CEO comment Q2, 2023
Total sales for the Group in the quarter was down -13% organically. The drop in volume is larger as we have implemented price increases over the past year. In addition to the price increases, we have also imposed restructuring measures primarily in the UK and reduced factory staffing in the Nordic region, but however it was not enough to mitigate the effects of the market downturn. Primarily due to the volume decline, operating profit for the Group decreased to SEK 83m (212), excl. items affecting comparability. The development is of course unsatisfactory, however, it reflects the development of the market.
The second quarter continued to be impacted by challenging market conditions. Construction activity has rapidly declined and disposable income for consumers is decreasing, adversely impacting demand for new kitchens from both project customers and consumers.
In the Nordic region sales contracted organically by -17%, which had a large impact on earnings. In addition, earnings were also affected by unfavourable mix as the higher gross margin retail sales dropped the most. In the UK, organic growth was down -16%. Operating income also declined, mitigated by savings from restructuring.
The restructuring programme is being executed according to plan and delivering the expected savings. In the UK we have closed two factories and reduced overhead resources and we are also seeing desired results from changes to how we conduct business. The project business is being reduced in size by exiting unprofitable contracts, and the remaining parts are becoming financially healthy following price adjustments. In the trade and retail segments, we now have the right incentives in place to promote profitable growth and we are also putting stronger emphasis on making our product range more relevant in the higher value mass premium part of the market.
As presented at the Capital Markets Update in March, the next step for the UK transformation is to explore and pilot improvements to our distribution network in the form of asset light models.
Already at the time for the decision to invest in the new plant we anticipated the large cash outflow in 2022-2024. We have agreed with our banks to adjust the terms for the funding facilities to reflect the current macro and market conditions. We are fully committed to reduce leverage and explore multiple leverage reduction options such as sale and leasebacks of assets.
It is a pleasure to announce that Henrik Skogsfors has been appointed new CFO for the Group. Henrik has done a great job serving as Acting CFO during the last half-year.
Construction of the new factory in Jönköping continues to progress well and production machine installations are ongoing. Other priorities include the UK restructuring, securing direct material price reductions, leverage reduction options and further intensified sales activities as we see continued soft market conditions ahead.
Jon Sintorn
President and CEO