Orthex Oyj — Earnings Release 2022

Nov 11, 2022

Orthex Corporation's Interim Report 1 January-30 September 2022: Sales grew, especially in strategically important European markets

Orthex Corporation's Interim Report 1 January-30 September 2022: Sales grew, especially in strategically important European markets

Orthex Corporation, Stock exchange release, 11 November 2022 at 9.00 a.m. EET
This release is a summary of Orthex Corporation's Interim Report
January-September 2022. 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/.
July-September 2022

· Invoiced sales increased by 0.6% and totalled EUR 22.2 million (22.0)
· Net sales increased by 1.4% to EUR 22.1 million (21.8)
· Adjusted EBITDA was EUR 3.2 million (4.3)
· Adjusted EBITA was EUR 2.2 million (3.3), representing 10.1% of sales (15.1)
· Operating profit was EUR 2.2 million (3.3)
· Net cash flows from operating activities were EUR 4.4 million (1.8)
· Earnings per share, basic was EUR 0.07 (0.12)

January-September 2022

· Invoiced sales decreased by 2.7% and totalled EUR 65.2 million (67.0)
· Net sales decreased by 2.9% to EUR 63.4 million (65.6)
· Adjusted EBITDA was EUR 6.7 million (12.1)
· EBITA was EUR 3.7 million (7.7)
· Adjusted EBITA was EUR 3.9 million (9.2), representing 6.1% of net sales
(14.1)
· Operating profit was EUR 3.6 million (7.6)
· Items affecting comparability totalled EUR 0.2 million (1.6)
· Net cash flows from operating activities were EUR 5.9 million (7.2)
· Net debt / Adjusted EBITDA was 2.5x (1.6)
· Earnings per share, basic was EUR 0.10 (0.29)
· In September, Orthex launched a significant research project for the
development of future recycled plastic products and related ecosystem.
· Additionally, Orthex participates in a large cooperation project of seven
years that will start in Finland in January 2023, to promote the circular
economy of plastics.

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 7-9/20 7-9/20 Change 1-9/20 1-9/2021 Change 2021
22 21 22
Invoiced sales 22.2 22.0 0.6% 65.2 67.0 -2.7% 90.6
Net sales 22.1 21.8 1.4% 63.7 65.6 -2.9% 88.7
Gross margin 5.0 5.8 -13.9% 13.0 18.1 -28.4% 23.2
Gross margin, % 22.4% 26.4% 20.3% 27.6% 26.2%
EBITDA 3.1 4.3 -26.4% 6.5 10.5 -37.9% 13.2
EBITDA margin, % 14.2% 19.6% 10.3% 16.1% 14.9%
Adjusted EBITDA 3.2 4.3 -25.5% 6.7 12.1 -44.5% 14.8
Adjusted EBITDA 14.4% 19.6% 10.5% 18.4% 16.7%
margin, %
EBITA 2.2 3.3 -33.1% 3.7 7.7 -51.7% 9.4
EBITA margin, % 10.0% 15.1% 5.8% 11.7% 10.6%
Adjusted EBITA 2.2 3.3 -32.0% 3.9 9.2 -58.0% 11.0
Adjusted EBITA margin, 10.1% 15.1% 6.1% 14.1% 12.4%
%
Operating profit 2.2 3.3 -33.4% 3.6 7.6 -52.3% 9.3
Operating profit 9.8% 14.9% 5.7% 11.5% 10.4%
margin, %
Net cash flows from 4.4 1.8 144.5% 5.9 7.2 -18.2% 9.0
operating activities
Net debt / Adjusted 2.5x 1.6x 2.5x 1.6x 1.7x
EBITDA
Adjusted return on 7.0% 9.9% 11.9% 28.0% 33.0%
capital employed
(ROCE), %
Equity ratio, % 33.3% 34.8% 33.3% 34.8% 35.8%
Earnings per share, 0.07 0.12 -42.6% 0.10 0.29 -65.5% 0.35
basic (EUR)
FTEs 298 319 -6.4% 298 318 -6.5% 314

Alexander Rosenlew, CEO:
In the third quarter Orthex's net sales increased by 1.4% to 22.1 million euros
(21.8). Our strategy to accelerate sales at a faster pace in the rest of Europe
progressed well. The distribution build-up for the new customers gained during
the previous quarters had a positive impact on sales development in Europe
outside the Nordics. Sales in this area grew by 7.4% during the third quarter
compared to the same period in 2021. Sales in the Nordics grew by 0.4%, driven
by price increases. There is uncertainty visible in customer purchasing
behaviour, but so far little significant effect is seen in consumer behaviour
that would reflect in less spending on Orthex products. We are committed to
implementing our growth strategy with a focus on international growth and
sustainability. The Storage category stands for most of the growth outside the
Nordics, but in the Nordics the sales of the Storage category were slower. This
resulted in a flat development overall in the Storage category during the third
quarter. Kitchen category sales increased mostly in the Nordics, which resulted
in growth of almost 5% in the category overall. International sales outside
Europe remained challenging, mostly due to slower demand in a few customers.
Cost development had an impact on Orthex's profitability as the adjusted EBITA
margin percentage decreased in the third quarter to 10.1% (15.1) and the
adjusted EBITA to 2.2 million euros (3.3) compared to the same period last year.
Even if the raw material price index is down from its highpoint in April, the
index is still showing an increase of around 45% for the period between December
2020 and September 2022. In the third quarter, we were affected by the continued
deterioration of the Swedish Krona. We are actively working with price increases
to adapt to the rapid cost inflation. It takes time to implement price increases
wisely without losing volume or customer assortment listings. Our ambition is to
follow a long-term pricing strategy adapting to the changing conditions. Even if
we saw a decrease in material price indexes during the reporting period, the
future development is hard to predict. Despite the prevailing short-term
challenges and market uncertainty, 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 long-term target.
In September, we launched a significant research project for the development of
future recycled plastic products and the related ecosystem. The project is
carried out in cooperation with partners and will last until the end of 2024. In
addition, we will participate in a large cooperation project of seven years
starting in January 2023, to promote the circular economy of plastics. In line
with our sustainability strategy, both projects support Orthex 2030 carbon
neutrality target and the target to increase the use of sustainable raw
materials. In the third quarter, we started using renewable raw materials in the
production of our SmartStore™ Compact and Compact Clear storage boxes. The raw
materials in these products are produced by applying a mass balance approach.
The mass balance approach means that renewable materials are mixed with fossil
materials in the raw material production process. This reduces the amount of
fossil-based plastic and supports our target to increase the share of
sustainable raw materials in our production to 80% by 2030.
During the reporting period, we prepared an application and made calculations to
commit to the Science Based Targets initiative (SBTi) and its science-based
climate targets. The purpose of the calculations was to ensure that Orthex's
climate targets are aligned with the target to keep global warming below 1.5°C
in accordance with the Paris Agreement.
We are putting strong efforts on growing and defending sales profitably as
demand development is likely to remain unpredictable. We believe that the raw
material market will eventually stabilise which will help us to fully focus on
actively growing profitably. We have an interesting and expanding range of
products that facilitate recycling at home and we are continuing our strategy of
launching new products closely following trends and consumer demand. Since the
start of 2021 we have invested around 6.5 million euros into capacity, efficient
production machines, automation, and new product moulds to ensure continued
successful strategy implementation. We have further strengthened our European
sales organisation to accelerate the implementation of our international growth
strategy. I am proud of our employees who adapt well to the very fast changing
business conditions and are consistently executing our strategy. We are all
eager to improve consumers' everyday life with practical and sustainable
products.
Press conference on financial results:
Orthex's CEO Alexander Rosenlew, CFO Saara Mäkelä and CMO Hanna Kukkonen will
present the report on the same day at 11.00 a.m. EET in a webcast. The webcast
can be joined through this link (https://orthex.videosync.fi/2022-11-11-orthex
-q3). 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
Distribution:
Nasdaq Helsinki Ltd
Main media
https:/investors.orthexgroup.com/
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 2021 was 88.7 million euros and operating profit 9.3
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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