Nilorngruppen AB (LTS:0GB5) Q2 2025 Earnings Call Highlights: Navigating Currency Challenges and Strategic Expansions

Nilorngruppen AB (LTS:0GB5) reports mixed results with strong gross margins and strategic investments amid sales decline and currency impacts.

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Jul 17, 2025
Summary
  • Order Income: Down 1% to SEK205 million for the quarter.
  • Sales: Decreased by 10% to SEK237 million for the quarter.
  • Operating Profit: SEK16 million, down from SEK25.6 million in the same quarter last year.
  • Accumulated Order Income: Up 7% due to strong Q1 performance.
  • Accumulated Sales: Down 1%, but up 3% when adjusted for currency effects.
  • Gross Margin: Increased, with a strong performance from global sourcing operations.
  • Operating Margin: 7% for Q2, below the target of 10%-12%.
  • Personnel Costs: Increased due to higher staffing in Bangladesh and Portugal.
  • Number of Employees: Increased to 681, mainly in Bangladesh and Vietnam.
  • Tax Rate: 24% for the quarter, varying by country.
  • Packaging Sales: Decreased from 21% to 18% of total sales, impacted by the luxury market.
  • Currency Impact: Significant effect due to the strengthening of the Swedish krona.
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Release Date: July 16, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Nilorngruppen AB (LTS:0GB5, Financial) reported a strong gross profit, attributed to effective global sourcing operations.
  • The company has seen a positive trend in the Outdoor segment, which continues to perform well.
  • Investments in the US market are yielding positive results, with increased staffing to capitalize on market momentum.
  • Nilorngruppen AB is expanding its production capabilities, particularly in Bangladesh and Portugal, which are performing well.
  • The company is strategically investing in Nilorn:CONNECT, enhancing client engagement and offering circular solutions.

Negative Points

  • Order income and sales have decreased, with sales down 10% to SEK237 million.
  • The Luxury segment is underperforming, particularly affecting the packaging product group.
  • Currency fluctuations, particularly the strengthening of the Swedish krona, have negatively impacted financial results.
  • Some European clients are hesitant due to market uncertainty and tariffs, affecting order patterns.
  • Operating profit has decreased to SEK16 million from SEK25.6 million in the same quarter last year.

Q & A Highlights

Q: Could you please provide some color on the clients that have entered restructuring? Which segment are they related to and which countries are they from?
A: We don't release any clients' names, but they are in the UK and Germany markets, specifically in the brand owner and retailer segments.

Q: Does the market momentum for packaging versus other product groups differ?
A: Yes, it differs. The packaging segment has been impacted mainly due to a slowdown in the Luxury segment, where we have been selling a lot of packaging. However, we expect this to recover by 2026. Packaging remains a promising area for expansion, allowing us to add value to existing client relationships.

Q: What are the key factors affecting the operating profit this quarter?
A: The operating profit was affected by a significant currency impact, a volatile market, and a few clients entering administration. Additionally, there was a change in ordering patterns, with clients placing orders later in the season.

Q: How is the company addressing the challenges in the Turkish market?
A: We have implemented cost savings in Turkey due to the high inflation and challenges in the textile market. We decided to downsize operations there to manage costs effectively.

Q: What are the strategic investments being made for future growth?
A: We are investing in expanding our production capabilities in Bangladesh and Portugal, and increasing our presence in the US and Vietnam. Additionally, we are focusing on Nilorn:CONNECT to support clients in compliance and sustainability, which serves as a door opener for new business opportunities.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.