Orthex Oyj — Earnings Release 2021

Aug 25, 2021

Orthex H1: Strong growth in all markets and categories, high raw material price level continues

Orthex H1: Strong growth in all markets and categories, high raw material price level continues

Orthex Corporation, Stock exchange release, August 25, 2021 at 9.00 a.m. EEST

This release is a summary of Orthex Corporation’s Half Year Financial Report
January–June 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–June 2021 in Brief

· Invoiced sales increased by 27.9% and totalled EUR 45.0 million (35.2)
· Net sales increased by 28.8% to EUR 43.8 million (34.0)
· Adjusted EBITDA was EUR 7.8 million (7.2) (adjusted for IPO related costs
EUR 1.5 million)
· EBITA was EUR 4.4 million (4.8)
· Adjusted EBITA was EUR 5.9 million (5.1)
· Adjusted EBITA margin was 13.6% (15.0)
· Operating profit was EUR 4.3 million (4.8)
· Adjusted operating profit increased by 15.4% to EUR 5.9 million (5.1)
· Net cash flows from operating activities were EUR 5.4 million (4.5)
· Net debt / Adjusted EBITDA was 1.5x
· Earnings per share, basic was EUR 0.16 (0.18)
· Due to the share issue, equity ratio increased to 33.0% (23.4)

April–June 2021 in Brief

· Invoiced sales increased by 22.7% and totalled EUR 22.5 million (18.4)
· Net sales increased by 25.5% to EUR 22.2 million (17.7)
· Adjusted EBITA was EUR 2.6 million (3.2)
· Adjusted EBITA margin was 11.9% (17.9)
· Operating profit was EUR 2.4 million (2.9)
· Net cash flows from operating activities were EUR 2.2 million (1.9)
· Snow toys moulds were sold to Wiitta Oy
· Raw material prices have risen to exceptionally high levels

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 Performance Indicators

EUR million 4–6/20 4–6/20 Change 1–6/20 1–6/20 Change 1–12/2020
21 20 21 20
Invoiced 22.5 18.4 22.7% 45.0 35.2 27.9% 77.9
sales
Net sales 22.2 17.7 25.5% 43.8 34.0 28.8% 75.9
Gross 5.6 5.8 -4.2% 12.3 10.7 15.1% 24.6
margin
Gross 25.1% 32.9% 28.1% 31.5% 32.4%
margin, %
EBITDA 3.3 4.0 -16.5% 6.3 7.0 -10.0% 16.5
EBITDA 15.0% 22.5% 14.3% 20.5% 21.7%
margin, %
Adjusted 3.6 4.3 -16.1% 7.8 7.2 8.2% 17.1
EBITDA
Adjusted 16.1% 24.1% 17.9% 21.3% 22.5%
EBITDA
margin, %
EBITA 2.4 2.9 -17.7% 4.4 4.8 -9.6% 12.3
EBITA 10.8% 16.4% 10.0% 14.3% 16.3%
margin, %
Adjusted 2.6 3.2 -17.1% 5.9 5.1 16.1% 12.9
EBITA
Adjusted 11.9% 17.9% 13.6% 15.0% 17.0%
EBITA
margin,
%
Operating 2.4 2.9 -18.5% 4.3 4.8 -10.4% 12.3
profit
Operating 10.6% 16.3% 9.9% 14.2% 16.2%
profit
margin, %
Net cash 2.2 1.9 17.1% 5.4 4.5 19.7% 12.7
flows from
operating
activities
Net debt / 1.5x n.a. 1.5x n.a. 2.3x
Adjusted
EBITDA
Adjusted 8.0% 9.9% 18.3% 15.9% 40.3%
return on
capital
employed
(ROCE), %
Equity 33.0% 23.4% 33.0% 23.4% 22.6%
ratio, %
Earnings 0.09 0.13 -33.3% 0.16 0.18 -8.2% 0.47
per share,
basic (EUR)
FTEs 321 269 19.7% 318 273 16.5% 285

Alexander Rosenlew, CEO:

Orthex’s net sales growth in the second quarter continued strongly at +25,5%
compared to the second quarter of 2020, contributing to total net sales growth
of 28.8% for the first half of 2021 and amounting to 43.8 million euros (34.0).
In line with our strategy, invoiced sales outside of the Nordics are growing
faster than the sales growth in the Nordic market. Invoiced sales in the Nordic
market grew strongly by 24.1% compared to the first half of 2020, amounting to
36.4 million euros (29.4). In the rest of Europe, invoiced sales grew as much as
40.1% and amounted to 7.2 million euros (5.1). Sales in the rest of the world
grew by 98.0%, amounting to 1.4 million euros (0.7). The positive development is
a continuation of the successful commercial strategy implementation, which
includes launch of new products, widened distribution, and opening new
customers.

All our product categories performed strongly during the first half of the year.
The biggest category Storage, with the brand SmartStore, continued to deliver
fast-growing sales, taking the first half growth to 31.7%, with total invoiced
sales increasing from 21.6 million euros in 2020 to 28.4 million euros in 2021.
Our second largest category Kitchen, with the GastroMax brand, performed at a
convincing 17.0% growth rate. The smaller categories Home & Yard grew by 17.6%
and the Plant Care category grew by 39.0%.

I am particularly impressed by the commercial team for showing resilience and
determination in implementing the strategy leading to positive sales development
during times of lower predictability due to COVID-19. With less opportunities to
arrange physical customer meetings, visit shops, attend trade fairs or
exhibitions, our ways of working had to be adapted to the circumstances. The aim
is to be the best partner for our customers also under these times of
restrictions and travel bans.

As anticipated, adjusted EBITA margin was relatively lower in the second quarter
at 11.9%, mostly due to high raw material prices. For the first half of the
year, adjusted EBITA margin was 13.6% (15.0). Adjusted EBITA for the second
quarter was 2.6 million euros (3.2), taking the first half adjusted EBITA to 5.9
million euros from 5.1 million in 2020. The strong sales growth helped to bridge
the negative cost development during the first half of the year.

The raw material prices continued to rise during the second quarter, but the
availability of our main raw materials on the market has eased. At the moment
raw material converters’ margins are at historically extraordinary high levels.
Raw material price fluctuation and measures to off-set the effects are common to
the business. 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 goal is to deliver adjusted EBITA
margin exceeding 18%, and we are committed to ensure that our actions lead to
reaching our goals.

As part of our sustainability strategy, we are continuously aiming to reduce our
carbon footprint, and this includes increasing the use of recycled and bio-based
raw materials. The energy we use in our production is another important factor
that we can influence. In 2020, we switched our Finnish production site to use
only renewable electricity, reducing our carbon footprint with more than 600,000
kg CO2e. In perspective, this compares to driving a car for 4.3 million
kilometres or 100 times around the globe. We have now made the change to
renewable energy also in our Swedish factories, which means that we have
completed the switch to renewable energy in all our factories. The effect of the
switch will be reported in our next sustainability report.

Orthex’s innovations continued to perform well during the first half of the year
and the pipeline of innovation both in terms of new products and new materials
remains strong.

We have been able to ramp up capacity according to plan to secure our delivery
performance. This is important to ensure being our customers’ preferred partner
during times of high sales growth. The installation of our new moulds and
injection moulding machines strengthens our production platform and we have also
strengthened the operations organisation to adjust for the increased demand and
rising volumes in our Lohja and Tingsryd factories. A positive side effect of
installing new machines is that energy consumption and efficiency improves
overall, also resulting in improved sustainability of production, as less energy
is needed per product produced.

The first half of the year has been positive, and we are prepared to continue to
implement our growth strategy, with focus on accelerated international growth
and sustainability. We have taken measures to reduce the impact of high raw
material prices, and we are committed to continuing to take targeted action
depending on the raw material price development. During uncertain times,
optimally timing the corrective action is important to maintain positive growth
momentum.

Press conference on financial results

Orthex’s CEO Alexander Rosenlew and CFO Saara Mäkelä will present the Interim
Report on 25 August 2021 at 11:00 a.m. EEST in a webcast.  The webcast can be
joined through this link. (https://orthex.videosync.fi/2021-08-25-orthex
-q2/register)  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 down
loaded 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.

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