CEO’s review

Orthex purpose is to improve consumers’ 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.

ALEXANDER ROSENLEW, CEO

From Orthex’s Interim report Q3/2023:

“The business climate was characterized by careful consumer behaviour and cost inflation. During these challenging market conditions, profit performance was strong with 57.7% increase in adjusted EBITA compared to the third quarter in the comparison period.

In the third quarter, Orthex’s constant currency net sales increased by 2.9%. Including currency effects, Orthex’s net sales decreased by 0.9% to 21.9 million euros (22.1). Rest of Europe delivered invoiced sales growth of 6.5% and sales were 4.2 million euros (4.0). The somewhat slower growth pace in the Rest of Europe during the third quarter is mostly due to timing of campaigns. During January–September, invoiced sales growth in the Rest of Europe was 18.6%.

International distribution build-up is progressing according to plan, delivering a growing base of customers and point of sales throughout Europe. During the period, it was decided that the time is right to strengthen our local presence also in the Benelux area, hence a local Benelux country manager will join our international sales team before the year end.

The third quarter sales in the Nordics were affected by careful consumer behaviour and weak currencies. The impact resulted in a flat overall Nordic invoiced sales development of +0.2%. Whereas the weak Swedish and Norwegian currencies affect the consolidated euro sales negatively, there is an adverse effect on EBITA from having a substantial amount of local costs in Swedish Krona in the Swedish production units.

The Storage category continued to grow at a pace of 6.7% compared to the third quarter last year. To keep strengthening the product offering under the SmartStoreTM brand, Orthex will extend it with stylish food storage products by changing the branding of all food storage items to SmartStoreTM. The re-branding allows more efficient investments in brand building.

Kitchen and Plant Care categories, traditionally strong in the Nordics, declined because of the careful Nordic customer and consumer behaviour. Invoiced sales in the Kitchen category declined 13.5% and in the Plant Care category 19.8%. There was a 4.2% increase in the Home and Yard category, driven by sales of new outdoor bin products gaining in distribution.

The strong improvement in Orthex’s profitability continued in the third quarter. The adjusted EBITA margin was 16.1% (10.1) and the adjusted EBITA was 3.5 million euros (2.2). The more favourable raw-material prices and efficiently adapting the operations to changing volumes affected the result positively. Third quarter cash flows improved to 5.3 million euros (4.4). The inventory level continued to decrease according to plan. The net debt to adjusted EBITDA ratio (leverage) was down to 1.4 at the end of the period.

Active sustainability work is an important part of implementing the corporate strategy. During the third quarter, Orthex continued extending the usage of ISCC PLUS certified renewable raw materials applying a mass balance approach on new products. The applying of the mass balance approach means that products have on average at least 20% of renewable content allocation.

We keep increasing our investment in commercial activity and have strengthened the commercial team and put additional focus on improving in-store execution. All of this is to support product sell-out of the stores during a period of weaker consumer demand. We are currently accelerating our pipeline of interesting new products to be launched in the coming 1–3 years. There is continued uncertainty in consumer demand, raw material price development and cost inflation development. I am happy to see that the business is progressing well thanks to consistent deployment of the strategy regardless of the prevailing conditions.”