Interim report January – September 2022
Third quarter 2022
- Net sales increased to SEK 3,480m (3,215) corresponding to organic
sales growth of 4% (3).
- Operating profit decreased to SEK 78m (228), corresponding to an
operating margin of 2.2% (7.1).
- Profit after tax amounted to SEK 19m (170), corresponding to earnings
per share after dilution of SEK 0.11 (1.01).
- Operating cash flow amounted to SEK -530m (123), including investments in strategic initiatives.
- Results were preannounced in a press release on October 13.
Sales grew organically in all our regions in the period, predominantly driven by higher average order values. However, operating profit declined as continued inflationary pressure, challenges in the Nordic supply chain and investments in UK sales initiatives all rendered higher costs. With profitability below our targets, we preannounced our results and will carry out further measures to address fixed overheads across the Group.
In the Nordics the order book remained strong, primarily driven by solid demand in the project segment. Organic growth of 7% in the quarter was mainly driven by price increases. Volume was flat due to component availability issues and challenges in reducing order backlog, which resulted in declining and unsatisfactory gross margins. Current bottlenecks are being addressed by temporarily outsourcing component manufacturing and making investments in internal logistic solutions. We expect these measures will normalise productivity towards the end of the year. We are also ramping up the new factory in Jönköping faster than planned and will start component manufacturing already by the first quarter next year, which is more than a year ahead of plan, pending authority approvals.
In the UK, Magnet retail performed well with double digit growth, whilst kitchen sales in Magnet trade were flat and project sales declined. Retail growth, through the strengthened Magnet proposition, contributed to a favourable segment mix and a gross margin in line with last year despite the high direct material cost headwind. During the quarter we increased our investments in sales driving activities such as kitchen design capacity and store network improvements which are intended to improve our position ahead of the winter-sales season starting in December. At the same time we are addressing our fixed overhead by executing on the cost-out programme launched in the second quarter. However, given current profitability we are not ruling out further cost saving measures in the region.
The performance in Portfolio Business Units was mixed. Total organic growth was 1%, with a strong contribution primarily from the Netherlands that grew by 13%. Austria delivered 4% growth whilst Commodore & CIE recorded substantially lower sales as the super-premium London segment continued to show very little sign of recovery.
Our major strategic initiatives, including the new factory in Jönköping and the transformation plan for the Magnet brand in the UK, are progressing according to plan. These initiatives will increase our competitiveness and resilience, which is especially important with the current macro-economic trends, for which we expect softening demand going forward.
President and CEO