Good morning, everybody, and welcome to the Nilörngruppen AB Q3 interim reports presentation. I know that today is a lot of presentations, a lot of companies, so I really appreciate that you take your time to join our presentation here. To myself, I am in Portugal. At our factory here, we, as you probably know, we're doing quite big adjustments in the factory, uplift in the factory, so here to follow that. It's an interesting project going on, so I think that will be really good for Nilörngruppen AB in the future. I'm sitting here on a small laptop, so I think it will work out well. I will start sharing my screen and put that on presentation mode here. Yes, now we start the Q3, and we are quite pleased with the Q3. The order intake here was - 13%.
If we take into consideration that we had a big packaging order in Q3 last year on SEK 18 million, and that will come now in Q4 instead, that is around 7% of the explanation. We also have another carrying effect explaining another 6%. If I adjust for the carrying effect and this packaging order, it's quite flat. In general, it's a difference between the segments. The luxury segment is still quite weak, though the outdoor and the other segments are quite strong. Still weakness in the luxury segment, no big improvement there. Sales up 10%, and adjusted for the carrying effect is actually up 18%. I think it's partly we had a quite weak Q2, so it's a spillover from the Q2. Looking at the different months, it was quite strong both in July, August, and September, so we're quite even throughout the quarter.
Here we see also in the outdoor segment and the other segments, but still a little bit weaker in the luxury segment. Operating profit SEK 26.3 million versus SEK 15 million last year, and that gives an operating margin of 11.4% in the quarter. As you probably know, the goal has been our EAS should be between 10%- 12%. That is the goal we have set. In this quarter, we target that. Looking at the P&L here, also we have a quite strong currency impact on the whole P&L, not only the top line. As you know, most of our business is handling outside Sweden. In Sweden, it's mainly sales companies, but we don't do any invoicing from Sweden at all. We have the headquarter, the headquarter cost. We have some cost in Swedish krona, but the majority and all the invoicing is outside Sweden.
What I want to say more here is also looking at the tax rate. The tax rate for the quarter is 24.6%, and that is in line also with the accumulated number. We'll see what's happened with the tax rate in the fourth quarter. It's always adjustments, and everyone is doing proper calculation, really the proper calculation of the tax. You think it will be in line with this 24.6% also for the full year. Personal cost has quite been stabilized now on this level, I would say. Also in currency impact on this level and other external costs. Coming back to that a little bit later. Split by product group, not so big difference compared to last year. It's mainly in packaging that has gone down, and it's contradictory to what we're doing now.
We're putting quite a lot of effort into the packaging, and the reason why packaging was going down here is that due to the luxury segment. We still have a quite big packaging delivery to the luxury segment, but they are overstocked, so it will take some time. I think it will take like in mid-2026 until we are back into normal deliveries for the luxury segment in packaging. Looking at the quarterly income statement and the gross margin, normally the Q3 is a quite strong gross margin, and so also this quarter, as you can see here, if you're looking at the historical level. The reason for that is we have less packaging. Packaging has a lower gross margin and less packaging in Q3 normally, and so also this quarter.
Operating cost is also lower normally in Q3, and so also this quarter, and that is due to the holiday. Most countries take holiday in July, especially in Europe. That's why that has a big impact on the quarter three. Operating profit, as you can see, it was a strong operating profit this quarter. As I explained, there was not only one single month. I think it was strong all the July, August, and September. Of course, you who have learned Nilörngruppen AB now, it's very much volume-driven. Once we get good volumes in a quarter or in a year, we also get a good profit. It goes a long way down. We're very much depending on getting volumes.
If you're looking at this similar, but in a graph, and also as I used to say, that in the past it was always Q2 and Q4 that was sticking out as the best quarter. Nowadays we see it very much flat. It's a change of purchasing pattern from our customers. They even out much more, buying much more into the season and much more shorter lead times. That makes our pattern different than it used to be. Here it's also following the profitability just in a graph. You can see here now Q3 that was quite strong. Balance sheet, we have a strong balance sheet, an equity level of almost SEK 350 million. That is good because we're now taking more and more time to search and see for acquisitions and so on. I will come back on that.
We also will do, or doing at the moment, both a big investment in Bangladesh and also in Portugal. Also coming back to that later on in the presentation. I just want to raise here, as we are a super international company, relatively our size, we are in 19 countries and with only the headquarters in Sweden. Therefore we have a big part of our equity abroad. That also has a big, the currency has a bigger impact when we translate the equity in the different countries into the Swedish krona. This now in 2023, that's had a negative impact on the equity of SEK 32 million. Of course, in the past we also have had positive impacts. Now due to the strong, relatively strong Swedish krona, that has an impact. Financial indicators, I will not go through them indeed.
I just want to mention here, we are on almost 700 employees. As you can see here over the years, we have increased that quite much. That is mainly in the production companies, mainly in Bangladesh, I would say. We also have invested in other specialist areas where we employ people to be in forefront of the with the competitors. We also invested in countries like the U.S. Also coming back to that later on. Where we're in the U.S. now, we have four people. This one, this is to explain the movement we have done between the year 2020 and today. By heritage has been really strong in design, and we continue to work on that. The design is a strong unique selling competence for Nilörngruppen AB. We have in packaging started and done much more here effort. We have a really good collection.
We have a category manager working with that. We're really taking a big step forward in packaging. Packaging, as I mentioned, we are delivering to the luxury segment. We're also packaging for sports and for our outdoor segment. We're talking here about the underwear packaging, sock riders, and so on. It's not packaging for corrugated standard brown packaging. It's more for the garments and for luxury segments. Financial strengths, we have had a strong balance sheet for many years, but we even now have even stronger. Sustainability, CSR, and compliance is an area where we have put a lot of efforts, and the employed people are all around the world to build up that. Which gives us also, in the past, we were talking about design, but I would say now sustainability is another core competence that is unique.
I will not say unique, but the selling points for Nilörngruppen AB, what we push for and where the client appreciates our offer. Digital solution and Nilörng Connect is one something we didn't have. We had digital solutions like RFID in the past and so on, but now we're taking even more steps onto this. I will explain, coming back to Nilörng Connect, what that is all about a little bit later. Global deliveries, what I mean by that is that we're setting up distribution companies in new countries, like in Vietnam at the end of last year, and also now Sri Lanka. We have also set up a company in the U.S. We're getting more and more international. Yeah, big currency impact, both on the top line and in the balance sheet. I used to say that we are quite well hedged. We match the cost with the income.
We take a country like Hong Kong. We have a big income there, and then we have all the costs matching that. In the end, we have a net profit. In different countries, we're matching quite well, but in the end, we have a profit that will be converted back to Swedish krona. In my example, that in Hong Kong dollar, that Hong Kong dollar will have an impact, as you saw earlier, on equity. As I mentioned, still volatility in the luxury market. We see now less uncertainty due to the tariffs. We've learned to live, and I would say it doesn't affect us directly. It's more indirect effect. It's our client that exports to the U.S. that has been affected.
I think the uncertainty is most of the thing that, I mean, as long as you have the uncertainty, you don't dare to move, but now the uncertainty moves away. It's more movement in the market. Operating profit, we mentioned already. Portugal factory where I am at the moment. We have been here in Portugal like in 40 years. The factory needs an uplift. We looked at moving the whole factory, but we decided to stay. We think that it's less risk in that, and we moved out of the warehouse to get more space in the factory. At the moment, we are changing the complete layout inside the factory to get a much more flow into the factory and also implementing lean. That is good, I think.
Nilörngruppen AB, Portugal, that has had tough times 10 yeas- 15 years ago, but that is now also a competitive edge for Nilörngruppen AB to have a good factory in Europe. Building for the future, that was where we now employed or built up this specialist we have within the group, where we have compliance, CSR, packaging, materials, and that is supporting sales. I would say being a salesperson in Nilörngruppen AB today versus 5 years- 10 years ago is a totally different story. In the past, we were out selling labels. Now it's all about selling a concept. The client is much more demanding now versus it has been in the past. Here is the specialist here in different areas. We increased in production and capacity. Here we also have Bangladesh.
We are currently, I mean, we got the land now and they're doing soil tests, and we are working on that, but it will take some time. We said earlier that it probably most likely will be ready by the end of 2026. Now we say it will be ready in the first half year, 2027. We've done geographical expansion, as I mentioned. We see a consolidation in the market. We've seen Trimco, we've seen SML, we see AV, and all the companies are taking part of that. We also see companies now that are for sale and actively selling. Looking at the label market as such, there are a few big players. It's a mid-segment, and there's quite a long tail of small niche players that are working in one market or with a few products.
For Nilörngruppen AB, we've come to the stage now that we're putting much more effort into this, and we have a team dedicated to search for these. What are we looking for? I think here we will search for companies that can contribute either geographical expansion in areas and countries where we are not that strong in. It could be like France, it could be Netherlands, it could be Spain, it could be the United States (US), where we can take more geographical expansion, or it can be vertical integrations in areas where we are not strong, like in heat transfer, or in RFID, or in packaging. We're not sure that we will succeed, but we now definitely take this seriously and put much more effort into that. Coming back to, I've presented this earlier. There's some new slides.
I will just add quite quick here what Nilörng Connect is about. Nilörng Connect is the QR code that you can see on the jacket here, where we have a system. It is a system behind that is Nilörng Connect. It's a QR code, and it's NFC chip or RFID. Why Nilörng Connect? We see three reasons why people want to go into buying Nilörng Connect. One is the legal compliance, the legislation, digital product passport. That is here to come. That will come. I will also present that soon here. This will be a must for our clients. This is a headache, and that we, through our Nilörng Connect, can be part of solving their problems. There are more nice-to-have for them. We can be part of the trend. Now we see repair, resell, recycle, where you have this QR code and the information carrier, and consumer engagement.
They, through the QR code, can have a consumer engagement and communicate with end consumers. That will drive sales, create loyalty, and acquire new customers. Just the timeline regarding the DPP. It has been going on for some years. There have been a lot of discussions, a lot of preparation. Some clients are in this already, not in the DPP, but into the Nilörng Connect and have this providing information to the end consumers about their garment and the sustainability. In 2026, the really delegated act expected for the first product groups and the first is apparel and accessories. In 2027, batteries will go full line with the DPP. In the mid of 2027, we expect that the DPP will be fulcrum for textiles. Through this QR code, when you scan it, you can have a carbon footprint.
You can have the different certificates they have on the garment, production history, and the country where it's produced, and so on. Recycling instruction, all that is within the DPP fulfillment. To the brand owners, we provide them with information. They can see what countries they have been logged in. You can see how many scans they have had, what garments they are scanning. You can also see if they have a QR code outside the jacket and inside the jacket, and they see the difference how that is scanned. We also provide information to the brand owners. Like this, they can see on a map here where it is scanned. Also what we have been working on is an AI now tool, talking to the product.
It's when you're scanning the QR code, you get to the web page where you can write and communicate with the through an AI tool and ask questions. I got this spot on my jacket here. How should I remove that? That we also do in the cooperations with the brand owners. We make sure that we provide the information that they want. We can go out widely in the internet, or we can just provide in their database and provide information that they have in their database. You have seen in the past the financial target and so on for Nilörngruppen AB. We have the, yeah, should achieve 7% growth with an operating margin above 10%. Yes, good. I will stop sharing this and coming back to you and see here. Maria is also with me.
I forgot to mention that at the beginning, Maria, the CFO for Nilörngruppen AB. Maria, do we have any questions for us?
Yes, actually, we have only received one question. That is a question about the sales split between outdoor and luxury, and the percentage for each segment.
Yes. Outdoor is still the biggest, absolutely biggest luxury segment. We started off with a few years ago. We see that the luxury segment is coming, and we think we can do much more there. The split here, I don't have the exact numbers, but I would guess that outdoor is between 25%- 30%, and luxury is between 5% to 10%. What's interesting with luxury is that we can do much more. Luxury is in the countries France, it's in Italy. Outdoor is mainly in, and outdoor, I would say outdoor sport, it's mainly in Scandinavian countries, in Germany, and in the UK.
Thank you for that. Now we received some more, so I will continue here. We also got a question about the EBIT. Could you elaborate on how much of the EBIT that comes from operating leverage and how much that is due to recent efficiencies?
I think most is, I mean, as I mentioned, that is the volume is met a lot. I talked also last time that we intend to do cost savings. We have a program here. We have not launched all of that yet. Cost is, but we're also taking on cost here, moving into new countries and so on. For me, this quarter is volume-driven, I would say.
Continuing on the cost savings, because actually we got a question about that as well. The question is, you previously commented on reducing your cost base in Turkey and doing similar analysis on other parts of the group. Do you have any updates on that front?
Absolutely. We have done that in Turkey. That has been implemented fully, and we are now working on other countries. This is partly, but also that we are moving now volumes from a country like Hong Kong, China, into Vietnam, Sri Lanka. That's a moving of cost. At the same time, doing cost savings. That is mainly in the Asian area, but partially also in Europe. At the same time, we're also taking on more and more employees in the U.S., so they are expensing and so on. My goal is that we can be more clear on that once we have done the structure that we are in the middle of.
Thank you. We got a question about the outlook for 2026. Has anything happened during the quarter that changes your view of the market outlook for 2026, specifically regarding different product groups?
I cannot say. I think there's nothing new regarding the product group. I hope and think that the luxury segment will be back in swing again. I think it will take until mid-2026 for other product groups. I don't see any major change, not as it is at the moment at least. We had, as you know, with the outdoor, it was peaking during the pandemic, and then it really bounced back. That is back to normal now.
Thank you. The last question that we have received is, are there any ongoing discussions to include segment reporting in the quarterly reports?
Segment, and maybe qualify because we do segment reporting in the interim report with countrywide. I assume here is more on product group levels, isn't it?
Yeah, I would think so.
Yeah, that's a good point. I think that is something that we should consider maybe and see what we can do there. We have not done that in the past, but it's a good point.
Thank you. That was all of the questions we have received.
Super good. Thank you very much for participating today. I know that it's a super hectic day with a lot of companies presenting. Thank you very much, and have a great weekend. Thank you.
Thank you.