CEO comment, Q1 2024
On May 1st I started my tenure as President and CEO of Nobia. We are still operating under difficult market conditions, but I am excited, humbled and very energized to take on the responsibility to this great company.
The market remains difficult for both our consumer and project businesses. We anticipate that the combination of high interest rates and a decline in housing starts will continue to weigh on our project market throughout the remainder of the year. In the consumer market, we see modest improvements in consumer confidence and an increase in design appointments across all countries, albeit starting from a low base. The challenging market is reflected in our organic net sales that declined 20% in the quarter. Despite improved gross margin and cost out activities the operating income was slightly negative.
Together with the Nobia team, I am committed to take all actions necessary to take us through the current headwinds. As we press forward with the execution of our strategy, including transformation of our operations in the UK and unlocking the full potential in the Nordics, in part from the full commissioning of the Jönköping factory, we also need to further reduce our fixed cost base.
In the first quarter, we successfully undertook significant actions to improve our balance sheet. This included divesting non-core assets ewe and Bribus, entering a sale and leaseback agreement for our Jönköping site, conducting a share rights issue, and securing extended credit facilities with our banks. I want to put on record my appreciation to all our shareholders for their support and participation.
The transformation of the UK business is progressing at pace. George Dymond has now assumed my former responsibilities as the Head of our UK operations. Since the beginning of the year, we have taken significant steps towards adopting a more asset-light operational model by closing nine underperforming stores and consolidating our UK manufacturing operations. Magnet has also successfully improved average order values in the consumer channel and entered new partnerships to distribute kitchens, including the signing of Magnet’s first franchisee agreement.
Completion of the Nordic factory in Jönköping is also progressing well. I recently visited the factory together with one of our largest customers and it is impressive to witness the progress the team has made and how it will step-change our competitiveness in multiple ways. We produced over 30,000 cabinets from Jönköping in the quarter, this is modest volume but ahead of our plan and an important step toward the full commissioning of the factory. The work is, however, far from complete and the next step is to deliver full kitchen manufacturing and then ramp up volume.
The cost program executed in 2023 has rendered savings well ahead of plan. However, as the market continues to be challenging we plan to reduce our fixed cost base further. This includes the transitioning to a more asset light model in the UK, harmonization of processes in the Nordics and supply chain consolidation. I will provide an update on the further actions we are taking in the second quarter.
Having encountered numerous challenges in recent years including a material downturn in new house building activity, as a result there is pent-up demand in our markets. While we anticipate facing further challenging conditions for the remainder of 2024 we are making progress across all aspects of our business and these changes will position us well for growth and market share gains.
I recognize the significant work ahead but I want to thank our teams for the hard work they do everyday across all our markets and especially so in these challenging times.
Kristoffer Ljungfelt
President & CEO