Fiskars Oyj Abp

Hello and welcome to Fiskars Group's Q2 results webcast. My name is Essi Lipponen and I'm the Director of Investor Relations. I'm here with our President and CEO Jyri Luomakoski and our CFO Jussi Siitonen. Let's look at the agenda of this call. Jyri will first go through Q2 in brief, some highlights. After that, Jussi will go through the financials in more detail, after which Jussi will hand over to Jyri, who will cover business areas and our guidance for the year. After that, we will have plenty of time for your questions, and we welcome questions both through the chat and through the phone lines. Jyri, please go ahead.

Thank you, Essi. Good morning and welcome also on my behalf. Brief summary of the quarter. It was actually the fourth consecutive growth quarter, much driven by our business area Vita. Comparable net sales 3% up and comparable EBIT improving from 3-ish million to shy of 8 million. So there was a clear way in the positive direction. Both sales growth and EBIT improvement really was driven by Vita. for Fiskars BA, where the growth number, it's a black zero, so when you go to the decimals, you get to a positive. It's not rounded up to zero, but it's rounded down to zero, and some margin expansion, but pretty much stable in terms of the EBIT. One of our focus points now since a year has been cash flow as a consequence of the Thank you very much. We introduced the new financial targets in our Capital Markets Day in May. And you can actually find those in the appendix of this presentation and in our releases. So that's something we will not dive deeper into today as such. On our sustainability journey, pleased to report also that we regained the platinum Ecovadi status or medal. And that's a result of hard work. We need to remember that that implies that we are in the top one percent of the company's success. And it's not the average companies that file for that. It's those who have sustainability already in their focus. We have not changed our guidance. It is as it has been since February, comparable a bit to increase or expected to improve from last year's level. But that's the segue to the numbers, Jussi.

Thank you, Jyri. So, as Jyri already mentioned, so after admittedly a quite long period of no growth, we have now succeeded to grow fourth quarter in a row. The growth has been very much driven by Vita, 5.5% now in Q2, and then Flat Fiscus BA. The growth has been very broad-based. So when it comes to our top four countries, USA, Sweden, Denmark and Finland now in Q2, which are more than 50% of our Q2 sales, all these four countries were growing. On top of that, we had a very robust growth in Japan. There are some differences between countries, but overall, at the group level, these four countries were showing a very robust growth. When it comes to our channels, so our own e-commerce was up 4% in Q2, our own retail up 2% and then wholesale up 3%. And by the way, this Q2 was the first time in company history when Vita was already bigger than Fiskars. And now we know that the second half is very Vita dominated when it comes to top line. On EBIT we were up quite significantly from admittedly low level last year so from 3 million to 7.7 million and I walked through more in detail which were the driver behind this one. Also our earnings per share adjusted was negative six cents very close to last year same period and I will go a bit deep on that one after a couple of slides. So moving to EBIT bridge, and I start here from the middle where we have BA Vita. So BA Vita succeeded to improve EBIT by 5 million versus last year. The main drivers being increased sales volumes, Thank you very much. As you can see, gross margin came down in BA Viitta. That's very much driven of those actions we have put in place in our supply chain to manage the inventory level, to manage the factory variances. On the right, BA Fiskars was flat at reported EBIT. Then currency neutral base, we were slightly up versus last year. In BA Fiskars, we continued improving gross margin. And as we said in the capital markets today, that in BA Fiskars we are focusing on this flywheel where we are increasing media spend, where we are increasing R&D and get a momentum on our top line. That continued now in Q2. So all those benefits what we had there from cross-margin improvement, we invested back in marketing and R&D. R&D was up over 20% now in Q2 versus last year. Then the cash flow, as Jyri already mentioned, we had a very strong Q2 cash flow. Free cash flow, the way we define it now, we changed it in capital markets today so that our unlevered free cash flow now includes also those lease payments there. With this new definition, we were at 30.4 million now in Q2, 28 million better than last year. which is significant improvement. They are mainly coming from change in net working capital and net working capital came down over 30 million whilst last year it was quite flat. Another positive driver what we had on cash flow is our capex. So CAPEX in Q2 was 7 million, which is less than half what we had last year, same period. Even for the first half basis, in the first six months, CAPEX was 12 million, which is half of last year's six months CAPEX. So this CAPEX management is now one of the key drivers what we have here to manage our cash flow. Then cash earnings per share almost doubled from 29 euros and to 51. And I'll go through a bit more closely that on the next slide. As I said, earnings per share was quite flat on adjusted basis. So from minus 5 cents to minus 6 cents there. Adjusted EBIT contributed improvement there by 6 cents. and then fair valuation of biological assets, i.e. our forest assets there, and net financials took it slightly down. When it comes to our net financials there, the biggest single negative is fair valuation of our commodity hedges. Then taxes also took it down, and taxes also include here those adjustments based on those items affecting comparability. On cash earnings per share, you can see significant improvement there coming from the networking capital chains, and that has been the main driver for this improvement. On net EBITDA, net EBITDA was now 3.42 at the end of Q2. Last year, it was 3.16, so it's increased versus Q2 last year, but versus Q1, so in this last quarter, we succeeded to improve it a bit. The main reason for this increasing net debt EBDA versus last year is coming from EBDA size. So rolling 12 months EBDA was lower than it was in comparison period. The net debt itself came down versus last year. When it comes to our net debt overall, what we introduced or what we made now in Q2 was 50 million tap issue to our existing 200 million bond. And then we have also strengthened our liquidity. So total liquidity what we have at the end of Q2 is 420 million consisting of 300 million committed great facilities, roughly 40 million overdrafts there and then roughly 80 million cash. So liquidity is very strong now when we start the second half. Then when it comes to our sustainability and on our sustainability targets, I would like to highlight the circularity, which is one of the key KPI what we are here following our environmental commitments. So now it's up to 30% versus last year, 28%, and we continue driving it towards 50% by the end of 2030. When it comes to emissions, Scope 1, Scope 2 and Scope 3, all are improving from last year. On the social side, I would like to highlight this lost time accident frequency. So significant improvement from last year, 3.6 to 2.9. And whilst we are very happy with this improvement, we can't be happy with the current level until it's zero. With that, handing over back to you, Jyri.

Thank you, Jussi. Looking at our two business areas, what's been happening at Viitta. So as in the intro mentioned, fourth consecutive growth quarter for Viitta, and we can clearly see signs of our turnaround that has been, is critical, instrumental to the business as such. Growth is relevant, but also those measures that we took In the wintertime, in the springtime, in terms of restructuring, both reorganizing and as a consequence of that, that was leading also to reduction in our headcount, which you can see also now In the quarterly report, when you look at the aggregate personnel, the FTE is average in the quarter. It's already down, already quite kind of in a relevant number and materially in line with our plans. So what was driving up the growth? So across D2C and wholesale on a broad base in terms of channels, we've seen growth. Georg Jensen, which is a kind of the newest family member in the family of brands at Viitta, acquired 23. have continued strong performance on the top line and as such been a very wanted brand for the consumers. Then many of our regional leader brands, whether it's Röstrand, which has celebrated its 300-year anniversary this spring, and Moomin Arabia have continued growing. So when we look at the comparable EBIT still this time of the year the number is dismal and it's also unfortunately negative but it has improved and that's the important that the direction is right and we are not sliding down on that side so we can see both the effects of the Volume growth and the effects, first signs or first kind of things ending up in the income statement and we have a degree of confidence those ending up in H2, in Q3 and Q4 on our SG&A savings as a consequence of the program that was announced in early February. And in Jussi's EBIT breaches, you saw that the gross margin, there was a negative variance, unfavorable move on the gross margin at Vita, but that's not because of pricing slippage. It is because of us continuing scaling down the production. So for many, many years, when we had a declining production, Jussi Lipponen, Thank you. The supply chain variance is a lack of absorption of the fixed cost of factory facilities that is hitting the EBIT. But when we take the ruler we can see that these lines will also meet each other at some point of time. And that's really behind the comparable gross margin decrease. And the good news is that we know what it comes from and it's not from price erosion in the marketplace. Many things have happened. As I mentioned, Røstrand turned 300 years and that's of course something that has been boosting. There is a good reason to activate. It's a royal purveyor. It has a royal warrant from the Swedish court. and attending also the 300-year anniversary, the Swedish National Museum is having an exhibition this summer on röstrand curated by the museum. So it's a bit similar like maybe in Iittala perceived as national property in terms of the heritage. Those who have been active and young in the 90s have been playing with Pokemon characters, etc. will recognize the limited edition collaboration with Pokemon actually sold out in the first week. More to come, but that's how desired brands are working. New Jewelry Series or Collection at Georg Jensen Weft. And then many of our brands were visible at the Three Days of Design in Copenhagen early June. Three Days of Design is behind, besides Milan, kind of the biggest, I think even globally biggest design event. And in the picture on the slide, You can see a 9-meter tall Alto vase. So it's a bit bigger than 90 years ago when the vase was launched and brought to the market. And it's not made out of glass, but it was pulling a lot of attention in the marketplace. Good way to celebrate the 90-year celebration and anniversary. At Fiskars, top line flat. On a currency neutral base, half of the business is in the US, in US dollars, so still the exchange is burdening us a bit. Less and less, the further we go through the year, when we look at last year's euro-dollar exchange curve. Margin slightly expanded, and while we were growing in the US, which is very much driven by Our distribution gains and our credibility in the marketplace as we handled the import duty or tariff crisis and kept the availability, have been bringing new products, declines in Central Europe. That appears to be the corner. Traditionally, it was the Finns. We Finns have been the most cautious countries. If there is a kind of gunpowder burning somewhere on this planet, as unfortunately we currently can observe, Finns were immediately stopping spending. And currently it seems that it's Germans and some other countries in the Central European markets where this consumer cautiousness is very visible. So stable EBIT and the gross margin as Jussi's bridge showed was expanding but we have had some good traction with our new products and want to continue on that track remaining relevant to the consumer and to the trade to grant us the shelf space. And then on picture level here, the modular system, one-click tool system was introduced during the quarter. And then we gained a few Red Dot awards and our new power tools, French actually, got the highest design award, best of the best distinction at the Red Dot design awards and our new pet care and dual action awards. Head shears and pruners and so forth got the normal kind of red dot design award. So it's been recognized also not only by the functionality, excellent functionality, but also the design and optics and aesthetics. So what is expected to happen this year? Still half of the races is unfinished. We expect that our comparable EBIT is improving from last year's level. I guess that some of the listeners or watchers of this webcast were hoping for some kind of range. That was something that we have been also hoping, but at the same time we've been hoping that some of the wars would settle and that hasn't been really the very recent trend, which means that the uncertainties in the global economy continue to persist and the visibility is somewhat limited. We know that our EBIT generation is much wedded to the second half of the year. and really the improvement is primarily driven by business area Viitta. We see that the changes that Viitta announced in February, the execution of those programs has progressed basically like the manuscript says and hence we have a high degree of confidence getting that benefit to the H2 and onwards also. We also know that we will still have kind of a savings mode and not full speed on some of our factories to eat up and consume the elevated inventories and that will, as a consequence, have a negative impact. But from the historical H1-H2 pattern, Obviously, when we acquired Georg Jensen, we also showed that it will actually make it even more extreme. But the good news is that the H2 heavy and Q4 heavy Jensen has been one of our leading growth drivers in Viita. So that's helping us much in terms of our confidence behind our guidance. That takes us to the Q&A.

Yes, thank you, Jyri and Jussi. We do have some questions already in the chat, but we will first check if there are any questions through the phone lines.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Joni Sandvall from Nordia. Please go ahead.

Yeah, thanks Jyri and Jussi for the presentation. Starting maybe with Viitto supply chain, you mentioned that in short term this will still burden the margins, so are you expecting, you know, let's say the impact to be still, you know, fading away during H2 or should we expect this only to happen in 27?

Not 100% sure I can follow the impact of... What do you imply with the impact, that part of the question?

Did you, Jussi? Yes, if you talk about Deltaverse last year, bearing in mind that those actions what we put in place last year, they started to impact second half 2025. So now when we are entering into second half 2026, they are already in our comparative numbers. So, of course, then the Delta when it comes to gross margin won't be the similar type of thing. It has been the first half this year.

Yeah, that's okay, yeah.

Okay, I'm just thinking if it's still, you know, is the drag, you know, increasing in H2 or are you seeing, you know, easing pressure already from this side?

We have not specifically guided individual income statement lines, but as you can certainly recall, last summer we announced that the focus is on cash flow generation and deleveraging. And as a consequence, we started to curtail production about a year ago. So hence the comps, as Jussi said, are easier in this aspect going forward in the H2. Okay, thanks.

Then going on to Fiskars BA, you have ramped up the marketing as mentioned, but the sales growth has remained muted. How confident are you actually on the growth side of the Fiskars BA?

The growth we see is much coming from the US market and a couple of European, mainly the North European, non-Central European markets, so to speak. And there we clearly see that both with the launches, our brand relevance with new product launches has been kind of, we've maintained that both to the trade and to the consumer's The consumer confidence type of a factor that we have seen, like in the Central European markets, certainly has been negative. And also on top of that, we had a year ago on the continent some problems. loyalty campaigns with some big retailers which we have not been repeating. Those type of campaigns can drive up volume not in the same proportion the bottom line though and from that perspective it's visible in the top line development but we are not regretting that too much when we leave in the end from the profits.

Okay, thanks, that's clear. Then coming on the lower capex now in H1, should we expect this to be more structural or is it just, you know, near-term, you know, gas saving action what you have taken?

If we take our rolling 12 months capex there, which is some kind of proxy for full year, we are level of 32 million there on rolling 12 months basis. We do have some project going on in the second half, but therefore the last year level is probably a bit too high for this year. So strict capex management will continue and the results should be quite visible for full year basis. Jussi Lipponen, Jussi Lipponen,

and maybe filling in a bit, building on that. When I look at the CAPEX, it's not that we pushed on any panic button. There is no single initiative or CAPEX program that I would have stopped kind of under the headline that we need to save CAPEX. It's more the structural. It's new product-related tooling has been a big item, some IT projects, Thank you very much. Okay, best.

Last one on the visibility you mentioned, Jyri, that it's limited, but maybe going back to Q1, from Q1 to Q2, could you say that visibility has improved or worsened when the summer has gone on?

Well, when there was a ceasefire, we thought that it has improved. But as we know, that's kind of, again, history from the recent past, that there was a ceasefire around Iran and that war. So I wouldn't, it's difficult, of course, to measure per se, but I wouldn't be able really to quantify that. No material change maybe is a relevant way to spell it.

Okay, thanks. That's all for me.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. The next question comes from Maria Wickstrom from SEB. Please go ahead.

Yes, hi, this is Maria Vikström from SCB. I wrote some of the questions on the chat but decided to join in the telephone line so you can discard those from the chat. And I was interested in your thoughts on the global consumer demand and maybe you need to split it by geographies. First of all, did you see any differences from different months during Q2? And what is your take? Would you say that the global consumer demand is currently improving? Or how would you describe currently the consumer appetite, given that you are one of the few consumer companies reporting early the Q2 results? Thanks.

Geographically, I think what we communicated around fiskars is maybe something we can apply on a more broader base. The American consumer appears to be more spending happy than the European one. And while historically we Finns have been the most cautious one always, now it seems that it's more on the continent where the consumer worries more. are more visible. When we look at the pattern of the quarter, towards the end of the quarter the growth rate was higher than it was in the middle of the quarter. So from that type of a curvature, Thank you so much for the callers.

Then I had a second question relating to the inventory that if we look on the first half basis, I think your inventory is down some 20 million, which in respect that the inventory value at the end of the Q2 was 340 million, is not that big number given that you have had these measures to take down the inventory level. What do you say that, I mean, do you think you need to take, I mean, further actions to write down the currently very high inventory level, or do you still think that you are enabled to move this inventory that you currently have in your balance sheet?

Maria, if I start with about the seasonality of our inventories, and then Jyri can continue with this latter part of your question. So what we see is that, of course, second half, as it's so much about Vita, and the projected inventory decrease what we have for this year is very Vita-driven. So therefore, it's year-end loaded where we should expect the inventories coming down. And year-end loaded here actually means that it's November, December, Thank you very much.

You referred to the write-offs and we of course analyzed the structure of our inventories on a monthly basis and at quarter end and especially half year end even more thorough analysis which also the auditors look carefully through. Daniel Lalonde, Essi Lipponen, Steffen Hahn, Daniel Lalonde, Paivi Timonen Anyhow, already now provisions for excess and obsolete inventory and it's much in the Vita area where we have some collections that we have discontinued. For example, end of last year, they are still sellable. When you look at the Vita gross margins, and that's the gross margin, That's much dominated by our sellout through wholesale, etc. And events like Black Friday, etc., which are much about making good deals and clearances. Those are, of course, important for us in making sure that the provisions that we currently have also remain adequate end of the year.

Maria, as you can hear from our comments here, we are not talking about fiskars here. So fiskars inventory levels are in good order and the way we are producing and selling, that goes well in line with plan. So this is very much VITA challenge what we have.

Yes, thank you. And then what's this extraordinary items during the Q2? Are they related to the VITA stuff?

They are predominantly all about this VITA plan we introduced in February this year with a note of 28 million EBIT improvement there. Up to one third will be already in 2026. And this program will result one of roughly 9 million. So those are now the ones what we have in Q2.

And that's all in the appendix to the release. There is a list of the laundry list of all the items this year and last year. Exactly.

And then finally about your guidance. I mean, you are currently, I mean, some 3 million ahead from last year on comparable EBITs. And my thinking is here that... How much is your guidance based on the underlying improvement in consumer volumes and then on your result from that? And how much for the VISA turnaround program that you are currently carrying out?

Given that the guidance is open-ended, your question is somewhat difficult to answer specifically, at least not in the level of detail you would like me to answer it per se. So if we are now three million ahead, that's true, that's kind of... Thank you very much. Jussi Lipponen, Still there and still in force. Yes, it has a component that we can grow, and we have shown that we can grow also profitably in terms of growth is not done by discounting prices. The gross margin reduction, as Jussi commented, comes solely from the supply chain. Let's say adjustment or right sizing there. So it has a component, but kind of year to date, the savings and then the belief that we can continue on the good momentum with our offering and the attraction of it to the consumers is giving us the confidence that we can deliver in the end a decent year.

Thank you. I did not have further questions at this point.

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

Yes, we still have some questions in the chat. Maybe starting from tariffs, Jyri, maybe if you want to take this one. What is the situation regarding the potential tariff refunds in the U.S.? Have you received any or are you expecting to receive something and when could this happen?

That's an excellent question. Our imports are focusing on what the phasing system of this tariff refund is referring us, wave two. And a couple of weeks ago, the system actually just opened for entering these refund claims or refund requests and how long that process then takes and what is kind of the approval rate. Rumors tell that customs is very kind of precise, that no typos allowed, so to speak. Paivi Timonen, Essi Lipponen, Steffen Hahn, Daniel Lalonde, Paivi Timonen, Steffen Hahn, Daniel Lalonde, but they were several couple of months ahead of us in terms of the wave one starting when that system opened for it. Fairly technical technical topic and of course we hope that we can complete on time the Thank you very much. We can comment, but there is a, if not around the clock work, but pretty much that ongoing with our U.S. teams.

Exactly, and regarding our guidance, for the sake of clarity, our guidance does not include any refunds from those potential tariffs. True.

At the moment we have one question, and let's see if any others... Jussi, how did Viita's sales margin develop in Q2 versus last year?

Sales margin or gross margin?

That is the question, but maybe it's gross margin.

I think if it's gross margin, I think Jyri, you made it through already in your presentation, so it came down. Thank you for your questions.

Thank you very much.