Swedish kitchen furniture group Nobia, owner of UK brand Magnet, has reported a decline in sales while UK transformation plan remains on track.
According to its latest trading update for the second quarter, total sales fell 13% to SEK 3,562m, with profit after tax amounting to SEK 1m, down from SEK 17m.
Nobia said the drop in volume is larger as it has implemented price increases over the past year. In addition to the price increases, the business also imposed restructuring measures primarily in the UK and reduced factory staffing in the Nordic region. However, it was not enough to mitigate the effects of the market downturn.
In the UK, organic growth was down -16%. Operating income also declined, mitigated by savings from restructuring.
“The restructuring programme is being executed according to plan and delivering the expected savings. In the UK we have closed two factories and reduced overhead resources and we are also seeing desired results from changes to how we conduct business,” Jon Sintorn, President and CEO, said.
“The project business is being reduced in size by exiting unprofitable contracts, and the remaining parts are becoming financially healthy following price adjustments. In the trade and retail segments, we now have the right incentives in place to promote profitable growth and we are also putting stronger emphasis on making our product range more relevant in the higher value mass premium part of the market.
“As presented at the Capital Markets Update in March, the next step for the UK transformation is to explore and pilot improvements to our distribution network in the form of asset light models.”
In the Nordic region sales contracted organically by -17%, which had a large impact on earnings. In addition, earnings were also affected by unfavourable mix as the higher gross margin retail sales dropped the most.
Jon added: “The second quarter continued to be impacted by challenging market conditions. Construction activity has rapidly declined and disposable income for consumers is decreasing, adversely impacting demand for new kitchens from both project customers and consumers.
“Already at the time for the decision to invest in the new plant we anticipated the large cash outflow in 2022-2024. We have agreed with our banks to adjust the terms for the funding facilities to reflect the current macro and market conditions. We are fully committed to reduce leverage and explore multiple leverage reduction options such as sale and leasebacks of assets.
“Construction of the new factory in Jönköping continues to progress well and production machine installations are ongoing. Other priorities include the UK restructuring, securing direct material price reductions, leverage reduction options and further intensified sales activities as we see continued soft market conditions ahead.”
Furthermore, Nobia has announced that Henrik Skogsfors has been appointed new CFO for the Group. Henrik has been Acting CFO during the last half-year.
