Dellia Group ASA (DELIA) Earnings Call Transcript & Summary

Welcome to Dellia's presentation of the second quarter and half year results. My name is Thea Guldbrandsøy, VP, Investor Relations, and I will later be hosting the Q&A. Before we begin with presenting the second quarter results, we would like to show you our new TV commercial that we have been developing in the second quarter and that we are now running in Norway, Denmark and Sweden. This is an important part of our brand building strategy as well as bringing all our products under one unified brand, the Sunshine Delights brand. Let's have a look at the TV commercial. [Presentation]

And with that, I would like to introduce our CEO, Jan Storli Eriksen, who will walk us through the second quarter results.

Thank you, Thea. And welcome to the second quarter 2026 for Dellia Group ASA. Our revenue in the quarter came in at NOK 167 million and for the first half year, NOK 382 million, and that's up 36% from same period last year. Our EBIT come in at NOK 9 million for the quarter and for the first half year, NOK 29 million. That was impacted with NOK 12.5 million in financial consultants and Kirirom expenses. Our gross margin came in at 41%, and that's up from 35% last year. And that was impacted by -- we also reduced air freight, as you know, in the second quarter -- in the first quarter this year, we had about 6 million air freight. We did not use that much airfreight in this quarter. And also we had impact by a favorable currency effects. On operational highlights, we see very strong consumer demand, and we sold out 5.8 million units out of major grocery stores in the Nordics. And that's a record. We never sold that many units out of the grocery stores in a quarter before. We also had several commercial wins in Europe, and I will come back to that under my Pan-European segment. And we are on track and expect closing the Kirirom transaction as planned in September this year, also next month. First, I would like to address why we changed the outlook for the Nordic segment to NOK 650 million for the year down from previous NOK 810 million. If you look on the quarterly revenue in the middle, you can see that in the first quarter, in the Nordic segment, we had sales of NOK 194 million, and that's a record, up up 70% year-over-year. That also led to increased inventory levels among the retailers, resulting in weaker revenue in the second quarter and also into the third quarter. So inventory level is one of the reason for the -- that we took down the outlook. And if you go back to our first quarter presentation, we mentioned that more brands and products are entering into the category as well. And those market conditions are also impacting our growth rate. If you look on the growth rate on the right, you can see that we have from '23, '24 and '25, we have more than 100% growth every year, 3 years in a row. And this year, we have an outlook of NOK 650 million, and that's up 12% from the Nordic segment in that was NOK 581 million. So overall, we see a more moderate growth rate in the Nordic. However, we are growing from a significantly larger base than before. Despite the reduction in the revenue outlook, Nordic consumer demand remains strong. Dellia are recognizing revenue when they are selling our products to the retailers. However, to understand the long-term growth of the company, we need to look on when consumers buy the products in the store and how that trend is. And here, we went back to the first quarter of 2024. On the left side, you have 1 million units sold out of major Nordic grocery chains. And on the right side, we also look at it in terms of KG or here ton out of retail stores, all the back down to Q1 2024. We can see that the trend is strong. We are selling more and more units out of Nordic grocery retailers. And in the second quarter, with our record, as I mentioned, 5.8 million units as well as in terms of tonne, we sold out 792 million tonnes in the second quarter. So both tonnes and units are increasing. And that demand, we can also see continuing now into the third quarter. Let's look on the category, dried fruit and Dellia are driving the category in Norway, Denmark and Finland. In Norway, we grew the category 147%. That means that the category went from NOK 129 million up to NOK 148 million and other brands and products. They reduce the category with we offset that and grew at more than 100%. The same, we are growing at more than 50% in Finland and 50% in Denmark. In Sweden, however, the category also grew, but more brands and products entered into the Swedish market, and they contributed to the growth in the category, and Dellia was just 1% of the category growth in Sweden, meaning that we lost market share in Sweden in the second quarter compared with second quarter 2025. When we look on market share, development in the Nordics, it's quite interesting to look on Sweden on that note. We saw that Sweden did not contribute that much to the growth in the category in the second quarter. You can see here on the middle here with Sweden, that Sweden had 36% market share, in the second quarter, 25%, and it fell down to 28% in the fourth quarter. However, the last 2 quarters, Sweden have changed the trend and now gaining market share step-by-step in Sweden as well as going -- and that trend also goes into the third quarter, whereas in July, took another percentage point in market share. The same you see in Norway, Denmark and Finland. Dellia is taking market share in the last 2 quarters in all Nordic countries by maintaining our premium price position and keeping stable prices, meaning that other brands and products entering into the category are selling at lower and lower prices. So our share of the value in the category remains high and increasing the last 2 quarters. And by that also, we are providing real value to the trade. We have high rotating product at high value providing good contributions to the grocery change. As we can see that the Nordic segment becoming more mature, the revenue growth are moderating, however, from a much larger base, but our plan is to grow the Nordic segment further. And we have 4 pillars: how we can do that. Number one, we want, of course, to improve visibility and placements in the stores, further take a role as a category captain, keep innovating and expanding with new products. And we also have opportunity to expand the sales we have outside growth rates. Today, around 75% of our turnover in the Nordics is from a major grocery chains, but we also have the 5% turnover from other channels. For example, travel retail, convenience and other chains. And in that segment, there's a lot of opportunities that we can develop. And for the brand building, it's critical for us that we are now establishing a brand, not that our Sunshine Delights brand is not only recognized but also remembered and being on top of mind is a base for long-term revenue growth. And here, you can see in how we now are activating marketing in the third quarter. We are doing TV commercials. We are on board, in-store marketing as well as visibility in stores, running campaigns in all Nordic retail change during the third quarter. That was an update on the Nordic segment. Now I want to turn over and she focus to talk about the pan-European segment. In the first half of the year, we had NOK 20 million turnover. And in the second half, we are having an outlook expecting around NOK 30 million to NOK 80 million turnover in the Pan-European segment, where majority of the growth is coming now in the fourth quarter. And we are seeing then in the fourth quarter, a very good and strong run rate for 2027 -- into 2027. We have grown the revenue in the pan-European segment from NOK 3 million in '24, NOK 17 million in '25 up to now the outlook of NOK 50 to NOK 100 million. The region that are driving the growth in Europe are U.K., the Germany, Switzerland and Austria, which we finance the DACH region, as well as Benelux. And we had multiple commercial wins in this quarter, and these wins is positioning Europe as an additional growth engine and I will now go through them one by one. We run a trial in -- a 6-week trial in Tesco in the summer. You can see here with displays in the Tesco stores, and that resulted in record sales and high rate of sales per week of those products. The success led that Tesco now are mandatory listing these products for another 3 months in the shelf for a new trial in 290 stores. And if that trial is also is successful, we have the further opportunity to expand with Tesco in 2027. It's very important that we now step-by-step are building this relationship with Tesco, as you know, Tesco is the largest grocery retailer in the U.K. We also secured a mandatory listing in Sainsbury's for the fourth quarter of 4 of 3 units of our new flavor dates. And that will be listed in 250 to 490 stores depending on the product mix. Morrisons is also having strong development. And in Morrisons, now we are working on our secondary placements in the Fresh division. We know how important it is to get a secondary placement and all that can make our revenue go 5x to 10x with that retailer rather than just be back in the shelf. When you look on the development here from February until July, you see a very nice organic development. And this is a classical example that it takes time to build sales in new markets. The consumers don't know our product, you put it in shelf. But when the consumer tries the product one time, they will buy it again. And this habit, this traction we have on repeat purchase is making a very nice organic growth development in the U.K., and we are now reaching around GBP 35,000 per week retail sales value with Morrisons by just being in the shelf without any secondary placement. And Morrisons is the fifth largest grocery retailer in the U.K. And then Germany, what is going on in Germany? We have now rolled out in 500 stores during July and August. And we have hired now 15 dedicated fieldations just working for Dellia in Germany, servicing those 500 stores, but as well working on all the stores where we do not have mandatory listing but as well are open to list our products. And our traction now in Germany is going beyond REWE. We also have secured 500 stores in EDEKA and EDEKA is the largest retailer in U.K., REWE is the second one. And we now have a mandatory listing in these 500 stores from this fourth quarter with EDEKA. Yesterday, we secured also in Germany, another 100 stores, a mandatory listing from September in a [indiscernible] called HIT which is hypermarkets, operate large formats of grocery. In Austria, we scored Billa, 300 stores. That's the second largest grocery retailer in Austria with mandatory listing also from November 2026. And we have good development, as we can see in Morrisons, step-by-step building up rate of sales and revenue in the Switzerland in 1,000 stores with [indiscernible]. So the development we now see in the DACH region are major, and we are now setting up our own office in Hamburg, looking after DACH region with local expertise and local people with dedicated field sales. And as long as we also now have -- as I wrote in my CEO letter, we have hired more people in the Nordic. We are professionalizing the Nordic organization, and that can step by step or gradually release time for founder to transfer skills and experience and scaled experience we have together with local salespeople in Europe, so they can get more support behind our development. We have secured proof-of-concept in the Netherlands, with 2 chains, Dirk and channels with very, very good rate of sales. We see that Benelux region has a very, very interesting growth territory, and we're now setting up an office in Amsterdam. And all our efforts here, we are doing now is to keep our first mover advantage and move fast in Europe and get our growth engine up and going in Europe as fast as we can while we're still maintaining and growing and developing the Nordic market by hiring more people there and they can release more founders to focusing on the growth in Europe. So this is a step-by-step development in other European markets. We do not have the same traction there as we have in DACH region, in U.K. and in Benelux but we are doing quite well in Italy as well. We said setting up a new office now in Italy with a new country measure. And we also just there now secured our central listing with a retailer called Modena, and we're also selling in numerous other Italian chains, still yet small volumes, but step by step, it is developing. In Spain and Portugal, the [indiscernible] region, we are working on setting up a good cooperation with local distributors, and we're also setting up an office there with a new country manager. We also are starting distribution in Slovenia with [indiscernible], and in France, we are slowly and step-by-step working on central listing processes. I want to highlight 2 things on our international market. Maybe not all of you know that we have a quite large -- actually, the largest office in the group now is in Shanghai, with more than 25 people. But we're not only looking at China like our operation and supply chain center. We also look like that as a market center China is an important market for the group. And we have hired a retail sales manager focusing on grocery distribution in China. And that we see a lot of potential in that. We are close to the factory. We have all operations there. And we know that, for example, Mango is a very popular fruit in China. And finally, we secured our trademark registration in the U.S. And we spent a lot of time working on that. And this shows that we believe that our largest market is yet to be developed. But they're not starting now full throttle in the U.S. Our focus now is to make European come up to breakeven and contribute positively to our EBIT from the first quarter. And then once they both have Europe and Nordic all contributing to the EBIT, we can start focusing more -- much more on leverage our U.S. trademark registration. And as I mentioned, finally, we are now in September on track to close the Kirirom transaction. And I want to tell a little bit about Kirirom here. And here you can see Kirirom's revenue development. From 2024, we had $17 million, that grew to $38 million, 25 million. And this year, in 2026, we have an outlook for USD 50 million turnover with Kirirom. The green marks Dellia revenue with Kirirom, which is now going to become internal revenue in the group. And the gray is external private label manufacturing. And you can see that from 2025, Kirirom grew their private label division from $12 million to more than $24 million expected turnover in 2026. And that private label division addressing a global dried mango market. And our industrial insight and industrial report are estimating that market to be approximately USD 3 billion in 2031 with a compound annual growth rate of 8%. So we are actually addressing a private label growing demand for dried mango. But Kirirom is much more than that. Our factory is located in Cambodia, just outside [indiscernible], where we have access to agriculture's resources, which enable us to have a lot of opportunities for innovating new products. And Kirirom is a highly technical factory with a lot of technologies, a lot of certification, and when you look on this holistically, we have the -- our product can be innovated in our food innovation lab in Oslo, which report with equipment, for example, to our Shanghai office. It then can be produced at Kirirom and we're changing that now into becoming a diversified snacking production platform where all the products produced there than are commercialized through our sales offices internationally. And this is putting Kirirom in -- as a heart in Dellia's integrated and scalable business model. And with that, I would like to welcome our CFO, to look on our financial performance in the second quarter of 2026. Thank you.

Thank you, Jan. We now look at the financial performance for the quarter and half year of '26. Start with Dellia's revenue. Total revenue for the second quarter ended at NOK 167.1 million, up 5.4% from NOK 158.5 million in Q2 '25. Year-to-date, we are at NOK 381.5 million, up 36.2% from NOK 280.1 million. Norway grew 8% to NOK 46.4 million and Denmark, 19% to NOK 38.9 million. Finland was up 34.3% to NOK 12.3 million. Sweden is the exception this quarter, down 25.4% to NOK 46.4 million against a very strong comparable quarter last year. Year-to-date, Sweden is still marginally up at 2.5%. Outside the Nordic, The growth continues. Pan-Europe grew from NOK 3.4 million to NOK 9.8 million and Asia from NOK 8.1 million to NOK 13.4 million. Our gross profit margin increased to 41.1% in Q2 '26 from 35.1% in Q2 '25. Year-to-date, we are at 36.9%, up from 33.1%. Currency had a positive impact this quarter. There is a delay of roughly 4 to 5 months from purchase of the inventory to when the U.S. dollar rate reaches COGS. The goods were sold this quarter were purchased at a weaker U.S. dollar rate we have seen earlier in the year. And we have had NOK 4.2 million in cost due to air freight last year in Q2 '25, but none this quarter. And we also had NOK 6 million air freight cost in Q1 this year. One comment on the margin level, a gross profit of 41.1% is high for a single quarter and the year-to-date figure of 36.9% is the better reference. Currency remains supportive, but promotional activity to normalized inventory level will provide some offset. The EBIT margin came in at 5.3% in the quarter against 13.1% in Q2 '25. Year-to-date, we are at 7.7% compared to 13% last year. Gross margin improved, so the decline comes entirely from OpEx and payroll. Gross profit grew NOK 13.1 million in the quarter, while other operating expenses increased NOK 17.1 million and payroll, NOK 7.6 million. A large share of the OpEx is sales driven and will grow with revenue and brand investment. The remainder is more fixed in nature, and that is where we are investing in this year, mainly through payroll as we add headcount. We also carry consultancy costs in '26 that we expect to come down as work moves in-house. Then for the balance sheet. So you see total assets at the end of the half are NOK 533.2 million, down from NOK 597.4 million at year-end last year. Noncurrent assets increased to NOK 26.2 million. And essentially, all of it is the right-of-use asset from the extended office premises in Oslo. Current assets came down to NOK 507 million. Two things drives that. The dividend paid in the first quarter and a reduction in trade receivable during the second quarter. Equity is NOK 380.1 million. Against year-end, it is down NOK 7 million. We paid a dividend of NOK 24.8 million and earned NOK 23.2 million as a net income in the first half. Total liabilities are down from NOK 210.2 million to NOK 153.1 million. We have reduced our use of supplier financing and factoring. Operating cash flow was positive, NOK 14.1 million in the quarter and positive NOK 5.4 million year-to-date. The main working capital driver is trade receivable, which is down NOK 24.3 million year-to-date. We entered into the new factoring agreement with Nordea in Q1 selling receivables rather than borrowing against them. And you now see that effect on both sides of the balance sheet. Financing used was NOK 48.8 million for the half year, mainly explained by the dividend of NOK 24.8 million and NOK 17.7 million net reduction in factoring. Thank you. And I will now give the word back to Jan for key takeaways..

Thank you, Sindre for a very good update on the financials. I would like -- now I would like to summarize the key takeaways from the second quarter. Number one, we see a very strong consumer demand, record sales. As I mentioned, 5.8 million units sold out of the major grocery stores in the Nordics. We continue to gaining market share in the last 2 quarters in all Nordic markets. And I'm particularly proud of the development in Sweden, where they now are changed the narrative and start growing market shares in Sweden, and by maintaining stable prices and our premium position on our products in the market. We revised down the outlook in the Nordics down to NOK 650 million due to inventory levels as well as market conditions, but we expect a more moderate growth, however, on a significantly larger base that we have developed over the past 3 years in the Nordics. 2026 is an investment year. We are doing investments this year to pay off for 2027. And we expect those results to come already from the first quarter next year. Europe is developing into our next growth engine, and that's driven mainly with the strong progress we now have in the DACH region, in U.K. and Benelux. And finally, we are integrating now Kirirom and closing the transaction, and Kirirom will then become the heart of Dellia's integrated and scalable business model. And I thank you so much for your time to review this, and we now will revert over to our Q&A session. Thank you.

Thank you, Jan and Sindre. We have received a few questions. So just start with the first one. Sell-out was up 29% in Q2, while reported revenue grew only 5.4%. Can you quantify how much of this gap was caused by inventory destocking at customers and distributors, particularly in the Nordics? And where do you see customer inventory levels today compared with a year ago?

As Jan said in the presentation, we had a record sales in tonnage in Q2, and the price per kilo is also stable. So I would say that 100% of the gap can be explained by the stocking situation at the retailers.

Thank you. Next question. Can you give us more detail on the underlying sales development in the Nordics versus the U.K. and Germany in Q2? are you seeing the same strong sellout momentum across these markets? Or is the growth increasingly coming from the U.K. and Germany?

I'll go back a little bit to what I said in the presentation. When the [indiscernible] market takes time to develop sales, the consumer do not know our brand or our products. They are on the shelf. And -- but what we see is when the consumer buy the product one time, they keep buying it. Again, we have a very strong repeat purchase. That is very obvious when you look on the graph, I explained in Morrisons from February last year to July now, where you see a 700% increase in retail sales value out of stores organically driven by repeat purchase. So the same pattern we -- where we are now in Europe are on early stage, and we see the same pattern and the same trend and similar rate of sales out of stores per week as we were when we started in the Nordics.

Thank you, Jan. Next question. With Tesco, Sainsbury's, REWE, EDEKA and HIT now adding significant distribution, when should we expect these listings to become material contributors to revenue? Should we expect a meaningful acceleration in [indiscernible], or is the most of the impact expected from 2027?

To go back to the -- we gave quite precise revenue outlook for the Pan-European segment. We had NOK 20 million sales in the Pan-European segment in the first half of the year. And then we are expecting the rest to come in the second half between NOK 30 million to NOK 80 million, and we have a total outlook for the Pan-European segment between NOK 50 million to NOK 100 million. We make a range here because it's it's a little bit difficult to predict exactly how that are scaling up. We expect the most impact, of course, to come from 2027 as you have an accelerating development. You are building up the markets you're making consumers become familiar with new products and new brands and start building on repeat purchase as well as more distribution. It's all about building distribution in Europe right now. So just like we started in the Nordics.

You have highlighted that the financial benefits of the investments and Kirirom should become increasingly visible from 2027. What should investors expect in terms of operating leverage and EBIT margin development in 2027 as revenue scales?

There's a lot of impacts in 2027. The investments we are making now in 2026 is to build the pathway for return in 2027 and continued growth. And I can summarize shortly Kirirom will impact in '27 for the impact of that when the company is integrated. We are moving production in-house. We have quite much external production. We can move it in-house at Kirirom. That provides benefits. Europe is coming up and approaching a breakeven level. So Europe from '27 can contribute positively to EBIT rather than reduce EBIT. We are also building up an organization as well. And that organization can then take over and phase out consultants. We have a period now where a double cost. We are building organization as well as having the consultants, and we are in transfer. When that consultants can be phased out and as well as we get a large organization, we can better manage and handle all the new customers that we have taken on board plus, of course, the effect of more medium- to long-term effect of increasing investments in the brand.