Orthex Oyj (ORTHEX) Earnings Call Transcript & Summary

Good morning, and warmly welcome to Orthex's financial statement release. My name is Alexander Rosenlew, and I have with me our CFO, Saara Makela; and CMSO, Hanna Kukkonen. We will take you through the fourth quarter of 2025 and the full year figures as well. At the end of the session, there will be an opportunity to ask questions. And please put your questions in the chat as we speak. We are tackling as many as we can at the end of the presentation. So that would be the flow. So I'll give you a short introduction about Orthex and then more into the numbers, the strategy moving forward. Saara will go through financials, and Hanna will highlight some good development in sustainability and marketing. So who are we? We are a Nordic-based or Nordic-origin company that is growing in Europe and making a mark with our own organizations in Europe as well. We have 3 factories, where we produce our own goods. And about 90% of what we sell is sold under the strategic brand: SmartStore, GastroMax and Orthex. So that very shortly, our logistics setup is efficient, close to the markets with 1 warehouse in Finland, 1 in the south of Sweden and 1 in the middle of Europe on the border between Germany and France. So for us, the mission is to make everyday life easier for the consumer. And if our products can actually solve a need in the home, solve a functional need, then we are on a good track. So usable, good, long-lasting products and one part of our sustainability strategy is quality. Quite importantly, we don't produce single-use. We produce products that last and that you can use over and over again. And then at the end of their lifespan, they can be recycled. We, of course, also use recycled material where possible. So storage, the biggest and widest assortment, about 69% to 70% of our sales. Then kitchen, a lot of products to make preparing and storing food easy, is about 20% of the sales. And then the final product group or category is Home & Garden, which includes all kinds of home products plus then the flower pots and home and yard related products. We do a lot of innovation. We follow trends. We follow trends both in color and design and about 10% of our turnover is supposed to come from new products. So that's quite a good way of keeping you present. So let's go into 2025 and how we did. So '25 and Q4 overall, I would say the sentiment from the consumer was careful. There was a lot of uncertainty from the consumer, and that also led to uncertainty from our customers, the big retailers, not so quick decisions, quite careful on the volume buying, quite careful on pricing, et cetera, et cetera. So 2025, a year which was not helped in any way by outside things for us as a company. During these conditions, however, we managed to perform solidly. We defended, I would say, our top line, and we strengthened our profitability. So the profitability in Q4 improved compared to last year. And I would say that this is a combination of, of course, tight cost control and way of operating and adapting to the situation where the top line is not in our favor, where sales is not growing as we would like to, then adapting to that and then helped by towards, I would say, the end of the year, especially if you look at the whole year, the raw material came down a bit, and that clearly started to be visible in our numbers. I would say that in terms of our strategic area, Europe where we want to grow, we have a good development on quite many fronts, but we also have a few customers not performing the way we would like to. But I would say the base is stronger. We have more opportunities. We have more things going on in Europe as we speak. Then, going into the numbers. So Q4, quite a decline in sales, I would say. In Q3, we told you that we shipped a lot at the end of the third quarter, and that's visible. The start of Q4 was a bit slow. And then usually in the end of Q4, we shipped a lot for the beginning of the following year. And this time, we didn't have as much to preship for 2026 at the end of Q4. So a bit of a hit in terms of timing on seasonalities there. And then, you can see how it's then divided on rest of Europe and Nordics. On the EBITA, we did EUR 3 million. The margin -- EBITA margin was clearly up to 13.6% from 12.7%, and the net cash flow was healthy at EUR 2.5 million. So if I look at -- in more sort of general terms, I think the theme that's coming back all the time is the consumer spending, which has been careful on many of our markets. When it's really tough to get the spending going, I think one of the key things we can do is to look really tempting in the store, our store presence can be such that at least if you're a shopper, you will not miss our products. And I think there, in 2025, we have especially made good progress, and Hanna will show you a few pictures later on of how you can make sure that the shopper will buy your product when he's in the storage section of the store. Leverage is down, down to 1.1x, net debt to EBITDA, and this clearly gives us room to maneuver for strategic -- potential strategic investments. So if we look at the full year, full year figures were down by almost 3% at 2.8%, and we did EUR 87.2 million in net sales. So a small decline, I would say, and so many times already explained in this presentation where it comes from. At the beginning of the year, we had to limit some shipments with customers being financially troubled. And towards the end of the year, we had some seasonal shipment things taking down Q4 a little bit. And then, throughout the year, I would say, all the uncertainty around us in the world, making consumers quite careful in using their money and that also translating to the big retail customers being careful in making decisions about more listings of our products in the stores, which we, of course, would very much like to see expanding rapidly. And then the EBITA towards the end of the year, we actually narrowed the gap. So we landed at 9.8% and on a full-year level, the percentage was, I would say, on par with last year despite the quite troublesome start where we were a bit behind before Q1 -- sorry, after Q1. So if we go into this by geography to the left, you have the fourth quarter, and to the right, you have the full year. And to the left, you can clearly see the sort of careful consumers in the Nordics taking down sales. And then, rest of Europe, I would say a bit of a tough comparison, 5.7% was a very high sales level the year before. Of course, we want to grow faster. I think we have some good things going on in Europe, but we have also one big customer in Q4 not ordering the same amount on campaign volumes as the year before. So quite a straightforward quarter in that sense, showing the sentiment on the market. And for the full year, down in the Nordics, we know Finland has had quite some trouble when it comes to the consumers. And it's a bit of a mixed bag between the Nordic countries, some consumers feel more healthy and some less. And clearly, the overall picture is that the careful consumer sentiment has affected our sales in the Nordics. Whereas rest of Europe is fairly flat on a yearly level, we would like to see more. But the nice thing is, I would say, the quality of the sales in the rest of Europe is better, it's getting wider. We are getting more distribution. We are getting more traction. So we have a strong belief in those numbers. If we look by product group as well, so on the left, Q4, and on the right, full year, and here, I would say the same picture, slightly down in storage, both on the quarter and then on the year, I think one sort of thing, which is worth mentioning is a slight up in Home & Garden coming from recycled flower pots development being quite positive. So, otherwise, I think the category development is quite in line with the geographical development as well. So if I jump into the strategy, which hasn't changed too much, I think we are on the right track here. We want to continue to win in the Nordics. That has to do with being the best partner in the categories we operate, bringing the new products coming with the right campaigns, et cetera, working closely to make the whole category where we operate more attractive for the consumer and also more sustainable for the consumer. The second box of growth is accelerating the growth in international markets. I say that we have quite a lot of the big customers in Europe, the retailers we want to cooperate with. We have some kind of started cooperation. We need to build on that. And we are strengthening the -- our own setup to be able to build more efficiently even on those areas. Hence, we are well prepared for what to come to, to start delivering on -- even better on this box. And then, we have the online, so the pure online is still growing. We are doing a lot of work. We're doing work not only to sell, but also to build our brands on platforms like Amazon or then the multichannel medias where you can put in good material on why our products are to prefer in terms of supply in these product groups and how they can be used in a good way, inspiration, et cetera. So it's not only online sales, it's also online brand building. And with these 3 initiatives plus a joker, which we call market consolidation, possible M&As, we are looking to become the #1 storage brand in Europe, and of course, protect our leading houseware company position in the Nordics. I now give over to Hanna to share a little bit of what's going on in the stores and on sustainability.

Thanks, Alexander. So, as Alexander told already, we've continued in putting a lot of effort in building the stores around Europe, and more and more stores are looking like this, as you see in the picture. And in 2025, we built almost 450 stores with our branding and our planogram. So that work is progressing really, really well. And here is some other pictures around France and Europe. So that is what we are continuing, and it's working well. Then, moving on to the sustainability. So we -- during the Q4, we've been updating or fine-tuning a little bit our sustainability strategy. As you know, we did a materiality assessment during the spring of 2025. And there, we kind of -- let's see, we found the critical topics for Orthex, and they weren't changed so much after the 2022 material assessment, so not any really big changes. So we still concentrate on consumers and end users, our own workforce, climate change and circular economy. But as part of this fine-tuning of the sustainability strategy, we have changed our previous carbon neutrality target. And now, the target is to minimize impact on the planet. And this is a much comprehensive wider target that then includes more aspects than just the carbon emissions. But we still continue our challenging and hard work to reduce our emissions, and we have succeeded in that, and we continue, and how we do it is that we increase further the recycled and renewable raw materials. We continue with more efficient energy use. We use our renewable energy. We promote circular economy and so on. So the work is continuing, and we will present the new updated sustainability strategy and the KPIs for 2025 in our sustainability report that will be published in a couple of weeks. So it's the week starting 16th of March. So more then about that. But if we still continue on the Q4, so we got a very nice recognition. Our Paulina self-watering flower pot won the Finland's Most Sustainable Product prize in the leisure time category. And this is a really nice recognition for us. It's a product that we've been selling from the 1980s, so during 50 years, and it really shows how a product can -- a design can last time and consumers still love the product. But what has changed during the 50 years is that now the product is produced with green energy from recycled raw materials and it's recyclable in the end of its life. So a good example of a long-lasting, high-quality product that lasts time. And then regarding the reporting, we got confirmed in -- during the Q4 that due to our size, we are exempt from the CSRD requirements. We are monitoring the regulations and the requirements, and we still continue to report our sustainability reporting according to the ESG structure. And as said, the report will come out during week 12. Then, regarding the novelties, our launch windows are yearly in February and September. So no -- not any new launches during Q4. So in the picture, you see the launches from September last year. And all in all, during 2025, we launched very many novelties, so we could really say it's a year of new product launches. And by that, I then hand over to Saara on the financials.

Thank you, Hanna. In the fourth quarter of '25, our net sales decreased by 6.6% to EUR 22.3 million. In constant currency, the decrease was up to 9.4% compared to fourth quarter of last year. Weak consumer purchasing power and different timing of seasonal and campaign deliveries affected sales, especially in Nordics, which accounted for most of the decline of sales. For the full year, net sales declined by 2.8% or 4.7% in constant currencies. I think Alexander covered the sales part already quite thoroughly. So moving on to profitability. Adjusted EBITA in quarter 4 remained stable at EUR 3 million, and the margin improved to 13.6%. Raw material prices were declining a bit, and that supported the development of the profitability during the last quarter. For the full year, adjusted EBITA decreased slightly to EUR 9.8 million with a margin of 11.3%. Lower sales increased the relative burden of the fixed production costs, but the cost control and lower raw material prices helped us to maintain the gross margin. In general, the tight cost control ensured that fixed costs remained at the same level as last year relatively. We've done a lot of work with the cost base and looking forward to getting back to a growth part and developing more to growth during coming years. Here, you can see the development of key raw material price indexes. During quarter 4, we saw some decrease in raw material prices, but it was in the range of the normal fluctuation. Then, the recent geopolitical escalation, the war in Iran is increasing definitely pressures in the plastic raw materials. Usually, spot prices are reacting more quickly than contract prices, and we are mainly purchasing our raw materials in contract prices. But if the conflict prolongs, and it might be affecting the prices in general. So we are, of course, following this closely, and it's very hard to say what is going to happen during coming months. Next, our investments and debt position. Investments in quarter 4 amounted to EUR 1.4 million, investments focused on new products and improvements in fire safety. And as there was no need to major capacity increases during the year, the overall investment level remained lower than in '24 at the level of EUR 2.7 million. The net debt at the end of the year was EUR 16.6 million, so down from EUR 20.3 million last year. And the total interest-bearing liabilities amounted to EUR 28.4 million. Leverage remained healthy at 1.1x adjusted EBITDA. Then here, we compare our latest reported figures to the long-term financial targets. Targets are the same. In tough market environment, organic net sales fell by 2.8% in total and 2.2% outside the Nordics. So we did not reach our growth targets, which were 5% in general and 10% outside Nordics. Our adjusted EBITA margin was 11.3% compared to the long-term target, which is above 18%. There was a lot of positive development during the year '25, but although not all of it is yet reflected into the figures, unfortunately. Leverage was strong at 1.1x adjusted EBITDA and well below the target threshold of 2.5x. And the Board proposes a dividend of EUR 0.23 per share, and that corresponds to 60% of the net result. Then, the Nomination Board has made proposals to the Annual General Meeting. Jyrki Maki-Kala had announced that he was not available for reelection. So there have been 2 new nominees proposed: David Miller, he's representing Conficap, and Sari Somerkallio was bringing strong financial expertise to support the Board's work. And the Board remuneration is proposed to remain the same as last year. Then finally, here are the financial reporting dates for '26. The annual and sustainability report for '25 will be released during the week in March. And the AGM is planned for April 14. And AGM is planned to be -- planned to take place here at the Espoo offices. So it's going to be a physical meeting. And we will be publishing our interim reports during the year on 7th of May, 18th of August and the 5th of November. And this concludes the overview of the quarter 4 financials, and I'll hand it over to Alexander.

Thanks, Saara and Hanna. Just a very quick summary before we go into the questions. I think we repeated many times '25 was a careful year from the consumer and the customer. And I think even more importantly, we used our time efficiently. We are well prepared for 2026. We have worked on our processes. We have worked on our organization and our tools, and we are ready and enthusiastic and well prepared for the future. And hopefully, there will be some stability coming our way as well, but we are also getting quite used to all the disruptions coming from all the directions you can imagine that we saw in the previous years. So let's go into the questions. And Hanna, if you can please facilitate the chat.

Yes. Thank you. Let's start with the sales result. Maybe that already came and maybe you can repeat it as well. So the first question was about we have said that we have been strengthening our resources in Europe and doing a lot of work in the in-store, but why haven't these kind of things have not succeeded or have had no effect in our sales since we didn't grow neither in Europe or Nordics. And maybe I can combine another question to this. So what is your view on the expansion in the Europe at the moment?

That's a very, very relevant question and quite understandable when you have flat development in rest of Europe for the year. And we're being -- or at least myself being quite optimistic in my comments. So I would say, first of all, we've strengthened the organization. We have a new sales director from within the company. We have more organized processes of how to approach the big, really relevant -- for us relevant customers that are present throughout Europe. We have also an assortment, which is when we launch new products, which is designed to not only be targeted to the Nordics, but for sure, targeted to a position where we are #1 in Europe. So those are the sort of prerequisites. Then, if you look bluntly at the numbers, I would say the -- what you can't see from the numbers is the quality of the sales. And that is we are operating out of a much broader base of big key accounts. We have 1 or 2 bigger customers that are not helping the growth, but we have plenty of big new opportunities on the table. So that's what makes me really enthusiastic about the situation we are in.

Yes. And then, on the M&A, so can you say what kind of M&As are you looking at? You probably don't need to buy production capacity or...

No, it's -- that's a good question. But I think if you want to be the #1 in Europe, and all of your current production is located in Sweden or Finland and transport is quite a big cost component and also an advantage is speed to the retailer, they don't have to wait 6 or 8 weeks to sail things from China, but they can buy from our warehouse, which is 24 hours away. So I think building a structure where we can take care of all the important customers throughout Europe, so they feel they are buying from next doors. And then, if that involves production capacity or only warehouse or sales functions, et cetera, that's then a second thought that we will return to.

Yes. Good. Thanks. Then, about the raw material prices and the situation in Iran. How do you expect the Iran situation to impact the raw material prices?

I can comment on that. I think I covered our thoughts already in the presentation. So it's very hard to estimate what's going to happen. If it's going to be a short-term escalation, the effects probably are not that significant because we are not in general buying with the spot prices. But of course, the risk is there if the escalation prolongs and it takes several months to sort of sort this out. But very hard to estimate, following closely on the situation.

And maybe sort of have to say it out loud, if needed, we need to react and take price increases if the raw material price goes up considerably. So of course, we are looking at that.

Yes.

Okay. And then do you want to comment changes in consumer retail behavior so far in '26, anything that has changed?

Yes, that's a good question. I think '26 is still quite fresh, but some kind of optimism was there, at least until the embargo in Iran. I think we were getting stable. We saw some small growth numbers even in the Finnish economy, which gave positivity. So let's hope that some kind of improvement will continue. In some of the Nordic countries, things are quite actually bright. They have not been as hardly hit as Finland. And in some of the European countries, we are not that dependent on the consumer sentiment because our market share is so small. So it's more up to us to arrange our growth than for us to be the victims of growing markets or not growing markets, so -- but until these strange things a few days ago, I think things looked a bit normal.

Then, about the online channel, so could you elaborate on volumes or the situation in the online channel?

Yes, I could. Or do you want to do it, Hanna?

Well, I think it's -- we are increasing. So as I think in all the -- in every category, online sales are growing. So we see a really good development in both -- well, in all our customers' online sales. So we are not selling directly ourselves, but we are selling through our customers' online channels and the e-commerce retailers. So we can see a very positive development in the online business. And then about -- I could continue with the novelties. So there's a question about novelties, you aim to generate 10% of revenues from the new SKUs, how has this KPI developed over the last years? And are we currently tracking in line with this target? So we're not publishing this KPI. But as said, we have put a lot of effort on novelties. And there as well, we see a really, really nice good development with the sales of the novelties and happy about that. Good. And we -- that was all for this time, and we want to thank you and looking forward for the next time in May. And as said, our annual and sustainability report will be published in week 12. So we will then inform when it's out and available for all of you.

Wishing you all a nice spring, and now, it's time to buy new flower pots and put your storage things in the basements and whatnot. So go shopping.