Nimbus Group AB (publ)

STO:BOAT

Earnings Call Analysis

Nimbus Reports Challenging Quarter with Rebound in Orders

Nimbus faced a tough Q3 with sales down 20% year-over-year at SEK 378 million, heavily impacted by a 61% drop in the European market. EBITA fell to minus SEK 69 million, hindered by a restructuring provision of SEK 55 million. However, amidst this adversity, the order intake rose 18% year-over-year, driven by the launch of the Nimbus 495 and a new order from FMV valued up to SEK 400 million. Management maintains a mid-term growth target of over 10% and aims for a 10% EBITA margin, with a commitment to a 30% dividend payout policy.

Navigating a Tough Quarter

In a challenging third quarter, Nimbus Group reported net sales of SEK 378 million, reflecting a significant 20% drop year-over-year. The primary culprit for this decline was the struggling European market, where sales plummeted by 61%. Despite this downturn, the company showed resilience by performing relatively better than its peers in the same sector. The year-to-date performance also noted a 13% decline, suggesting that while the situation is tough, the company is still managing to find some footing amid adversity.

EBITA and Operational Challenges

The EBITA for the quarter stood at a loss of SEK 69 million, a stark contrast to a profit of SEK 13 million from the previous year. This loss was partly attributed to a SEK 55 million restructuring provision related to production in Finland, alongside a decrease in sales volume that impacted gross profit by approximately SEK 20 million. On an annual basis, losses from value boats reached SEK 40 million, hinting at ongoing operational challenges that the company must address to recover profitability.

Mixed Market Signals

Sales dynamics varied across regions. While North American sales dipped slightly by 3%, the Nimbus brand managed a notable 42% increase in sales, showcasing strong brand performance despite external market pressures. Conversely, the Nordic market experienced a 5% drop. Encouragingly, order intakes in Europe surged by 18%, indicating potential for future recovery despite current sales disappointments.

Resilience in Innovation and Launches

Amidst these challenges, Nimbus Group demonstrated commitment to innovation, marking the launch of its new flagship model, the Nimbus 495, at the Cannes boat show with already 10 orders secured for production in 2025. Additionally, the production of the Aquador 400 has commenced, further diversifying the company’s offerings and enhancing its global reach, particularly important given the increasing international demand.

Financial Health and Future Targets

Nimbus Group maintains a robust financial structure with no outstanding financial debt, which positions it favorably for future growth. The company targets a mid-term revenue growth exceeding 10% and aims for an EBITA margin of 10%, aligning its strategic goals to regain financial stability. The firm also upholds a dividend policy that permits returning 30% of profits to shareholders, signifying a commitment to rewarding investors even in turbulent times.

Looking Ahead

As Nimbus looks ahead, it aims to navigate through this challenging period with a focus on innovation and adaptation to market conditions. The upcoming Q4 report set for February 2025 will be crucial in assessing the company's trajectory and responses to ongoing challenges, particularly in re-establishing profitability and sustaining growth momentum in its operations.

Earnings Call Transcript 2024-Q3

[Operator]

Welcome to the Nimbus Q3 presentation. [Operator Instructions] Now I will hand the conference over to the CEO, Jan-Erik Lindstrom; CFO, Rasmus Alvemyr; and Head of Investor Relations, Gunilla Ohman. Please go ahead.

[Jan-Erik Lindstrom, executive]

Yes. Thank you, and again, welcome. Business update, third quarter a tough quarter, of course. We have an ongoing recession, and we also have a quite unstable [ geopolitical ] environment or surrounding. And it means that it's quite tricky to read and it's not as predictable as we wish then, of course. But at the same time, this goes more or less then for everyone and especially the companies that are exporting like we are.

For the month then, sales amounted to SEK 378 million, down by 20%. Important, if we look at the industry's development, this is actually then still a good figure. And if we look at the year so far, it's down 13%, and that is even very good if we compare it then with our peers. And our peers is then, of course, companies that -- similar companies as us and that is working then on the same addressable market as we do, and we actually stand out then on the positive side. The EBITA, as a consequence, we have minus SEK 11 million compared then with a positive figure of SEK 13 million.

The cost levels, they are affected then by our lower production volumes. And of course, then we are decreasing capacity to this lower level, or lower demand, I should say. And the ongoing process then in Finland is, among other things then, is a consequence of that.

The value boats still then on the negative side. So far, we have -- or for the last 12 months, we have lost SEK 40 million, which is a quite high figure. But it is a soft market. It is tough.

Also, if we look market-wise, the European market is then very soft. We have year-over-year 61% down for the sales, of course, softer than expected. And Europe is an important market. But remember that, despite this decrease, we are actually then holding up quite well. And that is, of course, thanks to the fact that we are a global player, and we are not depending on a single market anymore. We will come back to this in Europe because there is also interesting things happening there.

On the positive side, we have an increased order intake in quarter 3 of 18% year-over-year. During the quarter, we'll also have the official launch of our new biggest ship, we can say, the new Nimbus 495, and that was in Cannes during September. And so far, we have 10 orders then for production in -- during the full year '25 that is already on board. And that is a very good figure, very good figure.

We have also started the production pre-series of the Aquador 400. And that is, of course, important for us. That means that we now have the complete 3 boat series, and the Aquador brand then will be sold globally. And I have talked about this before during previous presentations. We know what -- we have been here so long now, so we know what works, and the Aquador will be perfect for the global -- for our global network, I should say.

We have also then received the order, the Alukin order, or through Alukin, I should say, from FMV with a potential value then of up to SEK 400 million. And this is then a really interesting business opportunity for us. Of course, we have experience on that professional market before. We have sold boats to the police, Coast Guard, Fire Brigade and things like that. But we have never received an order from FMV, and we have never received as big an order as this. So that is promising for the future.

If we can change slides, a short reminder, Nimbus Group, founded in 1968, so we have been around for a while. We have a very long history of international trade. Already in 1970, we started the export, so that is something that is a daily business, more or less, for us. We have a true house of well-known global brands, and we score high in all these different brand awareness investigations that is done very frequently. We're always at the top.

I will not repeat everything that this slide says. It's a lot of North America. And that, of course, is not that strange. North America is more than 50% of the world market. And if you want to be a player in our industry, you need to be present in the U.S. And as you can see at the bottom, the U.S. today is actually our single biggest market.

So if we then go to the next slide, a little bit about the order book development. The order book amounted to SEK 508 million, and that is actually the same as last quarter. And that is also then another sign of -- that we now can see that the market is leveling off. And also interesting, if you look at the relation to the last 12 months, you can see that we now are on 28%, same as last month.

And actually then, if we look at the chart on the right side, you can see that it started then -- we start here quarter 3 '19, the last normal year. And what is normal today then is, of course, a question. But as we see it, the last normal year. And then we had the same, 28%. And this is normal for us. We will not see long order books as we saw during the pandemic, even if I think that we will have a slightly higher ratio than we have today. It's still that we don't have that long order books in our industry, same as the car industry, for example.

And as I said before, the order intake in Q3 increased then 18% year-over-year. And interesting then is that Europe actually stands for a big part of it, and I know that Rasmus will get back to that later on. But that's interesting and, of course, also very important for us.

The indication in quarter 2 then that we had a shift towards shorter order book time frame then has been more or less confirmed. And you can say that we now see a normalized picture from that perspective.

Of course, positive effects from Nimbus 495 and Alukin, and it should be like that. New sales in our business and product development is one of our cornerstones. So that's exactly as we want to see it.

Only confirmed orders in the order book, as before, and it's prepayment, of course. And if we do the same comparison that I did before and look at quarter 3 of '19, same level, or same ratio, I should say, but softer quality because, at that time, we didn't have that rule when we looked at the order book. And the order from FMB is not included. It's only the pre-series or the prototype, you can say, that is included in the order book.

And with that, I leave this to Rasmus.

[Rasmus Alvemyr, executive]

Thank you, Jan-Erik. Now we move on with the sales development per market, and start with North America. The North America dropped by 3% to SEK 201 million, and the drop was driven by lower sales from the EdgeWater brand due to the market situation. On the other hand, the Nimbus brand increased the sales by 42% in the quarter year-over-year, which is very strong, we think.

The U.S. market as a whole went down by about 10% to 15% in the Retail segment to end customers in the same period. The Nordics dropped by 5%, but the [indiscernible] tells us that the market now has -- seem to bottom-out due to the fact that we see that the order intake has increased year-over-year.

Sales in Europe came out as a disappointment with a sales drop of 61% year-over-year. In relation to our expectations in front of the summer season, this was a drop by around SEK 100 million, having, of course, a big impact on both our P&L and the inventory. But important here to mention is also that the order intake in Europe actually has increased compared with the last year, which means that last year's sales was therefore mostly driven by an older order book.

Other markets went down from SEK 19 million to SEK 8 million, but of course, on low levels. On an LTM basis, other markets corresponds to less than 4% of the total sales. On an LTM basis, we also see that North America continues to grow by 36% year-over-year and that the Nordics and Europe has dropped by 21%, respectively, at 34%. Also, other markets has increased by 21%.

Net sales in the quarter amounted to SEK 378 million, which is down 20% year-over-year. And as I said before, the drop here is driven by the European market, which has had a soft situation.

Sales from own dealers has remained on the same level as last year and amounted to SEK 114 million compared with SEK 112 million last year. So it's slightly higher.

Sales to external dealers and direct sales, including spare parts, went up to SEK 264 million, which was down 27% year-over-year. And this is also driven by this European slowdown that I mentioned.

On an LTM basis, the net sales ended up at SEK 1.706 billion, which is now down by 9% year-over-year.

And then we come to the EBITA. EBITA in the third quarter amounted to minus SEK 69 million compared with plus SEK 13 million last year. And the difference is driven by this restructuring provision of SEK 55 million related to the Finnish production and from also lower sales volumes, of course, having a big impact on our gross profit by around SEK 20 million. On a 12-month basis, the losses from the value boat business amounts to about SEK 40 million, which means that an adjusted EBITA on an LTM basis without the value boats would have reached about SEK 56 million, including, of course, taking into account the restructuring provision and an EBITA margin of 3.3%.

On top of this, it's also important to have in mind that the temporary production stop was made in the first quarter in EdgeWater in order to reduce dealer inventory levels. This had a negative impact first and the second quarter of SEK 36 million. Since the second quarter, the gross margin has been recovered from the former negative [ SEK ] currency effects that affected mostly 2023, but partly also the first quarter '24. These margins are now restored with correct price lists and -- which are reflected in the order book. But however, this effect has been offset by the cost under absorption effect from lower production, which makes the gross margin flat in total.

Cash flow and working capital, the net working capital increased in the third quarter and ended up at SEK 563 million, which is up SEK 15 million since the second quarter. The net working capital is, of course, affected by those higher levels of Finnish boats, mostly due to this soft European market, with less in-for-out sales than what we anticipated in front of the season.

Operating cash flow in the period amounted to minus SEK 69 million, mostly driven by less prepayments since the second quarter. And the net working capital in relation to LTM sales amounted to 33% versus 27% last year.

And with that, I leave the word to you, Jan-Erik.

[Jan-Erik Lindstrom, executive]

Thank you. Financial targets then, and then actually we stick to the very same, meaning that we want to have or we are aiming at the growth above 10% on midterm going forward. The EBITA margin, 10% then. And for us, it's to reach it again. The capital structure will be no financial debt, and we have no financial debt. And we are only allowed, so to say, to have it when it's related to property.

And we want to be a company that uses dividend as one of the tools. So we have a dividend policy that we will have 30% of the result as dividend.

If we then look forward before we go to the Q&A, the financial calendar, the Q4 report will then be presented the 4th of February 2025.

And with that, I leave to questions and to Gunilla.

[Gunilla Ohman, executive]

Do we have any questions from the telephone conference? So operator, are there no questions from the telephone conference?

[Operator]

There's no questions, no.

[Gunilla Ohman, executive]

Okay. Thank you very much. And we don't have any questions from the web either. So with that, I thank you all for listening in, and welcome back in February. Thank you.

[Rasmus Alvemyr, executive]

Thank you.