CEO comment, Q4 2018
The restructuring programme and lower sales volumes contributed to a weaker operating margin in the fourth quarter. In light of the increased uncertainty in our markets, we continued to reduce the overall cost level. Our strong balance sheet allows for an increased ordinary dividend.
The decline in organic sales in the fourth quarter was 2 per cent. Operating profit was impacted by non-recurring costs of SEK 88 million, primarily related to the cost savings programme initiated in the fourth quarter. The effects of this cost savings programme include reductions in staff and the closure of 16 stores, primarily in the UK. These measures will generate annual savings of SEK 80 million in 2019.
Overall, the Nordic market was unchanged compared with the fourth quarter last year and the growth rate diminished, primarily in the consumer segment. The decision to convert own stores in Norway to franchise stores had a negative effect on the organic growth but have reduced fixed cost significantly. For 2019 we see somewhat weaker demand in the Nordic construction sector. During the quarter there was inefficiency in operations, which we worked hard to rectify. Our focus now lies on both increasing productivity in manufacturing and logistics and on proactively adapting our staff numbers in accordance with any weakening of the market.
The political uncertainty over Brexit continues to hamper demand in the UK. At the beginning of 2019, the risk of a ‘no deal’ exit from the EU increased. Nobia is well prepared for such a situation, having taken such measures as building up a backup supply of components and fronts so that we can deliver complete kitchens to our customers even if there are disruptions to imports.
Sales via Magnet increased in the fourth quarter, despite the decision to reduce the joinery assortment as part of the repositioning of Magnet Trade. The new customer-centric Trade offering received a positive response and resulted in increased kitchen sales in this channel. Also B2B sales increased, while project sales via Rixonway and Commodore/CIE weakened due to delayed projects.
In the Central Europe region, productivity improved and prices increased in Austria. Bribus is performing well, having contributed growth of 3 per cent in 2018 and so far we are very pleased with the acquisition.
Nobia’s balance sheet is strong, and the Board proposes a dividend of SEK 4 per share. Acquisitions remain high on the agenda. In 2019 we will also initiate robust measures to enhance the efficiency of the production structure, and focus intensely on continually bringing down the cost level.
President and CEO