CEO’s review
From Orthex Financial Statements Release for the year 2022:
Orthex purpose is to improve everyday life with practical, beautiful, and sustainable products. We want to give consumers the opportunity to choose products that are better for the environment, therefore we constantly strive to improve the sustainability of our products and our operations.
In 2022, driven by lower consumer confidence, Orthex’s net sales decreased by 5.2% to EUR 84.0 million. In the strategically important European markets, we managed to deliver growth year-on-year and the growth accelerated towards the end of the year. The positive European sales development is a result of a successful commercial strategy implementation including widened distribution, customer collaboration, new customers gained, price increases and launch of new products that all helped to counter the negative effects of careful customer and consumer behaviour. The sales decreased in the Nordic core markets driven by a few larger Nordic customers that limited their purchases during the fourth quarter. The fourth quarter comparison is against an all-time high sales quarter in 2021. No significant customers or important product listings were lost during the year.
In 2022, profitability was influenced by cost inflation, especially in raw materials. The weakening of the Swedish krona and more expensive purchased products, transports and energy also impacted the result negatively. During the year, active measures to off-set the rising cost levels were taken. Especially adopting the pricing of products to rapidly increasing cost levels was done with a long-term view. The full year adjusted EBITA decreased to EUR 5.5 million (11.0). In the fourth quarter, the adjusted EBITA percentage improved to 7.9% (7.6), adjusted EBITA being EUR 1.6 million (1.8). We are disappointed with the result development for the year. Especially market conditions during the second quarter of 2022 affected the overall result negatively. Towards the end of the year, we already saw improving relative profitability despite uncertainty in customer purchasing behaviour.
We are committed to implementing our growth strategy with a focus on accelerated European and international growth with a strong focus on sustainability. All functions and activities are designed to deliver and support our growth ambition to become the number one brand in the storage category in Europe while strengthening our Nordic category leader position. Orthex’s products are sold in more than 40 countries, sales on our European strategic markets grew by 4.7%. In 2022, sales outside the Nordic core markets accounted for 20.2% (19.4) of Orthex’s invoiced sales.
Orthex has been able to utilize its capacity efficiently, which has positively affected our delivery performance. The uncertainty in customer purchasing behaviour is seen in an increase in inventory value towards the end of the year. The inventory value is affected by higher raw material prices and higher stock of our best-selling products in anticipation of sales growth. Focus will be put in 2023 to manage the inventory to ensure more efficient working capital levels.
We reached many significant sustainability milestones during 2022. One major achievement was that SBTi approved Orthex’s near-term science-based emissions reduction target, meaning that Orthex’s climate targets are aligned with the target to keep global warming below 1.5°C. At the beginning of the year, we took an important step by ISCC PLUS certifying our Lohja factory, which gave us the opportunity to start business with mass balanced renewable materials in selected product series. In addition, we sharpened our sustainability strategy based on feedback from an extensive materiality assessment. In terms of working with transparency, we earned a Nasdaq ESG Transparency Partner certification, improved our rating to B in the CDP Climate Change program and as mentioned our CO2 reduction targets were approved as science-based targets. We also started two important raw material related projects together with partners, the aim of which is to find break-through solutions with which we can increase the use of sustainable raw materials in our products. This is in line with our ambition to reduce our carbon footprint and reach carbon neutrality in production by 2030.
Digitalisation and in-store excellence play an important role in Orthex business development and in our strategy execution. In digitalisation, there are several important milestones achieved in 2022 including the creation of strong in-house e-commerce competencies and thereto related new customer openings in the fast-growing e-commerce business. Our ambition is to be a strong value adding partner both to pure e-commerce players and multi-channel partners. In terms of in-store excellence, we are proud to have implemented several initiatives especially in the storage and kitchen categories together with major retail chains in Europe and the Nordic countries. Making shopping easier benefits both Orthex and its partners and gives the consumer the choice to select increasingly sustainable products in the store. Innovation within our categories will further support our growth. We believe that the demand for sustainable products will continue to increase and therefore we are ensuring that we have a pipeline of exciting and relevant new products to cater for the prevailing consumer trends.
Now with the second year as a listed company behind us, I am pleased with many of the important strategic steps achieved in 2022. Despite the overall challenging conditions, we managed to achieve growth in strategically important markets, we managed to strengthen our product portfolio and we took important steps on our sustainability journey. I am especially proud of our committed and passionate personnel that makes the difference every day despite turbulent and unpredictable conditions.
With many good learnings from 2022, we are excited to start our third year as a listed company. I take this opportunity to thank the whole Orthex team, our stakeholders, and investors for the strong support in 2022.