Fiskars Oyj Abp

Hello and welcome to Fiskars Group's Q2 results webcast. I'm Noora Huttula from Fiskars Group's Investor Relations and I'm here with our President and CEO Jyri Luomakoski. Good morning. And CFO Jussi Siitonen.

Good morning.

So Jyri will first take you through the key takeaways of the quarter after which Jussi will talk about the financials. Jyri will then tell you more about business area specific performance after which Jussi goes through the tariff topic as well as our guidance for 2025. After the presentations, we will have time for your questions. We will take questions through the phone line as well as through the chat. You can already type in your questions in the chat during the presentations. With that, I hand over to Jyri.

Thank you, Noora, and good morning. The quarter, as I would say, is fortunately behind us and in terms of the key takeaways, as you certainly recall in the 21 launch strategy and period ending end of this year, we've had four transformation levers in our strategy. And these topics have been kind of 50-50 when you look at what are working, what are not working. When you look at our comparable net sales that has been shrinking in the quarter and definitely the big decline we've seen in the US is the key driver to this. The comparable EBIT, much driven by lower volumes and declining gross margin, was down to only 3 million, and gross margin has been basically the KPI on our commercial excellence, this transformation lever, and there we have had setbacks, reasons Jussi will also soon address too. Two, fortunately, are working. So direct-to-consumer, our direct-to-consumer business, i.e. QAM, our own stores, outlets, concessions, they grew in the quarter. And secondly, the transformation lever, the other geographical, besides US being China, grew 12% in the quarter. So that's clearly a mixed bag of lowlights and highlights. The guidance was updated in June, and we issued a guidance for the EBITDA's range between 90 and 110 million, but usually we'll go deeper into the numbers and then I will return back with the business area kind of events and topics issues.

Thank you Jyri. So let's start first top line as mentioned already. Net sales were down 6.8% here on FX neutral basis. It was very much driven by Fiscus BA and then USA. Jyri will go through more in details, but being down 11% in Q2, Fiscus was the main driver of this one. Net sales decline in the USA, that decline accelerated actually towards the end of the quarter. So May and June both were down roughly mid-teen percentages there. So it's intensified towards the end of the quarter. EBIT down a bit more than 16 million, 16.2 million, 3 million. It was mainly due to lower sales volumes and gross margin, which was also driven by tariff impacts. I'll go back to that a bit more deeper after a couple of slides. Also, bearing in mind that Q2 is low season for us, especially it's low season in Viitta, so the operational leverage, we have OPEX quite evenly split between four quarters, and when the top line coming down in this kind of low season, it will have a significant impact then on profitability and on EBIT. Gross margin was down 230 basis points, of which Viitta made a major part, 410 basis points, and Fiscus was down 150. When it comes to our free cash flow, bearing in mind that last year Q2 was the all-time high Q2 cash flow for us, we were now down to a level of 12 million there. It was mainly inventory and payables driven. Earnings per share on comparable basis was down 15 cents to 5 cents negative and then cash flow or cash earnings per share was 40 cents down. Both obviously driven by this volume decline and then on cash earnings per share was very much networking capital driven. Then this bridge from last year 19 million to this year 3 million. When I said that it's very much driven by low volume, so what you can see here is that lower sales volume was the biggest driver of this negative there. When we dive a bit deeper on this total gross margin impact there, you can find out that actually tariffs was the main driver of this negative there. Tariff impact of the 16 million declining Q2 was roughly one fourth on our EBIT. When it comes to OPEX validity there, we continue investing in demand creation, i.e. marketing there, but that investment was funded by lower SG&A, especially when it comes to general admin cost. They were significantly downwards last year, and that's the way we were able to increase spending in marketing, keeping the total OPEX then unchanged. Overall, when we are comparing those two businesses and their P&L profiles now in the first half this year, bearing in mind that these are now first half numbers, not Q2, you can see that Fisca's model is very cost efficient. There with 40% gross margin and then a bit more than 25% OPEX space there, we were able to deliver still mid-teen EBIT margin there. Whilst Viitta, the D2C structure there, especially when it comes to cost side, is somewhat heavy. And when we are in the low season, as first half is typically a low season for Viitta, then the outcome is this negative 2.6% EBIT margin for the first half. Cash flow, I already mentioned, it was very much driven by increasing inventories worth of 25 million. That's also more in Vita than in Fiscus BA. And then due to the fact that we do have lower volumes, the trade payables were also down. So therefore, the outcome for the first half, 12.4 million, is some 37 million down versus last year. Our last 12 months rolling cash flow is now level of 50 million, 48 specifically. And therefore, typically always, second half has been a stronger cash flow season for us. When it comes then to net debt EBITDA, now we finished Q2 at level of 3.16 and it's very much driven by lower last 12 months EBITDA. Net debt as such was pretty much unchanged from Q1, slightly down even there, and therefore net debt EBITDA was this 0.48x higher than what it used to be a year ago in the same period. When it comes to our liquidity, that remains strong. Our cash of 72 million and then all the credit facilities, what we have here, 300 million, of which committee level is 250 million. So the liquidity remains strong and that's the way we like to continue with. Having said that, I hand it back to you, Jyri.

Thank you, Jussi. In terms of our business areas, on Vita to start with, a big challenge there has been our performance for our brand Waterford. Waterford is crystal. Most of Waterford's sales are in the US and most of our US sales in Vita are coming from the Waterford brand. We've seen, as every coin has the flip side and the positive side here, we've seen growth in China. and especially with Mumin Arabia, which is a kind of birthday child, as Mumin is celebrating its 80th birthday. What is the issue with Waterford? I think it's important to recognize one fact, first of all, in the industrial logic. Crystal manufacturing, it is a process industry, while most of our businesses are actually operating, including the tableware. in a different industrial logic. And when volumes are dropping, suffering the cost absorption topics, because a glass furnace, you have to keep it on and the machines on, basically, that has created now in the slowest quarter with the volume drop, a very big hit. So the negative operational leverage in that industrial logic is severe. clearly on our agenda to make sure that we can have a demand and supply that both balance with each other. That's extremely important. At the same time with Waterford in the US, we have read many news about distribution topics and distribution topics relate basically to two fundamental topics. One is the uncertainty that is driving distributors, i.e. in Viitta's case department stores, willingness to keep inventories is very low. They have actually as a priority to drive down inventories because they don't know what the consumer will do. At the same time, there are some distributors and high profile cases. So when you read Bloomberg's or Financial Times, et cetera, you will find out that there are a few big department store chains which have apparently some financial And consequently, we have also entered a mode that we are not funding some of our distributors by extending credit. And that has been effectively reducing our distribution on Waterford. As I mentioned, very positive with Moomin Arabia, but also the other Nordic brands such as Arabian restaurant have performed well in the quarter and in the first half in aggregate, Iittala has done it. And that's also a good segue in terms of the Waterford topic, maybe preempting a question that might come on the line. Later on, Iittala at some point of time, couple of years ago, was also suffering in terms of some of the relevant topics to the consumers and there was a high profile change of the brand identity and a bit shifting gears last year and we have seen it bears fruit. So I'm confident that we have the experience to carry out changes and make a brand which maybe in the eyes of some consumers is getting irrelevant relevant again. Vita highlights in pictures, so China Q2 plus 12%, and there is a new category on the water bottle side under various brands of ours, which have been performing well. And also Arabia, which has been maybe perceived historically more like a local Nordic brand, has actually gained some foothold and positive development in the Chinese market. And of course we are celebrating every year the Mooming Day and now it happens to be the 80th year and that's something we are happy to celebrate with the consumers. In terms of BA Fiskars we've seen the tariff topic severely as we have reported also in the profit warning about half of business area Fiskars business is coming from the US and it's coming predominantly from products that are sourced from Asia and the tariff discussion has been heating hitting that supply clearly. At the same time, on the craft side, there is one fairly high profile bankruptcy of one of our distributors, which has been also closing some of those distribution doors for us. Again, with the coin having the positive side, fortunately, Germany, big economy in Europe, we've continued a strong growth in Germany, which we think is on a sustainable basis. And for example, in Sweden, positive distribution gains have helped us to grow in the economy. let's say traditional neighbor country market where we haven't been that relevant necessarily decades ago. So consequently we've been suffering from the EBIT decrease as a mix from the low volumes and the negative tariff impacts Jussi just alluded to in the bridge of the EBIT one. And in terms of the highlights pretty much mentioned, especially proud we are, now you can start to get the sixth generation Fiskars Classic scissors from the stores. And even we thought that the previous generation was the best one available, but there is now even better one available with the sixth generation. that leads actually on sustainability. We have definitely not dropped the ball and we remain committed to sustainability. And we've seen a good progress in circularity and in our emission targets. There is also the third target on the environmental side. The supplier spent from vendors who have set science-based targets has also progressed seriously well. It might be that there can be some setback short term now when we are looking at rebasing. some of the sourcing for the US BA Fiskars business, and there will be a lag basically getting back until we, or backwards until we get back to the current level. So that can happen, but that wouldn't definitely in any way indicate that we have kind of lost the focus on sustainability. On the social side, we have a zero harm goal and that's any accident is too much. The absolute number is not very high. The number is marginally up from last quarter and last year, but each and every should be avoidable on the relative level. towards peers, I don't think we are that bad at all. Our inclusion experience is gradually approaching. We're at 77 versus a global benchmark of 80. This is not that far and the 80 benchmark refers to the top 10% of global high-performing companies in terms of inclusion. But that takes us to the tariff topic back. And guidance, Jussi, please.

Thank you, Jyri. So tariff as such, which has taken a major part of the management time now in the past few months. Just reminding what U.S. represents us. So U.S. is 30% of the whole Fiscus Group net sales. But when we are talking about Fiscus business area, Fiscus brand, it's 50% of Fiscus brand net sales and Fiscus VA net sales. More focusing here now on direct impact, because those are measurable, those we can measure at high confidence, but also indirect impacts, particularly on retailer demand and inventory behavior, have materialized now more rapidly and negatively than previously anticipated. I already mentioned that what we saw when it comes to our sellout numbers in the USA with Viskas brand, the first four months, especially the first three months, a pretty solid development there, then somewhat stabilized in April, but then it hit hard in May and June, both months being down roughly 15 to 20 percent there. So that was the impact came and then also triggered the profit warning we gave a month ago. When it comes to direct impacts there, we still expect that we can largely mitigate the adverse impacts there. And I'll show on the next slide there how we succeeded already partially doing it in Q2. And then it's just timing difference what we have. The actions put in place will have an impact more on the second half, whilst the immediate impacts are already now in our Q2 numbers. We continue prioritizing our market share, so the big customers, especially in the USA, is the priority there. We are ready to prioritize that one, as well as the cash flow, which means that high focus is on inventories when it comes to this business. When I said that we have succeeded partially mitigated, I start first here on the right, where we have Fiscus BA EBIT Bridge now for Q2. So even though we came down this roughly 8 million there, you can see that tariff impact as such is one big item there, of course, on top of the volumes. But then this underlying gross margin improvement, mainly driven by pricing here. was able to offset already part of the impact in Q2. On the left, we have the same for Viitta PA. They're focusing on this tariff impact. You can see that that's a minor driver of this EBIT drop, what we have in Viitta. More coming from the items Jyri already explained. Then on tariff, on guidance based on the current visibility on the tariffs, we remain with our newly updated guidance, i.e. full year comparable EBIT will be in the range of 90 to 110 million there. And when it comes to tariffs, the situation is highly dynamic. In Fiskars, the actions are in place or will be in place now supporting our second half, and that's behind this guidance. But I would like to highlight that this is very tactical topic at the moment. We go, if not daily basis, on weekly basis through the plans that we have in place to mitigate the impacts. That's very shortly about guidance and tariffs, and now for the final key takeaways.

Thank you, Jussi. So again, half of our transformation levers, which I have to remind, were set in 21 for the strategy period up to 25. So we are on the last kind of lapse of that race. Half of them working, half of them not working. So not everything is doom and gloom, even though some of the numbers would indicate to that. guidance which was updated and about a month ago or a bit more than a month ago and it reiterated now of course we are living as we say in the guidance visibility is limited we are living now mid-july so we already at this stage have some view how July will evolve especially on the distribution business with the direct to consumer we don't know whether it's raining or sunny next weekend and whether people will come to the shops but there is nothing that would have come to our attention which would be contrary to the plans that support our guidance and that is keeping us confident in terms of things in the pipeline, older programs that we have carried out which will also have a favorable impact on the cost side etc. in the second half of the year and you see actually here the other day calculated for me over the last five years we have in four out of five we have succeeded to do H2, which was strong enough to be true to our guidance and knowing that the platforms and bases have been improved continuously with many efforts, that gives us the confidence to reiterate the guidance which was issued on the 12th of June.

Thank you, Jyri and Jussi. We now have time for your questions. We already have some questions here in the chat, but do keep them coming as well. Let's first take questions through the phone line. Let's see if we have any questions through the phone.

If you wish to ask a question, please dial £5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial £6 on your telephone keypad.

The next question comes from Maria Wickstrom from SEB. Please go ahead. Yes, hello, this is Maria from SCB.

Can you hear me?

Yes.

Yes, perfect. Firstly, I wanted to come back to the full year guidance, given that you are currently 40 million short of last year, which would, if we would assume a flat H2, would leave you to a 96 million. I think you mentioned earlier that these the tariff adjustments will be more towards the year end and then I also be happy to hear more about the Waterford issues because typically if you are going to make an investment in the brand it will take a bit more time I mean to actually show the concrete on the top line as well as the bottom line so if you I mean the Give a little bit more color. What makes you so confident that you will end up in the range? And have July orders from your distributors been more on a normalized level, which makes you confident that you could reach the full year guidance?

If I start first in terms of the tariff topics, excuse me, tariff topics, obviously the Fisker's BA, especially in the US has two main seasons. One is in the early of the year, the guidance season, and now we are soon through the back to school season, which are kind of the big seasons. At the same time, and the tariff situation is definitely a fluid one, our teams have done plan A, B, C and D, depending a bit on where the tariff landscape will land. So we have been working really 24-7 or the teams locally and our sourcing teams to set up that we have structures for quite many alternatives in terms of that play or game that is currently happening in the global trade trade and tariff markets. And first of all the existence of all of these plans is giving on the one hand the confidence that once the situation settles we have a plan. It's a destroyer which are many of them with those plans. That's one side. As I commented nothing has come to our attention By this morning, when we issued the interim or half-year report, that would be contrary to the plans that we have currently for the second half. With respect to the distributors, ordering patterns, etc., we don't comment those deeper as any mid-quarter type of statements are not typically issued by us. In terms of the Waterford topic, as you said, yes, there are certain things which will take longer. But then again, this issue around the process industry logic of a glass factory and the fact that we've been now on the lowest volume quarter which has been hit further than the hit has been really like taking the bigger bigger axe from the fish course assortment and hitting your leg that has been hitting our income statement but you'll see if you want to

Yeah, exactly like you said. What also needs to remember is the different dynamics what we have in the first and second half here. So first half predominantly Fiscus BA business and now we are entering into VIT here. When it comes to Fiscus BA plans for the second half to deliver the targets what we have set for the business for full year, The good thing is that it's very much based on the actions already in place or are getting in place as we speak. So we are not betting on any top line growth type of topics which are not fully in our hands. So I'm pretty confident with that plan what the team has executed or are executing the Anfiskas BA. In Viitta, as said, now we are entering the Viitta era there, and where typically we have seen growth and margin improvement in the second half. So that's also something giving us confidence to deliver the kindness what we have.

Okay, perfect. Thank you. And then Q2 showed a nice growth in China. Can you a little bit, I mean, split the growth, I mean, between the brands and how much of the growth is coming from these new products like water bottles that you introduced in the market? And do you think this kind of growth in China is sustainable also for the second half?

Yeah, Maria, you might remember when we started the year Q1 was down, if I'm correctly, 7% and now we were catching it up. So on a year-to-date basis, we are up 4% there for China. And at the same time, we see that our Danish brand, so the Georgiansen and Royal Copenhagen are also growing. So China is contributing significantly. What are the categories which are driving the growth? That we haven't disclosed. And how sustainable the growth is? That's also partially related to market, but the fundamentals what we have in place when it comes to distribution expansion, when it comes to category expansions, what we have, they are driving the growth so at least from our side I see that fundamentals we have in place the more sustainable growth but of course the overall demand is the one who which ultimately proves the case.

Yeah and maybe to fill in and as you know I've been now in this role for a bit more than two months but I spent the last nine years in the board of the company And we have historically been maybe somewhat shy in terms of category expansion. And now we have so many proofs in so many puddings that our brands can cover and carry on certain category expansions. And that's, of course, very pleasant to see that whether it's a Wedgewood or Arabia kind of patterned water bottle, for example, if it's fitting well with some nice handbags and so forth to people's picture. I think we are currently not any more shy in terms of using that as one of the growth levers and growing our business.

Yes, thank you. I think I don't have further questions at this point. So thank you very much for this and wish you a very nice summer holidays when you get there.

Thank you, Maria. Thank you.

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

Hello, this is Kalle from Danske Bank. I have a few questions, maybe we'll take them one by one. And first, coming back to the guidance, or the lowered guidance, so you lowered the guidance in mid-June. Did you already then know that Viitta and Waterford is challenging, or did the kind of challenges with Waterford come late in June, or what was the timing of all of this?

Yeah, maybe I start and then Juri, please jump in. Then, as I said, how we see this first six months this year, and then when we said that this was very much US-driven, and therefore the first three months, a strong, solid growth in USA, stabilized in April, and then hit hard in May and June, which then triggered this revised guidance in mid-June. So that was the background for this one. What we have seen, particularly throughout the year, is the challenge in VITA wholesale model in USA. It has nothing to do with Taris specifically, but we have seen it. Bearing in mind that US is roughly 10% of total VITA So it has not been so significant impact there at the beginning of the year. Now when we are entering this low volume season, everything counts and therefore it probably came through slightly bigger than actually we originally thought.

And we run a monthly forecasting process in connection with the monthly closings. All of our businesses prepare forecasts, and it was after the May closing, the one which was then hitting the red button and triggered this. And the U.S. crystal volumes, i.e. Waterford volumes, they impact effectively two volumes. of our production sites in Europe. And those effects, kind of the whiplash comes slightly delayed. So as Jussi said, on June 12th, the whole magnitude of that whiplash was not exactly identified, but the full year forecast, which in case of Viitta, we need to remember that most of the EBIT comes from the last quarter. And this is an off-season that was then realized now with the in full extent in the June closing.

Okay, thank you. And so for Viitta, is it true that June was then the weakest or the worst quarter for Viitta in terms of EBIT? Or was it May?

I mean, what was the month? Of course, as I said, all these kind of things, they were accelerating towards the end of the quarter. So I'm not going to specific which specific month was it, but towards the end of the quarter, these things became more visible.

Okay. Okay. That's clear. And then I was wondering about the, I mean, you mentioned the, or actually discussed quite a lot the tariffs and the the actions that you have done to mitigate these direct impacts of the tariffs. What sort of actions have you done? Is it only about raising prices to your customers or what have you done? Because I was just wondering that do you already have the prices for the second half agreed with your customers or are you 100% sure that the price increases will go through and so on. So can you open up more of the concrete actions on these mitigating actions?

Kalle, and I will specifically talk to you about fiscal second half here. So when it comes to those mitigation actions there, as you saw in Q2, we got some uplift there on the underlying gross margin through pricing. The good thing is that the plans in the second half, especially the ones which are pricing related, those already informed the market, they are already in there and they start impacting now in the second half. Therefore, this pricing specific part, we are pretty confident that that will materialize now in the second half. Then our own actions when it comes to sourcing when it comes to how we are running our own factories, how we are then further, let's say, rightsize our investment on OPEX space and the likes. Those are the things we have in place. When I mentioned OPEX rightsizing, you might remember that when we started the year, we said that this is the year we are I would say heavily invest in demand creation. In our terms it means that actually we had plans significantly increase in increased marketing spend here to promote those new categories what fiscals will further loans later this year. Of course now we need to stabilize some of those investments. I'm not saying that we put all the investment in hold but we are somewhat stabilized them to balance the short term and midterm.

Okay, that's helpful. And then lastly, on my part, I was wondering about the Waterford, the manufacturing capacity, and you explained it quite well that it's a different type of process or manufacturing process, but I was just wondering what can you do to adjust this either manufacturing capacity or then, you know, the way you produce. How can you increase the flexibility in Waterford? Because I'm sure that there will be hiccups in the markets in the coming years as well. So I was just wondering, what can you do about this manufacturing? And here I'm not talking about the... I mean, I'm more looking at the long term rather than the next couple of quarters.

That's very much now in the works. I have personally spent in my prior career a quarter of a century in a process industry logic operated industry where you either are on a on or off modus. It's a bit similar like a pulp mill or a oil refinery. that the capacity utilization, if it goes low, it's a miserable business, and if it's high, it's a great business. And this is now really the task for our teams to find a way. And there are many, many kind of ideas, but too early. early to go into those details, really to make sure that we have a setup that's fit for not only H2's demand, not only 26 demand, but a longer term solution in here. But that's something we hopefully can be more transparent in our Q3 release.

Okay. Fair enough. Fair enough. Thank you. That's all for me as of now. Thank you.

Thanks, Kalles.

The next question comes from Joni Sandvall from Nordea. Please go ahead.

Yeah, thanks, Jyri, and it's Joni from Nordea. Maybe a couple of questions also left for me. Maybe still coming back on this tariff issue. Does the market condition actually allow these mitigation actions to be implemented fully? I mean, you are speaking about pricing adjustment and productivity increases, but how these actually combine with defending market shares and cash flows?

When defending market share, of course, we go through, or I would say prioritizing market share rather than defending prioritizing market share. It's category and customer by customer specific topics what we have on the table. As said, we see that it pays back short term to be mindful and commercial. commercial agile with those topics to secure the long term. So therefore there definitely we prefer to have this long term good partnerships there with the big customers. And I'm talking about U.S. customers in this specific topic. Those price increases, what we have implemented, as I said, we have been very mindful that the challenge what we have with the tariffs is not only to be mitigated by price increases, but also our own actions, which of course are then easier to implement it and faster to implement it. So it's a balance of both. But so far what we have seen, those price increases, what we have introduced, implemented already, as you saw in our Q2, underlying gross margin, then Fiscus BA, those we are confident that they will materialize.

And maybe to add to that, that in most of our key categories, really the competition comes from similar geographies than our products. So there are no alternatives which would be immune to the tariff situation, which then leads to a clearly higher acceptance rate of price adjustments in the marketplace.

Okay, that's clear. Maybe also one longer term question beyond the 25. I mean quite a lot of speaking now about the wholesale, so what's your view of your current distributor network and what can be done here to improve the situation and do you need some changes maybe in the operating model, especially in the US?

I think we will guide 26 in February 26 and then the more strategic topics in a bit different context but it's clearly identified and of course the first and best cure is always to relevant kind of remain relevant to the consumers so as long as the distributors are live and kicking so to speak then they want to take our products if we are relevant to the consumers if there is a pull that we need to make sure that we are creating. Then, of course, these type of events, as we mentioned, like in the case of BF Hiskers US, when one of our distributors went bankrupt and doors were closed, those are always some type of points of discontinuance, and we need to watch out in that area that we remain. not only relevant to the consumer, but also accessible to the consumer. That's the key.

Joni, the model actually what we have and Fiskars BA leadership has put in place where it's a combination of new innovations, new categories there. Later this year, we are coming out with many times more new categories versus our historical pattern there. That's combined with investment in demand creation. We see that the fundamentals, at least on our side, are in place to continue growing wholesale channel in the USA.

okay okay that's clear all from me thanks the next question comes from maria wickstrom from seb please go ahead Maria Wickstrom, SEB, your line is now unmuted. Please go ahead.

Hi, this is Maria again. I had one follow-up question. I think you touched upon the subject with Joni's question as well relating to the distribution. in the US and especially for the VITA categories and saying that some of the distributors are having a tough time. Is this isolated to the VITA segment and more maybe to the brick and mortar retail compared to the e-commerce? Or do you see it broadly across retailers in the US?

answering your question in a very short way yes it is focused on on the brick and mortar and and focused on the vita distributors where where actually Ecom has taken more of the market. And as we have seen, those who follow some of the bigger department store chains in the US, you have seen over the last years how many hundreds or thousands of doors they've been closing and shrinking. And that's not because of poor demand to the Fiskars Vita products, but overall traffic getting kind of online.

And can you then remind me on the e-comm strategy, I mean, for what you have for VISA in the US? Is it just through the partners or would there be a possibility also to enter or increase the own distribution in the e-comm side, I mean, for VISA in the US?

Jussi. The current what we have, as said, half of Vita business is narrative consumer and this half, roughly one third is e-commerce. What we see that e-commerce growth, profitable growth in e-commerce is one of those key drivers what we have in Vita. How it's specific in USA, that's I would leave it until we have a clear new Vita strategy under the new leadership there in place.

Yes, thank you very much. I have no further questions.

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

All right, thank you. So we do have some questions also in the chat. Perhaps we start with some Vita topics. And this has been touched slightly, but can you please elaborate further? Why did Vita's comparable EBIT decline by over €9 million, even though comparable sales declined only by around 3%? Why did Vita's comparable gross margin decline by over four percentage points? Perhaps Jure, if you start and you see.

Okay, I think Jure, you partially answered already.

Addressed that well, but there were many numbers and percentages.

So when we are talking about a season where we have low volumes and when we do have own manufacturing there, which we keep up and running, the nature of the manufacturing setup that we have, that hit hard then of course on gross margin through negative production variances and the likes. So that's simply the reason.

All right. And maybe continuing on that, on Vitus GM, is there any meaningful difference in H1 versus H2?

Well, H2, of course, having high volumes there, having higher direct consumer volumes also in the second half, are speeding in the margin mix and therefore coming from that perspective. So when we talk about sales gross margin, either channels where the gross margin are coming in, they are coming now from higher gross margin versus the first half because of higher volumes.

Thank you. And then perhaps moving to US topics. Given the sharp drop in sales in US in May-June, how is the beginning of Q3 looking?

The only comment I made and that will be the only comment I will make on the current trading is that nothing has come to our attention. So far being in the middle of July, that would be contradicting our plans for H2, which is of course the plans that are compatible with our guidance.

Thank you. Perhaps some more specific financial questions on one-offs. First, is there still some one-off costs expected for H2 from announced cost-cutting measures? And then secondly, why was there a one-off from the old watering business divestment in this quarter?

If I start first, this U.S. watering business there, we had positive one-off there, as you probably have seen in the notes. The background for that is that when we sold the business in very early 2022, nothing regarding the transaction as such, but then we had long-term service agreement in place for the buyer and therefore now they succeeded to finalize the deal what we had regarding these service related topics what we had. We had written down some of those receivables earlier recorded that as an items affecting comparability and now this reversal of write down was also recorded as items affecting comparability but that's positive side when it comes to this longer term items affecting comparability hq level programs have been closed already last year that's i think we reported was q Q3 or Q4, that those big programs are over. We have some BA specific programs going on. You might remember that we announced this 10 million savings plan in Viitta earlier this year and the likes. So there we have some tails still left, which will be recorded as non-recurring items as communicated earlier.

Thank you. And then can you discuss a bit more on your leverage in relation to the target level? Any plans regarding more rapid deleveraging?

Yeah, as I mentioned, we finished Q2 at net EBITDA 3.16, which admittedly is much more than our target of 2.5. 2.5 there. Typically, I have said already, second half is stronger cash flow season for us versus the first half. And then we do have plans regarding this manufacturing adjustment, what Jyri also mentioned there, to take down the inventories to promote our second half cash flow. So following the historical pattern, we are typically coming down in our Net-a-Deep data towards the year end. What's then the ultimate level at the end of December that I can comment yet?

Okay, great. More for Jussi. In H1, financial items increased significantly. Could you elaborate on the key drivers behind this increase, particularly the impact of foreign exchange differences and other financial expenses? Will this trend continue in H2?

I try to provide some high level reply here because it's also quite technical. Overall, our first half financial items net was 21 million. Last year they were 12 million plus. So there's increase of 9 million in the first half. But if you take a look of our cash interest there, actually cash interest was down versus last year. So 21 million on P&L, 5 million on cash flow. So you can see that the difference is very much coming from valuation items. The biggest one being FX there. We have hedged FX, US dollar being the biggest currency what we have. You might remember that we are net buyer of US dollar and we have hedged that now at level of 70%. However, we are not in hedge accounting and therefore all these valuation difference are through our P&L on a monthly basis. So that's the main reason there. When it comes to true interest expenses, they are pretty much the same level as last year.

Thank you. Just one more question to go, but please, if you have any more questions, now is your chance to type them in. Perhaps we have already touched on this topic, but could you provide more detail on the timeline, cost implications and expected margin impact of your sourcing rebasing efforts regarding the US tariff situation?

As I indicated earlier, we have multiple alternatives depending where the tariff letters land on different capitals, typically in Asia or sometimes in other geographies. And from that perspective, to quantify these topics is rather difficult. It is clear that, as I indicated also earlier, this is something impacting the entire market, not only fiskars, but all of our competitors, the situation, which then will be leading to price adjustments, if that is relevant, depending how that landscape kind of in the end settles down. But there are a good number of plans and let's now keep fingers crossed that there will be some kind of a peace and calm that we can start executing those plans.

Great. Thank you. Well, we don't have any further questions. So with that, I thank you all for listening in and participating. And we wish you a good summer day.

Thank you very much for joining. Thank you.