Good morning and welcome to Duell's first half and second quarter 2025 finance report webcast. The result will be presented by CEO Magnus Miemois and CFO Caj Malmsten. My name is Pellervo Hämäläinen. During the webcast, there's an opportunity to send questions via chat, and at the end of the event, we will go through the questions and answer session. Gentlemen, you're welcome.
Thank you, Pellervo. Yes, so welcome on my behalf as well. The second quarter, which comprises from November, December, January, and February, is a period where normally the winter products and the winter categories are really at center stage in Duell's business. This year, in our quarter two, the weather conditions served up some challenges in this respect, and this changed the demand environment for Duell, and as such, a little bit different than what we had planned and hoped for. Despite these conditions, we were able to continue net sales growth of the company, and this change in demand picture, of course, also has a bearing and an impact also on the blended margins of the company. We'll get back to that a little bit.
The situation we had in the second quarter was that the snow conditions, the amount of snow in the Nordic countries, in Finland, Sweden, and Norway, particularly in the mid and south regions of these countries, were significantly below historical levels. Of course, that meant that the conditions for snowmobile riders did not at all materialize in a normal way. As you can see from the picture, while the green livery of the Arctic Cat sled goes maybe well together with the green turf, it is not the natural environment for a snowmobile. It should be a crisp white background, of course, a snowy background for the snowmobile market. This means that in those regions where the snow conditions did not allow snowmobile riding, it meant that sleds were left in garages to wait for better conditions, and in that sense, impacted the demand for snow category products.
In the most northern regions of both Sweden, Finland, and Norway, the snow conditions were good. There is still snow there. In those regions where the conditions were, shall we say, normal, we could also see that the progress that we made in these categories was as planned, meaning that we are growing the business also in this category. Overall, the situation we had now in Q2 was very much driven by the circumstances of weather conditions. This means that we ended up having to balance a little bit our activities and also pivot to focus more on other regions, other product categories, and in this respect, we succeeded reasonably well. Particularly there, the amount that we were able to grow the business with Central European customers. A few highlights of the quarter.
Despite a below average amount of snow in the Nordics, we are very happy to see that one of our youngest brands in the family, our house brand Amok, actually did a sales record in this winter. To some degree, of course, this is a situation that plays out already from pre-orders ahead of the season, but also throughout Q2, the progress with the Amok brand was very, very encouraging. We introduced new products in the range of products under the Amok brand, and these have been well received in the market. We are very happy with the progress of this product group and this brand. A warm winter means, of course, also that other categories, for example, bicycle, actually the market and the market window expands, and the conditions to ride bikes, bicycles, was started earlier in the Nordics this year.
We have also now in Q2 brought in new products in the bicycle product range. One highlight here, Pirelli tires for bicycles. This, you could say for Duell, is a very natural progression in the sense we have been working together with Pirelli as one of our major brand partners for several years on the motorcycle side. It was very natural for us to also expand this cooperation with Pirelli to the bicycle category. Interesting new products that the reception in the bicycle market has been very, very positive, so we have positive expectations of this cooperation going forward. Still remaining with the bicycle category here a little bit, during the period, we also held our own dealer event in Finland for the bicycle dealers in Finland.
This is a we continued on a concept that we launched last year, and now we were happy to see that that setup and that approach even brought more dealers to our facilities for the annual dealer days. This is a meeting point between our dealers, us, and our expertise, and we invite also a range of, we had probably around 15 brands represented during our event there. This is an example of how we implement our strategy, where we say we want to be the selected, the best partner both for brands and for our dealers. This is a great example of how Duell creates that meeting point between parties and with the interest to further all of our businesses.
In Central Europe, our strategy to continue focus and drive growth in Central Europe, where we see that there's significant potential ahead, we also in quarter two continued that journey to expand the customer base, the dealer network in Central Europe. Currently, this is very much focused around motorcycle riding gear. If I highlight a couple of regions in Central Europe, there I would say Germany and Benelux continue to be very promising potential for Duell with these categories and in this market. Strategy implementation continues. Highlights of the results. In the second quarter, we managed to grow our net sales with just about 4%, so it reached over EUR 29 million. This supported that on a half-year basis, we maintained a 4% growth and we reached EUR 57 million in the first half.
The impact of this change in demand picture and the blended profitability profile in the second quarter did also create a challenge for us on gross margins. On gross margins, we were down a little bit compared to the previous year due to these circumstances, and we managed to reach an adjusted EBITDA of EUR 1.1 million. On the half-year basis, this meant that it supported us to reach more or less same levels of gross margins, 24% and change. In absolute terms then, we managed to improve the adjusted EBITDA to a total of EUR 1.8 million in the first half of the year. On the financial position, the lower demand in snow categories, of course, deviated a little bit from our plans in terms of how we could turn around inventory sourced ahead of the season, and this impacts a little bit our net debt progression.
Nevertheless, the financial position with respect to net debt and with respect to leverage ratio is improved from the previous year position. The cash flow dynamics, if you look at the total year, this is the period where we're building inventory ahead of the peak season, which is the Q3, the start of the summer season, and also this year in a similar way. As you can see from the comparison figures, we are gradually able to also make this a little bit more efficient. While cash is going towards inventory in this period in the magnitude to which is slightly less than last year. These are the highlights, and here I'll hand over to Caj, and then we'll look at more details.
Hello from my side as well, and let's open up the numbers a little bit more. Starting from sales, here we see that the growth continues, and quarter two, full organic growth of 3.9% with a total EUR 29 million, EUR 29.3 million, bringing the half-year numbers to EUR 57.5 million, so a total growth of 4.3%. What's also what we have said before is continuing that the share of business in Central Europe is increasing, for the quarter, 48% compared to 44% a year back. Strategy as such is working, that focus on Central Europe is increasing. Our portion of own brand sales is stable, 20% compared to 21%. We can see an increase for the quarter in the online sales to 33% from previous year 26%, and on a half-year basis, 29% from 25%.
Business is gradually also moving towards online sales more and more. I can say looking at the development here, we have comparing quarters to similar quarter same year back. This is now the sixth quarter in a row with growth, so slowly growing the business. On the profitability side, we start from the half-year side. We have in real euro numbers EUR 1.8 million, adjusted EBITDA compared to EUR 1.7 million a year back, so a growth of 10.6% for the half-year. We logged then back on the quarter two number. Here we have a decline of 16% due to the weaker demand in the snow categories, but all in all, cumulatively, it's progressing well.
We can also see that looking into the OpEx development, if we take it in terms of percent of sales, now quarter two numbers, 18.9% compared to last year, 19.7%, and for the half-year, 20.4% compared to 21.1%. Here is, as we have said, that the impact of the efficiency program is gradually coming into the picture, a bigger impact now quarter two, quarter one was not really impacted at all. This is working as planned. Working capital is improving. We have a level of EUR 58.5 million compared to a year back, EUR 58.9 million. Here ahead development was not in the level that we expected, but anyhow, it's improving. Here we also have the challenge from the weak winter conditions impacting. All in all, the efficiency of the working capital management is getting better, improving 39% of inventory to LTM sales.
Here gradually improving, so from same timeframe 2023, 49.7%, now down to 39.5%. This journey continues. The financial position remains stable with a leverage of 4.0 compared to 4.5. Yes, a little bit above our medium target, but this is the time of the year when our leverage position goes up a little bit when we are tying up money in the balance sheet. Looking into the details there, cash flow negative, but improvement from last year. Cash and cash equivalent reserves EUR 0.2 million, but we have an unused RCF facility of EUR 18.8 million. All in all, if you see the leverage position improve, small improvement, 29.3 compared to 29.9 one year back. To summarize the whole financial situation, I say this on most of the parameters here, we are taking again one step forward and the development continues.
Giving back to you, Magnus.
Thank you, Caj. The development in the second quarter supports that we keep our 2025 fiscal year guidance unchanged. To repeat, this means that we expect that the organic net sales with comparable currency will be on the same level or higher than the previous years. Regarding profitability, we expect that the adjusted EBITDA will improve from last year's level. A quick reminder recap of Duell's strategy. The strategy implementation is an ongoing journey quarter by quarter, and also in this quarter two, you will have clear evidence that this strategy is working, that we are able to onboard new dealers, new customer relationships, particularly in Central Europe, where the focus to expand is.
As we saw from the figures and the key ratios, the online sales actually was very strong in the second quarter, and this is testimony to that Duell is a strong partner for all our customers that choose to utilize online channels to grow their business. Equally, the journey and the ongoing work to create an attractive brand portfolio and an attractive range of products with the highlights of Pirelli tires in the bicycle category and the highlight of house brands developing favorably and continuing to grow is a good, those both are good testimonies to that we have the ability and the know-how to read the market opportunities, the market demand, and match that with suitable attractive products for our dealers. We will continue to focus on developing the profitability as the trend supports, and this is a clear focus area also supported by a guidance.
Equally, growth, and again, we have, as highlighted, we have a track record now of being able to deliver growth in a number of quarters, and this is also supporting the work going forward. The capital efficiency, this is a clear challenge of this type of business, and this means that this will never go out of our focus window. This is an ongoing process also to step by step seek ways to have better capital efficiency in the business. Ongoing strategy implementation. Duell's position in the market is strong. We have a product assortment and a product category offering that many of our competitors do not have this broad offering, and this means that we have abilities to be a partner for many different types of dealers and customers.
Whether they are specialty shops that they focus only on one product category, let's say they are a service workshop for bicycles, or if they're an e-commerce dealer with focus on every category, or if there's a retail store with focus on some or several of these, we have the ability to match then both the product offering and the, shall we say, the value package to various types of dealers. The mix of both our own brands and strong, well-recognized leading brands in the industry is a formula that we see and we believe is the right way to go. This gives us both agility and gives us also a blended margin profile that supports development.
This is also an ongoing process with the amount of brands we have and with over 500 brands and the amount of products, this is obviously an ongoing process all the time. The fact that we are, despite tough conditions in a given quarter like this second quarter, we can grow the business, we also read as an indication of that we are able to also take our fair share of the market even in difficult times. Going forward, we believe this is a good position for Duell to continue the work and seek the growth and profitability development ambitions we have outlined in our strategy and our guidance. Summarizing quarter two, we are very happy about that we managed to continue growing the sales.
The very important component in this equation is the continued growth in Central Europe, and this is, as I highlighted, very much the sweet spot of Duell's growth strategy. The conditions in the Nordics, particularly, were disappointing, were difficult, and this meant that a little bit of the sweet spot that we would normally have in this time of the year with the winter and snow categories did not fully materialize. It is encouraging when we look at the details there, as I highlighted earlier, when we look in the regions where the conditions were normal, there the formula works, and there the results and the targets we had set out to achieve materialized. The disappointing side of the equation is that the conditions did not support it throughout the Nordic countries. All things considered in those conditions, we are reasonably happy with the quarter two performance.
That rounds off the details, the things we wanted to present to you, and then we also have room for possible questions from the audience, so over to Pellervo.
Yeah, thank you. There are many questions related to the market and specific questions to finance. We can start with this hot potato, the trade war. How do you see the impact of this to our business, and if we think that we have a big part coming from China, the goods? What kind of, how do you see this could affect our business?
Maybe the first comment is that, of course, these sudden and maybe even to some degree unpredictable changes to global trade patterns, it of course has an impact. Can we see the picture yet clearly how it will shake out? I think it's a little bit early days. If I start with the U.S. tariffs, then Duell doesn't have dealers and customers in the U.S. Our strategy is about Europe. From that point of view, we don't have a clear and immediate challenge there. We do have suppliers, to some suppliers in some product categories from the U.S., but by and large, most of those suppliers, we have also alternatives in other countries. Now, it's maybe more, I think the question was also related to China.
China, yes.
Of course, it would maybe be China-Europe, yes. I think it's simply too early to say how that will shake out when there's no clear things to address there. Yes, most of the products that Duell sells, they are, at the end of the day, consumer products. When you talk about consumer products, by and large, Asia is a big, big producer of consumer products. Yes, it would for sure have some impact. Today, I don't dare to predict the outcome of things that haven't really materialized yet.
Yeah. As said, the predictability is close to zero as all these changes happened overnight.
Indeed.
Difficult to comment, yeah. How about the poor winter conditions? Will those still affect the Q3 figures? If we got some extra inventory for winter goods, will they kind of affect the business in, let's say, next winter season and the profitability?
In Q2 is kind of like the prime, normally the prime, the peak of the market for these winter categories. Q3 is not. Q3 is very much the peak and the start of the summer season. Yes, of course, with the lower demand for these categories, to some degree dealers will for sure have more stock of winter products that they have to carry over from over the season now to next fall and equally for Duell. From that point of view, it has also an impact that will be seen a little bit over the next few months, but particularly where the hotspot for the business is Q3 is about the summer products and you could say everything else than snow, all the other categories than snow.
This is a good bridge to Q3 or summer season. How have the dealers taken kind of the summer products so far in, or are they still expecting to make kind of big buys or fast buys instead of kind of pre-orders?
I would go as far back as last fall when we started the pre-sales process for this summer season that has now started. Then very much dealers said, well, they had a good season behind them last summer, and this of course encouraged also appetite for plans for the next season, and the next season is now. We are positive about the Q3 outlook. Also now when the winter was mild, the season started sooner. If you go to, let's say, South Sweden, we've already had, or our dealers have had season opening kind of events, etc. When you look at, when we participate in them and look at the amount of people on the move and out there looking at new products, etc., we get a good sentiment from that.
Now the game is on, and in a few months we'll be back here to report the outcome.
Like, let's say, the spring started a bit earlier in southern part of, let's say, Finland and Sweden, did we have the goods also for the market already in place?
Yeah, let's say the cycles of particularly pre-orders and pre-order deliveries, they're not timed for, let's say, end of February or early March kind of activities, while you even could see some, the most diehard enthusiasts were testing the streets already in what we would normally consider winter months. It's not really the market. There's some diehard enthusiasts that really can't wait. In terms of the actual market demand and our, let's say, sequencing, this is well synchronized between us and dealers, so I would say normal.
Okay. As the winter season was pretty challenging, what were the actions that we kind of boosted to kind of get the negative side to positive?
Like I touched on, in the regions where snow conditions were normal, actually in some northern regions in the Nordics, even more snow than normal. Of course it meant that we pushed hard in those regions where the demand environment was positive. The other obvious is to just pivot to try to compensate then with other product categories, other customers, other regions. This we can also see in the results for both the geographical split and the e-commerce ratio there, those two things.
Related to the, let's say, online e-commerce, the online sales was exceptionally high. Did that come from a big bunch of customers or were there just only a few big customers behind that sales?
A blend. It is a basket, but in that basket there are bigger players and there are a bigger amount of smaller players. I would say everything, but what we clearly could see that those with capability also to make deals, they were active in this period.
These came mainly from Central Europe?
Yes.
Yeah. Okay. A few questions related to financials. The cash flow was negative. How do we make sure that we have enough liquidity going forward?
Yes, we have a pretty good RCF facility, so as such we are not running out of cash, and that is meant for this season of the year when the capital is to a large extent tied up in the balance sheet. This is part of the longer-term development to improve the working capital efficiency.
Okay, so this also much to do with the seasonality where we are taking the summer goods in for the high season.
Yeah, very much to do with the seasonality.
Yeah. About the cost efficiency program that we started, some of the impact came to Q2. What magnitude was that?
Hard to say exactly the magnitude of it because it's coming in gradually, but what we can see there, you have both personal related part of efficiency program and then other cost types of, and they are coming into the picture gradually here. Difficult to say how much really the impact, but continue going forward, the full impact is coming here during the year.
Yeah. Do you expect to, so we will gain more in Q3 and Q4 compared to Q2, or is it more or less stable?
More or less same.
Yeah. About the currencies, which currencies were the positive ones that impacted mainly for our result?
It's especially for the sales side there, that especially the Swedish krona, which we have big volume in, and then also the small portion Norwegian krona and British pounds, but main part Swedish krona.
Okay. We have a question about the inventory. Does the financial position limit the ability to build the inventory for, let's say, high season for summer, or do we need to restrict it somehow?
If we look from a financial position point of view, that's not a restriction for building an inventory, but that's more to focus to keep the inventory levels on a reasonable level with good turnover. From a financial side, it doesn't restrict us.
Okay, good. To a larger picture about the, let's say, consumer confidence and their spendings for free time, how do you see the, let's say, motorcycle going forward? Are people still kind of keeping the money at bank, or are they more eager to spend the money to their hobbies? What are the differences in Europe compared to Nordic countries?
Yeah, maybe my thoughts on this is, there's one perspective if you look at quarter two or even this first half of our fiscal year, and then when we read the headlines every morning, we start to maybe have a little bit of worries on our foreheads, wrinkles on our foreheads. Overall, we can see that the pressures that is affecting consumer sentiment has eased, and now talking about interest rates and similar. We can also, of course, read something from the statistics of registered vehicles, where particularly Central Europe is a little bit more positive note than what the trend is in the Nordics still. This is also why you see a little bit easier for Duell to make progress and growth in those regions than in the traditional markets.
Like I hinted, now we seem to be heading into times where major things might affect also consumer demand. You could maybe even use a stronger word than might in that sentence. This is something we have to follow very, very closely now, that how is demand, consumer sentiment developing with all these changes and all these surprises in the world.
Yeah, okay. Going back to Central Europe, the growth has continued. What are the kind of the factors behind the growth? What are the actions that we have been successful with, and how we are developing the businesses in Central Europe?
I would say when we talk about strategy in sort of simple terms, we talk about the right product at the right price in the right time. This is really the core, and this is what is center stage when we talk, when we engage discussions with a new customer, that we have an attractive product offering, and we have a formula that makes sense commercially for us and for them. This is the basis. The broad offering is a resource to dealers in the sense that it's a partnership that can grow, can actually serve them wider. I would say maybe particularly once we have an established, we have an opening, and then the journey continues. It is not really more complicated than that, that we have right products, and we can be a great partner for new customers.
In terms of activity, of course, it means really grinding work, finding those customers, convincing them. It's really traditional business development work.
Very good.
Something we're very good at.
Yeah, that's good. Those were all the questions that we have had in this session, and thank you for all of these. We will then come back on 3rd of July with the Q3 result. If you want still to summarize and conclude the session, so.
Yeah, maybe I'll focus on the final comments on the half year. We continue to grow, we're continuing to develop the profitability. We had some challenges in quarter two that we found ways to largely overcome, and I want to thank the entire Duell organization for well-done work and good efforts in quarter two. We'll meet again in early July for quarter three. Thank you.
Thank you.