CEO comment, Q3 2018

Double digit growth in Magnet Retail continued, but a hot summer and lower B2B and project sales in the UK led to disappointing sales in the third quarter. To improve profit generation, we will initiate a cost-reduction programme that will generate annual savings of SEK 100 million, in addition to rectifying the operational issues that have affected the quarter.

In the Nordics, we estimate the consumer market to be down, partly on the back of the hot summer. In the consumer segment, we maintained, and in certain markets even captured, market shares, despite lower consumer sales. Deliveries to the project market were flat in the quarter, however we believe that the Nordic kitchen market will continue to grow, mainly driven by the Danish and Finnish project markets.

In the beginning of the quarter, we carried out extensive maintenance work in our Swedish factory, which continued to hamper productivity. The manufacturing issues were resolved by September, and we expect improved performance going forward.

In the UK, there is fierce price competition in the lower-end segments. Magnet Retail grew for the third consecutive quarter, backed by our successful new retail offering. However, that was not enough to compensate for the shortfall of project deliveries and lower B2B sales, and thus organic sales growth was a negative 9 per cent. Commodore/CIE has an order book of more than SEK 1 billion, which is up more than 60 per cent compared to last year.

The Austrian and Dutch kitchen markets remain strong. In Austria, our new management is making progress to get the business back to performing in line with financial targets. The integration of Bribus is proceeding according to plan.

Due to uncertainties in our major markets we will initiate a cost- reduction programme to adjust the cost base and safeguard our profitability. This will be in addition to rectifying the operational issues that have affected the quarter. The programme will be initiated during the fourth quarter of 2018 and is expected to generate savings of SEK 80 million in 2019 and SEK 100 million per year from 2020. The measures include store closures and staff reductions in both commercial units and production units. The programme will entail a restructuring charge of SEK 80-100 million in the fourth quarter.

Cash flow remained strong in the period which gives us continued financial headroom to focus on profitable growth, both organically and through acquisitions. The financial targets including the dividend policy remain unchanged.


Morten Falkenberg
President and CEO