Nobia AB (publ)

Welcome everyone and thank you for calling in to this presentation of NoBS third quarter results. The presentation today will be done by our CEO Mr. Kristoffer Jungfeld and our CFO Mr. Henrik Skogsfors. And with those words, please, Kristoffer, I hand it to you.

Thank you Tobias. Good morning everybody and welcome to this quarterly update where we start with a summary of quarter three, which was a mixed quarter for us.

Here we go.

On the one hand, we are confident enough to say that the consumer market has started to grow again in our most important market and especially so in Denmark. This has resulted in growing number of design appointments and more activity in general in the store network, albeit this is still from a historical low point. On the other hand, we have had continuously large headwind in the project market where the lack of housing reasons is impacting volumes, which in turn is leading to some under absorption in our business. Given our dependency on the new build market, this is impacting profitability and we are strengthening our efforts to adjust the company accordingly. In total, organic sales was down 6% in the quarter with the Nordics declining 11% on the back of the product market and the volumes in that market were down double digits. Whilst in the UK we had flat sales after strong performance again in consumer sales, whilst the trade and product sales was very soft in the quarter. Gross margin improved despite the shortfall in volume and we are pleased about the gross margin performance in the Nordics where basically all operational livers trended well in the quarter. Average order values were up, productivity was up, savings were up and kitchen delivery on time in full was very good and that's also including TIDA home where we have had some issues over time and we are now confident that we can keep this going, this strong momentum that we're having. In the UK we had slightly declining gross margin mainly due to the volume driven under absorption and slight decline in average order values in the consumer sales and our strategy here is to remain improving the average order values and we are now implementing further initiative to strengthen our premium product proposition in front of winter sales season. We are also pushing ahead with our cost reduction programs and even if we have tougher comps we have managed to reduce costs quite considerably and instead that we will continue to do more to cost reductions until market recovers fully. So in the quarter we have executed a new cost loss program in connection with our reorganization which I will come back to a little bit later. Currently adjusted the FDNA declined by 6% in the period. EBIT then came in at 19 million Swedish crowns with a margin of 0.8%. Operating cash flow came in at 154 million sec negative. The cash outflow is mainly related to investments in yarn shopping and seasonal changes in working capital and Henrik will come back to that later with more details and describe how we intensify our efforts in working capital improvements and cash flow improvements. We're also advancing on our strategic priorities after five years of intense work we are very close to getting yarn shopping operational which would be a breakthrough not just for us but we believe it would be a breakthrough through for the entire industry. It has with no doubt been a challenging environment to deliver these large programs in the midst of COVID and inflation and demand shock etc and we are not yet fully done but we are pleased about the progression on the program and we will be very well positioned when they are fully concluded. We have also done a major reorganization in the quarter as just mentioned. We want to push out more accountability to our local entities and give us the ability to act freely within the framework and making decisions much closer to our customers. We believe this will further strengthen our operational excellence and we have seen encouraging results already and I believe that the organization has taken this on with large engagement and drive especially centered around our strong brand. We take the next slide please and here we go through our strategic priorities where we will still have the cost initiative on top of our agenda and again we'll have that as long it takes and the organization is very well set up for this. From our previous programs we have lowered run rate cost by a total of 400 million swedish crowns which is slightly above our target and in the quarter we launched a new program addressing mainly nordic sales organization and taking further steps in transitioning UK to an asset-like model. The program will be booked as I can see in comparability in the quarter and generate savings of 85 million sweds which in total then with the Q2 program will be an additional saving in the group of about 300 million. Then to realize full nordic potential we work intensively to get jönköping operational and start transferring volume from tillahom to jönköping. In this transfer we also harmonize the entire range of product in the nordics which will give further benefits in sourcing and complexity reduction over time. In UK the transformation is going according to plan where the UK team has done a good job in closing manufacturing in Halifax and stepped out of another 20 unprofitable stores this year and we are currently evaluating further store closures. We continue to drive improvement in higher average order values but in the quarter this mainly the result of better segments mixed as we grow the consumer sales and Henrik will talk a little bit more about that. As stated before we need to improve proposition for our premium products in front of winter sales which starts soon and we will also do selective price increases. Take the next slide it will go through some of the market development. If we start with consumer segment in the nordics this segment starts to look slightly better however again then from a very low starting point with interest rates now coming down and house prices stabilizing and house transactions picking up in our important markets we are more optimistic now that the recovery is gradually coming about in the consumer sales. However as for the project market we do not see any signs of a more general recovery. Denmark is looking slightly better than Sweden and Norway and we're not concerned about the construction market coming back in those markets. We believe now that it's more requested. We also know that when consumers start to be more confident we would get the trade segment picking up which is a very important segment where we have a strong proposition in the nordic market. However we are concerned about the recovery in the swedish construction market where it seems to be more structural issues that could impact housing for a little bit longer than in the rest of the markets. If we go to the UK and here you will see it's very similar trends as for the nordics with the consumer market it's clearly picking up from low levels. Also macroeconomics is starting to help the market recovery in the UK with the lower market rates and increasing number of housing transactions. However as for the nordics the housing stocks in the UK remain on very low levels. We are cautiously optimistic that we will see a gradual recovery in housing stocks from now and we also have seen that the government is initiating very concrete initiatives to ignite the housing stocks again and so far we've not seen it come through through the numbers but it's been a very low activity during fall. However long term we know that there's a big shortage of housing in the UK which will be beneficial in the long run. So we wanted to give you some more highlights on our strategic initiatives so if we move to the next slide. First of all the state of the art new yarn shopping factory and we are obviously very excited about getting our factory operational. The building is now 100% completed in accordance with all the high sustainability standards that we set for the building. Most machinery is in place and most of the machinery are operating on the standalone basis. The final push we do now is to get the -to-end process for the Marlborough rigid kitchen operational. We have managed to do with the flat pack range in the Nordics so roughly 10% of the Nordic volume is already today being manufactured in yarn shopping and the next big step for us is to start to transfer our Marlborough kitchens from Tidaholm into yarn shopping which would rather happen in 2025 with starting January planned and also here on the page you can see and I reiterate some of the huge benefits we will have from it where we can customize kitchen at large scale. We have the absolute latest automation and digitalization technology in the factory. We will step change performance and efficiency, flexibility, use our scale and improve lead time and improve quality design and also that we are very proud of have a strong sustainability footprint on our products because the Nordics. We also want to give you a short recap if you go to the next slide please. Short recap on our manufacturing footprint in the Nordics and how this investment would play a role in that. So today we have five factories operating in the Nordics. The Finnish Nassbala and the Egerdal have a capacity of about 500,000 cabinets to 300,000 cabinets a year respectively per factory and they both serve the local markets where they are and currently we have a workforce that has been slightly reduced in those factories to about 100 to 150 ft depending on the site. Tidaholm and our good being our larger entities have a max capacity north of 1 million cabinets and currently about 350 to 400 operators per site and in Jönköping we are now currently running 200,000 cabinets per year through the factory with a target to reach north of 2 million cabinets over time and in full ramp up the idea is that we have transitioned the Marlboro volume and transition the Danish volume for the Swedish and Norway markets and that will lead us to the margin enhancement that you see here to the left of about three and a half percentage points where of two and a half comes from the manufacturing and another one from transport and logistics and on top of that we expect further sourcing and product optimization benefits over time. So just finally on Jönköping the next slide please. So again the finalization of the new factory is progressing well. We have industrialized panel manufacturing flatback cabinets and certain types of front tools. Now we are in the industrialization mode of further front tools and full kitchen assembly. The remaining capex is about 650 million Swedish crowns and we also have about 300 million crowns from the same leaseback transaction to get back. And again full ramp up during 2025 when the manufacturing is cancelled from T-Line. We also wanted to shed a little bit of light on the UK transformation so if you move to the next slide please. This slide you've seen before and it's fair to say that it's been a challenge to drive this transformation in an underlying difficult market but we start to see green shoots in many areas and in order to migrate to this asset light operating model that we have talked about we have concluded both on phase one and almost all of phase two and that has entailed some major changes to the business. We have amongst other exited and profitable social housing business. We have downsized the staff in general and flattened the organization. We have consolidated our supply chain from five to two sites and that means a total many reduction over 1000 FTEs by now. We have also stepped out of about 15% of our store networks on those stores that were unprofitable and that equals actually 20% of the square feet store space. We also happy to have gotten some new successful partnerships which some of them are in trend models but early days looks very promising and we are also successfully targeting the slightly more affluent customer group with high average order values which is the main contributor to our improved sales in this year for the consumer segment. As we continue to advance toward this asset light operating model we will see stronger average order values to a more affluent customer base and we will start to see improved profitability coming through from our UK business as well. Now over to you Henrik to run through the regional results in more detail.

Thank you for that Christoffer. Let's start with the Nordic region. The organic sales declined by 11% showing slight sequential improvements over the second quarter. Despite a significant drop in the business to business volume and a decrease in organic growth, Nordic reported a higher EBIT than the same quarter last year. The average order values were bolstered by a federal mix between mix shift between the business to business to business to consumer which reported the top line. However, the overall volume decrease negatively impacted the sales performance in all countries in the Nordic region. Gross margin improved by 3.6 percentage points reaching 36.6, a satisfactory outcome considering the substantial volume decline we had in quarter. This uplift is attributed as Christoffer eluded you before to better productivity in the Nordic supply chain, the favorable mix across the segment, countries and the products with consumer sales performing better than the product segment. The improvement was partially offset by unfavorable -in-reference. Despite the uplift in gross margin, gross profit declined due to the business to business volume. Targeted cost reduction initiatives implemented both previously but also during the quarter along with a strict no-spend policy in Novia helped control FDNA expenses which lifted EBIT above the level of the third quarter in 2023. EBIT increased from 92 to 104 million per quarter with an EBIT volume improvement from 6.2 to 8.1. Strong performance in Denmark was the key contributor to this improvement. During the quarter, we were 43 million checked as items affecting comparability. These costs relate to the transition to the new factory in Jönköping and the implementation of an additional cost measures in August. The Q3 program will start to generate savings now in fourth quarter and will reach full run rate savings of approximately 40 million SEK by the end of the third quarter in 2025. So please, next slide please. UK reflected similar underlying trends as those in the Nordic region with growth in business to consumer and a decline in business to business. Organic sales in the UK however, flat in the quarter compared to minus 17 percent in the same quarter last year. Following growth during the Winterfell campaign, the retail segment achieved double digit growth which was offset by a double digit decline in both the project and the trade segment in UK. The gross margin declined by 1.7 percentage points to 38 percent flat. Positive segment mix as we mentioned was offset by under absorption in the supply chain. STNA expenses decreased by approximately 22 million SEK in the quarter, primarily due to the impact of our cost reduction programs. However, costs remain emulated in relation to the current sales volume which led to further cost cutting measures in August. Part of our strategy to reduce cost involves shifting to a more asset-like model in the UK with fewer own stores and more franchises and partnerships. This approach aims to lower our fixed cost base and reduce vulnerability to significant volume fluctuations. Airbus for the quarter came in slightly below third quarter last year. As outlined in the quarter report, we recorded 9 million SEK as affecting comparability for the quarter. These costs are related to additional headcount reductions within the administrative areas of the UK business. The cost reduction is projected to start January savings also now in the fourth quarter and which is saving around 20 million by mid 2025. Let's go over to the next slide please, the financial position. Cash flow from operating activities was minus 20 million for the quarter, representing a decline of nearly 200 million -over-year. This decline is primarily attributed to items affecting comparability this year of 56 million SEK along with the previous year's positive impacts from the divestment of the Dewsbury project in the UK. The movement in working capital from the end of the second quarter is consistent with the movement observed last

year.

Accounts receivable decreased on back of lower sales in region north and accounts payable decreased on back of cost savings and reduced purchasing lowering the accounts payable balance. Inventory affected cash flow positively. The total inward level has decreased by approximately as north of 200 million SEK compared to previous year. As Christopher mentioned earlier in the call, we are intensifying our efforts to enhance operational excellence with our new operational structure in place including continuing to reduce our inventory balances. We have a large focus on working capital in the group. The operating cash flow including investments amounted to 154 million SEK compared to negative 305 million last year. On this investment in the quarter primarily related to the new factory for the Jönköping was 138 million which is declined from last year's 484 million. As Christopher mentioned and showed you earlier, we are in the final stages now to complete the factory in Jönköping. Net debt excluding leasing and pension obligations decreased year over year by 719 million to 2 billion 320 which is driven by the divestment that we did of our business in Austria and the Netherlands in February. The sale of lease back of the property in Jönköping and the rights issue executed in April. Net debt increased by 386 million since the end of the second quarter. The quarter increase is primarily related to investments in Jönköping and the working capital swings that we usually have in the third quarter. The completion date for the factory is approaching and we still have approximately around 700 million SEK in ongoing outflows. However, it's important to note that we also have an outstanding residual balance of about 300 million from the buyer of the property and we are now in the final stages of fulfilling the terms of this agreement. So a major part of the amount that is hold back by the buyer can be released. That was all on the financial position. Over to you again Christopher. Thank you Henrik.

Just to summarize on our priorities going forward. Again, we are going to obviously advance on our strategic agenda with a very important ramp up of the Jönköping factory expected for 2025 starting now in January. We're also working intensively with the year-round operations including a review of further activities to advance to the asset life model as soon as possible and also we have a strong focus to deliver on our cost of program in order also to strengthen profitability and strengthen our balance sheet and we will continue to do so until we see a stabilized market recovery. But also we are increasing our efforts to leverage the daily operations in the new decentralized organization. We will capture growth in consumer where we see the customers returning gradually to our store networks. We will increase our average order values through capitalizing on our strong brand and using the product introductions we have done over the last couple of years now to drive consumer value. We are working on productivity enhancing activities. Our supply chain made some great achievements as of late and even so in the volume environment that we're currently operating in. We will have very disciplined cost control as Henrik was mentioning and this will be as important as ever and as you also heard from Henrik we are intensifying our targets on working capital and enhancing strict working capital governance especially to preserve cash flow and again to strengthen our balance sheet. Thank you very much for listening in. Now over

to you Clea and over to questions from the audience please.

Thank you. As a reminder to ask a question please press star one one on your telephone and wait for your name to be announced. To withdraw your question please press star one and one again. Once again that's star one and one if you wish to ask a question. Once again please press star one and one if you wish to ask a question. There are no questions at this time I would like to turn the conference bus to Tobias Norvi for closing remarks.

All right well if we don't have any questions from the audience then we say thank you from our side and welcome back on the 4th of February for our full year results presentation. Thank you everyone. Thank you.