Fiskars Oyj Abp

Hello and welcome to Fiskars Group's Q4 and 2023 results webcast. My name is Essi Lipponen and I'm the Director of Investor Relations. I'm here with our President and CEO Natalie Ahlström and our CFO Jussi Siitonen. Natalie and Jussi will first go through the presentation and some highlights and after that we will have plenty of time for your questions. You can type in your questions in the chat already during the presentation.

Go ahead, Natalie. Thank you, Essi. And delighted to be here to talk about 2023 and now Q4. If I start with the highlights of last year and Q4, we're really proud to say that this was an all-time high, all-time high cash flow for the company. And Jussi is going to talk about that more later. And 2023, we finished as we had guided, so came spot on in that. When we look at how we're taking the company forward strategically, transformation levers and Georg Jensen are delivering. And the integration of Georg Jensen is going really well, so we are executing the strategy. Following the strong cash flow and the strong cash position, the board is proposing an increasing dividend of 0.82 euros per share. And then guidance for 2024. Our guidance is that the EBIT will slightly increase from last year's level in this environment. But let's look into the details. So Q4, very much in line with the guidance. Our top line was flat. And when you look at the EBIT, we see an increase that comes from Georg Jensen that was integrated into the Q4 results of the company. The highlights of Q4 are really gross margin. Yet again, did we manage to increase the gross margin of the whole company? And this talks about how we're elevating the portfolio, elevating the company as we go forward. I spoke about the all-time high cash flow and that then also with the EBIT and the cash flow translates into increasing earnings per share and cash earnings per share. Both of these increasing quite significantly in Q4. When we then look at the full year 2023, We see a bit more challenging picture. Top line came down 10% and also as a consequence, then the EBIT came down. As I said earlier, where we are happy and proud is of the gross margin that is elevating the portfolio upwards. And of course, the all time high cash flow. And when we look at the delta from last year of 285 million euros in free cash flow versus last year, that's quite a good achievement in this environment. I'll continue talking about cash and a strong cash position. And that is what enables us to increase the dividend. Also the healthy balance sheet that we have in place after the Georg Jensen acquisition. Our dividend yield is 4.6%, which we find is a good one. And when we look at the CAGR of our dividend, how it's increased in the last five years, the CAGR is 10%. And with the strong cash, we have a healthy payout ratio. Then looking into the businesses, when we look at Viita, Viita, we could say had a tough Q4. We had, yes, top line came up, thanks to Georg Jensen, but overall wholesale continues to be challenging for us in Viita. The good things are that e-comm continued to grow, which talks about the love of the brands, the power of the brands, consumers wanting experiences coming to our e-comm sites and e-comm growing in Vita 5%. China continued fantastic execution with the local management in Q4 growing 26%. And as mentioned many times already today, GeoGens and integration, of course, supported Vita in Q4. Then looking at Fiskars. Fiskars really had a strong, strong Q4. Net sales was slightly up. Part of that due to phasing, but also thanks to snow, which also talks yet again about a broad portfolio that we are having that now when it's a snow rich season, the snow helped the net sales up in the snow tools. And following that also the EBIT strong delivery from the team of the EBIT where gross margin going up and very good cost management as the business has shown already quarter after quarter. So good performance for BA Vita in Q4 and for the whole year actually as well. Then about our strategy, we are very focused on continuing to deliver our strategy quarter after quarter. And as we said in Capital Markets Day, it's not only about the growth strategy and the focus we have there, the prioritization, but also the portfolio logic, the sharpened logic, how we actively, as a management, actively manage the portfolio brands we are having, And active portfolio management to us means how we are allocating investments, allocating resources and time to the brands that are going to accelerate the growth of the company and also a solid foundation of the company. The transformation levers continue to help us focus on what really transforms the company. And we see that the key KPIs are delivering and again, elevating the portfolio that we are having. And finally, on the growth strategies, enablers that help us to simplify the way we are operating and also driving the key things that are important for us. People, digital, innovation and design and sustainability, all core enablers as we go forward. Looking at the transformation levers, how did we deliver on them? Where are they tracking? And I'll now comment on full year. You see here also the Q4 figures, but full year on commercial excellence, where we are talking about how can we not only elevate the positioning of the brands, but also being more efficient on a cost side. We saw gross margin increasing 190 basics points over the year. Direct-to-consumer continuing good, especially e-comm, over the whole year growing 14%. So true growth driver for us in e-comm. And today direct-to-consumer for the full year is 25% of the whole company. So already a very sizable portion that's changing also the profile of our company. Then U.S. has been a challenge for us, actually quite many quarters already. And when we look at the full year and then versus Q4, we see that Q4 was slightly better. Some of that is also due to phasing of orders from the big retailers in the U.S. So we continue to focus on U.S. and of course getting it back on track. And then China, as I've said, full year, 25% fantastic growth. Thanks to our fantastic local management who are really focused on accountability and delivering in a tough market in China as well. We're not only transforming the company through these transformation levers. Sustainability is also at the core. It's our DNA, sustainability. And when we look at the matrix of ESG targets that we are reporting on a quarterly basis, we see that we have good progress across the matrices. One way we are especially proud of is the share of circular products and services of our total net sales. And we 3x, we tripled that share during 2023 from 5% to 14%. So that means that we are really here to protect the planet, looking at the biodiversity and ensuring that we more and more use recycled products in our finished goods. We also get external recognition and you see here down the external recognitions we have gotten last year and happy to report the CDP for 2023, which is A minus. So also externally well recognized and we're proud of this progress that we are showing. Then other highlights of the quarter, of course, Georg Jensen acquisition that was completed first day of October and then fully Q4 in our books. And also the success of the sustainably linked bond that was issued. I mentioned earlier that we are simplifying the way we are operating, and this shows in how we are organized today. We have strong BAs, BA Fiskars, BA Vita, that are full P&L responsibility. And it's important for us that this is how it is, because accountability is aligned, it's simplified, and then that way we are the closest to consumers, closest to the brands, knowing what is needed in the single different brands. So BA Fiskars, BA Vita, they are the ones setting the agenda for how we are running the company. We have scalable platforms that help us with cost synergies, capability synergies across the company. That's logistics, sourcing, digital and IT. And then Group is there to be active portfolio manager, allocating investments and resources according to our portfolio roles. During the last quarter and in totality in 2023, we've announced quite many organizational changes and streamlining changes. All those have been completed in full. Then looking at the ownership culture. For us now, when we say it's all about the brands, it's about BA Fiskars, BA Viitta. It's important for us that we have a feeling of ownership culture in our organization and this entrepreneurial spirit. We have the second wave of My Fiskars, which is ownership share plan. for the employees and today 13% of all employees have signed up and in the offices it's every third. 32% of all employees have signed up to MyFiskars employee share savings plan that we have in place. So every third in the offices. Then talking about innovation, also agility, we launched the first product in Fiskars Lab. This is on our Fiskars.com page, talking about fast tracking innovation. Innovation where we also can test and learn and listen to the market, what's relevant in the Fiskars brand space. So very good commercial success of the first launch in Fiskars Lab. Then the guidance for 2024, we are guiding that we are going to slightly increase our EBIT compared to last year. The assumptions behind the guidance is that the operating environment where we are today continues to be challenging. And we continue to see especially impact of this challenging environment in the first half. Consumer sentiment is uncertain. Also, what is hindering us is the wage inflation. We had significant wage inflation last year, and this year also we continue to see the wage inflation being there, impacting us. On the positive side, as I mentioned earlier, we had the organizational changes and these savings that came from the organizational changes, we are starting to see the impact of them to support our EBIT. Thanks to the acquisition of Georg Jensen, we see, of course, the impact from the profit side, which was already in our Q4 last year. But with Georg Jensen in our figures, we see a bigger shift towards the Q4 and the later half of the year of the nature of Georg Jensen. So that's our guidance for 2024. And with that, I hand over to Jossi.

Thank you, Natalie, and hello, everyone. Let's start first with Q4 comparable net sales. As Natalie mentioned, our Q4 like-for-like basis was quite flat there versus last year. And then on reporting basis, thanks to Georg Jensen, we reached this 13.7% growth in Q4. This also highlights the importance what we had when we acquired Georg Jensen to get the Q4 into our numbers. So on a full year basis, Q4 is almost 40% of net sales in Georg Jensen, which is now consolidated to our numbers. When it comes to BA Fiscus, as mentioned already, it was snow in the Nordics and then low comp in the US, which were contributing to this mid-single-digit growth what we had in BA Fiscus. That's mainly all wholesale business what we have in Q4 in BA Fiscus. Whilst in BA Vita, which was down this 4.5%, roughly 50% of sales were in indirect consumer, which was quite flatties, and then all negative came from retail. or wholesale business. Then on EBIT. So on like-for-like basis, our Q4 was quite flat versus last year. So BA Vita and BA Fiscus, they were offsetting each other, and then slight negative came mainly from this other segment there. If we break this down to the components, the organic gross margin was slightly down in Q4 due to the phasing in our supply chain impacting cost of goods. This is nothing to do with pricing, so pricing remained unchanged there, but this is phasing of approximately 5 million of cost we took in Q4 instead of 2024, so that makes the big difference there. OPEX was down mainly driven by marketing expenses there. In SG&A it was down only slightly. So the offsetting items due to the inflation took the savings off there. But as I said, pretty flat versus last year like for like basis. Here you can also see the importance of this Georgiansen. So 12.2 million of EBIT came from Georg Jensen in Q4. And as Natalie mentioned, it's very much year-end loaded type of business, especially Q4 loaded business, which almost 100% of profit is coming later in the year, mainly in Q4. Then on cash flow, as already mentioned, this was all-time high, full-year cash flow of 185 million, what we had in 2023. Admittedly, part of that is kickback from the previous year, when we made minus 100 million. And now we succeeded to melt down the huge networking capital accumulated there in 2022. So we got that now down. So we were there at almost 290 million improvement versus a year ago. A long-term target taking out this kind of ups and downs, this volatility, what we have had there is still unchanged. So long-term target for free cash flow is in the range of 80 to 100 million per year. On trade working capital, we continued reduction to trade working capital driven by inventories. So we were quite flat versus a year ago, end of 2022. But that includes already the Georgiansen networking capital. Excluding that one, organically, we were 127 million down versus the same period the year before. Now we are getting back, in terms of networking capital net sales organically, we are now back in December 2021 level, which means that this increase in networking capital we experienced in 2022, we have now succeeded to melt it down. So that's now compensated fully. The acquisition impact on our leverage was of course quite significant. And at the time of the acquisition, we anticipated that we get it back to the targeted level of 2.5x net at EBITDA. We succeeded to do that in one quarter. So by end of last year, we were already at this 2.5x level, thanks to this strong free cash flow. On balance sheet, our organic capital employed went down 88 million. And the asset efficiency decrease, what we have, it's temporary due to Georgiansen acquisitions. Full balance sheet in and only one quarter of sales. Balance sheet remains solid after the acquisition and liquidity is strong. The cash and then all unused facilities, what we have in place, totaled 430 million at the end of the year. Then when it comes to our long-term financial targets, all four, be it organic net sales growth, be it EBIT margin, be it cash flow or balance sheet. So on cash flow and balance sheet, we are back on track. We are plinking green there with those two targets. On EBIT and net sales, net sales down organically 9.7% and EBIT a bit shy of 10% there at the end of last year. Of course, they are not yet at the targeted level there. Taking a longer-term view, eliminating this kind of volatility there, we can see that the cash flow and balance sheet targets are based on the fundamentals we have put in place, and they are delivering the targeted level. So now it's focused on profitability improvement and then net sales when the market turns. With that, giving back to Joel.