'Softer Market' Contributes to Q2 Sales decline at Nobia

Nobia, the parent company of Magnet, has reported on second-quarter trading, covering the three months ended June 2019.

- Net sales for the second quarter amounted to SEK 3,751m (3,503).
- Organic growth was -1% (-2).
- Operating profit amounted to SEK 391m (387), corresponding to an operating margin of 10.4% (11.0).
- Total currency impact on Group operating profit was neutral.
- Profit after tax amounted to SEK 290m (297), corresponding to earnings per share after dilution of SEK 1.71 (1.76).
- Operating cash flow amounted to SEK 244m (184).

Market overview

The overall Nordic kitchen market is deemed to be flat compared with the second quarter of 2018. The UK kitchen market is deemed to have weakened due to the continued macroeconomic uncertainty. The kitchen market in Central Europe is deemed to be almost in-line with the preceding year.

UK region - Q2

Net sales in the UK amounted to SEK 1,535m (1,498). Organic growth was -1% (-6). Net sales in Magnet Retail declined while Magnet Trade improved, positively impacted by growth in trade kitchens but negatively affected by the reduction of the joinery offer. Sales to builder merchants improved while the contracts business was slightly down in the quarter. Gross margin amounted to 39.7% (40.0). Higher sales values and cost reductions were offset primarily by an unfavourable channel mix trend, mainly due to lower retail sales. Operating profit amounted to SEK 127m (134).

Nobia said:

"Group organic net sales were down 1% and operating income was slightly higher than last year’s second quarter. The performance in Nordic retail coupled with improvements in our supply chain mitigated softer market conditions and increasing inflationary pressure.

"In the Nordics we delivered a 2% organic sales growth, if adjusted for the conversion of Norema stores into franchise. Retail sales improved, especially in Sweden, partly thanks to the favourable trend for our new kitchen concepts. The solid retail sales more than compensated for the decline in the Swedish and Norwegian project markets and fewer delivery days due to the timing of Easter. As the Nordic project segment overall remains soft, we will redirect more resources to the consumer segment going forward.

"The UK market continues to be soft on the back of Brexit uncertainty, with the retail segment remaining challenging in terms of both price and volume. However, we are continuing to grow sales through other channels, including Magnet Trade. Thus with an organic growth in the UK of -1% we estimate to have captured shares in a declining market. Deliveries to our larger projects in London are also progressing well which should give tailwind going into the second half of 2019.

"In Central Europe our latest acquisition Bribus is performing above expectations and we are now investing in the supply chain to cater for profitable growth.

"Our supply chain has improved compared to a difficult last year. However, there are further opportunities for efficiency improvements and we are therefore reviewing our manufacturing footprint and consolidating our ranges to the Nobia standard (K20) platform. In parallel, we are implementing price increases and cost out initiatives to offset the mounting inflationary pressure.

"We believe the high market volatility and inflationary pressure is likely to continue, especially on the back of Brexit. But our recent trend in Nordic retail and UK trade coupled with improved supply chain performance puts us in a favourable position to grow market shares and improve profitability."

Morten Falkenberg, president and CEO of Nobia, confirmed his final quarter at the helm and said he would soon be handing over to newly-appointed CEO Jon Sintorn. He said: "I am proud to hand over a company that has a great set of assets in its dedicated employees and strong kitchen brands, and is several times more profitable and financially stronger than when I took over. I am convinced Jon together with our employees will lead Nobia to further success. I would like to extend a warm thank you to all our employees, customers and shareholders, for your support over these years."

Source : Insight DIY Team and Nobia

For all the very latest news and intelligence on the UK's largest home improvement and garden retailers, sign up for the Insight DIY weekly newsletter.