Humble Group AB (publ)

doubled their adjusted EBITDA for the quarter, while we had some negative impact in the sustainable care segment, mainly due to the headwinds in the UK segment, as mentioned before.

Yes, and let's talk a bit about future snacking. I mean, I think it's really rewarding to see. We've been talking about it for a couple of years now that we are investing. We have a really strong demand, more than 3,000 tons of candy that we can't deliver upon because the demand is so high. But we can clearly see here that the investments that we have been made in our facilities to scale up here is actually reaping some really good profitability. Increase of net sales of 22% and gross profit of 28%. And also, we can also see the operating leverage here with the beta up 98%. And mind you all, this is despite increasing some investments significantly into personnel, marketing, and sales in our growth brands. And despite that, we're making money on them, which I think is quite hard to do in FMCD when you conquer new markets. Pandian Trueco still remains very strong, ending on a strong first six months for the year, and we expect to continue to grow them for the last part of the year. Arena Confectionary, our manufacturers, we see some really tangible growth, and we have also, in Grans, for instance, already made the same profit in the first six months that we made in the full year last year. So our strategy here to invest to scale is working, and we know that we have the demand. Looking into sustainable care, this is the disappointment for the quarter, and there are some really specific reasons for that. UK market had a couple of different headwinds with change labour laws. We had cyber incidents with, not in our company, but with some of our key retailers that we supply with products. We had less than 70% reduction in volume intake for the first part of the quarter. And this impacted specifically Solent Group, which has been a growth company for the last years that we have owned it. We expect the company to grow in solid double digits next year, and we are going to have a bounce back in the second half of this year. But it has been a turbulent quarter in the UK, although we have some highlights. Amber House still doing very strong. Humble Coen 80 are recovering nicely. So just if we surface those headwinds for the period that we've had, we are confident in the bounce back of this segment over time. Talking about quality nutrition, in the last quarter presentation I mentioned that I think we are going to have a recovery in the second half of the year. We have already seen that we are back to growth in this quarter. We do have some challenges with the gross margin due to the volatile raw material pricing. We are working intensively to see how can we utilize our group scale to help our companies here source at more efficient volumes and also cost. What's really good to know here also is that our key customers in both powders and bars, which has been struggling in Q4 and Q1, they are back. They have increased their forecasts and have a good outlook for the second half of the year. In our last segment, Nordic distribution, here we can really see that our strategy of consolidation is working. The profitability is up 28% more than the net sales growth. And this is due to the sort of platform consolidation we have made in a few of the companies, especially Prevab. We can also see here that the demand is really strong. We had a bit of a push into April with the Easter products. But despite that, we have also throughout the quarter had a really solid growth. And we have also just invested in new warehousing for Privat Näsjön Trollhättan because we have been running full days just to be able to deliver the products to our customers. We see some really strong trend here growing a lot faster than the market in general, and it's because we are doing a good job and we've been able to secure several strategic partnerships. So in terms of the cash flow.

Yes, looking at the cash flow for the quarter, we came in on 129 million crowns for the quarter in cash flow before changing net working capital. And after changing net working capital, we ended up in 44 million crowns, which is a significant improvement from the same quarter last year where we had a negative cash flow of 49 million crowns. And we could see the strong delivery in June, as Simon mentioned, the strong momentum and demand for our products also drove up the accounts receivable, especially in the networking capital that have a negative impact for the cash flow for the quarter, with 72 million crowns especially. So with that said... Yeah, we could also mention that we paid a little bit extra tax, especially in our UK companies for the quarter, right? Yeah. That's true. Due to a regulatory change in the UK, where our UK subsidiaries now belong to a group, depending on the group size for Humber Group in total, they now pay their taxes in advance instead of paying them in arrear, which they have been doing in the previous year. So that had a negative impact with approximately 12 million crowns for the cash flow in the second quarter.

Yes. And lastly, talking about the leverage in the group here, we haven't been able this quarter to reduce the leverage. We have been investing quite significantly into CapEx, which is something that we believe is going to drive long term value. But this is a highly prioritized area for us. And as I also mentioned in the CEO letter, we are going to focus going forward more on increasing the profitability growth, rather than just prioritizing organic growth. So we think that this, in combination with having two strong quarters ahead of us in terms of cash flow, is going to help us reduce our net debt faster. Outside of this, we have, as I previously mentioned, also secured an updated financing agreement. And I think it really showcases the strong relationship we have with the banks, but also it gives us the financing structure that we should have as a company. In combination with the lowered Stibor, we could see on a 12-month base that our interest cost was down from 6.9% to 4.6%. So it's a significant improvement in terms of interest cost with a lower margin to the banks and also the lowered Stibor. So let's run things up with the outlook. We had a really strong closing of the second quarter. We have a good momentum in most of our companies and we are looking positively on the second half of the year. We have important initiatives to scale upon, especially in quality nutrition, which has been lagging a bit behind the timeline versus future snacking. But we are confident with our order pipeline and we can see that our customers are increasing their forecasts. UK market has been a headwind for us in the first half of this year. But we also believe it is temporary and we are going to have a build back in the second half of this year. And we're looking at a good 2026. Future snacking, we believe it's going to be a strong year in full. We don't see any weakness, really. It's all about enabling that capacity and scaling it in several markets that are reaping for more products and demand is strong. In terms of Nordic distribution, we are working to scale the warehousing so we are able to keep up with this strong demand. And we can see that the profitability is coming in nicely, scaling with the operating leverage that we get from our consolidation. And also lastly, we have strengthened our financial profile. We have now paid most of our earnouts and we are looking forward to having this financial flexibility. And once we get down in leverage, we might be open to look into some potential acquisitions. But for now, we are focusing short term to really increase our capacity output for the full group. With that said, let's open up for some Q&A.

Thank you, Simon. And I was just going through the questions here. I'm not sure if they are published so you can see them, but I will go through them one by one so we can elaborate a little bit on them. First question from Victor at EMB Carnegie. It's regarding once we lower the leverage, what areas are we looking for potential M&A efforts? And what do we think about synergies and future deals?

I mean, we are going to tread lightly here. We have some really interesting Bolton acquisitions, smaller bonds that we know will tap into our platforms and where we are able to scale immediately with synergies and operating leverage. So I would say that that would be the prioritized areas here. But with that said, as I mentioned, and as we also mentioned in our capital markets day, we have been prioritizing, as you can see, in the first six months as well to invest in our current facilities. And we have a strong plan for that as well. So I think we are going to start trading lightly with M&A with smaller acquisitions that fit really well into our platforms.

Thank you, Simon. Paul is asking about things that the profit is quite low in relation to the high turnover. Do you have any thoughts about that?

I mean, I think we also really need to consider, as we've been writing in the report, we have increased our sales and marketing spend significantly this year versus last year. Last year, we increased it by 85 million versus 2023. And these are investments that we do for our brands, building value and conquering new markets. With that said, I'm proud that we've still been able to keep up the profitability. But also, as we mentioned in the CEO letter, we are going to now look into our cost structure. We are happy with the sort of scaling we've done in terms of overhead in most of our facilities, and now we're just going to scale up the demand. So now it's time to start looking into, okay, how can we be more efficient with our cost structure and improve the margin in that sense as well? So I would say it's... It's a combination of cost control, looking into efficiency in the companies, but also mindful scaling in sales and marketing. I think the levels we are at right now is quite sufficient for the growth.

You mentioned about taking on new markets. Question from Jens. What are the plans to make profits on the hype of Swedish candy in the US?

I mean, we have already launched and we're starting to seeing some tangible traction. We have done it thoroughly. So we have launched our own packed B2B bags with the Swedish candy, which is a mix of most Swedish pick and mix candy favorites. Very grateful that the other candy companies out there want to join us on this journey. So that is one of the things we're looking into. We are also looking into setting up potentially a B2B wholesale platform for the U.S., So we can scale with the B2B business, much like we have done here in the Nordics. But also not about always, but only about U.S. This Swedish candy pre-packed bags is something that we are looking to scale globally. And it's packed in a way that it's really efficient distribution, which is what Swedish candy has been lacking historically now in this trend.

Thank you, Simon. I think we can hang on to the candy perspective or candy questions. We have a question here from Alice. Could you give us some more color on when we expect to pent up the confectionery demand as sports nutrition when the investments we're doing start to materialize into sales?

I think we're already seeing it in future snacking. I mean, our production facilities are growing like more than 30% and our candy brands very high as well. But we are working diligently to continuously scale and having this growth with our capacity, it is a challenging thing to do, but we can also see that we've been able to do it in a profitable way. But our plan here is to continue to scale in snacking for the remainder of the year and next year. In terms of nutrition, we have invested in most of the machinery needed to scale. So now it's all about filling it up with new and profitable clients, both in powders, bars and drinks. And we have an interesting order pipeline for the second half of this year. And my ambition would be is that by ending this year, we should have filled up at least one shift in all of those facilities extra in going into 2026.

Thank you, Simon. One question about the new credit facility. Jens is wondering if it could be a good idea to use it to repurchase chairs when it's such a low valuation as it is today.

I mean, a repurchase of chairs is, of course, a tool that we have available now with a mandate from the AGM. But also looking into our strategy of delivering the business, I think that is going to come first. Once we are at a leverage that we feel confident with, we will evaluate how we can deploy capital and get the best returns. And of course, repurchase chasing of shares could be an option if the share price is low enough, or if we deem it better to invest in continuous COPX or M&A. So it only depends on the return on deployed capital.

Yeah, thank you, Simon. One question here from Daniel. Why can't you find Pandia at ICA or Coop, or where can you find the products in Sweden?

Pandy, for instance, in ICA, we are closing in to being the top 15 brand of all confectionery companies. So in ICA, we have really good distribution. Axford and Coop, we are starting to get distribution. I think that's what's so interesting. Pandy is doing fantastically well, and we have a really good outlook for the year. Hard to keep up with customers, but despite that, we are below 40% distribution in Sweden. So even in our domestic market, there is so much left to do. In Norway, instead, we have actually been growing faster because it's more centralized and we have been taking a top five position of all the confectionery brands. So here we have a strategy going into a new market. We have a proof of concept that we know how to get it into the key retailers and quite quickly take a top position of all the confectionery brands. But Sweden, absolutely, we have much left to do here.

Thank you, Simon. Sergey from IDEO Capital here asks about if we can break down the components in the organic growth, how much was driven by price increases and underlying volume?

So overall, as we said, also for 2024, a high majority is driven by volume. There might be a little bit of price in there, but it's not tangible. So it's still volume driven for the group.

I think that summarizes pretty much the questions we've received for today's presentation. Any closing words?

Thank you everybody for listening to this presentation. As I mentioned earlier, we end the first six months on 7.7% organic growth. It's not as high as we want, but I think it's still a solid development given the headwinds we've had in one of our key segments in the UK market. And we end the quarter on a high note, which gave us confidence going into the second half of 2025. And wish you have a really nice summer. Thank you so much for listening in today.