Nimbus Group AB (Publ) (BOAT) Earnings Call Transcript & Summary

Thank you, and welcome Nimbus Group, the quarter 2 report. And if we start with Slide 3, business update for the second quarter. The sales amounted to SEK 571 million, down by 8% compared to last year. But despite this decrease, that know that we performed actually better than the industry as a whole. We had during the quarter a negative impact from the currency development by SEK 10 million, mainly U.S. dollar, which also then, of course, impacted the EBITA, together with this volume decrease. So we ended up with an EBIT of SEK 25 million compared to SEK 45 million last year. During the quarter and also before that, we have had a focus on stock release and we can say the net working capital in general. We have been quite successful, but then we also had some small impact on the margin because of this. On the other side then, the order intake for the quarter was actually higher than before, SEK 356 million compared with SEK 341 million. As said, better than last year, but we will get back to that later on in the presentation. More or less the same as last time, the tariff situation fuels uncertainty and hesitancy among customers and we saw this especially at the beginning of the quarter, and that is actually also where you can track the sales that we had a decrease. After that, it has been quite good in the quarter. But of course, the big obstacle for us as for many others is still -- that it's not fully predictable, even if this is starting to come down, which is -- at the end of last year, we initiated a cost reduction program, and this has started to have effect. And it will then -- this impact will increase quarter further on. But, despite this cost reduction, we have continued to invest in the market presence and actually then also product development. But this market presence has given us that we have established a couple of new marketplaces in locations, as we say here in North America, Europe and Asia. And this we will, of course, gain from further on. And actually, if you then look at the rolling 12, the picture will be even brighter, so to say. We have had a lot of new dealerships around the world during this last 12 months. So it's a good work done by the people involved in this work. And finally, on this page, of course, Kuopio, this project is going according to plan and will actually then be finished during quarter 3. It may be some small topics that will take some more time, but that will not affect the result or the cash. It will be more administrative or legal, I should say. Next page. It's more or less the same as we always show you [indiscernible] Group a short reminder of who we are, founded 1968 that is actually 57 years ago. So we have a long experience. And we also have a long history of international trade. So already in 1970, we started to export our products. And this is important because, for us, export is more or less daily business, which is important. And since then, where it was a single brand or a monobrand, we have developed to now true house of premium brands and you actually find them below on this slid here.. We have also there you may think didn't they sell that we did, but we can still use the name for a period of time. That's the reason we still -- because we are selling [indiscernible]. I will not mention anything on this slide, but at the end, you find 2025 May, new organizational structure implemented, and this is a big thing for us. And if we look from an internal perspective, it will make us more efficient and also focus on our core business. And if we look upon it externally, it's our belief that it will be easier to follow and understand our business. Switch page. When it comes to commercial sales, this new organization I was talking about will present you now. [indiscernible] we have the commercial sales which I will [indiscernible], then we have retail sales that Rasmus will talk about later on here and we also have that operation [indiscernible] outsourced, and that is more or less the [indiscernible]. [indiscernible] commercial sales, sales dropped 8% as for the group, still small numbers and more coincident I should say, it's not that many [indiscernible], we're talking about. Important for us is that we see more activity and we are closer to [indiscernible] and a proof of that, as we say here, the improved order intake in North America. And if we look below in the chart, you can see that North America has a big jump up from the order intake perspective. But let's not forget about Europe. Europe has struggled for, I should say, 2 years now. And even if from figures, we actually have doubled the order intake in Europe, and this is a really good sign for us. And the order intake takes us to the order book. And actually, this chart we have in front of us on the right side below, you see that more or less the whole picture is affected by the pandemic, and that's because it makes it different to relate to something we can call it a normal business. So I prefer to talk about the right-hand side of this picture. And we have talked about this before during the quarters, about this normalization, and we can clearly see that now, we have the same pattern in the order book, and we also then have this shorter order book that we have talked about before. The supply and demand is closer to each other as we [indiscernible]. And then of course, when we talk about the order book confirmed orders in the order book and that's one thing that we implemented later on. So it also affects the comp in this chart. The order from the Swedish is not included the as before. But during the autumn we will know more in what time this will be produced and sold to the forces. Net sales, I will not talk a lot about that. It's more or less, as I said before, small differences and more or less that differs [indiscernible]. Important thing for us is that [indiscernible] and with that I'd give to Rasmus.

Thank you, Erik. And then, we continue with the retail sales development. The second quarter is a seasonally important quarter for the retail business because of the domination in the Nordics. For [indiscernible] second quarter last year represented 56% of the annual sales. So that is an important quarter. Having that said, the sales decreased by 8% in the quarter to SEK 274 million, and this is due to a softer market situation, also in combination with a bit of unfavorable weather conditions in [indiscernible] which has affected sales on both own brands and traded and used boats. We saw that the positive former trend since the second quarter '24 was affected by the escalated tariff debate that Erik mentioned earlier, that ended up in March, April, and that had a negative impact on the sales, especially the first half of the quarter. In total, the sales of own brand was down 4% and traded and used boat was down 11%. The order intake turned down by 29% to SEK 148 million versus SEK 209 million last year. And the order book amounted to SEK 28 million versus SEK 35 million last year. The fact that the order book now is low in June is driven by seasonality effect, with lots of deliveries in the period that follows the normal business cycle. So this is not strange. Then we move on with the P&L and net sales in the second quarter amounted to SEK 571 million, as I said, which is down 8% since last year, SEK 723 million and the EBITA amounted to SEK 25 million versus SEK 45 million last year. The gross margin reached 11.9%, which is down 3.7 percentage points. The gross margin is still affected by cost under absorption effects from low production and low sales volume, but also from this change U.S. tariffs of SEK 1 million and from exchange rate fluctuations by SEK 10 million in relation to last year. The currency effect is mostly referring to U.S. dollars. Adjusted for those tariffs and currency effects, the gross margin reached 13.9%. The gross margin was also affected, as Erik mentioned earlier, from those supporting activities to reduce stock level of finished goods. So that has also had some impact, of course. OpEx amounted to SEK 42 million, which ends up in a cost reduction of 19% since last year. The gross savings are higher, but the investments to strengthen the sales organization reduces the net savings. And more savings initiatives are ongoing which we gradually have effect from the third quarter. Regarding the restructuring provision in Finland, the outcome in the period was slightly higher than expected. In the third quarter, we expect to be able to sum up the closing costs, including the outcome of the deal. The remaining reserve in the third quarter is SEK 3 million and SEK 6 million was reversed in the second quarter. The finance net amounted to minus SEK 27 million, and this is mostly driven by currency effect from intercompany balances amounting to about SEK 20 million. Also this effect comes from the U.S. dollar. Then we move on to the net working capital and cash flow. Operating cash flow in the period improved and amounted to SEK 90 million versus SEK 79 million last year. Net working capital amounted to SEK 664 million, which is down SEK 77 million since the first quarter. And the change refers to less inventory of SEK 129 million, driven by both seasonality effects, but also from the supporting marketing activities. Overall, we can say that the buying lead times are longer due to market uncertainty that pushes inventory release forward in both the retail sales and commercial sales business. And on the positive side, we can also say that measures implemented to adapt production volumes to the demand now has started to [indiscernible] effect and that the net working capital decreases. We see that happening gradually. Available cash, including unused limit amounted to SEK 299 million versus SEK 77 million last year and SEK 237 million in the first quarter. And with that, I leave the word to you, Jan Erik.

Yes. And then finally, our financial targets. And actually, they are exactly the same. We have the same target. We want to have a growth of about 10% midterm, we want to have an EBITA margin on 10% capital structure and no financial debt unless it's property, for example. And we, of course, want to have a dividend. So dividend policy says 30% if everything else is done in the right manner. And we truly believe that this is a correct financial target for us. But we need some help, of course, from the market, but a lot of other things is now in place for the future. And with that, I actually leave to Gunilla.

Yes. And we open up for questions.

[Operator Instructions] The next question comes from Henrik Christiansson from DNB Carnegie.

A couple of questions from me on the gross margin development. How should we think going forward on that? And how does it look in the order book? And then also how do you work with price, in this volatile FX environment that we are in currently?

If I start off then the gross margin in the quarter was, as we said, a bit affected by [indiscernible] To reduces top levels and [indiscernible] but of course we see that, this is the effect of the reduced -- but important here is the unrelying model that under business is still very good. We see that delivered in accordance with order book those we sell in accordance with what we expect to sell. So, what we expect to see is that the gross margin will improve moving forward. So this is a temporary [indiscernible].

Well, you covered it pretty much -- so the gross margin is, of course, affected by this that we're selling out, you can call it the valuables in the order book, you find premium and that is premium has a higher margin from the start, so to say. So of course, we will see an increase of the margin going further on. But also you asked about -- I think you asked about the price. I think it's related to the U.S. dollar and the tariffs and we are -- compensate in our prices [indiscernible] currency effects we're talking about, it's other things related to this. I don't know if we answered your questions there.

Maybe I should also fill in there, Henrik, about what we said also regarding the under absorption because now we have reduced the production significantly, which, of course, also reduces the cost side and causes less variance in the production. So this will improve the gross margin itself also, but only to a certain level because volumes needs to be increased to be able to get full scale, of course.

Perfect. Great. And then another question here on the order book. I mean you've seen a stabilization now in the last quarters. Is there an impact there from FX as well that you revalue the order book? That's the first one. And then related to that, very strong sales order intake in North America and Europe as well for that matter. I mean could you give some color on what's driven by new dealerships added and what's driven by like-for-like sales, if you will?

If I start out with how we treat the currency, we revaluate the currency in the order book. So we have sort of a negative effect in the order book, so to say. So that is how we do it. And if you wish to comment on anything about new dealers...

No, your second question. Of course, it's driven by the fact that we onboard more dealerships because they will buy a certain amount of -- but we also see that it increases the retail sales per dealership, so to say, but we have more dealerships. So the retail sales follows in the same pattern, so to say. But it is, of course, also the fact that we onboard dealerships.

So just so I understand that. So the underlying order book development is better than what you report, of course, because you have this negative currency effect that brings down the value...

That is correct. That is correct.

And then, if you say the improvement is 100, what is -- roughly what is driven by new dealership and what's driven by organic growth, if you will? Is the growth driven by new dealers only? Or is there a share that is actually driven that markets are improving organically as well? Or are we still waiting for that?

I would say that the organic growth is higher than maybe this is 60%, 70%, I would say, is driven by organic growth and the rest is driven by new deal.

Excellent. And then my final question here is on the dealer inventory situation, you talked about that in the past that dealers have been quite cautious in taking on inventories. And you said that you do well versus competitors. So could you elaborate a bit about that? Why are you doing better than competitors?

It is more or less the same. We can see that we're talking about U.S., for example, we can see that the U.S. dealers stock level is improving. It's more you can call it normal. In Europe, it's still very low activity on that side, which that we have more or less a stock as a boat, that's not correct, of course. The good part of that is when the market gets a little bit more activity as we talked about, meaning that the dealership doesn't have the boat, which means that they will order it from us. And I think that's actually what we see now in the increasing order intake. And that is a good sign. Then of course, we prefer that the dealerships have a relevant number of the I should say it's part of our business. We have normalized the situation, so to say. So now maybe not everyone, but most of the dealership has a relevant stock of boats.

The next question comes from [indiscernible] DNB Carneige.

I have just a couple of questions for you. First, I was wondering about the cost cuts that you announced. Could you please expand a bit on the measures what are you doing, and perhaps the estimated effect on earnings that you mentioned from Q3 onwards?

And just to be clear, you said the cost reduction program, the cost...

Yes, exactly.

We have not to be too specific, so to say. But if we have an organization and we are expecting sales level of, say, SEK 2.4 billion or something like that and we see a softer market, then of course, we need to adjust and that we did already last year. Now we get, more specific, a big part of this is related to the [indiscernible] that we are part of that industry. And that means that we -- you can say we take the ore the company to this premium company that we wish to be. And talking about the target is approximately SEK 20 million per quarter in [indiscernible].

Then my second question, you touched upon it briefly, but your operating cash flow held up quite well considering your margins. And as you mentioned, due to reduced inventories. Could you please give us some color on inventory levels moving forward, what we can expect regarding inventory releases and so on? We had a target actually then, since it has already happened, we can talk about it. But we wanted this demand and the supply to meet. And from the beginning at that point, we are then during the autumn '24, we saw that this could happen before the summer. Then we had a softer market than expected due to the global politics and [indiscernible]. As I said at the beginning of that point where they need, so to say, a bit further on. And actually, it will happen during quarter 3. And what we have done is, of course, that we have reduced our own capacity. We are closing, for example, [indiscernible] the plant. We are reducing production or we have reduced production, I should say, more or less in all our sites and quite severe. And by that, we're starting to sell the stock as that. So the demand is slightly higher than we actually have the capacity to build for at the moment. So that is the [indiscernible].

To fill in there if you look backwards the first half of 2025, we have come from a position where we still have produced more boats than what we could sell. So now we have changed this and we are, as we can see, gradually reducing the inventory levels. And according to our plan, we expect to do so. We expect to get the biggest impact now from the first quarter, which mentioned. So this is in line what we have predicted, so to say. But it is, of course, very hard to tell exactly what the levels will be, but we follow the plan that we made in the beginning of the year right now.

There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

Yes. And we have quite a lot of written questions, all from [indiscernible]. So I'll take one at a time. He says, great to see the reduction in net working capital. How do you see the level developing going forward, including the [indiscernible] ?

It's related to the last question we talked about a bit. So I would say that goes back to the previous question. Same answer.

And if we fill in regarding the deal with Blipp, this is also expected to happen, as Jan Erik mentioned before, during the third quarter. So those effects will be not that dramatic, I would say, in the quarter.

Okay. And you also asked about the restructuring program. Will they cover the reserve that you have cover the expected cost for Q3, no more one-offs expected in Q3?

According to our estimates, we are well covered. But always when it comes to these kind of items, you can be surprised, but we have done the best estimate we can. So it is our belief that we are correctly positioned, in accordance with what the outcome will be. But the outcome is also dependent on what happens with some of the stock related to the [indiscernible]. But we believe that we are well positioned in the reserve.

Good. So I also ask regarding your comments on revenues being at the bottom. I think you said that now Erik also that you see increases coming forward. So he asks if that implies that you expect year-on-year revenue increase from Q3 and onwards?

The simple answer is, of course, yes. That is what we see. That's the signs that we are building, so to say, you can call it forecast. Then of course, we have seen talking a lot about the predictability, which is important for all of us, but maybe especially when you're a producing company. And we really need that. And we have seen during, I should say, especially the late one and half year now that we are affected by things that happens globally today, which differs, and of course, quite many years back. But still it's immediately that we can see that the business process slows down and sometimes quite severe. But it is our belief and fairly confident that we have reached the bottom and we are starting the next journey, so to say.

Great. And then wonders about the sales in the U.S., how is the sell-in versus the sell-through to dealers?

And what we see is that soft market as we see in Europe, U.S. reach that point a bit later than we did. And my guess is that, that is the picture we will see at least for this year. 2026 will most probably then follow the pattern that we have seen in Europe during '25. It's hard to look through it, so to say. It's tough to predict, because it's so dependent on so many things, but the business climate tells me that. So I think that's what I can answer on that one. Do you want to add something?

And then he wonders about the sale of boats to the Swedish Armed Forces. Will that start in 2026?

Absolutely, and we don't have it in the order book, but of course, it's in a good order, so to say. The only thing we are waiting for now, as I said, is the delivery schedule. And there is a lot of discussions ongoing. And the plan, I can say that the plan is slightly more positive than the original one that we signed. But again, we are not there yet. But during the autumn, we will know much more about this.

Great. And then his last question is regarding the Nimbus brand of sales in the U.S. What share of sales in the quarter was non-U.S. produced Nimbus boats?

[indiscernible] low percentage. Edgewater and Nimbus is absolutely dominating brands. So, non-Nimus or Edgewater brand...

Nimbus branded but not in the U.S., I think?

Edgewater had a strong quarter. But at the same time, it was quite -- we don't follow this figure as you understand. But we quite small, still good in Europe, for example, we started to sell the 495 during quarter 1 in U.S. and that has started really well, and we have sold a couple of them. We still haven't delivered that. I think it's [indiscernible] , but that of course has an effect also.

That was all the questions that we had. So I really would like to thank you all and remind you that our third quarter report will be issued on the 23rd of October. So thank you, and thank you Erik and Rasmus.