CEO’s review Q2 2022
The second quarter marked the ninth consecutive quarter of growth for Fiskars Group. Our comparable net sales grew by 7.7% with all business areas contributing positively, despite the volatile market environment. For me, these nine consecutive growth quarters prove that our Growth Strategy is transforming the company and we have the fundamentals in place to drive sustainable long term growth. I would like to thank the entire Fiskars Group team for their hard work in successfully navigating this constantly changing operating environment.
In line with our expectations, our comparable EBIT for the second quarter declined from last year’s record high. We have actions in place to mitigate the significant input cost increases caused especially by the war in Ukraine, but the results from these actions are expected to come with a lag and be more visible in the second half of 2022. We have also found it crucial to continue investing in digital acceleration and direct to consumer growth to ensure that we remain a top choice for consumers, and this is visible in the increased SG&A costs.
We have been able to serve our customers and avoid any major product availability challenges despite the disruptions in the global supply chains. This has required higher inventories impacting cash flow negatively. We are targeting lower inventory levels towards the end of the year. However, this is dependent on how the global supply chain situation develops.
We continue to move forward with our Growth Strategy at full speed and we can clearly see that it is delivering results. Looking at the first half of the year, we have made good progress in our four transformation levers: commercial excellence; direct to consumer (DTC); the U.S.; and China.
In terms of commercial excellence, the broad based sales growth in all business areas and the only slightly declining gross margin in the first half of the year in this inflationary environment demonstrate the power of our brands. The mid teen growth in DTC in the first half illustrates that the investments we are making are paying off. Our sales in the U.S. have developed steadily with a very strong first quarter and growth also in the second quarter despite the cold spring affecting demand in Terra. In China, we have had strong growth in both quarters this year, which is a very good result given the intermittent Covid 19 lockdowns since March. Our team there has done an exceptional job in making the most out of a difficult situation and being agile in serving consumers.
One of the key enablers in our strategy is sustainability and we continue to make good progress towards our goals. The sustainability highlight of the second quarter was the announcement of further collaboration between Fiskars Group and Outokumpu, whereby we have started using their new emission minimized stainless steel as the first company in the world. This steel is used to manufacture selected Fiskars branded cookware products at our Sorsakoski factory in Finland. We can only achieve our ambitious sustainability targets together with our partners. This collaboration is a great example of pioneering design applied at every step of the product’s journey; from innovative, lower emission raw materials to long lasting, quality cookware.
With half the year now behind us, we keep our guidance for 2022 intact and confirm that we expect comparable EBIT to increase from However, the operating environment continues to be unpredictable and volatile and not all impacts on our business can be foreseen. During the quarter, consumer confidence hit low levels in many regions, which could have an impact on demand for our products. We are closely monitoring the development of consumer sentiment, especially in our main markets such as the U.S. In this environment, our strong brand portfolio and broad geographic presence work to our advantage and bring stability. Furthermore, in addition to the more short term actions we have in place to mitigate the cost headwinds, our growth strategy gives us confidence in our performance going forward, as we can see it is already delivering concrete results.
President & CEO