it's a volatile environment with a bumpy road. Despite this, all the BAs delivered profit improvement in Q2. And also despite the cold spring for Terra. As said, for first half, we're at par with last year, and we've been able to continue to invest significantly in our growth fundamentals into digital and direct-to-consumer. Also, our ability to show to be at par with the first half last year shows that the team is winning. Our team is winning. Our team is having grit to where that is going forward. Then if we look at the growth strategy here, I again want to say this growth strategy is the foundation for our transformation. This is also the one that keeps us focused, focused on what are the true levers really to deliver and continue to win as we go forward. And when we then look at where are we in the transformation levers, how are we delivering against those in Q2 and also in the first half, we see that we are delivering. And let me go through that. If we look at the commercial excellence, here we see that it's a broad-based growth. It's coming from all the parts of the company. What we're also especially proud of is that of this growth, the 7.7% growth that we perform in Q2, 50% of exit volume and 50% value. So it's healthy growth, healthy growth driving the company forward. Yes, we had the challenges with cost inflation and therefore we see with the underlying gross margin decline in the operating performance. And Jussi will talk more about that also, the impact of the cost inflation and the gross margin. Then direct-to-consumer, this is a transformation lever that's really delivering for us at the moment. And as I said, this is also where we have invested behind. So we see investments are paying itself back. Ecom growing 16%, owned retail globally 15%. So good growth in the channels that's in our own hands. In the US, the growth was merely 4%. Anyway, we are proud of this 4% because we had a very exceptional spring, a cold spring for Terra. And at the same time, Vita, thanks to the very good gifting season with Waterford Wedgwood in the US, was able to mitigate that and Crea with a broad-based growth, also back to school. So, again, a well-balanced portfolio. When there's challenges with the cold weather in one place, the other places can help and support. And then China. China, despite the lockdowns, our local team continued to have the can-do attitude, have the winning mentality. And in totality for Q2, delivered a 17% growth in Q2. then when we look at what's the run rate where where's the business heading when we look at june for example where the lockdowns were easing we already see 1.5 x growth so the business is bouncing back very fast along with the lockdowns and i think this performance in u.s and china is a good example of the well-balanced and broad-based growth that we're having in the company despite the many underlying consumer sentiments we have such a broad portfolio so we can work on it as we go forward. Then looking at sustainability, one of the key enablers, also for a strategy going forward, of course, on greenhouse gas emissions, we reduced in first half 7%, in totality since 2017, 44%. So we are advancing step by step on greenhouse gas emission. Then our commitment to use more recycled materials. Now, in first half, it's 5% of products are used of recycled materials. And I think a good example of that is, of course, our pots and pans that are already today used of recycled steel, but where we further took a strategic step in our commitment to sustainability with the partnership with Autocompo. Fiskars is the first company globally using the new lowest emission steel from Autocompo. The steel is minus 92% less emission compared to normal. So a true showcase of how big steps you can take through partnerships. And then outlook. As said, our outlook is unchanged. We're committed that our comparable EBIT for the full year will be above last year's. And this is what we're working towards. And with that, I hand over to Jussi.

Thank you, Natalie, and hello, everyone. Let's start first going through our Q2 financials and the big picture first, where we are tracking with our financial targets. So on net sales, the target being this FX-neutral mid-single-digit growth year on year, and how we measure it now is last 12-month basis. You can see that we were still at strongish double-digit growth there, 10.5% for the last 12 months. So we are well on track with our financial target on growth. Also on the balance sheet. What we have said about both balance sheet and cash flow is that first and foremost, they are there to safeguard our organic growth. And that EBDA, the target being maximum at 2.5, we are now 1.5 there. So we are still well below the maximum target, what we have set for ourselves. Then on EBIT, still okay is level 11.9 for the last 12 months. However, the direction is wrong because we have committed to this 15% by 2025. And we have also said that this is a non-hoccystic approach, all the improvement coming in late of the glide path. So there we still have work to do. Then on cash flow, no drama in that sense. We were negative of 8% there when it comes to free cash flow. There were inventory growth, and I'll get back to that later in my presentation. A couple of call-outs on Q2 and first half income statement. Let's start first with gross margin. If you just take a look on our reported gross margin, you'll see improvement. There are 30 basis points in Q2. 110 basis points in first half. However, this improvement, what you can see here, is due to structural changes we made when we sold US bordering in the beginning of this year. If we take like-for-like gross margin, it was down 220 basis points in Q2 and 90 basis points in first half respectively. And the reason for this drop what we have in like for like gross margin is the cost inflations. We haven't yet been able to fully mitigate. So both in first half and Q2, the gross cost inflations what we had on our gross profit was roughly 400 basis point. And as you can see, when we came out with 220 basis point drop, we succeeded to mitigate a bit less than half of the cost inflation in Q2, and then three quarters in the first half. This is exactly what Natalie talked about, bumpy road. So we continue driving up gross margin, and the actions what we have put in place start impacting positively in the second half. Then about those investment fundamentals. So operational expenses were up 14 million in Q2 and 27 million in the first half. Both in Q2 and first half, if you take sales and marketing expenses, two thirds of that increase is from investments, both in digital capabilities, what we have in marketing side, as well as D2C capabilities, especially in e-comm. And then on general admin cost, half of that growth, what we had in Q2 and first half, are driven by those investment in other digital capabilities, but marketing. So you can see that the main drivers of our OPEX growth are coming from those investment in fundamentals. Then when it comes to EBIT, the comparable EBIT was down 5.1 million in Q2, and we were quite flattish on the first half. If we look at the bridge of our EBIT, so you can see that when we're carving out the impact of US water there, 2.9 million, we are slightly improving our like-for-like EBIT. But the growth or EBIT improvement is coming from volume growth. And then that partially offset by cost inflations, net of mitigations, and then sales and marketing, as I said, D2C investment, two thirds of that. And then digital capabilities, half of general admin growth. So we start second half at the same level with last year. Moving 10 to BAs, first Viitta on top line, as said, strong high signal digit growth organically, 7.3%. Waterford, Royal Copenhagen, Wedgewood, Moomin, all at high signal digit or double digit growth. So, they really boosted this e-commerce growth also. So, D2C, both online and offline, D2C continued growing nicely. Now, double digit in this specific quadrant. Then, Finland and Sweden down, as they were also in Q1. And when Itala brand is 60% in Finland and Sweden, Itala brand came down. On EBIT, on the right-hand side here, Viitta succeeded to improve gross margin also when it comes to value there. So, gross profit improvement is not only the volumes what we had in Viitta, but also margin improve. So, that shows the power of portfolio what we have in Viitta there. We succeeded to mitigate inflation impact. Then we continued investments, mainly those D2C investments, what I referred, they are in Vita business, and also digital capabilities are in big time under Vita segment. 10 Terra, which is mostly exposed USA. And when USA came down, of course, that had an impact on Terra. The positive side, however, is that also in Terra, we continued growing. And that growth came from Europe. So Terra Europe was a double digit growth in Q2. And that's why the whole business was at missing a digit growth. In Terra, the like-for-like EBIT improves slightly. and all improvement that we had there came from volume growth, which was then almost fully offset by gross margin decline. a strong growth of 15% there in Q2, and the growth was very broad-based. Approximately 7% of Q2 net sales came from countries with declining top line. So you can see that growth came from various sources there. It was not only back to school, which was driving growth, but it came also from other segments there. We continued investing also in CREA. We have just started D2C in CREA business, and then also digital capabilities are now there in CREA to boost our further growth in this business. That's about P&L side. Ten regions, this is mainly a summary of what I just said. All the regions continued growing. Europe, a bit shy of 6% there. America's 6.3%. And then, ESA Pacific overperformed all the other regions there, mainly driven by China. and also Japan. This shows that our portfolio, no matter whether it's countries, whether it's brands, whether it's categories, it's very broad-based. And then the ones which are going down are offset by the ones which are improving. Then on cash flow, and no drama in that sense, that even though we are now minus 73 million for the first half, you can see that the big negative came already into Q1 there. The cash flow is very much now heavily weighted by inventory growth, what we had. That was the biggest single driver of slightly negative cash flow also in Q2. We continue monitoring inventories when it comes to inventories in Viitta and Crea. Those are now to be prepared for second-hand deliveries. And then in Terra, especially America's inventories are something we are very closely monitoring to make sure that we are up to speed with potential consumer sentiment changes there. We also continued share buybacks. We pulled back shares worth of seven million in Q2, and we increased our cash level by 30 million to 74 million to be ready for any challenges in liquidity in the second half. On balance sheet, you can see the inventory growth here, what we had. But first and foremost, even though inventory growth, we continued improving our asset efficiency in terms of capital turnover. So capital turnover up to 1.4. However, when the last 12 months EBIT came down, our return of capital employed went down slightly to 16.6%. As I mentioned earlier, balance sheet continued being very strong. Our net EBITDA solid at 1.11 and net equity 27%. With that, back to you, Natalie.