Orthex Q3: Strong performance despite high raw material prices
Orthex Corporation, Stock exchange release, November 11, 2021 at 9.00 a.m. EET
Orthex Q3: Strong performance despite high raw material prices
This release is a summary of Orthex Corporation’s Interim report January–September 2021. The complete report is attached to this release as a pdf-file. It is also available on Orthex’s website at https://investors.orthexgroup.com/.
January–September 2021 in Brief
- Invoiced sales increased by 19.9% and totalled EUR 67.0 million (55.9)
- Net sales increased by 20.9% to EUR 65.6 million (54.3)
- Adjusted EBITDA was EUR 12.1 million (12.3)
- EBITA was EUR 7.7 million (8.9)
- Adjusted EBITA was EUR 9.2 million (9.2)
- Adjusted EBITA margin was 14.1% (16.9)
- Operating profit was EUR 7.6 million (8.8)
- Adjusted operating profit was EUR 9.1 million (9.1)
- Items affecting comparability totalled EUR 1.6 million (0.3)
- Net cash flows from operating activities were EUR 7.2 million (10.1)
- Net debt / Adjusted EBITDA was 1.6x
- Earnings per share, basic was EUR 0.29 (0.33)
- Equity ratio increased to 34.8% (25.1)
- Snow toys moulds were sold to Wiitta Oy
- Raw material prices have risen to exceptionally high levels
July–September 2021 in Brief
- Invoiced sales increased by 6.4% and totalled EUR 22.0 million (20.7)
- Net sales increased by 7.7% to EUR 21.8 million (20.3)
- Adjusted EBITA was EUR 3.3 million (4.0)
- Adjusted EBITA margin was 15.1% (19.9)
- Operating profit was EUR 3.3 million (4.0)
- Net cash flows from operating activities were EUR 1.8 million (5.6)
- Orthex was selected as a pioneering company to the Finnish Innovation Fund Sitra’s list of the most interesting companies in circular economy in Finland
Long-Term Financial Targets
As long-term financial targets the company has adopted to an average annual organic Net sales growth to exceed 5 per cent at the Group level and to exceed 10 per cent outside the Nordics (growth in local currencies), adjusted EBITA margin (adjusted for items affecting comparability) to exceed 18 per cent over time and net debt to adjusted EBITDA ratio to stay below 2.5x. Leverage may temporarily exceed the target range (for example, in conjunction with acquisitions).
The company aims to distribute a stable and over time increasing dividend with a pay-out of at least 50 per cent of net profit, in total, on a biannual basis.
Orthex does not publish a short-term outlook.
| Key Figures |
|||||||
| EUR million | 7–9/2021 | 7–9/2020 | Change | 1–9/2021 | 1–9/2020 | Change | 1–12/2020 |
| Invoiced sales | 22.0 | 20.7 | 6.4% | 67.0 | 55.9 | 19.9% | 77.9 |
| Net sales | 21.8 | 20.3 | 7.7% | 65.6 | 54.3 | 20.9% | 75.9 |
| Gross margin | 5.8 | 6.7 | -14.8% | 18.1 | 17.5 | 3.6% | 24.6 |
| Gross margin, % | 26.4% | 33.3% | 27.6% | 32.2% | 32.4% | ||
| EBITDA | 4.3 | 5.1 | -16.4% | 10.5 | 12.1 | -12.7% | 16.5 |
| EBITDA margin, % | 19.6% | 25.2% | 16.1% | 22.2% | 21.7% | ||
| Adjusted EBITDA | 4.3 | 5.1 | -16.4% | 12.1 | 12.3 | -2.0% | 17.1 |
| Adjusted EBITDA margin, % | 19.6% | 25.2% | 18.4% | 22.7% | 22.5% | ||
| EBITA | 3.3 | 4.0 | -18.5% | 7.7 | 8.9 | -13.6% | 12.3 |
| EBITA margin, % | 15.1% | 19.9% | 11.7% | 16.4% | 16.3% | ||
| Adjusted EBITA | 3.3 | 4.0 | -18.5% | 9.2 | 9.2 | 0.8% | 12.9 |
| Adjusted EBITA margin, % | 15.1% | 19.9% | 14.1% | 16.9% | 17.0% | ||
| Operating profit | 3.3 | 4.0 | -19.0% | 7.6 | 8.8 | -14.3% | 12.3 |
| Operating profit margin, % | 14.9% | 19.9% | 11.5% | 16.3% | 16.2% | ||
| Net cash flows from operating activities |
1.8 | 5.6 | -67.5% | 7.2 | 10.1 | -28.4% | 12.7 |
| Net debt / Adjusted EBITDA | 1.6x | n.a. | 1.6x | n.a. | 2.3x | ||
| Adjusted return on capital employed (ROCE), % | 9.7% | 13.6% | 28.0% | 29.6% | 40.3% | ||
| Equity ratio, % | 34.8% | 25.1% | 34.8% | 25.1% | 22.6% | ||
| Earnings per share, basic (EUR) | 0.12 | 0.15 | -16.4% | 0.29 | 0.33 | -11.6% | 0.47 |
| FTEs | 319 | 292 | 9.1% | 318 | 279 | 13.9% | 285 |
Alexander Rosenlew, CEO:
Orthex’s net sales growth in the third quarter was +7.7% compared to the third quarter of 2020, contributing to a total net sales growth of 20.9% for the period January–September 2021 and amounting to 65.6 million euros (54.3). Invoiced sales in the Nordic market grew strongly by 16.9% compared to January–September 2020, amounting to 54.2 million euros (46.3). In line with our strategy, invoiced sales outside of the Nordics grew even faster: in the rest of Europe, invoiced sales grew by 35.6% and amounted to 10.9 million euros (8.0) and in the rest of the world by 27.2%, amounting to 2.0 million euros (1.5).
Demand was weakened in the first half of 2020 due to the beginning of the COVID-19 pandemic but had a strong rebound in the third quarter. This is important to keep in mind when comparing the quarters between the years. September 2020 was the company’s highest-ever sales month until we broke that record in September 2021 and finished the third quarter strongly.
The positive sales development is driven by successful commercial strategy implementation, which includes launch of new products, widened distribution, customer collaboration and new customers.
All Orthex product categories performed strongly during January–September 2021. The biggest category Storage, with the brand SmartStore, continued to deliver fast-growing sales, taking growth in January–September to 24.0%, with total invoiced sales increasing to 42.9 million euros (34.6). Our second largest category Kitchen, with the GastroMax brand, performed at a 9.8% growth rate. Of the smaller categories, Home & Yard grew by 8.7% and the Plant Care category by 30.4%.
I am happy to see COVID-19 related obstacles gradually being removed. We are now able to visit many of our customers and we have already participated in some physical trade fairs. Lockdowns of stores in our major markets are no longer imposed and the demand for our products is becoming more predictable. We can already see a normalising pattern with little seasonal variation in sales over the last few quarters.
As anticipated, adjusted EBITA margin was lower in the third quarter at 15.1% (19.9), mostly due to high raw material prices. For January–September, the adjusted EBITA margin was 14.1% (16.9). Adjusted EBITA for the third quarter was 3.3 million euros (4.0), taking the January–September adjusted EBITA to 9.2 million euros, which is at the same level as the January–September 2020 outcome (9.2).
Raw material prices started to increase sharply towards the end of 2020 and reached their highest levels during the second quarter of 2021. Since then, raw material prices have remained high. The cost for freights and electric power have risen in general but are not affecting the result notably as they are a fairly small part of the total cost. Our understanding is that raw material availability has been scarce on the market. However, we have been able to source the needed raw material for production. Raw material price fluctuation and measures to off-set the effects are common to the business, and the implementation of our measures started to have an effect towards the end of the third quarter. Unpredictable and fast increases in raw material prices create a short-term profitability challenge due to the delayed effects of implementing price increases or cost savings. Our long-term target is to deliver an adjusted EBITA margin exceeding 18%, and we are committed to ensuring that our measures are in line with that target.
Our strong commitment to sustainability was recognised when Orthex was selected as a pioneering company to the Finnish Innovation Fund Sitra’s list of the most interesting companies in circular economy in Finland. The list presents 41 pioneering companies that offer circular economy solutions to the global sustainability crisis. The panel of experts commented on the selection as follows: “A traditional company that has executed the circular economy for years by growing the usage of recycled plastics and by designing recyclable products. The company brings innovation to the market.”
Orthex has been able to ramp up capacity according to plan to secure delivery performance. The volumes shipped through the German warehouse are increasing, driven by European sales growth. The installation of new moulds and injection moulding machines strengthens our production platform and we have now considerably increased capacity in our best-selling storage range products. We also see the negative effect of COVID-19 decreasing, as for example decreasing sick absences in production result in reduced need for over-time and temporary workforce.
We are committed to implementing our growth strategy with a focus on accelerated international growth and sustainability. We expect that the effect of our first measures to reduce the impact of high raw material prices will soon be fully visible. We will continue our targeted actions depending on the raw material price development. At the moment, raw material prices, freight cost and energy price are on high levels and future development is hard to predict.
Press conference on financial results
Orthex’s CEO Alexander Rosenlew and CFO Saara Mäkelä will present the Interim report on 11 November 2021 at 11:00 a.m. EET in a webcast. The webcast can be joined through this link. The webcast presentation will be held in English.
Q&A
Questions to the management can be sent through the meeting chat.
Presentation material
The presentation material will be shared in the online meeting and it can be downloaded the same day on Orthex’s website at https://investors.orthexgroup.com/.
Recording of the event
After the event a recording will be available on the company’s website at https://investors.orthexgroup.com/.
Further enquiries
Alexander Rosenlew, CEO, Orthex Corporation
Tel. +358 (0)40 500 3826
alexander.rosenlew@orthexgroup.com
Saara Mäkelä, CFO, Orthex Corporation
Tel. +358 (0)40 083 8782
saara.makela@orthexgroup.com
Orthex in brief
Orthex is a leading Nordic houseware producer that strives to make consumers’ everyday life easier with its products that are presented under the consumer brands SmartStore™ in storage products, GastroMax™ in kitchenware and Orthex™ in home and plant care categories. Orthex aims to be the industry forerunner in sustainability.
Orthex’s net sales in 2020 was 75.9 million euros and operating profit 12.3 million euros. The company has customers in more than 40 countries and local sales offices in Finland, Sweden, Norway, Denmark, Germany, France, and the United Kingdom. Orthex is listed on the Nasdaq Helsinki stock exchange.