Good morning everyone and welcome to Humble Group's presentation for the first quarter of the year. My name is Noel Abdayem, and I'm the Acting CEO of Humble Group. With me today, I have our Group CFO, Johan Lennartsson.
Good morning everyone.
To everyone calling in, welcome and thank you for taking the time to be with us today. We will now go ahead and present the results for the first quarter. Following the presentation, we will open up for a Q&A session. Let's walk through the quarter. Our organic sales growth came in at 8%, with revenue coming in at nearly SEK 2 billion. Despite the challenging macro environment, we're seeing a stable demand for our products. This clearly reflects the strength of our portfolio and our ability to consistently meet consumer needs over time. All of our four segments grew well, and the main growth was driven by our segments Future Snacking and Quality Nutrition, where our brands and production sites are performing well with a good demand across the full segments.
Our gross profit came in slightly lower than last year, mainly impacted negatively by currency effects and the product mix around the group. Cash flow remains to be a priority for us, and we delivered a strong cash generation during the quarter. Our net debt has continued down, and we are now in line with our financial target of 2.5 x A djusted EBITDA. This means that we can gradually shift our focus from a more defensive approach to a more targeted capital allocation strategy. I am certain that our organically generated cash flows will enable us to drive Humble toward increased shareholder value over time. Johan will now dig into the numbers.
Thank you, Noel. Looking at our net sales, it came in to, as Noel mentioned, to nearly SEK 2 billion, and there is no doubt there is a strong demand for our products in the group. The organic growth amounted to 8% for the quarter, mainly driven by Future Snacking and Quality Nutrition, where we see a really strong performance for the quarter. If we start looking about the impact of currencies, we do have a large portion of our business in both U.K. and in Australia, where the impact of stronger SEK relation to the sterling and Australian dollar is impacting the overall sales development in a negative way. We also communicated the divestments during the quarter and a few acquisitions, and these had in the net effects for the total net sales had a minor impact of minus SEK 4 million.
Overall development for the sales in the quarter is positive, and we see a good amount for our products. Shifting our focus to the profitability of the group and starting with the gross profit. Gross profit came in on SEK 630 million for the quarter. That is an increase with 15 million. The gross margin amounted to 31.6%. That is a decline from the previous year by 0.7 percentage points, of which 0.2 is driven by currency impact. The major explanation and reason for the decline in the gross margin quarter-on-quarter is driven by product mix and mainly which segment is growing faster. We see that we have a strong growth in Quality Nutrition this quarter, which had a negative impact on the overall gross margin. Looking at the overall profitability and in particular the EBITDA, it improved to SEK 116 million.
That is only SEK 1 million up from previous quarter, but we want to underline that we have an underlying profitability improvement, and we will deep dive a little bit what we mean with that. First of all, we announced the efficiency program in Q3 last year, and we see that we have a good impact from that in the profitability. The efficiency program contributes with approximately SEK 20 million in the quarter. As we have communicated as well, we have a currency impact of SEK 6 million and also a loss in the divestment when we divested LEV stores, the stores in the LEV group. We had a capital loss of SEK 6 million in the quarter, which impacting negatively, of course.
We also have a volatile macro climate, which many of you are aware of during the quarter with turbulent situation in Iran, which impacting the energy prices somewhat and also impacts the overall profitability. With that said, that has a negative impact to the overall profitability. With that said, we also want to emphasize two major drainers to the profitability in the quarter, which is Privab, where we see an increased price pressure and competition in the market, but where we're also taking bigger and larger investments for this big company in the group to ensure, enable future growth, of which we optimize the warehouse and also invest in the organization to prepare them for the next step in their growth journey.
Secondly, we also see that Solent is regaining some of the challenges they've had in the past from a loss of a customer contract, and also somewhat challenging market conditions in U.K. These two has a negative impact to the quarter. With that said, we do have a strong underlying organic development of the profitability, which we are happy to see that we are moving in the right direction. We also want to say that looking at the segment presentation, we have had a changed procedure of how we present and how we allocate management fee internally between the quarters. Previously, we have done that allocation semi-annually, every six months. Now we change that presentation to every quarterly instead, which have an impact on the EBITDA and EBIT presentation for the segments.
The full impact is disclosed on the segments slides in this presentation and also in the interim report that we present on our webpage. Shifting focus to the cash flow, we are happy to see that the cash flow is developing in a profitable and strong way. Cash flow from operating activities after change in net working capital amounted to SEK 114 million. That is an increase from last year with 63%. Worth mentioning here is also we do increase that number even though we pay SEK 18 million more in corporate income tax this quarter than we did last year. If we look at the cash conversion, we increased that number as well from 46% - 73%, which is of course something we are happy with.
Also worth mentioning is that this quarter we had a repayment of tax deferrals of SEK 44 million, impacting that number negatively. All in all, we see that the cash flow is gaining strength and improving from previous year, and that remains to be a high priority for us here at Humble Group. Just continuing on the cash flow, we could see that the positive cash flow had a good impact on our overall net debt leverage ratio, which came down to 2.5 x. We are now also in line with the group financial targets that we've communicated previously. With that said, we have during the quarter continued the CapEx plan to invest in a new candy production facility in Skövde and also the second bar production line in Australia.
Those two investments had an impact of SEK 41 million during the quarter, and that had a negative impact to the overall leverage with 0.1 x. With that said, we see that we are moving in the right direction in the leverage ratio, but we are also continuing to be mindful with the capital allocation of the group going forward. Knowing that we have reached the financial targets also gives us the ability to start taking a little bit more offensive approach with how we can allocate the capital across the group. Lastly, I also want to mention and double-click on that we yesterday communicated a new facility agreement with our two main banks and two leading banks, SEB and Nordea. This is a refinancing of the existing facilities, and it gives us an increased flexibility in our business and simplifies our day-to-day lives.
It also has a significant reduction on the total cost of financing for the Group. That is something that we are very happy to being able to communicate and which gives us the right support to build the Group in the future.
Thanks a lot, Johan. Let's talk a bit more about our segments. If we start off with the Future Snacking segment, it continued to grow well during the quarter, where organic growth in the segment reached 11%. We have several brands within the segment that continue to gain market share through new launches and increased listings all over the world. Our confectionery production also continues to deliver strong performance. As mentioned before, we are progressing well with the completion of our new factory in Skövde, while we are actively building the order book for the facility. We're securing solid production agreements ahead of the opening in the H2 of the year, and are finalizing dialogues with larger customers and brands regarding upcoming launches, not only in Sweden but also internationally. The segment delivered a satisfying EBITDA development during the quarter as well, which we are very happy about.
If we look at our segment Sustainable Care, we delivered an organic growth of 2% during the quarter. It's not really where we want it to be, but we're working actively on it. Profitability in the segment remains challenged. Primarily as Solent, our company in the U.K., continues to recover from a demanding market environment where the effects of a lost customer contract have not yet been fully mitigated. After the end of the first quarter, we completed a bolt-on acquisition to Solent's existing platform, Jutexpo, which we expect will support the recovery and help us accelerate the growth going forward. Within Quality Nutrition, which is our sport nutrition segment, organic growth amounted to 19%. We continue to see a strong recovery in the production of sports nutrition products, and our assessment is that this positive development will continue during the year.
However, we do see an increased volatility in the whey protein market prices, which we expect will challenge profitability in the coming months. In Australia, our brand Body Science is successfully capturing synergies with our bar production facility, while the underlying business continues to show strong momentum. Finally, we have the Nordic Distribution segment that grew 6% organically during the quarter. Easter fell early this year, which contributed to part of the growth, but overall performance was primarily driven by our strong offering through a well-developed store network and a broad Nordic market presence. Finally, let's look ahead to what's next for Humble Group. After another quarter as Acting CEO, it is clear that our increased operational focus is delivering results. We are seeing tangible improvements, and I'm proud of the work our teams are doing across the group to drive this development forward.
Our cost-saving program is progressing according to plan, and we are already seeing positive effects in both earnings and cash flow. As mentioned, we have also announced the first steps of our strategic review. We have acquired Willumsen in Norway and after the end of the quarter, Jutexpo in the U.K. These are two add-on acquisitions with a clear strategic rationale and a strong fit to the group. At the same time, we have also completed divestments of a few companies as part of our efforts to streamline the group. Altogether, these transactions add approximately SEK 73 million in annual revenue and around SEK 14 million in EBIT, excluding any potential synergies. At the same time, we're also strengthening our focus on overall profitability profile over time.
The work to streamline the group continues as planned and as part of the ongoing strategic review, both acquisitions and divestments may be announced in the near term. Today, Humble Group is a large FMCG group with multiple companies operating across different categories. While we might seem broad, we are very focused, and we intend to further strengthen that focus through the ongoing strategic work with the ambition to build a more profitable, forward-leaning, and scalable group. During the quarter, we also announced that Anders Fredriksson will start his journey as Group CEO in September this year. Anders has a strong FMCG background, most recently as the CEO of Löfbergs. I'm very positive about bringing that experience into the next phase of the company.
As I have previously communicated, I look forward to continuing to support the business in an operational role following the transition, as well as remaining a long-term shareholder and member of the board. Thank you all for listening in. We will now open up for the Q&A.
Thank you, Noel. Let's go through the questions we have received here from. Maybe we should start from bottom. There's some questions about the CapEx outlook from Victor and remainder of 2026. Also some question from John at G6 Investments. Remaining in CapEx for Gränsö Hovden, the second bar line in Australia. Well, we can comment on that. The CapEx for the quarter amounted to SEK 41 million for these two investments jointly. For the Gräns facility, we estimate that we have approximately SEK 40 million left in CapEx during Q2, and some of it also to spill over in Q3. For the bar line in Australia, we estimate that we have approximately SEK 7-SEK 8 million in remaining CapEx to recognize during the second quarter.
Besides that, also the CapEx outlook for the remaining 2026 is there are two main initiatives that we have communicated and also have announced, and we do not have any other large initiatives in the pipeline. Besides that, it's more maintenance CapEx investments of approximately SEK 15 million per quarter to anticipate. Then we have a question from Victor about the divestment capital loss of SEK 6 million from the LEV stores, if that is included in the non-recurring items of SEK 10 million. The answer to that is yes, it is included. Let's see what we have.
We have a question here regarding the gross margin in the distribution segment, and if we have any initiatives to lift this up as we scale further. If we just comment on the gross margin in general for all the segments, it is a main priority for us. We are currently following up closely with each businesses through dedicated sessions, where we review concrete actions, expected timelines, and impact. This is an ongoing priority as we scale the group. Now, if we look at the distribution segment in particular, we see a small uplift on the gross margin. Worth mentioning is that within our distribution segment, we do not only sell our own brands, we also sell external brands. Which means that we need to be right when it comes to the pricing because we are operating in a competitive market.
Now, with that being said, Privab, as an example, has a large pick-and-mix concept that is being sold at ICA, and we see a potential of adding some more of our own products as we scale the Gräns factory into Privab, which will improve gross margins in that segment.
Thank you, Noel. Maybe we should start looking at the questions from John here at G6 Investments. I think it's four questions in one, and maybe, Noel, you want to start?
Yes.
Go through that.
Regarding the M&A, the strategic review is progressing well, and as mentioned, we have already taken several steps as part of that process. We will come back to the market when we have something more concrete to communicate. Our main focus is to ensure that we get the right outcome rather than being driven by a specific timeline. More broadly, these transactions should be seen in the context of our ongoing strategic review, where we continuously evaluate the portfolio based on current conditions, performance, and forward-looking perspective.
Second question there: How has the increased freight cost impacted your gross margin in the quarter? We can just a short comment on that. Yes, we do see some impact on the freight costs during the later phase of the quarter. I think the main impact will remain to be seen in the second quarter, especially what happens in the Iran-U.S. conflict will have some impact to that, of course. Worth mentioning here is that we have a really strong team at Solent working with securing freight contracts and competitive freight tariffs for other subsidiaries in the group. We are confident that they are doing a great job securing the best prices that we can see on group level. Third question, I think we can just cover them all, right, while running them through.
Sure.
Body Science, yeah, had a good quarter in Australia. We see that they are regaining some pace. But let's see. Sorry, I was trying to read the question at the same time. The EBITDA margin was down compared to last year. Yeah, just double-clicking on that one in the Quality Nutrition segment, the EBITDA margin was first of all impacted by the management fee allocation that we've mentioned earlier, but also some other subsidiaries in the Quality Nutrition segment grew very well. For example, Ewalco grew very well and did a fantastic performance in the quarter, but they have a lower gross margin and a lower margin profitability overall. So that explains a little bit why the margin is down for that segment in the quarter. Noel, current trading and outlook for the year.
Growth has really never been a problem for Humble Group. We have wonderful entrepreneurs. We have products that are attractive to the market, and we're confident that we will continue to be able to grow the group at satisfying levels, excluding any potential M&A.
Perfect. We have a question from Øystein, a private investor in Quality Nutrition. If it is declining, I think we've covered that one. Also another one about the negative impact from the consumer loss at Solent and price pressure at Privab. I think we can just comment on the Solent impact. That was an event that occurred in the latest stage of 2025, and we expect to see some impact from that during Q2 and also Q3. We expect them to regain, especially some of the mitigating sales that they have won is starting to take impact in the later stage of 2026. The price pressure for Privab, just to mention that very shortly. That is a continuous challenge they have in a competitive market.
We are confident that the team is doing everything they can to review the prices and also make sure that we stay on top to be competitive in that market and take impact. We expect to have a positive development in the segment going forward. Noel?
We have a question here from Musawer. Appreciate that comment. Thanks, Musawer. Can we expect higher gross margin in the end of the year? I think it's worth mentioning that if you look at our four segments, we have three segments that are running really, really healthy gross margin profiles. Now, with that being said, our Nordic Distribution arm is quite significant in sales. As that segment grows and the product mixes changes, this alters the overall gross profit of the group. Now with that being said, the gross margin is a key priority for us and something we are focusing on quite intensively during this year. This is also a central part of our operational agenda and the core responsibility of each CEO within each business.
There is a lot of work going on, and I'm certain that the entrepreneurs, together with the executive management teams and the headquarters, are doing everything that we can to get the gross margin up.
Perfect. Thank you, Noel. There is a question about the EBITDA breakeven for the facility in Skövde and when you expect to have some EBITDA contribution once it's fully operational. Do you want to touch a little bit on when it's expected to be open?
Sure. The process is going on well. We've had some slight delays on some parts of the machinery, but we feel confident that we will open up that facility at the second part of this year. Now with that being said, as mentioned earlier, we have already secured a few production contracts, not only for our own internal brands, but also external brands. It's not something we can announce quite yet, but we are certain that the demand for our confectionery production is high, not only for the usual sugar confectionery business, but mainly also the sugar-free or sugar-reduced side of the business. We'll get back to the market with some more info when we can, but we feel very, very positive that we'll be able to fill up that factory with some good quantities as we move ahead.
Thank you, Noel. Also double-clicking, tagging on to that, there's a question from Musawer about the specific target for the net debt end of the year. We repeat the financial target we have is 2.5x . Of course, I think Noel writes in the CEO letter as well, that reaching that level gives a good flexibility to continue to be mindful of the leverage ratio. That is the bottom line.
As our focus ahead is to gain some more profitability and improve our cash flows, we do see a natural development of the net debt going down even further. Adding to that, we might announce some divestments which will bring that leverage down quite significantly. We're not there yet, but we're working on it.
Yeah. Also another question from Øystein about the divestment and bolt-ons we announced. We generally don't comment about the prices we pay or the cash we receive for businesses as out of respect from negotiation perspective, and yeah, that's what we can say, very short about that. Let's see if we have covered all the questions or if we have any others coming in. Yeah, I think I was trying to go through all the questions. I think we've covered all of them. One last one here is coming in from Stefan. If we can comment on the price initiatives that are underway with further actions ongoing, what exactly are you doing and when can we expect to see the effects on this?
This is an ongoing work, and we're trying to work in a structured and proactive way to optimize our cost of goods sold. We have several initiatives in place, such as supplier strategy, how we work with products coming in, but mainly also how we work with potential price increases to our customers. It's ongoing work broadly at a group level, and we're certain and positive that we will see some positive outcome from that work as the business continues to grow during the upcoming quarters.
Okay. Thank you, Noel. I think we have been through at least most of the question. It was a big interest for the presentation today, which we of course are very happy to see. Any final remarks from you, Noel?
No, I would just like to send a big thank you to the whole Group. We have a lot of employees in the Group that works effortlessly to continue to scale and improve the Group financials and overall health. We are excited about the future ahead. I'm particularly excited to get Anders on board as well to get some outbound strategic experience, and yeah. Thanks a lot.
Thank you so much for listening in.