Nobia AB

STO:NOBI

Earnings Call Transcript 2021-Q4

[Operator]

Hello, and welcome to the Nobia Fourth Quarter Report 2021. [Operator Instructions] Today, I'm pleased to present Tobias Norrby, Head of IR. Please go ahead with your meeting.

[Tobias Norrby, Head of Investor Relations]

Thank you, and thank you, everyone for calling into this Q4 2021 results presentation by Nobia. We will go the usual way today, starting off with an overview by our President and CEO, Mr. Jon Sintorn. And then Mr. Kristoffer Ljungfelt, our CFO, will dive into some of the financials. And for COVID reasons today, we are in different places over here just so that you know that. With that, Jon, please go ahead.

[Jon Sintorn, President & CEO]

Thank you, Tobias. Good morning, everybody. Let's start with Slide # -- or the first slide, which is Slide #2, talking about some highlights from last year, 2021, some major events. And the talking point is a very positive one. We have, for the first time, had a Nordic EBIT exceeding SEK 1 billion, which is a 10% organic growth. And that was on the back of a strong growth in retail. And we also, with that, have a strong order book going into 2022. There is a strong good momentum in the Nordics. Another highlight, Central Europe, stable over 10% margin. It's on the back of a successful Bribus integration, the company that we have in the Netherlands. But also a good job done in the turnaround with -- in Austria with the Ewe brand, and we can call it completed. So stability in terms of profitability in Central Europe. Then we get into the U.K. U.K. is back on profits after the challenging 2020. And there is also further improvements that have been initiated. During last year, as you know, there was a high market volatility due to the corona lockdowns and on the back of some of the Brexit turmoils. And throughout the year, the project business, specifically in social housing and the premium projects in London, the climate for that has been very, very challenging. In projects, we're 50% down compared to 2019. What we have said though is that our trade efforts is paying off. This is the 6 consecutive quarters, 6 quarters in a row, we've had growth in the trade segment. So trade has been more resilient to the market volatility. What we also have done is that we have a new management team in place, and we have introduced several new products such as Nordic Nature and more features in terms of color. And on the back of that, initiated more of a focus on the Magnet business, more of that a little bit later into this presentation. Another big theme in the course of 2021 is in the supply chain, as you've seen not only in our industry, but in most industries across there has been a high cost inflation in direct material, manufacturing and logistics and availability of various components have issues or have been challenging. We have been able to produce. We have been able to deliver. So we haven't had any stop in the factories even though it has been obviously challenging, but we haven't had any stops. We have been able to deliver with a lot of efforts. And also, for the most part, for 2021, we've been able to compensate to have the higher average order values. And as we communicated before, not fully during 2021, but we expect that to recoup in the course of the first quarter of this year, 2022. That was a few things with regards to the summary on the 2021. Let's have a look at the fourth quarter. Well, at large, the fourth quarter continues on the same trend that we have seen flow out the year. It's the same story. Net sales increased to SEK 3.59 billion versus SEK 3.45 billion the previous year. And then the organic growth is 3% adjusted for the Benchmarx exit, a little bit more on that later on. We've had a continuous strong growth in the Nordic region adding up to 11% organic growth. But throughout the year, a slow recovery of projects and retail in the U.K. But we are going into the important winter sales campaign with a good momentum. Cost inflation was compensated by higher average order values. And for the -- across, we've done a good job and been I'm not going to say early, but early in initiating price increases on the back of the cost inflation. As I said, product availability remains challenging, but slightly improved. It has been an improvement of the situation overall, but it's still challenging. But as I said, we haven't had any stops. So the EBIT is adding up to SEK 238 million. Then also compared to last year, SEK 295 million, we have to remember that last year was fueled by opening up of restrictions in Central Europe and the Nordics, which is if anything, if not complete opposite, but at least it was hampered with some -- this year with some restrictions put in place rather than opening up this fourth quarter. In terms of the balance sheet, it is a solid balance sheet, and that will enable us to invest in growth and efficiency. On the back of the strong balance sheet and cash flow, we proposed to increase the dividend to SEK 2.50 per share compared to SEK 2 last year. But at the same time, that enables us to have good financing opportunity for investment in a strategic agenda as well as acquisitions such as Superfront. That was on the fourth quarter. Moving on to Slide #4. A brief summary of the kitchen market development, also pretty much the same trend as we've seen throughout the year. Nordic markets, solid housing market, consumer confidence continues to support retail sales and project demand is now slightly up. In the U.K., more of a mixed picture, the trade segment is growing, while retail and consumer is more stable and then continues -- continued London project market and social housing remaining weak. Central Europe, there is a good underlying demand, but in the fourth quarter, we have had corona restrictions impacting the market. Moving on then to Slide #5. This is our framework, the Tomorrow Together strategy, and I will touch on a few things going on, specifically on its own slides, a little bit around the U.K. our new factory in Jönköping as well as the acquisition of Superfront. But starting out with this framework, a few things going on, we can mention in the sustainability and design leadership ambitions, I'm very pleased to see how the Nordic Nature product have been introduced in our markets and also a fairly new campaign we called Re from Marbodal working on -- enhancing our marketing and information with regards to our sustainability agenda. So it's called Re, renew, recycle, reuse, et cetera. That's a good initiative. If we look at the growth initiatives, we can really see in the consumer retail space that our efforts and ambitions and introductions of paint on various color as one example, really is paying off. That's something that is -- we're doing really well, and it's a good momentum on those type of product throughout the markets. Then let's move in and look at targeting profitable growth in the U.K. As you have heard us say, multiple quarters, it has been a volatile market and the project sector has been very difficult for us. We are now -- or we have initiated an increased focus on the Magnet brand. The Magnet brand and the Magnet business will, let's call it, be the core of our business in the U.K. as a kitchen specialist. We have exited unprofitable business, such as benchmarks and categories within Rixonway and other -- and some other business. And we have focused on the long-term partners such as Wickes. So that part of our business, we've done a major step forward, improving our profitability. There is still some ways to go in terms of parts of the project business. One piece is obviously market related, in the London property market, there is -- the demand is not back to the levels which we used to see in advance of this pandemic. And there's also things as well as in social housing segment, and there are focus in other project businesses, which is not up to speed yet. But we will need to review these businesses and have a look at we are managing, let's call it, the cost structure adjusted for the way -- the future that we believe we will enter into. So there will be a review of the project business. With that said, there are healthy segments, and we will focus on those healthy segments in the project business with private developers and house builders and so on, and we will be leading for the most part with the Magnet brand.As I mentioned, we have a new management team. We have introduced some new products Nordic Nature, a of wider variety color and some other things. And let me already now say that some of those things, we are starting to see in effect. And I would like to emphasize that the current winter sales campaign, the current winter sales period, we are performing very well. So there is a momentum in the Magnet business as we speak. Moving on next, a big item on our strategic agenda is obviously the building of a new factory in Jönköping. The site preparation, piling, casting of foundations, a lot of stuff has happened in that area. So the first section of the production building is now under construction, and we're starting to see walls being put on that structure as well. So we are progressing in -- on time and on budget in this project, where we are also ordering a lot of production equipment. As you see on the slide below, there is some equipment now being built to be later on to be shipped, obviously, to the factory. So there is a lot of momentum also here. And as I said, we are progressing according to plan in terms of time and in terms of budget. Then early this year, we made an acquisition of the company Superfront, a European online kitchen and storage brand with a strong digital marketing and social media presence. There are frontals, handles, legs, et cetera, with a high design content and an upcycling business model. The turnover is SEK 65 million with a double-digit market, and we really see it as a good opportunity for this company to grow and expand as a part of the Nobia Group. And it also brings consumer design element more of bespoke possibilities into our group as well. So this is a really exciting acquisition and also exciting in the way how we can further communicate and have a dialogue and have interactions with our customers online. So that's a nice acquisition. Excited to bring that forward. And with that overview, I hand over to Kristoffer.

[Kristoffer Ljungfelt, Chief Financial Officer]

Thank you, Jon. so let me run you through the financials for the fourth quarter. First of all, for the Nobia Group. And as you know by now, the organic growth was flat in the quarter. But with a big mix between the different regions, whereas the Nordics was growing 11%; U.K. was declining 14%; and the Central Europe was declining somewhat. Gross margin, slightly down 0.2 percentage points, driven by a margin decline in the Nordic region, whilst the U.K. improved considerably on the back of the Magnet business. EBIT of SEK 238 million, again, below last year, but mainly on the back of inflationary pressure and lower volumes in the U.K., all in all, a margin of 6.8%. Moving to next slide, please. Just an update on the direct material and our ability to price for it. As you know, the inflationary pressure has continued in basically all parts of our business. But on a positive note, the availability issues that we had in the beginning of the quarter has improved considerably towards the end of the quarter. And even though there are still some challenges in certain areas of the supply chain, we are increasingly optimistic about this fact. As previously communicated, we are fully committed to pass on all material price increases to the consumers at the end. And judging by our order book, we can see the higher prices coming through already by the end of Q4 and into Q1 2022. And as such, we believe higher order values will fully compensate for the inflation during 2022. But having said that, we still do not rule out that we will do further extraordinary price increases during the year ahead given the current situation. Moving on then, and looking at the split of sales by country and by segment. If we start with Denmark, we have a very good momentum here, continuing with the underlying strong market condition and double-digit growth in all segments. We also have good growth on the back of successful product launches and improved average order values. Sweden has a similar situation with double-digit growth in all segments, very strong retail campaigns continue, and we believe we are taking share with the customized painted products. Availability of paint and paint capacity has been difficult during the second half of this -- of 2021, and it has resulted in higher costs for our manufacturing and for Tidaholm, but we can see that, that is easening up somewhat. Norway, Finland, together 16%, had lower project sales in Q4, but we can finally see that the order book is picking up in both countries again on the back of solid housing starts. Both markets have had a good growth in retail. However, not to the extent that we have seen in Denmark and Sweden. So all in all, very good momentum in the Nordics, driven by volume and higher order values and also better segment mix, which has resulted in the healthy order book going into 2022 as Jon was alluding to. Central Europe, Netherlands, and Austria, 11% of sales had a softer sales period in Q4, mainly due to COVID restrictions hampering deliveries and harder comparables from last year. This year was hampered by lockdowns and quite high sickness rates in the quarter, it has been difficult to keep the construction sites running normally, which impacted our deliveries of kitchen and many of these orders have been moved into the next year, meaning 2022 then. Also, the store networks and supply chain have been impacted somewhat during the quarter. If we then double-click on U.K., which is now 36% of our sales, we can see that Magnet Trade has outgrown Magnet Retail, which is very much in line with our strategy. We grew yet another quarter in the trade segment, and we're also good at defending our higher price points, even if some competitors undercut on price, which had an impact on our volume. The retail market was still soft in the quarter and a little bit of logistics and installers in the beginning of the quarter impacted dispatch. Market prices picked up a little bit towards the end of the quarter, and the market, as such, continues to build in front of the important winter sales period that started in December. As Jon was talking about, the project business has been problematic throughout the endemic with volumes being down over 50% compared to pre-COVID and we have basically lost a good source of income temporarily in the U.K. P&L. And our project business is now trading slightly below breakeven levels. We do not foresee the market to bounce back considerably before this summer as we still are waiting for the Asian investments in London to pick up. Social housing probably recuperating slightly before then. Also, you can see that we highlight Benchmarx here, which we exited during summer 2021. And it was an unprofitable business for us, and that's in line with strategy to exit. This quarter, it had a top line in 2020 of about SEK 80 million. So moving over to the Nordic financials. Again, Denmark, Sweden, leading the growth with strong growth in both volume and average order values. Gross margin, as you see, was down in Q4, and it was heavily impacted by the high input materials. And also, and more importantly, the higher cost for manufacturing and to secure availability of the product in the quarter. And also to remember that Q4 last year had a different phasing due to the pandemic, and therefore, comparable margins are very high in the quarter. So just to shed some light on the 12-month rolling dates, our gross margin and EBIT margin in the Nordics has increased by 0.5 percentage points. And we believe, as stated many times now, that the extraordinary price increases done before summer will come in this full effect in Q1, and that sends off the direct material price increases. Looking at the U.K. financials. Organic sales minus 14%. Excluding the Benchmarx business, it was down 6%. Main driver of the decline was the project business again and Magnet Retail, whilst Magnet Trade was growing. Gross margins were considerably up as we exited unprofitable low gross margin business and focused on the Magnet business. We have also stayed very firm on our price increases, which have improved margins, but impacted volumes somewhat. And we will continue to stay firm on the price increases, and we now see -- as I said, most of the markets moving in the same direction as we have. We have also put some additional investment behind the Magnet brand in front of the [ winter ] campaign during Q4. All in all, gross margin of about almost 42% and a breakeven EBIT in the period. Over to Central Europe financials. We had a very strong Q4 last year due to the pent-up demand after the COVID lockdown. This year, we have had opposite effect in Q4, whereas we have had lockdowns in Austria and Netherlands, which impacted both deliveries and ability to run business in a smooth way. As in the Nordics, the gross margins were burdened by higher costs of manufacturing, including direct material costs and due to the long order book we have had in both countries, it has taken slightly longer to get the market price through. But also here, we expect to be able to cover for the material price increases during 2022. Still a solid EBIT of 11%, SEK 40 million in the quarter with a good order book going into 2022. Financial position. Operating cash flow, Q4 came in at negative SEK 2 million, the underlying operating cash flow was strong due to good working capital performance, whilst the majority of the fixed asset increase was related to the factory building in Jönköping, which Jon showed you a picture of. We ended the year with a very strong balance sheet to support both the suggested dividend and larger investments, of course, our financial net debt equals about SEK 200 million, and excluding pensions, we have a net cash position of about SEK 20 million. And as stated, we will see higher investments coming through in the coming 2 years mainly related to the factory building. But having said that, we are also very optimistic that we still have a lot to do with our working capital that will help to finance and we also have a loan facility to finance the investments. So with that, I hand over to you again, Jon.

[Jon Sintorn, President & CEO]

Okay. Thank you, Kristoffer. As a summary at the end, going forward, we have solid order books going into 2022. There is some momentum in the business. We have solid order books going into 2022. And we are increasingly building a momentum in the U.K. As both myself and Kristoffer has been alluding to, it's been a very challenging project market which has challenges in the project sector. But the importance now for us to build the momentum in the U.K. is focusing on the Magnet brand. And by that -- and one step in that is to secure a strong winter sales campaign and the current momentum is strong. Continue to invest in the trade segment. We've had 6 consecutive quarters of growth, and we will continue to invest in this segment, leading with the Magnet brand. And on the back of what we just said throughout this call and previously, we will review the project business further. Going forward, we will also manage -- continue to manage the material inflationary pressure, material pricing and availability. We've been able to manage that well so far, and we will continue to do that going forward. And we will obviously continue to invest in multiple strategic and contemporary areas. But with the big thing, obviously, is being the new Nordic factory as we talked about. We do have a strong balance sheet. A strong balance sheet that can enable financing of investments but also a proposal to increase the dividend to SEK 2.50 compared to SEK 2 of last year. So with that, thank you very much for listening, and it's time for Q&A session.

[Operator]

[Operator Instructions] Our first question comes from the line of Adela Dashian from Handelsbanken.

[Adela Dashian, Analyst]

Let's start with the U.K. My first question is related to the profitability in the region. If you could please explain what drove the higher operating expenses in Q4? And also how we should think about the cost base going forward into 2022?

[Kristoffer Ljungfelt, Chief Financial Officer]

Yes. So I'll take this one, Jon. The cost position was slightly higher in the quarter. We did, as I mentioned, invest a bit more in supporting the winter sale as we head on into the very, very important winter sale this year. And also, there's a mix effect in the numbers that you have seen as a percentage of the turnover basically. But we foresee that we will have solid cost control on the business in the U.K. So we don't see any reason to have any other effect on that going forward.

[Adela Dashian, Analyst]

Okay. Got it. And then if we can get some more comments related to the current state of trading in the U.K. maybe in relation to where you were at a year ago, do you feel more confident about the recovery today than you did back then? Or how should we think about the outlook for the region?

[Jon Sintorn, President & CEO]

So again, in terms of the project market, we don't foresee any quick recovery for the normal property and those sorts of things. That continues to be struggling. What we do see is leading with the Magnet brand and the current trading in terms of the winter sales that we're into right now, we are gaining momentum. There is a stronger performance now than a year ago, and there is a stronger performance now than 2 years ago.

[Adela Dashian, Analyst]

Could you then explain why consumer and retail sales or the market in itself is flat or projected to be flat in the U.K.? I'm thinking shouldn't there be a lot of pent-up demand now that society is reopening?

[Kristoffer Ljungfelt, Chief Financial Officer]

But if we look at Q4 now where we talk about the flattish environment, we must not forget that there was a bit of pent-up demand last year as we came into Q4, it's not really a retail quarter either. It's very much tilted towards the trade business. And this year has been a bit affected by the COVID restrictions and the spread of the Omnicom virus as well, leading people to stay more at home. So I think that's probably the drivers behind the flattish development of the retail segment in Q4.

[Adela Dashian, Analyst]

Okay. And then also, you mentioned that for the Nordic region, at least you see solid order books for 2022. Do we think of that for all regions? Do you see the same as for Central Europe, for example? Or is it the Nordic region that is really driving the main momentum when it comes to overall performance for the group?

[Jon Sintorn, President & CEO]

Yes. Yes.

[Kristoffer Ljungfelt, Chief Financial Officer]

I mean just to shed a little bit more light on it, we -- yes, we do see some -- a good order book going into next year, foremost for Nordics, but also Central Europe, which I, as I said, have been had a lot of orders as well moved into 2022. In U.K., it's now really important with the winter sales to drive the order book. And so far, we see that we have good traction with Magnet. So we are optimistic about the order book going into 2022.

[Operator]

And the next question comes from the line of Victor Hansen from Nordea.

[Victor Hansen, Research Analyst]

Victor here. A couple of questions or a lot, maybe. So start to think off. How much of your pricing increases did you see take effect now in Q4? And how much more is to come because you started talking about the raising prices in July.

[Kristoffer Ljungfelt, Chief Financial Officer]

Yes. So we see a lot of price increases coming through. What hit us extra this quarter was the -- all the production cost for what has happened with the incoming -- basically, everything has gone up even more and we will need to continue with our price increases, but we are confident that the order book looks good in terms of the prices coming through already in Q1. So we should be able to fend off with a better gross margin here going forward.

[Jon Sintorn, President & CEO]

And it's some, as Kristoffer said, availability related cost rather than that. Also, there's direct material where we have been able early on to have price increases, it's a bit of a lag as we communicated before, before we go through -- all the way through the order book, but it's absolutely taken effect, and then we had some additional stuff in terms of just having the availability as such. But it will pay out good in the first quarter, as we said before.

[Victor Hansen, Research Analyst]

All right. And then I guess a follow-up. And how confident are you that price hikes will restore the margin by Q1? Are there any dark clouds on the horizon that could hamper this?

[Kristoffer Ljungfelt, Chief Financial Officer]

I would say that we are quite confident. And judging by how we have communicated before about the Nordics, we know that Q4 was going to have some pressure on it, but we are confident looking into the current order books we have that the price increases are coming through. Will there be availability issues? We -- I mean it's too early to say, but the situation has looked much better towards the end of the quarter than what it did in the beginning of the quarter. And things like I was alluding to the whole paint issue we had in Tidaholm, for example, seems to be improved. And there are other suppliers as well that are much improved compared to Q4. So we are optimistic about that. But you know the situation in the market and the supply chains that are really still affected about it. So of course, there is also uncertainty in it.

[Jon Sintorn, President & CEO]

We are humble but we've managed so far. And if anything, the situation is slightly better now than it was a couple of months back.

[Victor Hansen, Research Analyst]

And then a follow-up on a previous question. The U.K. costs, which are hurting the margin, is this mostly temporary marketing costs related to the winter sales? Or how should we view this? And how much?

[Kristoffer Ljungfelt, Chief Financial Officer]

It's partially related to winter sales. It's partly related to -- or strengthen the Magnet brand proposition as we also said back in Q3 so we have put more money behind the brand really. We don't expect that the run rate will increase as an effect, but rather stabilize in the quarters to come, yes.

[Victor Hansen, Research Analyst]

So stabilized versus Q4. So this is not temporary. The higher costs are reflected in the run rate now?

[Kristoffer Ljungfelt, Chief Financial Officer]

No, the opposite. So we were tracking a little bit higher cost in Q4 and towards the end of Q3 to drive the winter sales and to build the Magnet brand in a better way. Then we don't rule out that we will spend in the future a little bit more marketing to further drive the trade business. But we will do that in a prudent fashion and follow the top line. So spend revenue in that sense.

[Victor Hansen, Research Analyst]

All right. Great. And then you previously talked about moving all the U.K. production to Darlington. How is this going?

[Jon Sintorn, President & CEO]

I need to ask. When was that?

[Victor Hansen, Research Analyst]

I think it was Q2 2020. When you did the restructuring.

[Kristoffer Ljungfelt, Chief Financial Officer]

I think -- yes, I think what you're referring to is moving the -- not all manufacturing to Darlington, but moving the project business manufacturing to Darlington, which we basically have done what we're looking for now is we still have our factory in Dewsbury, which manufactured to the project business running with various tiny volumes. And we will keep that factory for the increase in volume that we expect when the markets recover. And when the push we do in Magnet Trade now, we'll deliver higher volumes. But right now, it's more or less a small crew just running in that factory with very small volumes. [indiscernible] is a [ multi-dollar ] company.

[Jon Sintorn, President & CEO]

Yes. So that's the compound manufacturing is now in Darlington. There is assembly activities going on in Dewsberry, which is now being fully supporting the project business. And that's that with slim volumes as we speak, facilitates room for growth.

[Victor Hansen, Research Analyst]

Yes. And then if you could quantify the negative impact from the lockdowns in Austria?

[Kristoffer Ljungfelt, Chief Financial Officer]

We cannot put the number on it. It's clearly so that we would have dispatched more if we didn't have the situation and now the order book has moved forward. So it's not lost money, so to say, it's just that it's going to need to be delivered a bit later. And again, I think we do a very solid result in Austria and the Netherlands, given the situation that we have and also given that it was very hard comparables last year.

[Victor Hansen, Research Analyst]

Yes. And then just 2 more questions for me. Thank you for answering all of these questions. So Jon, you touched upon M&A earlier in your presentation. Should we, again, expect any larger M&A ahead or just bolt-ons similar to Superfront in size?

[Jon Sintorn, President & CEO]

The simple answer to your question is rather the later bolt-on. You cannot -- we're not looking for any major acquisitions as we speak in that sense. We have a very exciting agenda in terms of the Tomorrow Together strategy with the new factory in the Nordics, focusing on the Magnet brand, and there are product introductions. There are multiple things that we have in our agenda. Driving -- positioning us in order to drive growth and efficiency. And I think that is in itself a very exciting agenda with a lots of activities and that is our focus. On the Superfront, when these type of opportunities arises, that is very exciting for us to take on. And that was -- for us, now Superfront was a good, good opportunity. It builds on the strategy being more of mass premium, mass customization type of thing to have an ever stronger offering in the retail sector and also -- or consumer sector, but also enabling us to connect to the consumers in a digital fashion in an even better way. So that type of acquisitions are interesting for us. So the bigger thing it's not as a big part of the strategy as it used to be some several years back. And -- but it is because we have very exciting, very strong initiatives that will build value and will strengthen our business in the next couple of few years, and that's where we have our focus.

[Victor Hansen, Research Analyst]

Great. And then just a final question from my side, and I think this one is to Kristoffer. You mentioned working capital releases earlier. Could you quantify the potential going forward here?

[Kristoffer Ljungfelt, Chief Financial Officer]

I can't quantify the potential. But you have seen from our historic numbers lately that we've had a pretty good performance within working capital. And we have found a lot a new opportunities which we will drive continuously going forward. But as for the But as for the moment, I would not like to put a number on it, so to say.

[Victor Hansen, Research Analyst]

That's all for me.

[Operator]

The next question comes from the line of [ Sofia Serling ] from Carnegie.

[Unknown Analyst]

Let's kick off with more of a high-level question. In the U.K. market, do you believe it's possible to go back to the pre-pandemic level in the U.K.? Or you believe now that the business climate has changed here and change for Nobia going forward?

[Jon Sintorn, President & CEO]

Well, as we said, we've done some things like the exiting of the benchmark business to strengthen the overall profitability. Now we are hit with a lack of demand in some of our project sectors, which is obviously hitting a profitability. But we are investing -- leading with the Magnet brand. We've had growth in the trade segment. We are coming with more of really interesting consumer offerings as well in terms of new products and color and those sorts of things. So we expect profitability to recoup step-by-step in the next, let's call it, midterm. We will improve. We will get back to the profitability, and we will have a stronger core in our business. And we're also looking forward to drive put in these initiatives that we put in place, obviously, it will take some time before they really take off all of them, but we also anticipate better growth leading with the Magnet brand with profitable business.

[Kristoffer Ljungfelt, Chief Financial Officer]

And we don't see any big structural differences between the U.K. market and the Nordics market, so to say. So it should be possible to get margins back to previous U.K. Nobia margins, but even more so getting closer to the Nordic levels long term as well.

[Jon Sintorn, President & CEO]

It's been some interesting couple of years in this market [indiscernible] level. We got...

[Unknown Analyst]

Okay, I see. So if going back then to the pre-pandemic levels, what are you mostly waiting for to happen in the U.K. market? And also, since you mentioned the margin -- would you say that you're more negatively impacted by cost inflation in the U.K. region compared to the other market regions.

[Jon Sintorn, President & CEO]

No, we're not more impacted in the cost inflation in the U.K. than in the other markets. That's one. But this on and off and having the retail network or a store network being closed and open and closed and open, that has been 1 piece, which has made it challenging. Then the demand side on the profile that we have in our project portfolio has been challenging. But we do -- maybe that's not going to happen next week. But in a little bit of time, we do believe that things -- the macro environment, if I put it that way, will stabilize a bit more. And that with the efforts we're now putting into the Magnet brand, we believe that we put ourselves in a position for profitable growth.

[Unknown Analyst]

All right. And you mentioned the trade segment has grown quarter-by-quarter for the last 6 quarters. Do you have a -- can you quantify that? Do you have any growth quarter-by-quarter in that segment that we can see that actually this one is growing much faster than the other segments in the U.K. region?

[Kristoffer Ljungfelt, Chief Financial Officer]

If you listen back to the other communications we have done, we often comment whether we have had double-digit, single-digit growth in the trade segment. And this quarter here in Q4 was single digit. We expected a bit higher growth. But in terms of pricing for the rest of the market, it was quite hampered actually. So the volumes are still good. And it's a field for us to invest further in as we have stated. So...

[Unknown Analyst]

All right. Okay. And also, you mentioned before that you were experienced, at the end of 2021, with the shortage of installers and drivers in the U.K. Would you say that this is still the case at the beginning of 2022?

[Kristoffer Ljungfelt, Chief Financial Officer]

That situation looks much better and...

[Jon Sintorn, President & CEO]

Sorry, we're not in the same place. Go ahead, Kristoffer.

[Kristoffer Ljungfelt, Chief Financial Officer]

Yes, that situation looks much better. And also to remember, I mean, winter sales is the most important sales period for retail in the U.K. market. And we have not been able to do that for 2 years because the store network has been closed or on and off closed for the last 2 years. So we're really looking forward to this year where, knock on wood, it would be kept open, and we have a good momentum. So it has been some really strange last 2 years.

[Unknown Analyst]

I see. And regarding the winter sale, could you quantify that in some way, how successful or how good momentum you have currently compared to last year?

[Jon Sintorn, President & CEO]

Well, we typically don't comment that we have a strong momentum.

[Unknown Analyst]

All right. Great. Then the Nordics, maybe you add this before, but can you give us a split between the price increase and the volume increase of the organic growth?

[Kristoffer Ljungfelt, Chief Financial Officer]

We would not like to give the split on that, but what I can say is that we are growing in both volume and price.

[Unknown Analyst]

All right. And the upcoming price increases, could you give us a quantified level of what this could entail? Is it 2%, 5%, 7%?

[Kristoffer Ljungfelt, Chief Financial Officer]

Well, what you have seen is the incoming raw material cost inflation and the market information, right? So what we need to do is to make sure that our price increases cover for that. And I think we've done a really good job during the summer last year. Prices continue to go up during fall. And as every year, we have price increases during the year end, which now will also have an effect. So I don't like to go more into detail on our price increases as such.

[Operator]

And we have one more question from the line of Fredrik Moregard from Pareto Securities.

[Fredrik Moregard, Analyst]

So just coming back to cost inflation and price increases. I was hoping you could shed some light on your visibility when it comes to cost inflation, particularly on appliances, steel and wood-based products and so on. Have you entered any contracts for any of those items? Or are you buying spot prices, just to get a sense of what the sensitivity to any future changes in those prices?

[Kristoffer Ljungfelt, Chief Financial Officer]

Yes. So obviously, we cannot go into details on contractual arrangements and so on. But let's put it like this, that the contracts are shorter now than what we have seen historically. There are some contracts that we have are based on the retail price that the supplier is setting to the market. I mean, typically, this is appliance business or so forth. And it would be very easy for you to see also on the market price for that. But it's clearly so that it's been an inflationary pressure in basically all parts of the business, I would say.

[Fredrik Moregard, Analyst]

Sure. And a follow-up then because I mean in appliances, I mean, appliances makers have been raising prices throughout 2021, you made one significant hike during the summer. They're signaling further price increases here starting early 2022. So I guess you're seeing continued acceleration on those prices. And then you're saying you're looking at additional price increases, but it's only now that you're getting actually full compensation from the price that you did -- from the price increases you had last summer. So is there any reason for why these new price increases should come through quicker? Or will you have full effect from additional hikes only sometime during the fall?

[Jon Sintorn, President & CEO]

No.

[Kristoffer Ljungfelt, Chief Financial Officer]

So if you look -- go ahead, Jon. Yes.

[Jon Sintorn, President & CEO]

Yes. I think we -- I think it's -- taking one step back, we were early out of the blocks, putting price increases into play to cover for inflationary pressure, and we saw that. And it has taken an effect. There was a bit of a lag in our projects -- in some of our longer contracts and those sorts of things. We will cover fully in the first quarter. And we -- in that sense, now everybody understanding this situation, we can see other players in the industry now later coming with price increases, which I think is interesting. So in that sense, we were early on. We have and are continuously looking at the pricing situation and put prices into place. Then we have these particular windows where there's better opportunities for us. But I don't foresee that we will need to wait until November before we see the effect of the price increases that we are initiating at this stage, as you were alluding to. So there is a...

[Kristoffer Ljungfelt, Chief Financial Officer]

And just to add to that -- I mean...

[Jon Sintorn, President & CEO]

[indiscernible] if I put it that way.

[Kristoffer Ljungfelt, Chief Financial Officer]

To add to that, about 1/3 of our purchases are bought in goods and those price increases on those are immediately passed on to the market also through us. So there's no lag in that. The lag is really where we have manufacturing of the kitchen component, so to say, and an order book that has been quite long for the product business and to some extent for the retail business. And this is -- just to emphasize, that this is just in line with what has been communicated from us all along that Q4, we will see the last differential in between price increase and what we get through in terms of on cost. And we are confident about being able to mitigate the direct material cost in Q1. I think what has come in addition in Q4 is the availability issue, which has been worse than what we expected going into the quarter in certain areas like paint, for example.

[Fredrik Moregard, Analyst]

And then a final question when it comes to pricing because I mean, the kitchen business in general, at least on the retail side, is sort of a discount or a negotiation price when it comes to selling kitchens to consumers. Maybe you can tell us a little bit about what you've been seeing on the discounting side over the past year, how that has developed? Have you benefited from a tight market, are you less discounting to consumers? Or has discounting moved in the opposite direction? And is that a worry for you going forward?

[Jon Sintorn, President & CEO]

We have been able to keep our pricing. We have -- it's been important from my side, from our side to make sure that we protect the gross margin as [indiscernible] as we can, we put some price rigor in the U.K., for example, in that sector. We are managing pricing and discounting in a better way. As Kristoffer was alluding to earlier, there were a moment in the market where some people were working also with pricing but we stayed with our pricing and have a better rigor -- even better rigor in terms of the discounting than we had before. So I anticipate that we are able to keep our pricing in a good way also going forward.

[Operator]

And as there are no further questions, I'll hand it back to the speakers.

[Tobias Norrby, Head of Investor Relations]

Thank you very much, everyone, for calling in, for listening in, and we welcome you all back on the 5th of May for the Q1 numbers. Thank you.

[Jon Sintorn, President & CEO]

Thank you, everybody.

[Kristoffer Ljungfelt, Chief Financial Officer]

Thank you.

[Operator]

This concludes the conference call. Thank you all for attending. You may now disconnect your lines.