Nobia

CEO comment

Nobia executed multiple strategic initiatives during 2023 that will benefit us going forward. We remained profitable at the operating profit level excluding items affecting comparability, despite very tough market conditions and currency headwind, and we have improved the gross margin in all three regions. We also made the strategic decision to focus on the core Nordic and UK markets, leading to divestments of non-core operations in the Netherlands and Austria. Our strategic initiatives focus on maximizing cost efficiency, realizing the full potential of the Nordic region, and continuing to execute the UK transformation program.

The cost reduction program, launched early in 2023, continues to yield significant savings and was a strong contributor to the positive operating profit in the quarter, despite a 22% drop in sales. The gross margin was higher for the Group as well as in all regions. Cost reductions, a slight decline in direct material prices, and price increases all contributed to the improvement.

We are coming closer to the finalisation of the  Jönköping factory, which is to be fully operational by the end of the year. It is expected to enable several competitive advantages, such as digitalized order flow from order to delivery, highly automated mass-customized production, higher service levels, and shorter lead times. We are also harmonizing our Nordic product ranges and processes and are, at completion of the Jönköping factory, at a point when we can realize scale and efficiency synergies that were not possible before. We are expecting the factory to positively affect our Nordic EBITDA margins by approximately 3.5 percentage points with additional potential from increased volumes. In addition, the new factory gives us opportunities to further optimize the Nordic manufacturing footprint.

The UK transformation program continues to progress well. Our local management team in the UK is driving a shift towards becoming a focused mass premium leader. Cost savings and restructuring measures are showing positive effects with, for example, a more attractive product mix, an increased average order value, and a clear gross margin improvement. We will continue to drive further improvements, for example, by adding asset-light distribution models, at the same time as we focus our own store footprint. This is a capital-efficient way to increase our distribution reach, which also makes us more agile in the front end and less volume-sensitive. We have recently reached an agreement for a shop-in-shop concept in partnership with Selco, a leading UK builders merchant.

Market conditions remain challenging and sales declined by -22% in the quarter, with even more pronounced decline in volumes. But, there are some positive signs and the decrease in order intake seems to start flattening out. We expect some stabilisation in 2024 and the market to start recovering in 2025, lead by the consumer segment. However, considering the lag between order and delivery, the coming quarters will continue to be challenging.

Today, we also announce a fully guaranteed rights issue with preferential rights for existing share-holders of approximately SEK 1,250m and an amendment and extension of the Group's revolving credit facilities. The purpose is to finance remaining investments for the Jönköping factory and to strengthen the balance sheet allowing for operational and financial flexibility. Together with the recent divestments of Bribus and Ewe, and the sale and leaseback transaction of the Jönköping factory property, our debt situation has been significantly improved.

We will continue to work relentlessly on protecting our earnings, executing our strategic initiatives, as well as ensuring that we are ready to capitalize on opportunities when market demand returns.

Finally, I want to thank our shareholders, employees, suppliers, and customers for your continued support.

Jon Sintorn,
President and CEO