NIL-B.STNIL-B.STSTO
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Krister Magnusson: Good morning, everybody, and welcome to the Nilörn Q3 interim report presentation. I know that today there's lot of presentations, a lot of companies. So I really appreciate that you take your time to join our presentation here. Myself, I am in Portugal at our factory here. As you probably know, we're doing quite the big adjustments in the factory, uplift in the factory, so here to follow that. So it's an interesting project going on. So I think that will be really good for Nilörn in the future. But I'm sitting here on a small laptop and I think it will work out well. So I will start sharing my screen and put that on presentation mode here. Yes. Now we start. The Q3, we are quite pleased with the Q3. The order intake here was negative 13%. But if we take into consideration that we had a big packaging order in Q3 last year on SEK 18 million, and that will come now in Q4 instead, that is around 7% of the explanation. We also have another currency effect explaining another 6%. So adjusted for the currency effect and this packaging order, it's quite flat. In general, it's a difference between the segments. Luxury segment is still quite weak, though the Outdoor and the other segments are quite strong. So still weakness in the luxury segment, no big improvement there. Sales up 10%, and adjusted for the currency effect, it's actually up 18%. I think it's partly -- we had a quite weak Q2, so it is spillover from the Q2. Looking at the different months, so it was quite strong both in July, August and September. So we're quite even throughout the quarter. And here, we see also in the Outdoor segment and the other segments, but still a bit weaker in the luxury segment. Operating profit, SEK 26.3 million versus SEK 15 million last year, and that gives an operating margin of 11.4% in the quarter. And as you probably know, the goal has been or should be between 10% to 12%. That is the goal we have set. So we in quarter, we target that. Looking at the P&L here. Also, we have a quite strong currency impact on the whole P&L and not only the top line. As you know, most of our business is handling outside Sweden. In Sweden it's mainly sales companies, but we don't do any invoicing from Sweden at all. And then we have the headquarter costs. So we have some costs in Swedish krona, but the majority and all the invoicing is outside Sweden. Yes. And what I want to say more here is also looking at the tax rate, tax rate for the quarter is 24.6%, and that is in line also with the accumulated number. We'll see what happens with the tax rate in the fourth quarter. It's always adjustments and everyone is doing proper calculation, really the calculation of the tax. But we think it will be in line with this 24.6% also for the full year. Personnel cost has quite been stabilized now on this level, I would say, also currency impact on this level and other external costs, but coming back to that a little bit later. Split by product group, not so big difference compared to last year. It's mainly in packaging. That has gone down and it's contradictory to what we do now. We're putting quite a lot of effort into the packaging. And the reason why packaging was down here is due to the luxury segment as we still have quite big packaging delivery to the luxury segment. But they are overstocked so it will take some time. So I think it will take like in mid-2026 until we are back into normal deliveries for the luxury segment in packaging. Looking at the quarterly income statement and the gross margin. Normally, the Q3 has a quite strong gross margin and also this quarter, as you can see here, if you're looking at the historical level. The reason for that is we have less packaging, packaging has a lower gross margin, and less packaging in Q3 normally and also this quarter. Operating cost is also lower normally in Q3 and also this quarter, and that is due to the holiday. Most countries take holiday in July, especially in Europe. So that's why that has a big impact on the quarter 3. Operating profit. As you see, it was a strong operating profit this quarter. And as I explained, it was not only one single month. I think it was strong all the July, August and September. And of course, you who have learned Nilörn now, it's very much volume driven. Once we get good volumes in a quarter or in a year, we also get a good profit. It goes a long way down. So we're very much depending on getting volumes. And then if you look at the similar but in a graph. And also that is to say that in the past, it was always Q2 and Q4 that was sticking out as the best quarter. Nowadays, we see it's very much flat. So it's the change of purchasing pattern from our customers. So they even out much more, buying much more into season and much more shorter lead times. And that makes our pattern different than it used to be. And here, it's also following the profitability, just in a graph. And you can see here now Q3, that was quite strong. Balance sheet. We have a strong balance sheet, an equity level of almost SEK 350 million. And that is good because we're now taking more and more time to search and see for acquisitions and so on. I will come back on that. And also we're doing at the moment both a big investment in Bangladesh and also in Portugal. Also coming back to that later in the presentation. Just want to raise here. As we are an international company, relatively our size, we are in 19 countries and with only the headquarters in Sweden, and therefore, we have a big part of our equity abroad. And that also had a big -- currency has a big impact when we translate the equity in the different countries into the Swedish krona. And this now in 2025, that's had a negative impact on the equity of SEK 32 million. And of course, in the past, we also have had positive impacts. But now due to the relatively strong Swedish krona, that has an impact. Financial indicators, I will not go through them so much. But I just want to mention here, we are almost 700 employees. And as you can see here over these years, we have increased that quite much. That is mainly in the production companies, mainly in Bangladesh, I would say. But also we have invested in other specialist areas, where we employ people to be in forefront with the competitors. And we also invested in countries like U.S. Also coming back to that later on. In U.S., now we have 4 people. This one, this is to explain the movement we have done between year 2020 and today. We, by heritage, has been really strong in design and we continue to be work on that. So design is a strong unique selling competence for Nilörn. We have in packaging started and done much more here effort. We have a really good collection. We have a Category Manager working with that. And so we're really taking a big step forward in packaging. Packaging, as I mentioned, we're also delivering into the luxury segment. But we're also packaging for sports and for Outdoor segment. We're talking here about underwear packaging, sock rider and so on. So it's not packaging for corrugated, standard brown packaging. It's more for the garments and for luxury segment. Financial strengths. We have had a strong balance sheet for many years, but we even now has even stronger. Sustainability, CSR and compliance is an area where we have put a lot of effort and employed people all around the world to build up that, which gives us also -- in the past, we were talking about design. But I would say now sustainability is another core competence that is unique -- I would not say unique, but a selling point for Nilörn, what we push for and where the clients appreciate our offer. Digital solutions and Nilörn:CONNECT, this one is something we didn't have. We had digital solutions like RFID in the past and so on, but now we're taking even more steps into this. I will explain, coming back to Nilörn:CONNECT, what that is all about a little bit later. Global deliveries. What I mean by that is that we're setting up distribution companies in new countries like in Vietnam end of last year and also now in Sri Lanka, but also we are setting up a company in U.S. So we're getting more and more international. Yes. Big currency impact both on the top line and in the balance sheet. And I used to say that we are quite well hedged. We match the cost with the income. So we take a country like Hong Kong, we have big income there. And then we have all the costs matching that. And then in the end, we have a net profit. So in different countries, we are matching quite well. But in the end, we have a profit that will be converted back to Swedish krona. And in my example then, the Hong Kong dollar will have an impact, as you saw earlier on the equity. As I mentioned, still volatility in the luxury market. And we see now less uncertainty due to the tariffs. We'd learned to live and also, I would say, it doesn't affect us directly. It's more indirect effect. It's our client that export to U.S. that has been affected. And I think the uncertainty is most -- I mean, as long as you have the uncertainty, you don't dare to move. But now the uncertainty moves away so it's more movement in the market. Operating profit, we mentioned already. Portugal factory where I am at the moment. We have been here in Portugal like in 40 years. So the factory needs an uplift. We looked at moving the whole factory but we decided to stay. We think there is less risk in that. And we moved out to warehouse to get more space in the factory. And at the moment, we are changing the complete layout inside the factory and to get a much more flow into the factory and also implementing LEAN. So that is good. I think Nilörn Portugal had tough times 10, 15 years ago, but that is now one also a competitive edge for Nilörn, to have a good factory in Europe. Building for the future, that was where we now employed or built up these specialists we have within the group, where we have compliances, our packaging materials. And that is supporting sales. So I would say being a salesperson in Nilörn today versus 5, 10 years ago is a totally different story. In the past, we were out selling labels. Now it's all about selling a concept. And the client is much more demanding now as it has been in the past. Yes, here is the specialist here in different in areas. And then we increased in production capacity. Here, we also have Bangladesh. We are currently -- I mean, we've got the land now and we're doing soil test and we are working on that. But it will take some time. And we said earlier that it probably most likely will be ready by end of 2026. Now we say it will be ready in first half year 2027. We've done geographical expansion, as I mentioned. We see a consolidation in the market. We've seen [ TIMCO ], we've seen SML. We see Avery and all the companies are taking part of that. And we also see companies now that are for sale and actively selling, looking at the label market as such. There are a few big players. It's a mid-segment and there's quite a long tail of small niche players that is working in one market or with a few products. And for Nilörn, we come to the stage now that we're putting much more effort into this, and we have a team dedicated to search for this. And what are we looking for? I think here, we will search for companies that can contribute either geographical expansion in areas and countries where we are not strong in. It could be like France. It could be Holland. It could be Spain. It could be U.S., where we can take more geographical expansion. Or it can be vertical integrations in areas where we are not strong like in heat transfer or in RFID or in packaging. So we're not sure that we will succeed, but we now definitely take this seriously and put much more effort into that. I presented this earlier. There are some new slides. I will just add them quite quick here. What Nilörn:CONNECT is about. Nilörn:CONNECT is the QR code, like you can see on a jacket here, where we have a system -- it is a system behind. That is the Nilörn:CONNECT. And it's a QR code and it's an NFC or RFID. And why Nilörn:CONNECT? We see three reasons why people want to go into buying Nilörn:CONNECT. One is the legal compliance. The legislation, Digital Product Passport, that is here to come. They will come, I would also present that, soon here. So this will be a must for our clients. So this is a headache that we, through our Nilörn:CONNECT, can be part of solving their problems. Then there are more nice to have for them. We can be part of the trend. Now we see repair, resell, recycle, where you have this QR code and the information carrier. And consumer engagement. They, through the QR code, can have consumer engagement and communicate with the end consumers. And that will drive sales, create loyalty and acquire new customers. Just the timeline regarding the DPP. It has been going on for some years with a lot of discussions, a lot of preparation. Some clients are in this already, not in the DPP but into the Nilörn:CONNECT, and have this providing information to the end consumers about their garment and their sustainability. And in 2026, [indiscernible] expected for the first product groups, and the first is apparel and accessories. And in 2027, batteries we go full live with DPP. And the mid of '27, we expect that the DPP will be a fulfillment for textiles. And through this QR code, when you scan it, you can have carbon footprint, you can have the different certificates they have on the garment, production history and the country where it's produced and so on, recycle instruction. All that is within the DPP fulfillment. To the brand owners, we provide them with information so they can see what countries they have been logged in. They can see how many scans they have had, what garments they are scanning. They can also see if they have a QR code outside the jacket and inside the jacket, and they see the difference how that is scanned. So we also provide information to the brand owners. And like this, they can see on the map here where it is scanned. And also what we have been working on is an AI tool, talking to the product. And when you're scanning the QR code, you get to the page where you can write and communicate with them through an AI tool and ask questions. I got this spot on my jacket here, how should I remove that and so on. And that we also do in cooperation with brand owners. So we make sure that we provide the information that they want. We can go out widely in the Internet or we can just provide their database and provide information that they have in their database. And this you have seen in the past, the financial target and so on for Nilörn. We have, yes, achieved 7% growth with an operating margin above 10%. Yes. Good. I will stop sharing this, and coming back to you and see here -- and Maria is also with me, I forgot to mention at the beginning, Maria, the CFO for Nilörn. And Maria, do we have any questions for us?
Maria Fogelstrom: Yes. Actually we have only received one question. And that is the question about the sales split between outdoor and luxury, the percentage for each segment.
Krister Magnusson: Yes. Outdoor is still the biggest, absolutely biggest. Luxury segment, we started off with a few years ago, and we see that the luxury segment is coming and we think we can do much more there. And the split here, I don't have the exact numbers, but I would guess that the Outdoor is between 25%, 30% and luxury is between 5% to 10%. But what's interesting with luxury is that we can do much more. Luxury, in the country, it's France. It's in Italy. Outdoor is mainly in -- and Outdoor, I would say outdoor sports, it's mainly in Scandinavian countries, in Germany and in the U.K.
Maria Fogelstrom: Thank you for that. Now we received some more, so I will continue here. We also got a question about the EBIT. Could you elaborate on how much of the EBIT that comes from operating leverage and how much that is due to recent efficiencies?
Krister Magnusson: I think most is -- I mean, as I mentioned, the volume matters a lot. I talked also last time that we intend to do cost savings. We have a program here. We have not launched all of that yet. And cost is -- but we're also taking on cost here, moving into new countries and so on. So for me, this quarter is volume driven, I would say.
Maria Fogelstrom: And continuing on the cost savings because actually we got the question about that as well. And the question is, you previously commented on reducing your cost base in Turkey and doing a similar analysis on other parts of the group. Do you have any updates on that front?
Krister Magnusson: Absolutely. We have done that in Turkey. So that is being implemented and fully -- and we are now working on other countries. This is partly, but also that we are moving now volumes from a country like Hong Kong, China into Vietnam and Sri Lanka. So that's moving our cost and, at the same time, doing cost savings. And so that is mainly in the Asian area but partially also in Europe. But at the same time, we're also taking on more and more employees in new assets. They are expensive and so on. But my goal is that we can be more clear on that once we have done the restructuring that we are in the middle of.
Maria Fogelstrom: Thank you. And now we got a question about the outlook for 2026. Has anything happened during the quarter that changes your view of the market outlook for 2026, specifically regarding different product groups?
Krister Magnusson: I cannot say. I think there's nothing new regarding the product group. I hope and think that luxury segment will be back in swing again but I think it will take until mid-2026. For other product group, I don't see any major change, not as it is at the moment, at least. We had, as you know, the Outdoor obviously peaking during the pandemic and then really bounced back. But that is back to normal now.
Maria Fogelstrom: Thank you. And the last question that we have received is, are there any ongoing discussions to include segment reporting in the quarterly reports?
Krister Magnusson: Segment. Maybe qualify what -- because we do segment reporting in the interim report with country-wise. But I assume here, it's more on product group levels, isn't it, I assume they want to know.
Maria Fogelstrom: Yes. I would say.
Krister Magnusson: Yes. And absolutely, that's a good point. I think that is something that we should consider maybe and see what we can do there. We have not done it in the past, but it's a good point.
Maria Fogelstrom: Thank you. And that was all of the questions we have received.
Krister Magnusson: Super good. Thank you very much for participating today. I know it's a super hectic day with a lot of companies presenting. And thank you very much, and have a great weekend. Thank you.
Maria Fogelstrom: Thank you.