Earnings call transcript: Nobia AB Q2 2025 sees stock drop amid sales decline

Nobia AB’s second quarter of 2025 earnings call revealed a challenging period marked by a 5% organic decline in group net sales and a dip in gross margin. According to InvestingPro data, the company has not been profitable over the last twelve months, with a negative earnings per share of -0.18 USD. Despite cost savings and positive cash flow, the company’s stock fell by 8.14% in early trading, reflecting investor concerns over market conditions and future prospects.

Key Takeaways

• Organic sales declined by 5% in Q2.
• Gross margin decreased by 0.5 percentage points year-over-year.
• Cost savings of SEK 80 million achieved in Q2.
• Positive cash flow improved by SEK 150 million from the previous year.
• Stock price dropped by 8.14%, nearing its 52-week low.

Company Performance

Nobia AB reported a challenging second quarter, with organic sales declining by 5%. The company managed to achieve cost savings of SEK 80 million and improve cash flow, but these gains were overshadowed by a decrease in gross margin and a challenging market environment, particularly in the UK. InvestingPro analysis reveals the company’s total revenue stands at $1.03 billion for the last twelve months, with a concerning gross profit margin of 37.09%.

Financial Highlights

• Revenue: Not specified
• Earnings per share: Not specified
• Gross margin: 39.4%, down 0.5 percentage points YoY
• Cost savings: SEK 80 million in Q2
• Cash flow: Positive SEK 100 million, SEK 150 million stronger than last year

Market Reaction

Nobia AB’s stock fell by 8.14% following the earnings call, reflecting investor concerns over the company’s declining sales and challenging market conditions. The stock’s movement positions it closer to its 52-week low, indicating a cautious outlook from investors. Despite recent challenges, InvestingPro data shows the stock has demonstrated strong momentum with a 37.37% return over the past six months. Subscribers can access additional insights through InvestingPro’s comprehensive analysis, including 8 more ProTips and detailed financial health scores.

Outlook & Guidance

The company aims to continue its cost reduction initiatives and expects to gain a 3.5 percentage point improvement in gross margin as operational leverage increases. Nobia is also focusing on ramping up its Johan Schapping factory and enhancing its consumer segment growth.

Executive Commentary

CEO Christoph Jornfeldt emphasized the company’s commitment to improving gross margins and operational efficiency. He stated, "We will gain another 3.5 percentage point on the gross margin," highlighting the strategic focus on cost reduction and productivity.

Risks and Challenges

• Continued sales decline in key markets.
• Supply chain and manufacturing challenges.
• Low consumer confidence in the UK.
• Project market at historically low levels, with no expected rebound in 2025.
• Potential impact of macroeconomic conditions on consumer spending.

Q&A

Analysts raised questions about the potential for margin improvement in the Nordic region, customer retention in the project market, and the strategy for turning around the UK operations. Concerns about manufacturing automation challenges were also discussed.

Full transcript - Nobia AB (NOBI) Q2 2025:

Conference Operator: Good day, and thank you for standing by. To the Novia Second Quarter Report twenty twenty five Conference Call. At this time, all participants are in listen only mode. After the speakers’ presentation, there will be the question and answer session. To ask a question during the session, you need to press the 11 on your telephone keypad.

You will hear an automatic message advising your hand is raised. To withdraw a question, please press 11 again. Please be advised that this conference is being recorded. I would now like to hand the conference over to our first speaker today Tobias Norby, Head of Investor Relations. Please go ahead.

Tobias Norby, Head of Investor Relations, Novia: Thank you. Good morning, and welcome everyone to Novia’s second quarter twenty twenty five results presentation. Presentation today will be conducted by our President and CEO, Mr. Christoph Jornfeldt, as well as Hendrik Skooksvosch, our Chief Financial Officer. And with those words, I hand it over to you, Kristofer.

Christoph Jornfeldt, President and CEO, Novia: Thank you. Good morning, everyone, and thank you all for joining today. Let me start off with some key highlights for the quarter. So in Q2, we continued to improve EBIT, improve our EBIT margin and our cash flow. And we do so in a continued challenging market with historically low volumes in our core segment, the construction markets for residential property.

The Nordic Region, we continue to perform strongly with an EBIT margin now improved to 8.9% despite sales decline and during a large supply chain transformation, which is progressing according to plan. Group net sales declined organically by 5% in the quarter, driven by the volume decline in the product segment and less sales on the back of the store closures in The UK. However, and on a positive note, we are pleased with our growth and performance in the consumer segment. Some of the growth comes from the gradual recovery in this market, but we also improved as a result of intense work to strengthen and develop our consumer sales funnel, a work that has been going on across all our markets for the last twelve months. Gross margin of 39.4% is 0.5 percentage points below last year or 0.2% below if including the freight cost.

The decline was related to The Nordics, where we recorded larger depreciation of circa million and was also hampered by lower volumes in the supply chain, whilst the mix mitigated this somewhat. On a positive note, The UK recorded a gross margin improvement on the back of strong retail performance and despite volume under absorption. Having said all this, we’re not entirely happy, but we were below gross margin last year and we’ll continue to drive towards further gross margin improvements. We are, however, pleased with the good returns that are materializing from our cost saving programs, where we recorded a saving of about SEK 80,000,000 in Q2. From our cost programs, we have now surpassed run rate savings of SEK 600,000,000, which is above plan.

Cash flow came in at SEK 100,000,000 positive, which is about SEK 150,000,000 stronger than last year, driven by improvements in Denmark and The UK and abating investments in Johan Schapping. Our strategic initiatives are progressing as planned, with the main focus to continue our cost saving measures, ramp up the manufacturing in Johan Schapping during 2025 and transition our UK operations to a more asset light model. And I will come back to some more highlights on these topics later. Then Tobias, if we can move over to the kitchen market for the Nordic region. So we continue to see a great recovery in the consumer market in The Nordics, especially in the countries where interest rates have started to come down, which drives an increased appetite for home renovation again.

On the back of this and on the back of the work we do in the sales funnel, we see better store footfall and better build of our quote banks. We also believe that the slight recovery in housing transactions and the government grants to support home renovation is contributing positively to the market sentiments. We would, of course, welcome more government backed initiatives like the one we have in Sweden to kick start the housing sector again in more of our markets. With regards to the project market, it is now on historically low levels and we do not foresee any material change during 2025. There’s a slightly more optimistic sentiment in the Danish market, even if we experience product volume declines also here, albeit at a lower rate.

So if we could take the next one, please. Over to The UK. The consumer confidence in The UK continued to trade low, even though house transactions and house prices have started to trend slightly upwards. We can see that the continuously high interest rates and inflation is burdening consumers and private home renovations, and we also experience that it takes longer to close the orders. As for the product market, it continues to be soft, also in The UK.

And despite the very large pent up demand for British housing and new builds, the activities during the first half of the year have been challenging for the market and for us. Just as in The Nordics, we do not see any indications of a market rebound during 2025 in the product business in The UK. So let’s move over to the strategic updates where we are making a lot of progress, and we are continuing with these three large transformational programs for the group. If we start with a cost efficiency and deleveraging program, we are as I said before, we are pleased with the cost reduction initiatives that have delivered solid savings over the last twelve months. We also believe that the new organizational structure is working well and that it’s contributed to faster decision making and accountability to manage this transition and cost position.

Run rate cost improvements from the programs now exceeds SEK 600,000,000, which is up and above plan. We have also good traction in our working capital programs, especially when it comes to credit collection and inventory reduction, which supports positive cash flows. And obviously, we are also relentlessly driving towards cost discipline, but also especially at this period of time when our core segment is under such constraints, we will continue with our cost saving initiatives and be very disciplined about spend. If we then focus on realizing the Nordic potential, so even now when we are trading close to 9%, we have so much more potential in The Nordics, both in terms of growth primarily then in the consumer segment as of now. We have potential in our margin enhancements on the back of stronger average order values and supply chain optimization with also with a new Nordic platform that will be implemented at that point in time.

Key to unlock this full potential is to finalize the supply chain transformation, and we have a lot to do and accomplish this year. We are ramping up our truly amazing factory in Jonskapin, which I will put some more light on later. We are also progressing in moving our Finnish production to Ergur in Denmark, and that’s a one time cost recorded in the quarter for this move, which Henrik will come into. And with the move to Ergud, we also open up for the Danish range to be sold and distributed in Finland, which is a very positive move as well. And with this new when we do this supply chain changes, we go live with a new kitchen platform across all our markets, and it also comes with a lot of improvement in design, both aesthetic and functional design.

It comes with a lot of quality enhancements. We will get cost improvements and purchasing benefits, and above all, also industrial leading sustainability credentials. So it is very exciting times for this reason. As for The UK transformation, we’re proceeding at high pace, although the transition to the new model gets complicated by the extremely challenging and volatile market we have in The UK. And on the back of that, I think the UK team has done a really well and good job in the quarter to increase our shorter values and deliver on the cost savings activities in line with plan, all which contributed to an improved earning in the quarter.

However, and of course, we are not where we need to be and want to be as we continue to operate with losses in The UK, and we are driving hard now to continue to rightsize the business to the circumstances in the market. Then moving over to a little bit more insights on the Nordic factory. And first of all, I’m extremely happy to announce that we have received the prestigious BRIM Excellence accreditation for the building. BRIM is probably the most prestigious award you can get for buildings across Scandinavia, at least, but also in Europe. And the amount of work that’s gone into this is truly amazing.

We have measured pretty much every truckload for CO2 emissions. We have taken precautionary actions to prevent the fauna and local biodiversity. We have put solar panels on the roof, electric chargers everywhere, improved circular flows of wood waste to the power plant, which is on-site, and much, much more. And to receive this prestigious award, BREAM Excellence, we put this really stretched target already in 2019. And I believe or we believe as an organization, it’s a true testimonial for the drive we have to set the benchmark for the entire industry when it comes to sustainability.

Then a bit more about the manufacturing in the plant. In simple terms, the new factory has two sections. The first section is the component manufacturing, where we basically cut, edge, drill and paint, and we also manufacture the frontals that go with the kitchen. And this part is now running more and more efficiently every day and has ramped up in most of the phases. And we basically have all the output needed already to supply the demand for both Marbital, the flat packs in the region, rigid stocked cabinets and the supply and we also use this to supply the entire network with panels, although currently at a quite low level.

The second section is where the assembly and order consolidation takes place. And during spring, we started to ramp up this section for stocked cabinet, which is now running efficiently as planned, although this only represents about 10% of the Marbital volume. And we are now about to implement the important last stage of the product where we start to deliver highly customized Marbital kitchens to the end consumers. And this process will start in August with the final preparations now being conducted during summer. And this final stage is expected to be completed this year, so will be ready by 2025.

So very exciting times indeed for us. Now I hand over to you, Henri, to give us some highlights on the financials by region.

Henrik Skooksvosch, Chief Financial Officer, Novia: Thank you, Christopher. As Christopher mentioned, while the market remains challenging, we are pleased with the progress in The Nordics. The improvement reflects the impact of several key initiatives, including focused cost reduction efforts and a strong push to grow sales in the consumer segment. And these actions are delivering tangible results and represent a step in the right direction. The organic growth declined by 3% in the second quarter, primarily due to the continued challenges in the product market.

Despite the ongoing pressure on overall product volumes, we delivered a solid improvement in profit. Adjusted EBIT increased by 21,000,000 to 134,000,000, representing close to two percentage points EBIT margin improvement to 8.9%. Gross profit and gross margin was impacted from lower volumes as well as higher depreciation cost in the Yarnshopping factory. This impact was partly offset by continued positive sales mix with the consumer segment helping to mitigate the decline in the professional segment. The gross margin declined by 1.6 percentage points to 36.4%.

Although both gross margin and the gross profit declined, our strong focus on cost saving initiatives through the cost out programs that we initiated last year and ongoing cost discipline drove the solid improvement in adjusted EBIT, which rose from $113,000,000 to $134,000,000 And as a result, as I mentioned earlier, that EBIT margin then increased to 8.9%. As we have highlighted in recent investor calls, Denmark’s strong performance continued in the quarter and remained a key driver of the overall improvement. Norway and Sweden also continued with gradual margin enhancements, supported by higher average order values and lower SG and A cost. Finland continues to present challenges. However, we are taking decisive steps to improve the situation.

In April, as you all remember, we announced the closure of the Nastola plant as part of our strategy to enhance the cost efficiency in the Finnish market. And due to that, in the quarter we have reported items affecting comparability of million, which primarily are related to the Nantabak closure, but also some costs for the transition associated with the ramping up of the new facility in Yanshapi. And as we mentioned also in the press release on April 9, we expect that the move to Nastla production will generate annual efficiencies of approximately €4,000,000 Over to the next slide, please. And similar to The Nordics, we continue to see encouraging consumer volume growth in The UK. However, this was offset by double digit decline in the professional and trade segments.

Organic sales declined by 7%, but when adjusting for the 17 store closures, the year over year sales were flat. And as Christoph was alluding to a little bit earlier, we are pleased to report that despite the negative impact from the under absorption in UK due to the decline in professional volumes, the gross margin improved by one percentage points to 41.6. This improvement was driven then by the more favorable sales mix as well as impact from the cost out initiatives. On a currency adjusted basis, SG and A expenses decreased by approximately 7,000,000. The cost reduction measures implemented last year are delivering the expected savings.

The EBIT from the quarter improved to a loss of 21,000,000 compared to a loss of 32 last year. This improvement was driven by the better gross margin performance and benefit of lower SG and A expenses. Over to the next slide, please, the financial position. As Christoph mentioned, the cash flow improved during the second quarter. Cash flow from operating activities was million compared to SEK165 million last year.

Slightly higher EBITDA was supported by positive working capital. The account receivables and inventory movement was close to flat when comparing to the second quarter last year. Accounts payables improved year over year on back of the decision last year to exit the supply financing program. The overall working capital impact was slightly lower compared to the second quarter last year, primarily related to timing effects. If you instead look at it on a year to date basis, the working capital has improved by $260,000,000 year over year.

As previously communicated, we are intensifying our focus on operational excellence through our new operational structure that we set in place in end of Q3 last year. A key component of this is our ongoing initiative to reduce inventory balances. And these efforts are continuing to impact cash flow positively, primarily driven by UK and Denmark, which is offsetting the planned inventory increase that we had in Johan Sverdruping during the ramp up phase of the new factory. The operating cash flow, including then investments, amounted to positive SEK100 million, which is SEK150 million better than last year. Of this, investments in the quarter mainly related to the machinery for the new factory in Yorkshopping, was 138,000,000, which is down from $227,000,000 last year.

The net debt excluding leasing and pension increased year over year by approximately 600,000,000.0 to 2.5, driven then by the investments in the new factory. The net increased by 37,000,000 compared to the end of the first quarter. This small quarterly increase is related to the cash flow in the quarter and abating investment levels in Zhiyanshapping. And as Kristoffer told you about before that after the very hard and dedicated work from the Norbea team, we are very proud to announce that we received the BRIMS excellent certification for the factory. And as a finance guys, I’m even more happy that due to this Green Excellent certification notification, we have, after the quarter end, received an additional SEK70 million from the buyer of the factory building.

And we have now approximately SEK 40,000,000 outstanding before we have received full payment for the building that we divested last year. That was all on the financial section. So over to you, Christopher. And next slide, please. Thank you, Henrik.

Christoph Jornfeldt, President and CEO, Novia: And let me just then finalize this call by reiterating our priorities going forward, of which we are crystal clear about. First of all, advancing on our strategic agenda. We are at an important stage now for the ramp up of the Johan Schapping factory, and a lot of focus is on that. We continue with our turnaround of The UK operations, focusing on an asset light model. And probably above all, we continue to deliver on our cost out programs and remain extremely disciplined with how we utilize the cost in the group.

On top of it then, we will leverage on our strong brands and leverage continue to leverage on the new organization. We will capture growth in the consumer sales with what we believe is a proven model. We will continue to increase our average order values by the good product launches that we have done over the last couple of years and by utilizing the strength of our brands. We will continue with our production enhancing activities and the supply chain consolidation in Astola. We remain disciplined with the cost control, and we will continue with our strict working capital governance programs, which are running in all our markets.

Thank you. And with that, I hand over to you, Tobias.

Tobias Norby, Head of Investor Relations, Novia: Very good. And operator, we can please open up for questions.

Conference Operator: Thank you, dear participants. As a reminder, if you wish to ask a question, please press 11 on your telephone keypad and wait for your name to be announced. To withdraw a question, please press 11 again. And now we’re going to take our first question. And the question comes from the line of Marcella Klan

Your line is open. Please ask your question.

Marcella Klan, Analyst: Good morning. Thank you for taking my question. I have a couple of questions. The Nordic EBIT margin came at almost 9% this quarter despite soft market. Can you tell us more about your ambitions when Yunshopping is up and running?

Can we expect margins around 12% or even more? And in 2021, you reached 14% in The Nordics, and that was before the Jenshopping factory. So could you talk a little bit about your ambitions regarding profitability in The Nordics once the new efficient factory is up and running?

Christoph Jornfeldt, President and CEO, Novia: Yeah. Hi, Marcella. If we to answer your question, well, first of all, as you know, we don’t give any forward guidance on Novia as such. But what we have said before is that when we are fully operational in the factory in Yunschapping and made the transitions, we will gain another 3.5 percentage point on the gross margin. We are, of course, not where we want to be with the 9%, although we are quite happy at this point in time with such low historic volumes to be at that position.

But it also puts us at a very good place to grow our margins once the volumes will start to come back. So of course, on the back of that, we expect to have quite high operational leverage on any volumes coming through later on in terms of the project market.

Marcella Klan, Analyst: Thank you. Then a question regarding project market. In these tough times, are you keeping your professional customers, or are they possibly choosing other kitchen suppliers given your move from either home, beyond shopping, and potential disturbances related to that? Are you delivering to the EM and Kamska and the others?

Christoph Jornfeldt, President and CEO, Novia: Yeah. I think with the new factory, have the both huge opportunity with the current customer base we have. And I’ve also had the chance to show the factory to many of our larger clients. And I would say that they are both impressed by what we are achieving with that. And they’re also very interested to be a part of this journey that we do.

And above all, I mean, we will be able to offer them even better services, even better quality products, even better design on what they would buy. I think there has been, during the COVID situation, obviously, a lot of disturbances in the supply chain, but that has come not just for NOVEA. That has been a general kind of situation for the entire industry. So I think we are in a very good space. I think with the help of the factory, we’ll be able to gain even more market share.

And, yeah, I can just see benefits coming from that.

Marcella Klan, Analyst: And regarding the machines that you are connecting to each other in have there been any hiccups with automation in Yumshopping?

Christoph Jornfeldt, President and CEO, Novia: Well, the simple answer is yes. There’s a lot of hiccups. It’s very complicated machinery. It’s a lot of different machinery and machine suppliers that are being connected into the factory. However, I think we have done a or the team over there has done a really good job to get this up and running.

We have good suppliers that are helping us in this. We also have very good third party IT professionals that are helping us with the IT solutions. A lot of the machinery is new to the kitchen industry, but it’s not new to the world. And therefore there is experience in how to do some of this. And as we have also said before, we are using a lot of the machine part from the automotive industry, for example, and then we combine it with machinery also from more traditional kitchen industry, like drilling and cutting, etcetera.

Marcella Klan, Analyst: And then a question regarding UK and your UK turnaround. Is it going fast enough in your view? I mean, you have been making losses in The UK for many years. And, I mean, looking at is this the right capital allocation strategy to stay in The UK given the changes? And what is your target for EBIT margin in The UK?

5% or would you be able to make more? And maybe also related question, what is your competitive edge in The UK market given your strong competitors that you have there? Yeah.

Christoph Jornfeldt, President and CEO, Novia: Yeah. So, a lot of questions in one, but let me start then with, if we’re going fast enough. And also the easy answer here is, well, since we are continuously making losses, we probably should continue to do things even faster. However, I would say that I’m very pleased to see that some of the benefits that we are talking about are starting to come through now, and it has a bit of a lag in The UK. So we see in the quarter that the gross margin is starting to improve.

It’s on the back of the product launches and the planned average order value increases. We also see a lot of the cost benefits coming through now as we have both reduced the number of stores and made substantial cost reduction in The UK. So we’re trading towards a much better position. But on the opposite side of that, we have an extremely challenging market in The UK, where we also see an inflationary pressure in salaries, which has been government backed salary increases, which we have, by the way, managed to also sustain by the cost reduction initiatives we have had. So yes, it’s a challenging period.

The edge that we have is that we have one of the most famous and important kitchen brands in The UK in Magnet. And with moving over to a more asset light model with a different type of store network, I think we have huge opportunities to enhance the margins that we have in The UK. And we know that the products are right. We know that the organization is right to deliver to those promises. But, again, we we need to step out of the old store network and into the to the new asset light model.

Marcella Klan, Analyst: Thank you. That’s all questions for me. Yeah.

Conference Operator: Thank you. The speakers will just give a second for all participants if you would like to ask any other questions. There are no further questions for today. I would now like to hand the conference over to the management team for any closing remarks.

Tobias Norby, Head of Investor Relations, Novia: Well, Dan, thank you, everyone. We conclude from our side and welcome you all back on the November 4 for our third quarter results.

Christoph Jornfeldt, President and CEO, Novia: Thank you very much for today.

Henrik Skooksvosch, Chief Financial Officer, Novia: Thank you.

Conference Operator: This concludes today’s conference call. Thank you for participating. You may now all disconnect. Have a nice day.

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