Fiskars Oyj Abp

Hello, and welcome to Fiskars Group's Q1 results webcast. I'm Noora Huttula from Fiskars Group's Investor Relations, and I'm here with our president and CEO, Nathalie Ahlström, and CFO Jussi Siitonen. So to kick things off, Nathalie will first take you through the key highlights of the quarter, after which Jussi will go through the financials. Natali will then tell more about business area performance, after which both Jussi and Natali will spend some time to discuss the impact of tariffs, as well as our guidance for 2025. After the presentations, we will have time for your questions. As usual, you will be able to already type in your questions in the chat during the presentations. And this time, we also have the possibility to take your questions through the telephone line. So if you wish to do so, you can find instructions in our results release published earlier today. But with this, I hand over to you, Nathalie.

Thank you, Nora. And from my side, welcome to this Q1 announcement. I'm really proud to stand here and talk about Q1 because we really come from a position of strength. We had in Q4, we had the all-time high Q4 in terms of EBIT. And now we go into Q1 with also having a very strong Q1. This is the first time we've grown. since the mid-2022, after the Ukraine war started. It's been a lot of actions, and I'll talk about that later, that we have done to really start to drive this organic growth. And we also saw the EBIT growing. A true joy is also that our own channels, our D2C, so our own retail and our own e-com is growing at 9%. That's a healthy growth. And that really shows the strength of our brands, that they are growing so much in our own channels. The business separation that we announced in end of October, that is already online. End of January, we started operationally to drive the company as in two legal own entities, Fiskars and Vita. Now, to fulfill the separation of the business areas, we are still setting up the legal entities. But operationally, we are already working like this. And then finally, on the guidance, we keep the guidance for 2025 intact, despite the headwinds of tariffs that we are seeing. And as Nora was saying, we have a section later in this presentation where we are going to talk about our guidance and the impact of tariffs and what we are doing to mitigate it. So we are seeing our guidance for the year to stay. We expect the EBIT to be improving from last year's level. And with that, I'll hand over to Jussi.

Thank you, Natalie. First, some highlights on our financials here. As Natalie mentioned, we had a good start for the year. Net sales up 1.7% on currency-neutral basis, 3.2% in reporting currencies. Both PAs were growing, and that's something that we haven't seen since Q2 2022. EBIT up 1.7 million, and EBIT margin up 300 basis point here. One thing what we have, and I get back to that more in detail, is that gross margin went down 80 paces point here. Cash flow, free cash flow was negative as practically always is in Q1. Now it was 2.7 million better versus a year ago. Earnings per share on comparable basis was four cents down versus last year. This is mainly due to our financing items, especially when it comes to FX changes. However, cash earnings per share was up four cents. When we informed about this BA split and had a more independent role of our BAs, at the same time we promised that we are increasing transparency, how we are reporting these BAs. This is the first time we are now reporting business area specific gross margins. So what you can see here, the green line represents quarterly gross margin, what we have. Potent Vita on the left and then Fiscus on the right. And orange line is our rolling 12 months basis. As I said, Viitta gross margin up 90 basis point here, mainly driven by channel mix changes. So strong growth in D2C, 9% up, e-commerce 10% and retail 9% there. But also within D2C, we were able to increase gross margins. So that's the main driver of this 90 basis point improvement, what we had in Viitta. Fiscus was down 160 basis points versus Q1 2024. I would say that this is more from unsustainable high level what we had in Q1 2024. On longer term, this is very much in line with what we typically have had gross margin in Q1 quarters there in Fiscus. On longer term, if we take this rolling 12 months trend, what we had in the last three years, we have succeeded to improve gross margin is Vita by 230 basis point and almost 400 basis point in Fiscus. So this being the driver of our further profitability, I would say it's coming from very sustainable sources. Then on Q1 EBIT, as I mentioned, it was up 1.7 million. And it's a good mix of further investments. When we came out with our Q4, we said that this year we are committing invest in demand creation, mainly in marketing there to support new categories, new product launches, new innovations. We continued that now or started that now in Q1. so marketing expenses were up almost 5 million there. And the good thing is that we were able to fund these investments organically. Volume growth, what we had, as well as further efficiencies there when it comes to SG&A, they contributed so that we were able to invest back. If you wonder what is this other income increase there, that's those realized effect hedges what we had now in Q1. On cash flow, as I said, it's following our typical historical pattern, what we had Q1, typically negative here. Now, the big changes versus last year Q1 is networking capital. It went upwards last year by 17 million, the main driver being inventories. Long-term, if we take our last 12 months cash flow, what we have, it remains flat at roughly 85 million. On net debt EBITDA as well, following the historical trend or seasonal trend what we have, net debt EBITDA was 2.90, now in Q1, slightly downwards last year, same period. Also an increase what we have from year end was slightly less than a year ago, what we had in the same period. As said, this is following our seasonal trend, so typically we are peaking up at the beginning of the year, and then when our strong cash flow quarters like Q4, and also partially Q3 are coming in, then we are getting back to a more normalized level, closer to our target of 2.5. With that, I'll get back to you, Natalie.

Thank you, Jussi. So then looking into our now independent business areas and their performance. We start with Vita. Vita grew in Q1, like Fiskars as well. And the driver behind the growth was really those strong brands, especially Royal Copenhagen and Moomin, who also last year in 2024 showed already last year a strong growth and now they are continuing the growth in this year. We're also very proud to say that Iittala is now growing one year after we did the brand new renewal. And also Iittala has been improving the gross margin. So it's a very good recovery of Iittala. Like we also have had in the portfolio roles that it's an optimized brand where we want to turn it around and that's now happening. Our EBIT was increasing thanks to the growth in the top line and also prudent cost management. Like Jussi was saying, in Viita also we are investing in demand creation, which is then going to build the growth for the future. And thanks to the channel mix and the good growth in direct-to-consumer, our gross margin in Viita came up 90 basis points to 56.3. Then if we look at the few highlights from Vita. We announced earlier in the year that we are simplifying the organization to keep really clear accountability. The regions are executing, the brands are putting the strategy, the channel strategies and assortment. And while simplifying this and ensuring that we have the right accountability, we have also then used this money that we are saving from the simplification into demand creation. And that structural reorganization has been completed in nearly all but one country. Then the power of our brands. Viita in our own channels, our own e-com and our own retail and e-com, we have roughly 62 e-com sites globally and our own retail, we have more than 500 stores globally. And here we were able to demonstrate a 9% growth. And that really talks about the power of the Vita brands, how much they attract consumers to come into our stores and do the purchasing there. So this is a key indicator of how strong Vita is and the future potential of Vita. Then I mentioned already Royal Copenhagen and Moomin Arabia who continued their good growth from 2024. And also Royal Copenhagen is this year celebrating 250 years and Moomin Arabia 80 years. So a lot of excitement and the celebration. And as I said, Italy really has turned around now. Italy is growing, the gross margin is improving, so it's fantastic to see that only one year since the brand renewal we're already seeing very positive figures. In addition to these brand gains that we've had, we also see good growth in the Nordics, in Japan and South Korea. Viita now has built on its foundation and it's looking at the future potential and that's also why we announced a few weeks ago that we've appointed Daniel Lalonde as the CEO of Viita. Now the focus is on growth and really to execute on the full potential on Viitta. And I see when looking at Daniel's background, a mix of premium and luxury background, very international background in fantastic companies. I think this is really a new start for Viitta and we'll take it far in the future. Daniel has already started with us. He started already last week and is in full speed in executing the future of Vita. So warm welcome, Daniel, to the team. Then Fiskars had a good Q1, growth of 2.6%. And this was really driven by distribution games in the US. So we have been winning new doors in the US. We've been winning shelf space and market share in the US. And also good growth in Finland and Germany. Of course, the good growth in top line is also then translating into increased EBIT. Like with Viitta, also in Fiskars, we've invested significant amount into demand creation for the future potential of the brands. And like Jussi was saying, the gross margin came down a bit to more normal levels what it is in Q1. Then looking at the few highlights of Fiskars. I mentioned already the distribution games in the U.S., which is fantastic also, thinking that U.S. is our biggest market for whole of Fiskars Group. And also, it's the world's biggest economy. We also see growth from our not only distribution gains, but also when we're expanding into categories. And here's a good example of indoor gardening, a new category that we have been slowly expanding into and now it's really delivering. It's indoor gardening, but also for urban gardeners on your balcony and so on. Then we're also renewing our products. Our classic scissors were just launched and yet again we won a Red Dot Design Award. And this is the 65th Red Dot Design Award we won as a company. And this time it's for the orange handle scissors from Fiskars. Then a few fun things from Q1, we had the March Madness, which is a basketball NCAA competition in the US, and where Fiskars scissors are very prominent because they're always there to cut the net after the victory ceremony. So those are a few highlights from BA Fiskars. Then looking at sustainability, we're really proud to see that we continue to improve on our sustainability. And when we look at what's the most important metric we are following, it's the circularity. And when we look at circularity last year in Q1, our share of circularity of all our net sales was 15%. And now in Q1 2025, it's already 27%. So a huge tick up in how we have much products in net sales in circular products. So we're really committed to future proof the business and ensure that we look at the whole biodiversity of the planet. We're also happy to announce that we were today listed on Financial Times list of the European sustainability leaders and in this Financial Times ranking we were mentioned in today's paper. Then going to tariffs and our guidance. And when we look at our tariffs, the U.S. tariffs, of course, the visibility is quite limited. It's a very dynamic situation we see out in the market. We're changing news all the time. If you look at the facts, for Fiskars Group, US is 30% of our net sales. For Fiskars BA is 50% of the net sales. So of course, the direct impacts are significant for Fiskars Group. And these impacts are direct sourcing of products into the US. Then we also, of course, have potential, which we don't know yet, that's speculative, potential indirect impacts on consumer confidence, but that we don't know yet. And we don't see a sign of that yet in any of our markets. We are fully focused since Liberation Day on mitigating this adverse impact. So we are proactively working on mitigating the cost pressure and also to ensure that we preserve our market share, our placement in the shelves in the US, and also our margin resilience. And what we are doing, and Jose will soon talk about it more, is of course we are looking at pricing adjustments, But at the same time, because I was also saying that we want to maintain market share on shelf space, we're looking at a lot of different productivity initiatives to ensure that we are competitive in the U.S. market so that we can mitigate. So with this, we are mitigating the direct impacts of the tariffs for the Fisker's BA into the U.S. with the actions we have now in place. And then let's look more at the financials.

Thank you, Natali. So in this very dynamic and volatile environment where your case is equally good as mine, we have decided to stick to the fundamentals here. And then if we go through the impacts there, what we have already now achieved this year. First, these direct impacts are more straightforward. And they are, of course, Fiskars BA is very much exposed to those, whilst Viitta is not so much on those direct ones there. However, Fisca's first half direct impact, we are expecting to manage. There are a couple of reasons here. First, we do have inventory in place when it comes to our US customs cleared inventory. That's already in our warehouses in the USA. Q1 done, which is, as you can see historically here, has a big weight on our full-year EBIT. 39% last year, for example, was delivered in Q1. And then this last week announced 90-day extensions there for tariffs. Of course, that's helping us as well as the announcements what we heard a couple of days ago that the current level seems to be quite unsustainable high level also for the U.S. government. So these are the fundamentals what we have in place. We have first half very important for fiscals, so two-thirds of fiscals EBIT is typically delivered in the first half, whilst in Viitta actually 97% is coming from the second half, so that almost 80% is Q4. And when WITA is so much year-end loaded, the direct impacts are small, and then indirect impact, as Natalie said, no further visibility yet, so therefore it's almost like a guessing game what happens late into this year. So these are the fundamentals behind the guidance what we have. Now back to you.

Yeah, so these are the fundamentals, like Jussi was saying, behind our guidance that we are keeping unchanged despite the very volatile environment. So we're saying that our guidance will have an improved EBIT compared to last year's 2024 level. And what are the assumptions we have behind it? On the negative side, yes, the operating environment is very unpredictable. We see that the tariffs are going to have an impact on the sourcing costs that come into the U.S. And with the inventory we already have in place, plus the multiple mitigation actions that we are having in place to ensure that we keep our cost efficiency and more productivity in the U.S., we are able to mitigate the direct impact of the tariffs now for 2025. So that's really strong delivery of the teams. Then the potential indirect impacts on consumer confidence, not only in the US, but in the whole world. Those we don't know. We have very limited visibility. And as you saw, for Vita, Q4 is really the main quarter to deliver. So there, of course, we have so limited visibility. However, with the mitigation actions and also that Fiskars is delivering 67% of its whole year in the first half, we are confident that we can keep the guidance with the information we know at this point unchanged. On the positive side we see that we have gross margin resilience. We are expecting the gross margin to continue to support our EBIT going forward. And also the pricing adjustments and the ongoing productivity actions that we've had already and put in place already last year are there to support the EBIT going forwards. So as I said, we keep the guidance unchanged. The first half of the year is very important for BA fiskars, and there we will be able to mitigate the direct impact of the tariffs for 2025. Then for the EBIT generation of the whole year and the whole group, of course, Q4 and VITA and consumer confidence, which is indirect impact of the tariffs, is the big unknown where we don't have visibility at the moment. With that, just going and summarizing the highlights In this very dynamic world where there's so much happening, I'm really proud to stand here and say that we come from a position of strength. We had the all-time high Q4, we have a strong Q1, where we also showed growth for the first time in a long time and also improved EBIT. So we are in a strong position to tackle the challenges that we see in the macro environment going forward. We're very proud of the direct-to-consumer growth of 9%, which really talks about the strength of our brands. Consumers come to our stores, they are attracted to our brands. So 9% growth in direct-to-consumer, that's a good place to be in, going into this uncertain place. The split of the company into two legally independent entities is moving forward and already today Fiskars and Vita are operating as own separate companies operationally. And finally, we are keeping the guidance intact and the comparable EBIT is expected to improve from last year's levels. Then a bit of a news flash. We are going to have an investor event, and this is really for all of you to get to know Vita, get to know and hear more about the look and feel of Vita. We're going to have this investor event in Copenhagen, May the 21st. So please reach out to our group investor relations team to get signed up. During this physical event in Copenhagen, We will, of course, myself, Jussi, but then also Daniel Lalonde, the newly appointed CEO of Vita, will be there talking about the business. So focus on getting to know Vita. Our creative directors from our main brands, four of them, will also be present, talking about the brand desirability, what we are going to do in the future to attract consumer attention and staying relevant for consumers. So we will have a good panel with our creative directors. We're also going to see one of our heritage sites, our Georg Jensen Silver Smithy, downtown Copenhagen. and also then for Royal Copenhagen see some painting and also our newly renovated flagship store in Copenhagen. So please come and join us in Copenhagen May the 21st of May and get to know Vita more. But before that, before we see each other in Copenhagen, let's go for some Q&A.

Thank you, Natalie and Jussi. So we already have some questions in the chat, but please do keep them coming. But first, let's see if there are any questions through the telephone line. So over to the operator.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Maria from Wikström. Please go ahead.

Yes, hi, this is Maria Wikström from SCB. I wanted to touch a bit more on the tariff question and more respect to the future rather than just this year's guidance. I think you mentioned earlier that you have expanded your sourcing in Asia outside China. Can you please give a little bit of magnitude of the countries where you source from Asia?

Thank you, Maria, and good to have you here online. Yes, you're right, Maria, that we are sourcing a lot from Asia, not only China. And already during the first Trump administration, many, many years ago, we moved away part of the sourcing, for example, to Vietnam. But now with this new wave of tariffs that came on Liberation Day, we are looking at multiple countries in Asia, but also in Latin America, to really diversify the the footprint, which will also be good for the longer term in the future. And the team is fully focused on doing this shift of the sourcing for the season then 2026.

And then if I may continue a bit on this same aspect that How do you think is your possibility to transfer the increased tariffs to your own prices? Or do you expect to see the hit on your own profitability when the tariffs are put effective?

Maria, what we really want to do in the US is, as we have been now gaining, not only in the US, in Germany as well, we've been gaining a market share, we've been gaining distribution and shelf space. And we also want to go forward and protect that going forward, because that talks about the long-term attractiveness of fiskars going forward. But that's why this diversifying our sourcing is so important that we will then ensure that we are competitive also going forward. But priority is to protect the shelf space that we are having but then at the same time ensure that we are cost competitive there also that we don't price ourselves out of the market. We also have improved efficiency in our own factories in Europe. So there's also a lot of opportunity for us to source directly from Europe into U.S. And that's a huge benefit we are having, for example, with our factories in Bilnes and in Slupsk in Poland, Bilnes in Finland and Slupsk in Poland, that we also can already now immediately start to use to supply to the U.S. So we have multiple options to protect our shelf space.

Well, that's actually a good point. So it's not only about pricing. Pricing to our customers or our consumers, they, of course, we are mindful that there are certain price sensitivity, all those markets. So how much we can increase prices if so needed. But as Natalie mentioned, it's very holistic view. We are also discussing with our existing vendors there how we share this challenge, what we currently have. And then also the whole manufacturing footprint, not only AESA, but Europe and all factories.

yes and then finally if you could say a few words about the chinese demand i mean how how do you see it currently yeah good good maria thank you for reminding about china china as we know has been since the second half last year china consumer sentiment has been challenging and and we were able last year to have a flat development in china now in q1 we came down with top line in China. And we don't see a change in the consumer sentiment in China at the moment. However, of course, the central government also last week and this week has put a lot of actions in place to stimulate the consumer sentiment in China. We don't see the actions of that yet in our own stores. We have a big footprint of our own stores, more than more than much more than 50 stores at the moment in China. However, what so we don't see a change in the consumer sentiment. However, what our team is doing in China is that they are really activating with new innovation, new celebrities. Celebrities is key in China. We will have new ones coming up so that we continue to be interesting for the consumer as we go forward. But yes, China has been challenging already since second half of last year and now Q1. But But I'm very confident in what the actions our team in China is doing.

Perfect, thank you. I don't have further questions.

Thank you, Maria. Thank you.

The next question comes from Kaie Loikanen from Danske BNK. Please go ahead.

Hello, this is Kaile Loikanen from Danske Bank. And thank you for taking my questions. I was wondering, could you perhaps open up a bit more on the gross margin development in BA Fiskars?

Yeah, for sure. So BA Fiskars, the main drivers are the operational efficiency, what we have achieved, and then the new innovations, what we have. As Nathalie mentioned, Q1 this year was more like back to the normal level. So last year, Q1 was, I would call it, almost unsustainable high level. But more importantly, following this trend, what we have had there, so in the last three years, if we take our rolling 12 months gross margin there, we have succeeded to get up almost by 400 basis points. So it's coming from many sources, mainly supply chain related. And further, what we will see in Fiscus is that when the new categories, new innovations are entering into market, they are further sweeter in our gross margin in Fiscus BA.

And also, Kalle, I could add that as mitigation actions also to the tariff and continuing now competitiveness in the U.S., as we have this trend of improving gross margin, that's of course one thing that is helping us now as we are fighting the tariffs, the direct tariffs in the U.S.

Yeah, absolutely, absolutely. And then thinking about the The full year 25, obviously Q1 comparison number in gross margin was quite high, but how do you see it for Q2 and the rest of the year? Is there still room to improve also in BA Fiskars?

Without giving any specific guidance on gross margin for Fiskars BA, the fundamentals what we have in place there in supply chain, in new interventions and the likes, are built to continuously improving gross margin in Fiskars BA. So for sure, based on what we can see, we have all the ingredients there to continue improving.

Okay, thank you. And then I was wondering about any comments on the different kind of areas, geographical areas in Q1. You already covered China, but any kind of other regions that you would like to comment on shortly at least?

I could start. So if we look at Fiskars BA, the strong regions was U.S. thanks to the distribution gains and also continued growth in Finland and Germany. So main markets for us in Fiskars BA. Then on Vita side, the strong regions were Nordics, Japan and South Korea. So also significant markets for us. A joy to see that.

All right, that's clear. And then I was wondering that, you know, with very much uncertainty going on, especially in the U.S. and, of course, globally, what are your customers, you know, currently, customers in the U.S. currently saying? What are they seeing in terms of underlying demand? What are their thoughts in all of this? Any kind of comments from them?

Yeah, I would say, first of all, thoughts and how we are feeling. This is a challenge, and we're just with good energy going in and finding solutions. And we find these solutions together with our big customers, and our teams are meeting with the big customers every single day in the US. And it's really focused on finding solutions, so very good, exceptionally good dialogues they are having. Then more on consumer, we see that we have had a positive trend in Fiskars brand on the selling out. So point of sale data is showing strong growth. So it's early to say that how the consumer sentiment then eventually over time will be impacted by this changing in the US. But good, good energetic solution minded discussions with the customers.

All right. Thank you. That's all for me. Thank you. Thank you.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

All right. Well, now we have time for questions over the web as well. And I think we can go straight to the tariff topic. There are several questions also on the chat here. So first, maybe Jussi would like to take this. Was sales in the US boosted by pre-buying ahead of increased tariffs?

That's a bit challenging to answer, because we don't see what's the buyer's or customer's motivation to buy. What we see is that the year started very strong, and when we ended up with this 2.6% growth, it was more the first half of Q1 buyers than the second half.

Yeah, and perhaps a little bit similar but on a different angle, have you made any increased sourcing to the U.S. inventory during Q1 while anticipating the potential tariffs?

So what you saw there when I shared our Q1 cash flow was that inventories went up 11 million here, whilst last year they went down 30 million in Q1. So of course, and then combine that with the comments we said that this kind of US customs cleared inventory, what we have in warehouses in USA are able to serve us now for a short period of time, there was a certain period of time. So that's what we have done.

Great, thank you. And then Nathalie, perhaps for your question on our guidance. So just to be clear, your guidance assumes current tariffs to be enforced for 2025, but no demand impact.

Yes, so we are focusing in our guidance, that's a very good question, on the direct tariff impact. That's what we have in our guidance. We haven't assumed anything about the consumer sentiment because we haven't seen ourselves any sign of that, and we have over 500 stores globally. We haven't seen a change in consumer sentiment, so that we haven't assumed in the guidance because that would be speculative, which we don't see happening at the moment. But of course, the situation can change.

Thank you. And then you see a bit more on the sourcing side. Can you elaborate how much of goods sold in US are currently sourced in China this year? And how much can you reduce that, for example, going into 2026?

Well, I think Natalie already partially answered these questions. We haven't disclosed specifically from which countries we are sourcing. Of course, China has a key role there. But as mentioned already, we have moved sourcing even before these tariff announcements to other countries, just like Vietnam. Then the capacity what we have in Europe, we have capacity in Finland, we have capacity in Poland in those products what we can ship and sell in USA. So it's a quite broad manufacturing and sourcing landscape what we have here to operate.

Great. And a bit more on the redirection of sourcing, more on the margin side. So, if assuming continued high tariffs between China and the US, is it possible to redirect sourcing and how large impact could this have on your Fiscars BA margin?

Would you like to start?

Yeah, I can. I mean, yes, so we're actively working on redirecting the sourcing. And as I said, we've started it already during Trump's first administration and now accelerating it. And I think it's too early to go beyond 2025 to 2026 and look at the impact on margins because the world is so dynamic. But as I said, we're fully focused on this and have multiple actions in place. Yeah.

Thank you. And it looks like we now have only one more question in the chat. So if you have any more, now's your chance to add them in the chat. But so far, the last question, perhaps Natalie, you can answer this one. Do the current tariffs have any impact on new category launches?

Yes, they do. We're actually fast-forwarding innovation so that we will be able there to, with the changing landscape of consumer sentiment potentially in the U.S. and globally, to be there for the consumers. And this is also part of the discussions we are having with customers at the moment. So, yes, fast-forwarding and accelerating innovation. Great. Well, there's no further questions.