Risks and risk management

Nobia is exposed to both commercial and financial risks. Commercial risks can be divided into strategic, business development-related, operating, sustainability-related and political and legal risks. Financial risks are attributable to currencies, interest rates, liquidity, borrowing and credit granting, financial instrument and pensions.


All business operations are associated with risks. Risks that are well-managed can create opportunities, whereas risks that are not managed correctly may lead to damageand losses. The aim of Nobia’s risk management is to create awareness of risks and consequently limit, control and manage them, while safeguarding business opportunities and strengthening profitability.

Identified materials risks are managed on an ongoing basis at all levels in Nobia and in strategic planning. The Board of Directors is responsible to the shareholders for the company’s risk management. Company
management regularly reports on risk issues to the Board.

Strategic risks

Corporate-governance and policy risks

Corporate-governance and policy risks are managed by Nobia continuously developing its internal control. The internal dissemination of appropriate information is ensured through the company’s management systems and
processes. A more detailed description is provided in the Annual Report for 2015.

Business-development risks

Risks associated with business development, such as acquisitions and major structural changes, are managed by the Group’s M&A department and central programme office and by specific project groups organised for the various projects. Continuous follow-ups are carried out compared with plans and expected outcomes. More long-term risks are initially addressed by the Board in its Group strategy planning. In conjunction with this, Nobia’s business development is evaluated and discussed based on external and internal considerations.

Operating risks

Market and competition

Nobia operates in markets exposed to competition and mature markets, which means that underlying demand in normal market circumstances is relatively stable. However, price competition remains intense.

Demand for Nobia’s products is influenced by trends in the housing market, whereby prices, the number of transactions and access to financing are key factors. Four-fifths of the European kitchen market is estimated to comprise purchases for renovation, and one-fifth for new builds. Nobia’s strategy is based on largescale product supply, product development and the utilisation of the positioning of the Group’s strong brands in the various markets and sales channels. Nobia’s various offerings are also based on the strategy of offering added value to customers in the form of complete solutions with accessories and installation.

The company’s cyclical nature does not deviate from that of other companies in the industry. Nobia has a structured and proactive method for following demand fluctuations. Robust measures and cost-saving programmes for adjusting capacity have proven that Nobia can adjust its cost level when demand for the Group’s products falls.


Kitchens to end-customers are sold through approximately 300 own stores and a network of franchise stores, as well as DIY stores, furniture chains and other retailers. Conducting sales through own and franchise stores is a deliberate strategy to achieve greater influence over the kitchen offering to endcustomers, which contributes to better co-ordination of the Group’s supply chain. However, own stores allow the concepts to be profiled with higher added value. A risk is that retailers are unable to fulfil their commitments under established contracts, which may have a negative effect on sales.

Sales to professional customers, also known as project sales, are conducted directly with regional and local construction companies via a specialised sales organisation or directly through the store network. Concentrating on these large separate customers entails an elevated risk of losing sales if a large customer is lost as well as increased credit risk.

Supply chain

Nobia’s cost structure in 2015 comprised about 60 per cent variable costs (raw materials, components, accessories), about 30 per cent semi-variable costs (personnel costs, marketing and maintenance) and about 10 per cent fixed costs (rents, depreciation, insurance). The division of costs is relatively equal between the primary markets, except that the UK has a slightly higher percentage of fixed costs due to their extensive store networks.

Nobia’s proprietary production mainly comprises the production and installation of cabinets and doors, together with purchased components.

In 2015, Nobia purchased materials and components valued at about SEK 5.6 billion, of which some 20 per cent pertained to raw materials (such as chipboard), about 55 per cent to components (such as handles and hinges) and about 25 per cent to goods for resale (such as appliances). The underlying raw materials that the Group is primarily exposed to are wood, steel, aluminium and plastics. Cost variations can be caused by changes in the prices of raw materials in the global market or the company’s suppliers’ ability to deliver. Nobia’s sourcing organisation works closely with its suppliers to ensure efficient flows of materials. The Group’s sourcing and production are continuously evaluated to secure low product costs.

Property risks in the form of loss of production, for example, in the event of a fire at manufacturing units, are minimised by Nobia conducting annual technical risk inspections jointly with the Group’s insurers and the risk consulting firm AON that reports on deviations from Nobia’s “Standard for Loss-Prevention Measures.” Preventive measures are continuously implemented to reduce the risk of disruptions in the operations.

Strategy and restructuring

Nobia’s ability to increase profitability and returns for shareholders is heavily dependent on the Group’s success in developing innovative products, maintaining cost-efficient manufacturing and capitalising on synergies. Managing restructuring measures is a key factor in maintaining and enhancing Nobia’s competitiveness. Restructuring is a complex process that requires the management of a series of different activities and risks.

Human capital risks

Nobia endeavours to be an attractive employer, which is a key success factor. To ensure availability of and skills development for motivated employees, manager sourcing and managerial development is administered by a central unit at Nobia.

Sustainability-related challenges and opportunities

Nobia’s products are encompassed by international and local regulations regarding environmental impact and other effects arising in the production and transportation of kitchens, for example, the release of exhaust fumes and emissions, noise, waste and safety. Nobia works continuously with its operations to adjust to the necessary expectations and requirements. The company is well aware of the demands in these areas for the near future and, provided that they do not significantly change, the current products and ongoing development activities are deemed to be sufficient to meet such requirements.

Political and legal risks

Changes in local tax legislation in the countries in which Nobia conducts operations may affect demand for the company’s products. Subsidies for new builds and/or refurbishment or changes to the taxation of residential properties may influence demand. Tax deductions on labour for home renovations, for example, have had a positive effect on demand in several Nordic countries.

Financial risks

In addition to strategic and operating risks, Nobia is exposed to various financial risks. These are mainly attributable to currencies, interest rates, liquidity, borrowing and credit granting, financial instrument and pensions. All of these risks are managed in accordance with the finance policy, which has been adopted by the Board.

Currency exposure

Nobia’s manufacturing and sales presence in several countries balances currency effects to a certain extent. Transaction flows have the greatest impact on currency – when sourcing and/or production is conducted in one currency, and sales are conducted in another. The Group uses currency derivatives to hedge a portion of the currency exposure that arises. Currency hedging means that the impact of currency movements occurring today will be delayed to some extent. Nobia is also affected by translation differences when consolidated sales and operating income are translated into SEK.

For a sensitivity analysis, read the 2015 Annual Report on page 39.

Changes in value in balance sheet

In addition to the financial risks that are regulated in the finance policy adopted by the Board, there is also a risk for changes in value in the balance sheet. A structured work model is applied to testing the value of assets and liability items in the balance sheet.

For a description of impairment testing of goodwill, calculation of pension liabilities and deferred tax assets, read the 2015 Annual Report on page 39.

Latest update: 16 May 2016