Fiskars Oyj Abp

Hello, and welcome to Fiskars Group's Q1 2024 results webcast. My name is Essi Lipponen. I'm the director of investor relations. I'm here with our president and CEO, Nathalie Ahlström, and our CFO, Jussi Siitonen. Natali and Jussi will first go through the presentation and the highlights from Q1, and after that we will be ready to take your questions. You can type in your questions in the chat already during the presentation. Go ahead, Natalie.

Thank you, Essi. And also welcome from my part. It's a privilege to be here to talk about Q1 report that we just published. Let me go first to the highlights. Q1 now in 2024, it's a solid performance in a very challenging market. What we are proud of is that despite the challenging market, we are able to continue to strengthen our foundation. So it's really about the foundation that our transformation is strengthening. And we continue to deliver on gross margin, Ecom and China. I'll come to the details later. At the same time, we have also today announced that we are investing and making change in our plants, in our factories, in our glass factories, that we are taking the portfolio upwards towards more premium and luxury products. So significant investment and at the same time actively managing our portfolio. And for 2024, our guidance remains intact. Our comparable EBIT will be significantly above, no, slightly, sorry for that, slightly above 2023 levels. But let me take you to the key facts about Q1. If we start with the key figures for the quarter, despite the volumes coming down in Q1, driven by the weak consumer sentiment, yet again we were able to increase our gross margin by 185 basic points. Now, if you look in the last three years, a bit more than three years, we've increased gross margin from 40.6 to today, where we are at 48.3. So it's nearly 800 basic points that we've increased the gross margin. Talking about how we are working to strengthen the foundation of the company, transforming it. Another thing just to highlight is last year, we had the all time high cash flow of the company's history. And now in Q1, free cash flow continues at historical normal levels. Then looking at Vita. In Vita, we see that the consumer sentiment that is weaker has impacted our volumes. On the positive side, of course, we are growing via acquisitions. So the acquisition of GeoGensen that we did in 1st of October is now part of our figures. And that is then inorganic growth that we show in Vita. The integration of GeoGensen continues really well. And when we come out with Q2 in July, we will then also report on how GeoGensen integration is progressing. And today it's progressing really well. Despite the challenge on volumes in Vita, the highlight is how Ecom continues to grow. Ecom continues to grow at 12%, which again shows that consumers are driven to our web pages. They come, they want to read the stories. It's about storytelling. It's about the lifestyle experience they get from our brands. So Ecom is growing. So we're moving our portfolio, actively managing it. And therefore, as I mentioned in the beginning, we are continuing to invest and we are making significant investment now into our factory in Rogazka, that's in Slovenia, where we today announced that we invest in 15 million euros to both optimize production, increase competitiveness and modernize the factory. This will also much more accelerate our journey towards net zero in the factory in Rogarska. So we are investing. At the same time, what we are doing, these changes, it's yet again a move of moving our portfolio of the company towards more premium and luxury with the setup. And then, as I said, also the journey towards net zero. So as a summarize, what we have communicated today with the changes, not only Rogashka, also in the Itala factory, it's really in line with the portfolio roles that we spoke about in November during Capital Markets Day, where we say that we are moving more up towards luxury. And we also have brands, Itala, Waterford, that we need to optimize to future-proof the competitiveness of these brands. So we are actively managing that. Then the highlight of Q1 is truly Fiskars. Despite net sales coming down, it's extraordinary profitability for Fiskars in Q1. We reached 18.9% of EBIT margin in Q1, so it really talks about the commercial excellence we are looking at. Which are the channels, which are the places we want to be present in? What does good look like in stores? And as a consequence, despite the volumes coming down, we were also able to increase gross margin and that offset the decline in volumes. And we were able to deliver a solid EBIT for four fish cars. Another highlight in the Fiskars BA is the outdoor brand Gerber. Gerber has truly been one of the growth building blocks in Q1, where Gerber introduced a new category in Camp Cook and at the same time won more listings that were now opened up and filled in Q1. So fantastic work. Also there to drive growth for the future. So building the foundations for the future. Then, coming to the strategy. Like we always say, we are here and we have sharpened the logic. We sharpened the logic of what we are doing and it's really that we're actively managing the portfolio. Like the examples I've just given, for example, the investments we are making into the glass factories. We have transformation levers that deliver. We're making the foundation to make it even more solid, future-proof for fiskars. And when the volumes come back, we'll really see an uptick in our performance. And also we have a simplified way of working. It's with very clear accountability and decision making in the BAs, in BA Fiskars, BA Vita. So that makes us agile and much faster as we go forward. So speed is of essence. Then looking at how do we deliver on the transformation levers. So, three out of four transformation levers are delivering. I mentioned already gross margin and commercial excellence, and it's very much about the channel mix that we're working on, as well as our assortment. And we saw that in Q1, our gross margin grew 185 basic points. So yet again, a quarter when the gross margin goes up. Direct-to-consumer, e-com, fantastic growth of 12%. It's about the storytelling, the power of the brands. Consumers want to take part of this. Retail declined, but when we look at like-for-like and the pop-ups that we've closed after Christmas, the like-for-like of retail is flat. And now when we look at the importance of omnichannel, especially in the luxury segment of Vita, it's fantastic to see that Vita direct-to-consumer is already more than 50% of all of Vita. So we are truly moving the portfolio up and executing on the portfolio roles. US continues to be challenging and our big retailers, big box customers continue to be cautious with inventories. And we saw a slight decline in the US. Then China, again, the local Chinese team doing a fantastic job, growing Wedgwood, Rolke, Copenhagen. So 15% growth in China. If we include our newly acquired Georgiansen into the figures, so including then inorganic growth, China growth is 20%. So 15% organic growth in China with Georgiansen 20%. So China continues to be strong for us. And despite China overall on a macroeconomic level being a bit subdued for us, it's about the scalable model we have where we started with Wedgwood. Now we are doing Royal Copenhagen and Georgiansen then on top of it. So it's a scalable model that we can continue to deliver the growth building blocks in China. It's not only on the business itself we are transforming. Of course, sustainability, ESG, is the heart of what we are doing. It's the heart of our DNA. And on biodiversity, our recycled content, it's fantastic to see that yet again, we increased a little bit to 15% of all the content is circular products and services. So we are also, from an ESG point of view, transforming Fiskars Group. And therefore, it's natural that we in March came out with our net zero target. We are going to become net zero by 2049. If you wonder why do we have such a strange year of 2049, that's when we turn 400 years as a company, while we are this year turning 375. To reach the net zeros and the current targets that we are having, we have a lot of plans in place and we are going to continue to execute on them and reporting back to you where we are with this. Other highlights from Q1 and also from now where we are. I'll start with this. I spoke about the growth building blocks. It's really in our brands. It's about the lifestyle that the brands are creating for consumers. And this Gerber has taken to its heart and they are surrounding the consumers with new categories. An example, as I mentioned earlier, is Camp Cook that Gerber launched now in Q1. Then Fiskars brand won yet again Best of the Best for Red Dot. This is the fifth consecutive time we win Red Dot Design Award for products. And this year we won two Best of the Best. We're also innovating to enhance our ESG journey sustainability. And one important fact is that today already two thirds of our cookware products are PFAS free. This is important for the consumers and also for sustainability for the whole planet going forward. And by the end of this year, all our cooking products will be PFAS free. So a lot of growth building blocks, innovations. But it's also about our culture, our culture at Fiskars. And I'm very happy that we could in March announce that we are going to continue to reinforce our ownership culture in the company with MyFiskars, where employees, through employee share savings plan, can invest into the company and own shares. So in this way, we can also welcome our Georg Jensen employees into the program. And from the first launch we had already in 2023, we see a fantastic uptick in participation from our employees. Today, as an example, in Finland, in offices, 50% of our employees are Fiskars shareholders. So it's truly about the ownership culture we are creating in Fiskars. And then our guidance for 2024. Our guidance remains intact. It's a challenging environment with the macroeconomics and also wage inflation is against that. At the same time, and Jussi will talk about that soon, we see that the savings from what we initiated last year is starting to come in. With the Georg Jensen acquisition also, we see that our profit will be much more heavy at the end of the year, heavy loaded at the end of the year. So the typical quarterly variations is going to change towards the end of the year. But with that, I'll hand over to Jussi. Thank you.

Thank you, Natalie. And hello, everyone. Let's start first with the net sales. So as Natalie mentioned, we were down 5.8% organically. Out of that, Fiscus was 6.2% negative and then Vita 5.7%. When it comes to Fiscus BA there, the good thing is that we started to see growth there in Sweden, which is a big country for for Fiscus. Then the biggest countries, US, Finland, we had low single digit negative in those countries, taking the whole Fiscus BA down to this minus 6.2. On Vita, as already mentioned, China, which is 100% Vita country, Denmark, Sweden, UK, Norway, they were all up. So we have now more and more countries which are growing. However, the two biggest ones now in Q1, Finland and Japan, they were down. So that's why we were down also in VIT as a total. Natali already mentioned that Kerber was nicely up. We were up roughly mid-teen there, thanks to these new categories and footprint expansion when it comes to distribution. So these were the main drivers there for this like-for-like net sales minus 5.8 and then total net sales up 2.9%. Then on EBIT, EBIT came down. EBIT came down 3.7 million there when we have like-for-like basis, which means that excluding Georg Jensen impact here. It was mostly because of low volumes. That was the biggest single reason what we had there taking EBIT down. We succeeded to partially mitigate this with better gross margins, especially Fiscus BA and then the savings. And we are very pleased with the fact that now, after those announcements what we had last year, one announcement in January and then another one in September, we start now seeing that savings are flowing in. If you go through this bridge, what we have here, you can see that the low volumes impacting, of course, gross profit due to the net sales drop, but then also production, negative production variances, what we had there. Those were the biggest single reason. Then top line driven negatives, mainly coming from bad debts, marginally down. And then depreciation and marketing. These were all items which are not under those saving programs, what we initiated last year. Then you can see that both cost of goods and SG&A, they are nicely contributing our EBIT growth. And that's important also to understand that whilst the EBIT as such is coming down, the underlying good momentum there, what we have the saving plans, seems now to work. When it comes to a big part of the SG&A, employee cost of salaries, there still we see that inflation is partially offset the benefits what we are getting from a low headcount base. But let's see how now it's continued during the year. On cash flow, Q1 cash flow minus 20, free cash flow minus 20 million there. That follows the historical pattern what we typically have in Q1. Of course, we are not happy with this kind of negative cash flow, especially when last year we succeeded to make positive free cash flow in Q1. Out of this minus 20 million, roughly 8 million is Georg Jensen impact and then 12 million old Fiscus. The main reason for this negative is the net broking capital. However, within this net broking capital, we succeeded to continue inventory reductions so that now they were 31 million down in Q1, nicely equally down in both BAs, both in Viitta and Fiscus BA. On balance sheet, net EBITDA, the target being this 2.5x. We were now 2.9x. That's a seasonal impact what we have. Capital employed remained pretty flat, and that's important for us that we need to continue improving our asset efficiency. So now it's temporary down due to the fact that we still have some fair valuations therein from Georg Jensen, but we gradually start improving also that one. Q1 negative cash flow and then dividends, they're all funded through cash reserves, what we had at year end. And return on capital employed, 9%. So we still are in value creation mode in that sense. Taking all our financial targets, four financial targets here, net sales growth, organic, EBIT margin, cash flow and balance sheet. If you take a rolling 12 months at the end of Q1, the cash flow conversion is still very positive there. And then taking a longer perspective there, mitigating this kind of short term volatility there. The balance sheet remains strong and we are also catching up on cash flow. EBIT and net sales are the ones which are impacted by this challenging environment, what we currently have. That's very shortly about financing and giving it back to you, Natalie.