Nilorngruppen AB (LTS:0GB5) Q2 2025 Earnings Call Highlights: Navigating Currency Challenges ...
Sales: Decreased by 10% to SEK237 million for the quarter.
Operating Profit: SEK16 million, down from SEK25.6 million in the same quarter last year.
Accumulated Order Income: Up 7% due to strong Q1 performance.
Accumulated Sales: Down 1%, but up 3% when adjusted for currency effects.
Gross Margin: Increased, with a strong performance from global sourcing operations.
Operating Margin: 7% for Q2, below the target of 10%-12%.
Personnel Costs: Increased due to higher staffing in Bangladesh and Portugal.
Number of Employees: Increased to 681, mainly in Bangladesh and Vietnam.
Tax Rate: 24% for the quarter, varying by country.
Packaging Sales: Decreased from 21% to 18% of total sales, impacted by the luxury market.
Currency Impact: Significant effect due to the strengthening of the Swedish krona.
Warning! GuruFocus has detected 2 Warning Sign with LTS:0GB5.
Release Date: July 16, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Nilorngruppen AB (LTS:0GB5) reported a strong gross profit, attributed to effective global sourcing operations.
The company has seen a positive trend in the Outdoor segment, which continues to perform well.
Investments in the US market are yielding positive results, with increased staffing to capitalize on market momentum.
Nilorngruppen AB is expanding its production capabilities, particularly in Bangladesh and Portugal, which are performing well.
The company is strategically investing in Nilorn:CONNECT, enhancing client engagement and offering circular solutions.
Negative Points
Order income and sales have decreased, with sales down 10% to SEK237 million.
The Luxury segment is underperforming, particularly affecting the packaging product group.
Currency fluctuations, particularly the strengthening of the Swedish krona, have negatively impacted financial results.
Some European clients are hesitant due to market uncertainty and tariffs, affecting order patterns.
Operating profit has decreased to SEK16 million from SEK25.6 million in the same quarter last year.
Q & A Highlights
Q: Could you please provide some color on the clients that have entered restructuring? Which segment are they related to and which countries are they from? A: We don't release any clients' names, but they are in the UK and Germany markets, specifically in the brand owner and retailer segments.
Q: Does the market momentum for packaging versus other product groups differ? A: Yes, it differs. The packaging segment has been impacted mainly due to a slowdown in the Luxury segment, where we have been selling a lot of packaging. However, we expect this to recover by 2026. Packaging remains a promising area for expansion, allowing us to add value to existing client relationships.
Q: What are the key factors affecting the operating profit this quarter? A: The operating profit was affected by a significant currency impact, a volatile market, and a few clients entering administration. Additionally, there was a change in ordering patterns, with clients placing orders later in the season.
Q: How is the company addressing the challenges in the Turkish market? A: We have implemented cost savings in Turkey due to the high inflation and challenges in the textile market. We decided to downsize operations there to manage costs effectively.
Q: What are the strategic investments being made for future growth? A: We are investing in expanding our production capabilities in Bangladesh and Portugal, and increasing our presence in the US and Vietnam. Additionally, we are focusing on Nilorn:CONNECT to support clients in compliance and sustainability, which serves as a door opener for new business opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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