Humble Group AB (publ)

Good morning, everyone. Welcome to Hamburg Group's quarterly presentation of the first quarter 2025. My name is Simon Petrin. I'm the Group CEO of the company. With me today, I have Johan Lenardsson, our Group CFO. Good morning, everyone. So before we dig into the details of the quarter, I just want to share a few highlights. We've had a quite strong start to the quarter with strong development in the beginning of the quarter with a little bit softer trading by the end of the quarter, mainly due to seasonality. We didn't have any sales from the Easter and that goes into April. So we're quite confident about the trading for the first six months of this quarter and the year. Looking at the highlights, it's really rewarding to see that we have been able to continuously improve the gross margin. We're making more money out of the sales that we're having and we are investing that additional profitability into growth initiatives. We can also see that we've been able to maintain the profitability margin despite those quite significant investments. And we have also seen a significant improvement in the operating cash flow after networking capital, which is also one of the key priorities that we highlighted in the fourth quarter report. This is also something that we are going to maintain a high focus on, given that we had a quite weak cash flow in the first six months of the last year. So this is a priority going forward. One of the big highlights for me this quarter is that we are starting to really see the results of the investments and initiatives that we'll be executing upon in future snacking. It's really the highlight segment of the quarter and especially Truco and Poundee, where we had a really strong growth of more than 100 percent for the period. That being said, we have also further initiatives to execute upon quality nutrition, the weakest segment in the quarter. We have an interesting pipeline for the second half of this year and also one of the key priorities for us. But let's dig into some of the details.

Looking at our net sales, it came in on 1.9 billion. It's comprised of a total growth of 4 percent, with an organic growth of also 4 percent with limited currency impact. Looking at the segment wise, we saw a strong contribution from the future snacking segment, mainly driven by a really solid growth for some of our strong brands, Poundee and Truco, who grew their sales by nearly double the sales in the quarter. We had some challenges in the quality nutrition segment with some delay in or postponed orders in some of our production facilities, causing some delay in sales and profitability. Looking year on year, we can also see where we had some negative impact from the late Easter. This impact is mainly shown in the distribution segment for the quarter.

Talking a little bit about FX, I've had a lot of questions the last few weeks from investors asking us how will this impact Humble Group? We have a lot of positive feedback from investors. We have a lot of positive feedback from investors. We have a lot of positive feedback from investors. We have a lot of positive feedback from investors. We have a lot of positive feedback from investors. We have a lot of positive feedback from investors. We have a lot of positive feedback from investors. We have a lot of positive feedback from investors. We have a lot of positive feedback from investors. We have a lot of positive feedback from investors. We have a lot of positive feedback from investors. We have a lot of positive feedback from investors. We have a lot of positive feedback from investors. Dr. Misty it makes me want to say that we are on a whole range of goals so we are not worried about it long-term. Future stacking, resistor, not nearly double sales but actually quite a bit more. So, really rewarding to see the investments we are making in these companies are really starting to show results.

So, really rewarding to see the investments we are making in them are really starting to show results. Looking at the gross profit, we grew the gross profit by almost 9%. came in on 615 million for the quarter compared to 566 million the previous quarter. And we are also happy to see an improved gross margin driven by priorities internally on strengthening the overall profitability of the group. Gross margin came in on .3% compared to 31% in the previous quarter. We see that the main growth in the gross profit is driven in the sustainable care and the future snacking segment. Your thoughts Simon?

I think it's really strong to see that we both sequentially and versus last year are improving the gross margin. We are maintaining that streak ever since middle of 2023. We have been improving the gross margin continuously. We still have further room for improvement here but we are gradually improving it. That is also something that we are very focused on right now. For us it's about making more money out of the sales that we are having but also being able to maintain growth. Having that balance is always challenging but I think we've been able to do it well here. But as I mentioned earlier we do see some potential further improvements with a strong SEK but also not to mention the freight cost. We do import a lot of containers from Asia and we know for a fact that the container prices are down. This is not something that is in the P&L right now but it's actually going to come a little bit further down the year with the FIFO principles. So that's just worth mentioning. We have two macro factors here that might also play in our favor with the gross margin but despite those we still maintain a high focus to continue to solidify our gross margin in our companies.

Profitability wise we managed to grow the adjusted beta to 133 million compared to 128 million compared to last year. This is a total growth of 4 percent and bear in mind here that this is a growth of 4 percent despite significant investments in selling and marketing activities in some of our hero brands across the group. Main contributors to the profitability growth is found in the future snacking segment and sustainable care segment here as well.

Yes and I just want to share a few words on this because in Q1 last year we also made a significant increase in sales and marketing spend and the results we are seeing in some of our brands this quarter is actually of the spend that we did almost two years ago. So some of the key markets we have entered and invested in historically are actually starting to show results and when we have that sort of traction data we aren't afraid to invest more because we know that long term this is going to be highly value-accurate for the group. But that being said these are efforts that we control so if we need to we are able to turn those down a bit to improve the profitability even more. So I think despite increasing it by 18 percent we are actually showing a tangible profitability growth in line with the net sales growth and that's due to strong cost control and that we are starting to see some leverage in our companies where we have been scaling to additional shift and also implement the efficiency processes for the supply chain.

Looking at our first segment the future snacking we saw a strong underlying growth in the net sales already communicated earlier. Net sales grew with 19 percent and amounted to 282 million SEK for the quarter. We also saw a strong increase in the underlying gross profit amounted to 144 million comprising a gross margin of 51.1 percent and the adjusted beta amounted to 32 million SEK improvement to 11.4 in the Simon mentioned is some selling and marketing initiatives that have a negative impact on the overall profitability for the segment.

Yes and also worth mentioning I mean first class brands one of the bigger companies in this group we have actually gotten back not to growth but we are actually just a little bit below last year. We do have an ambition to grow in this year we've had several very interesting initiatives one of them ready to drink Funlight that has been a real success and also several product launches with our own brands. So I think with that big company back on track with the restructuring process we've been having and also the strong trading from our manufacturers they are doing really really well we're getting the results that we wanted from scaling them and also the brands on top of that. So I mean future snacking is really the shining star of this quarter but we have a good hope for for more this year.

Looking at sustainable care the nested group by four percent amounted to 543 million. The gross profit also increased by 15 percent to 240 million and the gross margin amounted to 39.4 percent is also an improvement from from previous quarter. The profitability amounted to 68 million compared to 57 reaching an adjusted beta margin of 12.5 percent for the quarter comprising a total growth of the overall profitability of 19 percent.

Yes and what's worth mentioning here I mean we have two of our big brands Nathie and Humbleco. We are starting to see the results from from work in those companies. Nathie has been back to growth now several months in a row which is really rewarding to see and also the profitability are improved in both of these companies. So it's a little bit early to if the consumer is getting back on the sustainability track with their procurement but we are seeing positive results from the retailers higher sales velocity and that the work we've been doing for the last two years is starting to yield results. Also in this segment we have some of our UK companies Amberhausen Sollent in UK with the new labor regulations. There has been a little bit weakness with some of the retailers. When I say weakness I mean they have been reducing their stock levels so we have had a short-term effect on this but it's not something that's going to impact us long term that we believe. So overall I think the performance here has been quite solid but it could have been even stronger and we do have a turnaround position here in two of our brands that could be really interesting for us going forward.

Looking at the quality nutrition segment here we as mentioned earlier we saw a negative sales trend reducing the sales by seven percent reaching 362 million and this is a negative trend that we noted in the fourth quarter that we also had some impact in the first quarter. Worth mentioning here is that we've taken some initiatives to reduce this impact going forward mainly caused by some postponed orders from major larger retail stores. Looking at the gross profit decreased by 14 percent for the quarter mainly driven by the lower net sales for the segment and profitability wise we managed to remain flat on the adjusted almost flat on the adjusted beta decreasing to 26 million compared to 33 million for for the quarter.

Yes and I mean quality nutrition is one of our key segments where we expect a lot of growth going forward. We have prepared with our powder site with increased capacity, we have our bar site with increased capacity available and we have the drink line that we had the official opening for just a few months ago and I'm really impressed with what we've done here fully automated energy drink line. So our ambition here is now to really scale up this additional capacity with high value customers. So we're focusing a lot on export here, we see many opportunities and this is one of the key initiatives for the year that we are going to gradually ramp up the capacity utilization in all of these companies and as I mentioned earlier bit weak trading in Q4 and Q1. What's positive here is that we've seen increasing orders from our existing customers going into the I'm not worried about quality nutrition long term and it's a fast growing market but for us it's key here that we're able to ramp up the additional capacity but with the right customers that also has strong profitability.

Looking at the last segment in order distribution grew the net sales by six percent amounting to 718 million. Here we also had a little bit weaker gross margin reducing the gross profit to 133 million and the gross margin decreased to 18.5 percent and this can mainly be explained by some sellout of some low value stock for the quarter and here I should say that the profitability managed to reduce flat on 27 million for Adyasa de Vita. Yeah

and I think this is really showcasing as you mentioned we have reduced the stock levels a bit here. We have a good trajectory going forward in this segment and also as you mentioned earlier a lot of the Easter sales with Candy is in this segment so this is something that have already hit our P&L in April positively but what's really rewarding to see here is that we're despite having a bit of a sellout with some inventory we're able to maintain a solid profitability and this is due to the different efficiency initiatives that we have been executing upon historically so I think with normal gross margins and the regular trading here we have a good opportunity for strong profitability and that's something that we focus on because we want to be really efficient in our distribution.

Looking at cash flow wise this is as previously communicated a highly prioritized area for us the cash flow from operations came in on 134 million compared to 127 before changing networking capital. After changing networking capital we could see that we had a cash flow of 70 million compared to 60 million and increased by 10 million but worth mentioning here is that we also had a repayment of tax deferrals by 45 million that reduced the networking capital. Adjusted for that effect we had a cash flow from operations after changing networking capital of 115 million which is a significant improvement nearly double the cash flow compared to

the Yes and as you mentioned I'm really positive about this we are translating more of our our net sales into cash flow and what we can see also what's really important for us is the second quarter we had a bad second quarter with minus 49 million last year so I think if we're just able to keep this track and being able to grow and scale efficiently without tying too much network capital we should be able to provide strong cash flow as well and that is one of the challenges being a product company when you are growing you have to have the products in advance and that's tying some networking capital this is a main priority for us to continue to strengthen and we're trying to implement more processes to be even leaner in our inventory and networking capital management.

Looking at the debt ratio and the leverage we see that the the overall leverage adjusted EBITDA in relation to the net interest bearing depth came in on 2.8 times this is a almost flat development from the fourth quarter last year but we can see that we have a continuous improvement here and we're not so worried we see that we have a positive trajectory of the overall leverage quarter on quarter.

Yes and also worth mentioning here we had a negative impact from currency so this is also something that impacted our cash by the closing balances but despite that we've been able to reduce the net debt and we are closing in on our target to get down to below two and a half times as in our financial targets. So to wrap things up for the first quarter and what we're thinking ahead as I mentioned in the CEO letter we have a clear ambition to deliver higher organic growth for the rest of the year than we did this quarter in our financial targets we have a minimum majority of 15 percent so that's quite a bit up from where we are in Q1 but we have a really positive outlook for the rest of the year and despite the volatile market and environment our companies are actually quite confident I think it's all about executing on the initiatives and maintaining the momentum that we've had in our companies for the last years and we feel solid about that. What's also good with our positioning here is that we are seeing some strong demand in our private label and contract manufacturing side of the business and this is something that we are trying to grow especially in the Nordics where we are a little bit behind the UK retailers so that is one of the things that we are working on and also looking at the gross margin I mentioned earlier we have two major things that actually might play in our favor with the currency for Swedish companies and also the reduced freight costs for a lot of our companies that import goods from Asia so that is something that might play in our favor but on top of that we are implementing several initiatives to further improve the gross margin such as centralized procurement in some of our platforms. The third part here is about cash flow and that's something that we are highly focusing upon because we want to reduce our debt we want to improve the cash flow and over time we might be able to start acquiring some companies and do bolt-on acquisitions again there are a lot of companies that really like what we are doing and want to become part of this group but we want to feel confident about our balance sheet before we do so so that being said thank you for this first quarter and we're looking forward to the rest of the year

and I have now time for some questions it's not so many questions but one question from Victor is what's behind the sales decline year in year in Sweden in Q4 was six percent now it's minus one so

I think I mean we've had some challenges as also mentioned in our quality nutrition segment that's the big drainer for this year but also as we also mentioned audit distribution we are meeting tough comparables given that we have didn't have any in in sort of pipe fill sales for Easter which is actually several percentage points of a potential growth so and I mean that's if you're looking at the first six months of the year that's not going to have any sort of seasonality impact but Q1 versus Q2 is always a bit tricky just because of the Easter and that we do have a lot of companies selling candy and you know providing the stores with the products for Easter but overall I mean Sweden is is doing well and we see especially future snacking I mean the development is very strong but quality nutrition I mean a lot of our companies in that segment are in Sweden and what's positive here is that we have been able to to ramp up the capacity the drink line is up and running we're starting to provide the first serious customers and the pipeline in both our powder bars and energy drinks is looking very strong and we've been in development projects for the last six months with a lot of these customers so I think as long as we're able to convert these customers to actually producing orders which generally take you know from start of a project to actually being up and running nine to fifteen months you know we should be quite doing quite well in the coming sort of quarters for quality nutrition as well.

Great thank you another question given reduced acquisition activity and limited cash available have can you share some thoughts on if the group have shifted focus toward organic growth and joint venture products and maybe share your thoughts on future M&A opportunities?

I mean my you have to be mindful about that if you look at the last two years we have invested quite significantly into Copics as well and that is something as we mentioned in our capital market state we're not going to have the same level of Copics investments going forward so I think by reducing that and that we have been able to invest in all of our facilities to a certain point that we feel okay now we do have capacity by having lower Copics we will generate more cash and we deploy that into acquisitions but of course I mean those investments are to facilitate organic growth in our existing companies and we have a lot of extra capacity going forward with the investments we made and a few more coming this year next year so we have a lot to do with our own companies but that being said with our cash generating profile and with the Copics gradually going down you know there will be room for acquisitions as well.

Okay thank you one question here about quality nutrition that we mentioned temporary slowdown and some postponed orders just how question is about how should they think about the temporary wording temporary and have we seen some pickup in sales?

Yeah I mean just to give an example our one of our biggest customers in the bars production they had a lot of excessive stock in Q3 they didn't buy anything Q4 and Q1 and now they started ordering again for Q2 so I mean you have those shifts sometimes in the market same with powders there was a bit of weakness last year in that but now that our key customers here are turning up their orders again and if you look at sport nutrition market and quality nutrition market for a longer period of time it's a very strong macro growth so as long as we are an efficient supplier of quality products you know there will be demand with other brands to produce with us so I think it's all about that that as long as we feel confident in our ability to produce great products and being having a solid profitability on that I think we're in good shape and as I mentioned earlier I think the the dream client I was severely impressed when I saw it finalized actually and I think that's an exciting opportunity we have a great pipeline but it's like six to twelve months before those customers are starting to produce with us but there are some good leads already.

One question here is a little bit related to why are we not focusing more on profitability and taking these strategic selling and marketing activities?

I

mean

as an entrepreneur of a brand like Bandi many years ago the sort of traction we are seeing in our brands it's everything you would want as an owner and if you look at these brands I think we're keeping it at sort of a break even level and reinvesting everything we can to grow them and if you talk about value creation long term that's exactly what you should do because growing these brands they have tremendous value for us and also potentially others so I think that is something really to worth considering if we were losing money and not having the opportunity to turn off marketing I mean then that that would be an issue but you know entering a new market and building brand awareness rapid start campaigns demo activities all of those investments that's because you are going to take a good position and grow long term. Pandi a great example we did start in Norway quite recently and it's been a tremendous success almost surpassing Sweden so I think when you have that data and that sort of traction that's what you need to invest and we're not afraid to do so if we're confident it's going to bring value long term.

I think you're touching a little bit on it but one question is a little bit on our markets in Europe and the penetration of course may be tricky to pinpoint every market but what are your general thoughts on how we perform on the different markets?

I mean we're barely scratching the surface I think Scandinavia is of course a big market for us but we have been initiating a lot of activities throughout the last two years to you know get into Germany, UK, I mean the US is something that we've been starting with and starting to see some really interesting dialogues with retailers so I mean we have a few key markets that we want to enter but of course I mean over time we want to be present in any sort of western market where you have the same consumption behavior with the products that we are providing and we have a lot to do in Europe and not only with our brands and as I mentioned if you look at in terms of value producing you know quality products from the Nordics in for instance nutrition is something that is very attractive for international brands and companies so if we can be a bigger exporter of products that's also going to be value editing for us long term.

One question from Stefan here what are your thoughts about the time lag before we see a potential tailwind from the weaker US dollar?

I don't want to guide on that exactly but generally it's between five to nine months before you have like the changes in COGS in the P&L for most of our companies but it depends on if you're a brand or distributor or manufacturer but I mean a weaker dollar is impacting some of our Nordic companies but also some of our international companies where we're buying in US dollar from Asia for instance so I mean the strength of the SEA currency lately is like we have to provide more info on that going forward how it's actually going to impact the profitability long term. What we do know is that it is going to be positive on a 12-month basis and it has been one of the big drainers historically also when we had an opposite effect of the currency.

Thank you Simon. We are through all the questions that we received relating to the first quarter. Do you want to summarize?

Well thank you everyone for listening in. I think we're continuing on the track and the strategic plan that we have set and we look forward to the rest of the year. Thank you so much.