Nobia AB (publ)

Thank you everyone for calling in this morning to Nobia's Q1 results presentation. The presentation today will be by our president and CEO Mr. Kristoffer Jungfeldt and our CFO Mr. Henrik Skogsfors. And with those words, please, Kristoffer, the floor is yours.

Thank you Tobias. Good morning everybody and thank you for joining. Let's start off with some key highlights for the quarter. In Q1, we're moving into a positive EBIT compared to a year ago and are taking a lot of important steps in the right direction, even if our core markets remain soft. To lift off a few positives, we've done really well in generating cash in the period, which increased by almost half a billion Swedish crowns compared to the same period last year. Cash flow from our operating activities was positive, whereas we normally have a negative cash flow in Q1 due to seasonality. And that is a testimonial to our efforts of driving improved working capital and liquidity, which is one of our main focus areas across all our business units. I'm also pleased that we see continuous improvement in gross margins across the group for the fifth quarter. The gross margin came in at 38.6%, which is the mix up to mass premium and strength and productivity to improve further going forward. Thirdly, we're materializing the savings up and about the plans that we have communicated and from the cost of programs that we launched last year. In the quarter, we released 70 million savings and the total cost of programs have now generated over half a billion Swedish crown savings the last one and a half to two years. Finally, and as the consequences of the above mentioned, we continue to make good progress in the Nordic profitability, where we steadily strengthen our EBIT margin through the improved consumer sales, gross profit and execution of our cost programs. With regards to the market, then the recovery continues in the consumer market in all our geographies, especially in Denmark and Sweden. We also experience growth in the mass premium segment, which is most of our brands play and which is positive for us. On the other hand, the product market continues to be soft and we do not expect any significant increase during 2025, but the rate of the decline is gradually taping off and in markets where consumers have been strong for a while now, like Denmark for example, we're starting to see much more activity with builders and tradesmen. Organic growth, we can add minus 6%, the Nordics was flat, while the UK had an organic decline of 12%, but a negative 3% on a like for like store basis. In the Nordic, the consumer sales is starting to trend positively, which proves that our strategy of pulling resources into this mass premium consumer segment is working. With stronger average order values in consumer, we also mitigated the volume decline in the product business. In the UK, we are building our order books in the quarter for dispatch during Q2, Q3, and as we have exited a large number of stores according to our strategy, we have fewer distribution points and lower sales, but the store closures will drive large cost savings throughout the next coming quarters, which Henry could come back to as well. Operating income came in at 16 million with a margin of 0.6%, and again the improvements was related to the progress in the Nordics. However, profitability declined in the UK where we took this extra marketing costs to drive sales during the import and winter sales period, and therefore we did not get the full impact of the cost savings this quarter, but expect to get the full savings from Q2 and onwards. Let me also add that we do not see any direct impact from the trade barriers as we do not export nor import anything from either US or China. If anything, we could be slightly helped by a weaker dollar, but that is marginal. We also have not seen any change in the consumer buying behaviors as of now, but we will of course continue to monitor the situation closely. That goes without saying. So if we move into the next slide please, please. So the kitchen market development in the Nordic region, and as I just mentioned, we continue to recover in the consumer market, which we believe is driven by a slight recovery of housing transactions and a pent-up demand for home renovations. We have continued positive momentum and improved football and design appointments, and we also foresee that various government grants in house renovations will support the demand for kitchen. We expect consumer growth to gradually also improve our business with the tradesmen, where we in some markets can see more activity, as mentioned just earlier. In markets with higher interest rates like Norway and UK, we experience recovery in the consumer segment, but at a lower rate than in the rest of the market. As for the product market, we still experience volume decline in Norway, Finland and UK, but in Denmark and Sweden, it is tapering off in the quarter. Judging from housing starts, as I said, we expect the product market to remain soft until the end of 2025. Then if we move over to the UK, it's quite similar to the Nordics with a recovery in the consumer segment, while the product market remains soft. On a positive note in the UK, housing transactions have started to increase and mortgage rates have fallen since a year ago. It should also be mentioned as a positive that some major UK lenders have eased mortgage affordability rules to enable additional borrowing for home renovation as well. We are also positive that more government-backed property developments are coming about, and can therefore see some increased activity in that segment as well. So, let's shed some light on our strategic priorities, which we have seen before, but we will reiterate these and give you an update on where we're at. First of all, maximizing cost efficiency. We remain set up to do this in current environments, and we are very pleased with the new organizational setup with the centralized operation, where we can still extract the scale benefits that we get in the group for local competitiveness. We have had good impact from the cost reduction initiatives at that, and savings have now surpassed the 500, it's up to 550 million, and we have run red savings of yet another 100 million to materialize during the rest of the year. To realize the full Nordic potential, the next point here, we have come a bit to strengthen the Nordic supply chain, and I believe that that team has done really well over the last 12 months. Now we have an important transition from Tidaholm to Jönköping in front of us, which is progressing according to plan, and we should shed some light on that as well. Also, in the quarter now to strengthen our finished business and lower our fixed cost base, we decided in April to close the Finnish factory to supply instead the products from Ørgud in Denmark. And the Danish product range is very well suited for the Finnish market, so we also expect to be able to gain some market share with this setup over time. It's been a month in its making, and even though it is always hard to see some good colleagues leave, I'm really pleased about the progression made by our Finnish and Danish colleagues. In the quarter, in Q2, sorry, we will take a cost of roughly or exactly 6 million euros, for sure, and expect savings of about 4 million euros per annum for this move. Finally then, the transformation of the UK business is progressing as planned, although the underlying market, especially so the product market, is definitely challenging whilst we do this transition. And also the product market is giving us quite high under absorption into our supply chain in the UK. We continue to close the old store formats that are very capital intent and replace them with smaller city centre stores for the mass premium consumer, moving into what we call the asset light model as we have talked about many times, which is an important pillar of our strategy. We have also had some good progression with our new partnerships that are coming along nicely, especially those with the Builder Merchant and Franchisee. And we are consolidating the brand Commodore into the Magnus business as of now, which is proceeding according to plan. We have also now exited the most unprofitable stores that were up for lease renewals, so we believe we're in a considerably better cost position now than a year ago. Our efforts to drive sales in consumer with higher average order value definitely is the right strategy and we see good development in front of us and have seen good development in consumer sales for the last 12 months. Then let's move to the next slide and talk more about Jönköping and the state of the art future oriented factory we have there. It's extremely exciting what we're about to accomplish in the new factory in Jönköping. The majority of the machine park is now in place and we are every day making huge progression in connectivity between systems and machines. Kitchen, sorry, component manufacturing and distribution of the same throughout the Nordic supply chain has been more or less completed and we are now optimizing those flows across the network. The next big step which we have started now in Q2 is to industrialize the frontal manufacturing and to have the frontals assembled together with the kitchens and consolidation of the kitchen order. Then there will be the next important step to deliver the fully assembled and fully consolidated kitchen directly to end consumers and that's something that we are ramping up now and we're in the midst of ramping it up and we do that in parallel to the other steps starting from May. As planned we expect that the transfer of the Mambodal volume will be completed during this year. I should also mention here that the investments remaining in 2025 amount to about 200 million capex before we're done and a 350 million cash flow impact of the tank. With that I hand over to Henrik to talk more about the financial supply region.

Very good, thank you Christopher. As you just highlighted Christopher we are pleased to see the gross margin improvement and increased profitability for the Nordic region. Organic growth was slashed compared to the first quarter last year. Despite continued pressure on our overall volumes in the product market we achieved a significant improvement in the yesterday average. Everything increased by 86 million to 109 million which is equivalent of a 5.9 percentage points improvement to 7.5 percent. This improvement reflects the impact of several initiatives including cost reduction efforts, improved supply chain productivity and as communicated in previous course the continued emphasis on the consumer segment. These actions show tangible results and positive steps forward. Our average order values in North increased supported by the continued shift in the sales mix between professional and consumer products which helped offset some of the pressure on overall volumes. Our gross margin improved by 2.7 percentage points reaching 36.6 per milliport despite the decline in the volumes and higher on-cost from the ramp up in Jönköping. The improvement is driven by operational efficiency gains in the Nordic supply chain, the favorable sales mix across countries, segments and products with consumer sales performing better than the product side. Both gross margin and also gross profit increased year together with cost savings in selling and admin expenses on back of the cost of programs and the ongoing cost discipline improved the adjusted EBIT from 23 million last year to 109 million this year. The EBIT margin increased to 7.5 percent. A continued very strong performance in Denmark was a major contributor helped by market share gains in consumer sales. Norway and Sweden also gradual margin improvement supported by higher average order values, operational efficiencies and our S&A. Finland continues to be a difficult market and we are actively working to adjust our cost structure. As part of these broad reports we communicated in early April and as Kusofia mentioned we have made a decision to close our national plant in Finland and move the manufacturing to our Danish factory in Ölgård. This is a step intended to increase the profitability in Finland. In the Nordics in the quarter we took 22 million as items affecting comparability primarily related then to the Nordic supply chain and in particular the transition to our new factory in Jönköping. So if we go over to the next slide please, the UK. The UK market continues to reflect the same underlying dynamics as we have seen in the Nordics. Growth in the consumer segment offset by declines in the professional segment. The organic sales in the UK declined by 12 percent in the quarter. If we adjust for the store closures sales declined three percent year-round. The consumer segment continued to show growth but was more than offset by double digit decline in the project and the trade segment. Despite the supply chain under absorption caused by the professional volume decline, growth margin improved by 0.4 percentage point to 41.3. This was driven by a more favorable sales mix and continued impact from our already initiated cost out initiatives. On a currency adjusted basis, S&A decreased by approximately 12 million. Our cost reduction efforts implemented last year are delivering plant savings although these have been partially offset by inflationary pressures and increased spending on online lead generation during the quarter to drive the very important sales in the winter period. EBIT for the quarter came in at negative 53 million compared to negative 11 last year. The impact from the sales decline despite the improvement in growth margin caused a drop in EBIT in the quarter. We are confident that the savings from the cost out programs during 2024 will continue to contribute to a lower cost base during the coming quarter. So if we go over to the next slide please, the financial position. We are pleased with the strengthened cash flow during the first quarter. Cash flow from operating activities was positive 28 million compared to negative 258 last year. Slightly higher EBIT was supported by improvement in working capital. The lower sales in UK resulted in a positive impact on the counter receivable. The cable increased on back-up timing compared to last year. As previously communicated, we are intensifying our focus on operational excellence through the not now so new operational structure that implemented in the over the last year. The key component of this is our ongoing initiative to reduce inventory balance. These efforts positively impacted the cash flow in the quarter primarily driven by UK and Denmark which also offset the planned inventory increase in Jönköping during the ramp-up phase for the new factory. So on an overall basis our inventory levels have decreased by 10% year over year. The operating cash flow including investments amounted to negative 85 million compared to negative 574 last year as Christopher mentioned earlier. Of these, investments in the quarter mainly related to the machinery for the factory in Jönköping. Total 139 million down from 324 last year. The net debt excluding leasing and pension obligation and also IFR 16 decreased year over year by approximately 0.4 billion to just short of 2.5 billion. Those are of course driven by the measures that we took last year. We did a divestment of the subsidiaries in Austria and the Netherlands. We did the sale and leaseback of the property building in Jönköping and the rights issue in April last year. The net debt increased by 241 million compared to the end of the fourth quarter last year. The quarterly increase is primarily related to the enormous disinheritability of cash flow during the first quarter and continued investment in Jönköping. That was all for me. So over to you again Christopher and next slide please.

Thank you Henrik. So looking at the priorities going forward we are very clear with our agenda. First of all we will continue to advance on the strategic plan that we have put in place. We have important period in front of us ramping up Jönköping factory. We are kicking on with the turnaround of the UK operations as we have addressed and we are also continuing to deliver well on our cost of program and this remains definitely a very high focus for us. In terms of operations we will continue to leverage on our strong brands and the new decentralized organization where we are to capture the growth that we see in the consumer sales and as you can see we have managed that well during the quarter. We have also as we said in the priorities managed to reach the average order values to a satisfactory level. We have increased our productivity and are continuing to launch productivity enhancing activities. We have been very disciplined with cost control and will continue to be so and as both myself and Henrik has mentioned we are very pleased with the strict working capital governance that we have had that has generated a lot of improvement in cash flow last quarter. So with that we open up for questions. Very good

operator please open up for questions.

Thank you as a reminder to ask a question you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question please press star 1 1 again. Please stand by while we compile the Q&A roster. We will take our first question and the question comes from the line of Sindra Sorbay from Arctic Asset Management. Please go ahead your line is open.

Yes hello good morning and congratulations with the very strong results in the Nordic. But looking at the UK the losses are actually accelerating and I mean with a negative a bit of around 50 million. How sure are you that you will turn around this with the savings announced at this stage? I mean you have cut a lot of costs during the year and it still goes more into dread.

Yeah hi well first of all we are as you said happy and pleased about the Nordic results and improvement but we can't of course be happy with making losses in the UK. In the quarter we are building the order books because of the very important winter sales period which is also impacting our cost base obviously and at the same time we are pulling down our cost base quite significantly in the UK. So just looking at the quarter in isolation it looks like we don't have any cost saving measures coming through and therefore I think that a quarter like this is not representative from where we believe we stand in the transformation of the UK and therefore also as alluded to in before here we expect higher savings to come through the UK business going forward this year. And again we are confident with the turnaround that we're doing in the UK and the fact that we've moved out of the very capital intel stores that we have in the UK.

Yeah sure so then it's partly seasonality because historically in first quarter has been quite poor but what you're also indicating is that not all of the cost cuts are at this stage yet reflected in the P&L.

Yeah I think for the UK it's hard to look at the quarter in isolation because on the STNA side you don't see any marginal improvement however the underlying improvement in the STNA is much higher and is mitigated by our activity to drive more marketing in the to support the winter sales period.

Yeah sure just a final follow-up on that one. I think in earlier call you said that there were approximately 100 million more of cost savings to be realized during the course of 2025. Could you give us a split between those 100 on the Nordic versus the UK?

It's around 50-50. A little bit more in the UK than in the Nordics. We have done more restructuring last year in the UK than we did in the Nordics if you remember the release we did in end of June last year. So more of it is more biased versus the UK of the remaining 100 that Christopher mentioned earlier in the call.

Yeah and in those 100 savings from the 4 million from closing down Finland it's not included that comes in addition right?

No it's not it's not included in this because that's what when we were talking about the software show before that was what we communicated last year we did we had one communication in the second quarter and one communication in the third quarter when Christopher presented earlier in the call we were talking referring to those kind of programs. Finland was taken after the closing of the first quarter so that is something that we will follow up with the external market view second quarter third quarter going forward so not including in that amount no. And that will

be 100% savings in gross margin.

Yes

not in the open.

Yeah Finland yes.

Okay thank you. Thank you. Thank you. Once again if you wish to ask a question please press star one one on your telephone. We will take our next question and the question comes from the line of Marcel Erklang from Handelsbanken please go ahead your line is open. Good morning gentlemen I

agree with Sindra great great great progress you've made well done. A couple of questions from myself as well you mentioned 350 million cash outflows related to young shopping can you give us more guidance on timing of these cash outflows?

Yeah the timing I would say that they are pretty evenly spread for the remainder of this year because as you know we the majority of our investments we have already done and we have some remaining investments coming here but it's approximately 350 and 200 more that will be booked as capex and 150 of them we already have as account tables and so it's evenly spread I would say if we're going to face it over the rest of the year.

Thank you and the remaining 100 million that will be paid through Nobia when do you expect those?

It's also coming here the majority I think we mentioned that in the last call also that what we have said is that we we will get them during 2025 we mean from the buyer of the property correct that's what we're referring to. Yeah we have not received any money during the first quarter which we knew we shouldn't but we are expecting some money here in the second quarter but primarily it would be Q3 Q4.

Thank you and then a follow-up question regarding UK you mentioned store closures now you had 170 stores compared to 191 a year ago do you have any lease expiry during 2025 or the cost savings coming in the remainder of the year is related to the stores that you have closed?

Yeah we have leases coming up for renewal also this year I think not an exact number top of my around 10-15 the majority of the cost savings we come from the source that we have already closed and basically walked out of now both in Q4 and in this quarter.

And on average how long are the leases for your UK stores 171?

It varies but between mostly around five years break.

Five years remaining from now?

Oh no no the lease the leases previously our leases were written on much longer break clause but nowadays we have negotiated them to around five years break clause over losing the new day.

So the average remaining time somewhere between two and three years.

Yeah yeah I can say that yes right but it is like you said that when we when we prolong a new lease we usually come as we have the possibility to break the contract in five years so we are shortening it compared to the history when we had a longer contract.

Yeah and then a question on Jönköping you mentioned in your report also in the presentation complete kitchens in May is that the fully automated production process that you will also expect at the end of the year?

We will gradually you know have more and more automated flows in the beginning there will be a lot of manual supervision let's call it and some manual hands-on activities before we have to be automated all the flows and optimize but the machines are running and as I said the system connection with machines is also working in a way that makes me very confident that we have invested in the right places.

Sounds good and at the end of 2025 how many kitchens per minute will leave the Jönköping factory?

Oh that I can't I don't have the exact figures so that I need to come back on on exactly by a minute on the volumes that we will have for just Marlboro. This is the transition of the Marlboro volume into into Jönköping but then you know when we also have ramped up you remember according to the plan we will then move in with with some volumes for HGH as well that is to be delivered in Swedish Sweden HGH volume for Sweden and Norway and when the flows are when all those flows are in place we talk about two kitchens a minute.

Sounds good thank you that's all for me.

As a reminder if you wish to ask a question please press star 1 1 on your telephone. There seems to be no further questions at this time I will hand back for closing remarks.

Very good well once again thank you everyone for calling in and see you next time on July the 18th for our second quarter results.