Nilörngruppen AB

everybody, and welcome to the NE-Learn Q4 presentation. I will share my screen. And I'm really happy to have so many on board, especially now as it is really intense reporting period. So a lot of reports released this week. I will go through the numbers as usual and then also a little bit and update what's going on within Nealon and the group and the market and so on. Just looking at the Q4 and the order income was down 7%. But as most of you hopefully remember, we had a packaging order that came in in Q3 this year and Q4 last year. So just for that packaging order, it was actually an increase of 1% for the order income. Sales was up 14% to 232 million Swedish. And just for currency effect, it was almost the same, up 13%. Operating profit for the quarter is 19.5 million versus 9.2 last year. And of course, volume matters here. And we'll also see that later on in other slides that we will present. And just looking in the quarter, December was strong. It was a strong month. And we all know that also Chinese New Year has an impact. Chinese New Year is early this year. 2025 was already in end of January, beginning of February. But what impact that has and how much and so on, it's difficult to predict. But I think that might have some impact on the December numbers. Looking at the accumulated numbers, we had a cyber attack in Q3 that we managed to handle quite well. And then looking at the currency effect that we have a minor currency effect that is quite well balanced even because we are in many different countries. We have like in Turkey, we've had a very, very weak Turkish lira. And we are also in countries where we have the Hong Kong dollars, where it's connected to US dollars, which has been strong and also euros. So even though we are in many different countries, most outside Sweden, The currency effect totally was very minor. Operating profit of 82.9 million in the quarter, which is 8.4% of the sales. Operating margin is 8.4%. And outdoor segment has come back as predicted. In the beginning of the year, as you remember, that was very strong during COVID period. And then we had a big period of 23. And we predicted that it would come back in 24, which has done, especially in the last year. Now it's back as normal, I would say. Luxury segment still slow. We were spoiled after the COVID, with a very, very strong luxury segment. And that is also a bit slower now. So we'll see what happens with that. Just looking into the market, what's going on. As you also can read in the newspapers, quite many brands go into reconstruction or into bankruptcies. Nylon has been lucky here. We have not had any major climbs going into bankruptcies. So we are lucky in that sense. But there is also a consolidation going on in the market where companies make bigger play-bys, the niche players.

So a lot of things going on in the market currently.

And, yeah, the profit and loss, we'll not go through this in detail, but as you can see, volume matters. We have here a tax rate for the quarter of 27.9%, which is higher than the average for the year of 24.5%. The reason for the higher tax rate in the quarter is due to payment of dividend from Bangladesh, where we need to pay out the tax on the dividend that we receive. Also, volume matters in terms of personal cost and other external costs. So the higher volume, the more dilution we can have on that.

So that is an important factor.

Slipper product group, you can see here that the product has gone up from 25 to 29%. That is also in the Reese product. We also have this Nealon Connect. I will also present that a bit more in detail later on here in the presentation. Labeling percentage of the total sales is slightly lower, and the other remains quite stable. Packaging is something that we will focus on even further, so I will come back on that. Here, the gross margin is also depending on what kind of product group we are selling and to clients. It's not obvious that big clients has lower margin, small clients has bigger margin. It's also depending on very much on the product group that we are selling. Packaging has normally lower margin versus labels, but also in packaging, there's also bigger volumes. So the gross margin is very much depending on the product group, but also that our sourcing team since 2020, during COVID, we started to build up a central sourcing organization. And that has also had impact on the gross margin because they're doing a good job here, negotiating, concentrating on suppliers and so on. So that is also an impact of the strong gross margin that we have seen here. Operating margin. We were spoiled here in the COVID. Historically, for you who remember the New Zealand, we used to be around 10 to 12%. During COVID, we were up here to 16, 17%, extremely high. And then we had slightly low in 23, and now we're working on back again. So the goal is to be around the 10%, even though we're not there yet. And as I mentioned earlier, volume matters here. And the Nealon you see today is slightly different compared to the Nealon in the past. And now also going into other segments like much more technical and support and compliance and so on to the client. Portable comparison that is the same as the numbers, but here is more a graph showing that Q4 was strong in sales. And that is also better on the operating profit, as you can see here. So volume matters. Balance sheet, wrong balance sheet. We have an equity of 350 million, an equity rate of 58.6%, and the net cash position now adjusted for the IFRS 16 of 60 million. We have cash in European countries like India, Pakistan, Bangladesh, and that is not so easy to take back to Europe on a daily basis that we take back through dividends. So that happens maybe like once a year. So that is more rigid in that sense, giving us not that flexibility as it would be in other European countries. But we take out dividends and we normally do that once a year from those countries. We are also going here building up cash for the coming investment that we will do here in the group. But more about that slightly soon. And the number of employees has increased. We are now 660 employees. Countries where we increased the number of employees is in Asia, mainly. I would say it's Indian, it's in Pakistan. It's in Vietnam where we built up a new office, new production. Where we now in Vietnam, we are around 20 employees. And we continue to increase in Bangladesh, where we now also set up a new factory.

Some comments here. Strong Q4 as seen here.

Also predicted from the strong order income we had in Q3. This has been affected by Chinese New Year or not. I'm not sure. We will see that here, what's happening in Q1. We're operating margin of 8.4 in the quarter and 8.8 accumulated. Or the accumulated number is 9.3%. If we adjust for the 4.4 million in cost we had for the cyber attack. And the goal, as I mentioned, is between 10% to 12%. But in my take, I would say that we are fully back now and no effect at all, I would say. And we strengthened our security a lot since then. So in that sense, it was a tough period for Nilo, but we came out even stronger from that. Proposed dividend by the board to the share meeting is 150. And the total amount is 17.1 million Swedish. And that is 29% of the net profit. And for you who remember, the goal is to have 60 to 90% of the net profit to pay out the dividend. This time is slightly less. That is also to continue to have a strong balance sheet at the same time. we will build the factory, both in Bangladesh and also in Portugal. Outdoor segment I mentioned, luxury segment I mentioned, but we can see good development in these countries, which is good because they're relatively small, Spain, Switzerland, And U.S., from the needle perspective, U.K. is a big country for us. But it's really good to see that they have been strong and coming back well. And there is more to take care, I would say. And we're investing even more now in U.S., employing more people here. Yeah, the market and the consolation, I mentioned that already. The Bangladesh factory, we have now in the middle of going through a contract to sign off for land. And we will continue to have our old existing factory that will continue to remain. So we're building a brand new factory besides the other one. This will be in a zone called economical zone, which is the duty-free zone, which is different to the other factory we have, which is outside or inside the country. This will be a project, and I think it will take approximately two years until we are up and running with that factory. We have established a project team, and once the contract has been signed, we will buy the land, and from there, there will be a big project. And the goal is, as I said, to be end of 26, to have that up and running with production. In Portugal, we mentioned earlier that we should build a new factory. Here, we will not build a new factory. We will rebuild the existing factory to make it more compliant and more nice. And we will move out the warehouse to get space in the factory to have that externally. So I think by this, we reduce the risk to have two big projects going on at the same time. But at the same time, we can take a step further here in Portugal. In Vietnam, we are now up and running. Clients are moving over. And that is mainly a transition of clients from Hong Kong, China into Vietnam. And here we have a lot of outdoor clients that wants to be in Vietnam. They have a lot of production there. So instead of shipping the labels and the goods from China, Hong Kong to Vietnam, we now supply them internally. We will set up a company also in Sri Lanka that will not be without production, that will only be sourcing and office and warehouse delivery. So that is not that big, quite small operation. It continues to be a big interest in the Nilo Connect and that is the main focus for us, that we will continue to invest and be strong on that. Production is a strong development in the group. We see it continue to develop well. And that is something that we will be focusing on now, increasing the capacity with new factories. Packaging is an area where we have around 20% of the sales. We will and we think there are much more potential here. We focus on that and just employed a packaging technical manager starting here on Monday this week. So that will support sales among the client, but also be the link between the sourcing in the group and the sales team. So here I think that person can have a lot to contribute within the group. Also making our sales team more secure when they are meeting clients. And we do a lot of investments here, as you can see, both in production, but also in Nealon Connect and also going into packaging. And I'm sure that we are well equipped to meet both the challenges and opportunities that comes in the market here. And just a few slides about NeedleConnect. We talked about that earlier, but for you just to remind you what is NeedleConnect. It's a concept, I would say, more than a product. And starting off with a QR code where we can feed this with information for you as a end consumer. When you scan this on your garment, you can get information about the garment. about where it's produced and so on. So, as you know, there's a lot of legal compliance in Europe where the digital product passport is to come. and where our client currently has a lot of headache. So through this and through the information carrier, which is the label, and through our system, we will connect data from different sources and provide to the brand owners. And they can provide different information to the owner of the garment, like repay, resell, recycle. And engaging customers, engagement, drive sales, create loyalty with the client and acquire new customers. So even though it started here with the compliance side, very much compliance behind it, we see that we can build in so much more in this area. neither will not go and build all these different things but we will be the goal is to be in the center in the network we have the labels with the queue with the information carrier and through that we will have cooperation with the suppliers and um and of different systems and so on so we can we will be in the center supporting our client with the information Yes, this is our target is to have a growth without exceeding 7% and operating margin exceeding 10% and the net debt should not exceed two times every year. And for 2024, we had a growth of 9% and operating margin of 8%. We didn't reach the operating margin of 8% and the The dividend of Groupen, as I mentioned earlier, should be around, the goal is to be 60 to 90% this year. We increased the dividend to 150 from one kronor, though it's slightly lower than the goal we have set up. But that is due to continue to be a strong, healthy company and still be able to do the investment we are seeing in front of us. Yes, thank you. That was all regarding the presentation. Time is running, but do we have any questions?

Yes, we have received questions from two persons, so we can take those. The first one is about the potential in the US and a bit about that.

Yes, good, good. Just by the history, we started off in Europe and when I was starting in New Zealand 17 years ago, I've been there quite long now, we were very... very Nordic, very weak out in Europe. We are built up now in Europe, so we been stronger and stronger. So we cover most countries in Europe and we're quite strong there. And 2020, we started off in the US. We started very quietly. We just have one employee there. And it took some time until we had the breakthrough, which we have had now. And we are profitable. And what we're aiming for now is to build up a small organization there to have a sales assistant and one or two more salespeople and build from there. But So we will continue not to do a big, big thing, but continue to build and make sure we are profitable and keep on that. right on the way we have now where we are profitable and build up a local organization. The way we're doing now is that we have one salesperson in the US that is served from the sales assistant in Europe and Asia. Now we will build up that in the US as well. So coming back to the question regarding potential, I think the potential is definitely there. We can see that our competitors is there, but we will take it step by step.

Yeah, good. Thank you. And then we also got two questions about the investments. When do you expect the new Bangladesh factory to be running at normal capacity? That is, how long would it take from factory completion to business as usual? And also, when can we expect the Portugal upgrade to be finished?

Yeah, starting off with Bangladesh first. Once the factory is running, we will invest. I mean, we will fill this factory. This factory will be much bigger in number of square meters compared to the old one, I would say in double size. But we will not fill up this one with machineries completely at start. We will take it gradually as well. Once we see the volume counts, we will invest in machineries and so on. And I think... The factory will be ready in Q4, Q3 next year, 26. From then until the factory is up and running completely, I would say another year.

Yes. And for Portugal? Yes, Portugal as well, yes.

I would say... end of 25, beginning of 26, I would say that is finalized. That is my best guess at the moment. We have not started, we have not come so far in the project. We just made a project plan there. And what happens now is that We just employed a new production manager that will be very into this project as well in Portugal. So it will take some time before this person is ever running. But I respect. But the big change is not that big change in Portugal as it is in Bangladesh, of course, as we will just change the layout of the factory and we will implement lean in this factory. And that will take some time. And of course, during this period, we will not stop the production.

We will continue at the same time we do the restructuring.

Thank you. Yes, and as we are running out of time, I think we unfortunately have to stop there.

Very good. Thank you very much for listening and taking your time. And looking forward to meet you again in the next Q1. Thank you.