Interim report, third quarter 2024

CEO comment

The kitchen market remained weak in the third quarter primarily due to decline in the project market across all regions. Consumer market showed signs of recovery with most of our brands experiencing an increase in design appointments and improving quote banks from consumers.

Net sales for the Group declined organically by -6%, with flat sales in the UK and a decrease of -11% in the Nordics. While consumer sales grew, project sales were down double digit. The Group’s gross margin improved to 37.4% (36.6%), excl. items affecting comparability, due to efficiency improvements and the higher share of consumer sales. Sales and administrative costs decreased by ‑6% as our cost-out programs continued to generate savings. Operating profit came in at SEK 19m (18), excl. items affecting comparability.

During the quarter, a major reorganization aimed at decentralizing responsibilities was completed. This new structure is designed to strengthen local accountability, enhance agility, and enable faster, more customer-focused decision-making.

We continue to align our operations with current market conditions. Since the beginning of 2023, we have delivered savings of approximately SEK 400m and recently initiated additional cost-savings of nearly SEK 300m, of which SEK 85m relate to the reorganization. The majority of the savings will be materialized by mid 2025. We remain committed to further reducing costs until we see a stable market recovery. In the UK, we are also evaluating additional cost-saving measures to strengthen current profitability and support the transition to an asset-light operating model.

Net sales for the Nordics declined by -11% on the back of a soft project market, whilst consumer sales increased. We are pleased that the Nordics managed to improve both margins and earnings in this challenging market environment, and especially HTH in Denmark had a promising quarter. This was mainly a result of disciplined cost reductions, efficiency improvements in the supply chain and the more favorable customer mix with a higher share of consumer sales. We expect the project sales to be soft and will therefore continue to apply strict cost discipline and redistribute resources toward the consumer segment.

Total net sales in the UK remained flat compared to last year, despite a substantial decline in volume due to weaker trade and project sales. Growth in consumer sales was not enough to compensate for the loss in volume, which resulted in under absorption in our supply chain. Gross margin fell in the quarter due to lower volumes and lower average order values in the consumer channel. To improve gross margins, we are adjusting our product offering to strengthen average order values. The cost reduction initiatives implemented earlier in the year generated savings according to plan.

Significant effort has been dedicated to transitioning our UK business to an asset-light model. We have now managed to step out of unprofitable project business, reduced our manufacturing sites from 5 to 2 and closed about 15% of the store network. Whilst a lot has been done we still have more to do and are evaluating additional actions, including a further review of the store network.

The construction of our new state-of-the-art factory in Jönköping is progressing as planned. We are  manufacturing flatpack cabinets for customers across the Nordic region and progressing towards industrialization of full kitchen assembly and frontal manufacturing, with promising results in design, sustainability and durability. Production of Marbodal kitchens will ramp up gradually in Jönköping during 2025, starting in January as planned.

We are advancing with our strategic agenda by gradually ramping up operations in Jönköping, executing our UK turnaround plan and expanding cost-saving initiatives. Given the ongoing market challenges, we are also intensifying our efforts to enhance operational excellence within our new organizational structure including a strong focus on cash generative activities, with encouraging signs of progress already emerging.

Kristoffer Ljungfelt
President & CEO

This disclosure contains information that Nobia AB is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 05-11-2024 08:30 CET.