CEO comment Q2, 2018

Strong Swedish project sales caused production disruptions, leading to a negative sales mix and a short-term EBIT deviation compared to last year.

We estimate that all markets in the Nordics grew in the quarter. However, the period was heavily impacted by manufacturing disruptions in Tidaholm on the back of strong project volumes, resulting in long lead-times and consequently a sharp drop in sales primarily to consumers in Sweden and Norway. We estimate that the production disruptions had a negative impact of SEK 20-25 million on operating profit. During June and July we carried out extensive maintenance work and the situation has improved for Q3 deliveries.

In the UK, competition intensified in the quarter, especially at the lower end and among builders’ merchants. I am therefore pleased that Magnet Retail managed to deliver double digit growth in the quarter, confirming that the new brand proposition stands strong in the current environment. We are now extending this work to Magnet Trade with the ambition of finalising it before the end of the year. The exit from Homebase and the extraordinarily strong past year deliveries in project sales affected year-over-year growth in the UK by approximately -5 per cent.

We were pleased to announce the acquisition of the Dutch company Bribus, with a turnover of EUR 65 million and profitability in line with Nobia’s target. The company is one of the strongest kitchen suppliers to the Dutch project market and has an impressive track record under current management. Bribus will give us a solid platform to expand our presence in Central Europe. The deal is financed through our renewed syndicated loan, but with our strong balance sheet we will still have room for further acquisitions.

Going forward we believe that the Nordic kitchen market will continue to be strong, mainly driven by the Danish and Finnish project markets. The Swedish project market is holding up better than expected and we now estimate that our project deliveries in Sweden will grow during the first half of 2019, after which they will most likely normalize. Our UK project business has good momentum and the order book is more than twice as big as last year.

Our financial targets including the dividend policy remain unchanged.

Morten Falkenberg
President and CEO