Nobia AB (publ)

Good day and thank you for standing by. Welcome to NoBR Q3 Report 2025. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 and 1 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Christopher Longfelt, CEO. Please go ahead.

Good morning, everybody, and thank you all for joining. We start with some key highlights for the quarter. And similar to our last quarter, we continue to improve operating performance and strengthen our EBIT and cash flow, despite soft product markets. And even on these historical low levels, we have demonstrated that we can operate above 8% in the Nordic region, also on a rolling 12-month basis. With regards to group net sales in the quarter, it declined organically by 3%, driven by volume decline in the product segment in both regions. and especially in the UK, which also led to further underabsorption in our supply chain. However, and on a positive note, we had growth in Region North for the first quarter since Q3 2022, which concludes a period of 11 consecutive quarters of decline in the Nordics. Also, our continued growth in the consumer segment is promising, and we are encouraged by the growth in store visits and kitchen design appointments. We also continue our mix up to higher value products and therefore improved average order values, which also strengthen gross margins. Gross margin of 38.6% in the quarter is one percentage point above last year, primarily driven by improvements in UK, but also supported by improved average order values in the Nordics. Gross margin was then negatively impacted by the under absorption in supply chain across both regions. We continue to generate savings from our cost-out programs, including the store closure programs in the UK. We recorded another quarter with large improvements, and the total savings from the programs now exceeds 650 million Swedish kronor. Having said that, the year-on-year effects will taper off from here, and we do not rule out that we have to introduce further cost initiatives as long as the market remains soft. Operating cash flow came in at 102 million SEK. We are pleased with that improvement versus last year. And this is something we have worked very consistently with over the past 12 months. So it's good to see that we get solid traction on our initiatives. On October 21st, we inaugurated Nova Park in Jönköping. And it was really a pleasure to see the huge interest in this new facility. We had over 1,000 customers visiting us over two days. And on the day, we also launched two new important trademarks, which I will come back to. And these trademarks also underline our commitment to product innovation and design for the future through this site. As we pre-announced last week, we made a 1.9 billion non-cash impairment of our UK operations, which mainly refers to intangible assets. And we are continuing our efforts to transition to more asset-light operating models in the U.K., but we will also look for further strategic options for the U.K. operations. And Robert will come back here a little bit later on the impairment. Let's move to the next slide, slide number three, which is the kitchen market development in the Nordic region. So the gradual recovery Consumer sales continues, and we are encouraged by the latest stats of housing transactions, growing consumer confidence in general, and government grants that support home renovation, especially in Sweden. However, the consumer market only represents about 20% of our volume. With regards to the product market, where we have about 80% of our volume, we experienced another soft quarter in Q3, and it is clearly so that housing starts have not yet increased materially. We are, however, seeing higher levels of activity in areas such as meeting with architects and quote revisions, et cetera, but it will take some time before this materializes into firm kitchen sales. In addition, we believe there is starting to be a significant demand across many parts of the Nordics, which should eventually translate into growth in this segment. Next slide, please, slide number four. The kitchen market in the UK. In the UK, we have a similar pattern to the Nordics, where we're seeing some signs of optimism in the consumer segment. However, the product segment remains particularly soft in the UK. We believe that high interest rates continue to burden house and starts and home renovation as many homeowners choose to delay projects until financing conditions improve. It's also an ongoing uncertainty around government-backed initiatives, particularly for high-value purchases and for residential property developers. And overall, we believe this has led to more cautious market in Q3, even though we believe the underlying demand remains. Let's move over to strategic updates, slide number five. We start on the top again. Very good return on our cost of programs carried out the last couple of years, which together have rendered savings north of 650 million. But given where the market is and our commitment to the leverage, we will continue to rationalize from where we are today with strong cost discipline. And again, we do not rule out that we need to take some larger steps also in the coming quarters to reduce costs. As stated already, we have had good improvements in working capital and We are very pleased that our initiatives for the last 12 months have started to pay off. With regards to realizing Nordic potential, we need to streamline our supply chain, which is well underway. We successfully closed our Finnish factory in the quarter, well ahead of long-term planning, which will start to generate savings already in Q4. We are looking to close down processes in Tidaholm as we are transferring volume gradually to the new factory in Jönköping. And we also expect to start to generate savings from the new optimized K2020 platform as we go live in Norge Park. With regards to transforming UK, we continue to transition to an asset-light model by closing the large non-performing stores consolidate supply chain and sign up partners to distribute our magnet products and it's absolutely critical to get into this new operating model and We believe that the team has done a really good job over the course of the last year Although there is still a lot more to be done foremost it has been challenging to exit parts of the store network and it has been taking longer than we were expecting and And we have now exited roughly one third of the store space, but we still need to do more to get into the desired model. Given these challenges coupled with soft market conditions and therefore prolonged financial recovery, we are impairing 1.9 billion Swedish crowns related to the UK business. And again, we have initiated further strategic reviews to strengthen profitability. Take slide number six, please. The successful consolidation is ongoing in the Nordics, and as I referred to earlier, we closed the Finnish factory in Nastola in the quarter and took another important step on this consolidation journey. Apart from the cost benefits by doing this, we also introduced a more competitive product range by using the HTH range. which the Finnish consumers have appreciated a lot, and it has also been important to our B2B customers. These products will be delivered from Denmark. Some of the B2B customers in Finland also have Nordic presence, so it makes a lot of sense for HTH to provide the same products and service levels across the entire Nordics to these customers. And again, we believe this transition will generate savings of about 40 million SEK annually. If we move into the next slide, please, the ramp-up of Nobia Park, the new Nordic manufacturing facility in Jönköping. First of all, I'd like to thank our customers and suppliers that participated in the inauguration of the new site. It was a very important day for Nobia where we had the chance to showcase the latest manufacturing capabilities in the kitchen industry, but also showcase our new products with outstanding quality fit, fill, and finish, and also world-class sustainability credentials, which you know is with really incredible performance and sustainability credentials. And PrimeShell is the latest technology for selling products, sealing products against moist breakage. And we have already begun to distribute these products features across the entire Nordic network and will continue to do so in a larger scale the coming year. As we currently have NOBIA Park to manufacture and distribute components to about 30% of the network. So we have in a way already established this site as a central hub for NOBIA. With regards to food kitchen assembly and distribution for Mabedal, we are in the midst of ramping up production, with the first assembled kitchen being manufactured and distributed in August. There is, of course, a great deal of training and fine-tuning underway as we work toward industrial scale in this process over autumn, so that we can, or NOGA Park can effectively offload production from Tida Home, which is the current site for Mabedal. Can we ask you, Robert, new on the job, to update us on the regions?

Yes. Thank you, Kristoffer. So moving on then to page eight, starting with the Nordic region in the third quarter. And as highlighted by Kristoffer, we are pleased to see a positive, although small, organic sales growth in the quarter of 1%. versus minus 11% the corresponding quarter last year. In the quarter the average order value increased supported by the continued shift in the sales mix between consumer and professional products which helped offset some of the pressure on overall volumes. Looking at the individual countries in the Nordic region we saw continued strong performance in Denmark supported by strong and profitable mix across B2C, trade and social housing. In Norway, we saw a modest sales growth of 1%, while Sweden saw a northwardly margin improvement, supported by higher average order values, operational efficiencies and lower SG&A costs. Looking at the gross margin then, it improved a bit, 36.7 versus 36.6, explained by the positive segment mix and also the cost out activities despite them under absorption and higher depreciation in the supply chain network. Looking at last year it came in roughly flat at 219 million SEK versus 288 the corresponding quarter last year where inflationary pressure were mitigated by cost out activities. Adjusted EBIT came in a bit lower than last year, 99 million versus 104, primarily related to lower gross profit caused by lower nominal sales levels. On the currency adjusted basis though, EBIT in the Nordics came in flat compared to last year. And then final remark on this slide, during the quarter we recorded 39 million as items affecting comparability, primarily related to the Nordic supply chain and particularly then the transition to our new factory in Jönköping. If we then move to next slide, slide number nine, looking at the UK region, the UK market continues to reflect the same underlying dynamics as we've seen in the Nordics, i.e. growth in the consumer segment offset by declines in the professional segment. Organic sales in the UK declined by 7% in the quarter. If we adjust for the store closures, sales decline was actually 4% year over year. The consumer segment continued to show growth, but this was more than offset by double digit declines in both the trade and project segments. Despite the supply chain under absorption caused by the professional volume decline, gross margin actually improved by 280 basis points to 40.8. This was driven by favorable sales mix and continued impact of our cost out initiatives. If we look then at the SG&A on a currency adjusted basis, it decreased by approximately 41 million SEC. Non-carriage adjusted, it decreased by 66 million. Our cost reduction efforts implemented last year are delivering planned savings. Looking at EBIT then, EBIT for the quarter came in at 2 million compared to minus 49 million last year. Despite the uplift in gross margin, the gross profit value declined on back of the sales decline, which however was mitigated by the lower SG&A in the quarter. As previously announced, and as Christopher mentioned in his opening slide, in the quarter we recorded a non-cash impairment of the UK operation amounting to 1.9 billion SEK, largely related to intangible assets, which are then included, this item is included in the items affecting comparability. 0.3 billion SEK is recorded in region UK, and 1.6 billion SEK is recorded in Greece. With that, we move to the next slide, slide number 10, looking at our financial position. In the quarter, we're pleased with the strengthening cash flow. Cash flow from operating activities was positive, 182 million, compared to negative, minus 20 million last year. And this was then supported by an increased EBITDA of 53 million and then reduced seasonal impact from working capital. As previously communicated, a key component of our focus on operational excellence is our ongoing initiative to reduce inventory balances. These efforts positively impacted cash flow, primarily driven by the UK, but also in the Nordics, offsetting then the planned inventory increase in Jönköping during the ramp-up phase of the new factory. Overall, our inventory levels have decreased by 11% year-over-year, or 128 million SEK. If we look at the operating cash flow, including investments, it amounted to 102 million SEK compared to a negative minus 154 million last year. Of this, investments in the quarter, mainly related to machinery for the factory in Jönköping, totaled 83 million. which is down from 138 million last year. Finally, then, if we look at net debt, excluding leasing and pension obligations, it increased year over year by approximately 325 million SEK to 2,645,000,000. Compared to the end of the second quarter, net debt increased by 146 million SEK. As mentioned in the second quarter call, in July we received an additional 70 million SEK from the buyer of the factory building in Jönköping. And as Christopher said, there is approximately 40 million SEK outstanding before we have received full payment for the building we divested last year. With that, I hand over, I return to you, Christopher, for going through slide number 11.

Thank you, Robert. So the priorities going forward is to continue to advance on our strategic agenda, obviously, where the ramp-up of Noga Park in Jönköping is critical to us. We will also continue with the turnaround of UK operations, where we will include further strategic reviews. And we need to continue to deliver on our cost of programs. We will also leverage on our strong brands, as communicated before, to strengthen the operational leverage and EBIT, capture growth in consumer sales with the proven model, where we also have shown that we can increase average order values. We will continue with our activities, discipline, cost control, and, of course, the strict working capital governance. And with that, thank you, and we open up for any Q&A.

Thank you, Christopher. As a reminder, to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by as we compile the Q&A roster. Our first question comes from the line top, Adrian Almond from Norda. Please go ahead.

Operating cash flow divided.

Hi guys, good morning. Odin here from Nordea. A couple of questions from my side please. So firstly, regarding the strategic review here of the UK business, are there any additional cost savings programs that you can and believe that you can benefit from? If so, what numbers are we talking about here? Like what more could you do to reduce the cost base in the UK? And also in regards to the strategic review, is there any possibility of just spinning off the UK business?

Okay, so if I start and then you fill in, Robert, if you may. When we are in the midst of the strategic review, obviously it's very difficult or if not impossible to answer on that right now. But what I need to say is that we continue with the efforts towards this asset type model and that's usually important for us and also to come out of more cost, which we certainly believe is possible. But again, we are conducting at the moment further strategic reviews for the UK business.

Okay, thanks. Second question here then. Could you give us sort of an updated timeline here on completing the transition from Tidaholm to Jönköping? And kind of what efficiency gains are we expecting here? Are those still the same as previously expected? And kind of when do you expect to have sort of filled the production capacity in the new factory?

Yeah, so with regards to the return for... for this manufacturing facility, we still believe that we will achieve the desired returns. And they are obviously based on the scale. And we are now wrapping up the Marbodal production. And the next one to go live is the parts of the HTH brand in Sweden, Norway, and Finland. gradually to look into exactly how that transition will be done, and I have to return with more details on that. On a positive note, we believe that we can manufacture more of the components from Jönköping than what we previously have said. And also, in the beginning of this program, we did not have really in the plans or in the calculations to close the finish factory. So from that, there will also be some benefits coming through in Jönköping, not at least on the component side. So we are confident in the long-term kind of achievement of the targets with Jönköping.

Okay, thank you. Last question here. Could we also have an update kind of on the cash position here? You have some, what, 750 million left in the credit facility? You got it for some 150 million in cash outflow in the remaining of the year, but also some gain to be withheld of some 40 million from the salience back transaction, right? But when heading into next year, kind of what CapEx needs or cash outflows are you expecting?

But again, we don't give any guidance as such, but we feel comfortable with the cash position we have now and also for... For the reminder of the year, you can look at the past years as well, and I think we're in a good place for that, even if we have some outlays for the Jönköping factory, which is about 60 million more for CapEx and about 150 million from a liquidity perspective.

Okay, perfect. That was all for me. Thank you. Thank you.

Thank you. Just a moment for our next question, please. Next, we have Sofia Soling from DMB Kargini. Please go ahead.

Hi, thank you. Thanks for taking my question. So perhaps maybe a first question about this $70 million that you received from the buyer of the Janschöping property. Completed in the cash flow statement, where is it recognized? Is it in the net working capital or if you can just give some details on that?

I think, Sofia, we have to come back to you on that specific question. I will, together with Robert, look into exactly how it's been recorded.

Okay, but just to confirm, it's through the balance sheet and not through the operating process.

Yeah, yeah, yeah, it's through the balance sheet, absolutely.

Yes, okay, great. And then just another question on items affecting comparability. So you mentioned that a major part is non-cash impact, but how much is cash impact by this item affecting comparability?

So you mean the 1.9 billion impairment we did?

No, I mean, like the total items affecting comparability, you mentioned that the major part is non-cash impact, but I would assume that perhaps the transition cost to Norga Park may be cash impacts, or should we view that about 40 million or 50 million is impacting cash flow?

Regarding the rest of the items affecting comparability, that is not the impairment. then about 30 million of that is cash.

Okay, great. And then I have a follow-up question, an audience question actually, on the transition from the home to Jönköping. So maybe I put it in another way, the question. So when do you expect to close down to the home fully? Is it into 2026 in Q2 or perhaps later? I know it's difficult to say when you get full capacity or speed in Jönköping, but do you have a timeline when you expect to not have this cost related to the whole?

Yeah. But we're doing everything we can now to ramp up as fast as absolutely possible. And I think that we're doing good progression with that. There is a gradual kind of movement between Tidahom already today to offload Tidahom on processes which we believe from an assembly point of view that we will finalize early next year definitely and there's also ongoing progress of moving over components from Jönköping into Tidahom. So we are well underway on that transition. There will be In Sida Home, we will continue to have very few but high-value processes for the part of the range that will not be transferred to Jönköping. For example, the very high-value hand-painted products, etc. There will still be a little bit of operations in Sida Home during 2026. Okay. That's the one we refer to, Tidaholm Trä Center, to be clear.

Okay. And, yeah, just a follow-up question on the margin in the Nordics. You did a good presentation there, but just to understand, so you have 1% organic growth. You see a positive mix here, consumer sales versus project sales. Just the gross margin improved year-over-year, and you mentioned the six-fold selling and admin cost reduction. But year-over-year, the adjusted EBIT margin is down 30 bits. So do I understand it correctly that this is more related than to ethics impact, or what are we missing here?

Primarily, yeah, the ethics impact that Robert mentioned was just like-for-like. We're on par with last year. But the main difference from last year is the volume in the product business. which impacts the absorption in our factories. And that has a negative effect on gross margins, really. So the true effect we get from mixing up to higher price points in consumer sales has a positive effect, but it doesn't fully mitigate the drop in product volumes.

Okay. Okay. And yeah, just a final question from my side on the UK business engagement and did ask this or actually two. Did I understand you correctly that you have completed one third of the stores in UK that transformation or the remaining stores one third needed to be transformed to this more? Yeah, we have like type of model.

We came out of about one third of the store space already. And there's more to be done on that side, yeah. And that's why you would also see cost reductions in the UK in the quarter.

Yeah, okay. Yes, I think I stopped there. Thank you.

Okay, thank you.

Thank you. Just a moment for our next question, please. Next, we have Marcilia Klan from Händelsbanken. Please go ahead.

Good morning. A couple of questions from my side as well. You mentioned, Christopher, that you cannot confirm that you are evaluating potential divestment of the UK business, but would you believe that that would be a cash flow transaction if that was the case? What is your view?

I really can't answer that question as of now. Again, we're just looking into various strategic options here. So I can't comment on that.

Understood. You also mentioned during the presentation larger steps to take out further costs. Can you speak more about that? Are you referring to the footprint or... What larger steps do you mean?

Yeah, but the way we see the project, if I refer back to Q3 here now, where it's been negative again in terms of volume. Of course, we have to lift on all stones, which we are always doing, of course. But there's more to be done on the cost side. And I also don't want to comment right now exactly the different options we have here. But it's fairly so that we will need to do more.

Then a question on a different topic. With the consumer segment now recovering, can you talk more about any activities or campaign that you're doing to be a preferred partner within the project market as well? What is happening there? behind the curtains within the project market? Are you keeping your market share and making sure that your preferred partner?

Yeah, there's a lot of things I could say. There's a lot of activity ongoing for the moment, and we have also seen quite a large increase in activities, which is kind of leading up to potential kitchen sales. We have, as I referred to, a lot more architect meetings. We have revision of a lot of the quotes. I think we have a super strong position with our brands and the intimacy we have with our customer base. So once they are starting up their activities, we're in a very good place to deliver to that. And again, we got many of the customers over to Novia Park now, regardless of where in the Nordics they sit. And I must say that the way they looked at this and the future for Nobia and the brands was really, really promising. So I think we're in a very good shape at the market when the market will recover, so to say.

Sounds good. Then a question for Robert. First impressions on the job. How comfortable are you with Nobia's financial position? And do you see for the potential for write-downs?

Yeah, what's my first impressions? Good ones, I would say. Once again, I started with a hard close, Q3 closing. A lot of information to be digested in a short period of time. I think I've had a good start and feeling really comfortable about the situation right now. And then to your second point, I can't comment on that. As part of the strategic reviews we're doing, we'll see what comes out of those.

And a final question from me. You mentioned ongoing initiatives to reduce inventory levels now down by some 11%. What target number are you aiming at in terms of inventory levels? Are you almost done with these initiatives or is there more to take out?

We believe we have more to take out from inventory, and that's one of the benefits we get with the factory consolidations as well here. I mean, just looking at how it's panned out after Nostala closure, where we can really close down the inventory without actually adding any inventory in the Erlgut site. The same goes for the different store networks. The very large stores we have now that are non-profitable, they also come at the size where you keep inventory, and by consolidating the store footprint and reduce size of it, we can actually get this inventory over to distribution hubs instead, which has proven quite successful actually, and one of the reasons why inventory levels are down quite a lot in the UK business.

Thank you so much. That was all from me.

Thank you for all the questions. This concludes the Q&A session. I will now hand the call back to Christopher.

Okay. Thank you very much. Thank you all for calling in, and I hope to see you all again at least on February the 4th next year.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.