April-June 2023

• Net sales decreased by 51% to SEK 102m (206), organic growth amounted to -53% during the quarter
• Operating profit amounted to SEK 23m (107)
• Operating margin was 22.6% (51.7)
• Cash flow from operating activities amounted to SEK 9m (55)
• Earnings per share, diluted, amounted to SEK 0.76 (3.01)

January-June 2023

• Net sales decreased by 45% to SEK 190m (343), organic growth amounted to -48%
• Operating profit amounted to SEK 38m (168)
• Operating margin was 20.2% (49.1)
• Cash flow from operating activities amounted to SEK -33m (92)
• Earnings per share, diluted, amounted to SEK 1.31 (4.81)

CEO’s comments

Gradual recovery of the bicycle market
As expected, net sales in the second quarter was soft, with a 51 percent decline compared to the same quarter last year. The decrease in net sales was mainly due to a continued soft demand in the bike sub-category.
 
Bike retailers in the key US and European markets continued to reduce their inventory levels during the period, as expected. Inventory levels at many retailers have returned to historically normal levels and we assess that inventory levels at retailers will be fully normalized during the third quarter.
 
However, we see that the inventory levels of our customers, the helmet manufacturers, in bike are still higher than normal. We see that they are more restrictive with additional orders for current season compared to previous years. This general caution is mainly due to the fact that they have tied up more capital than normal in inventory this season. This also means that although there are many positive signals in the bicycle market, there is a lag effect in our sales, which are generated from sales to helmet manufacturers, compared to what many companies that sell directly to retailers.
 
Even if demand to end customers is lower than last year, sales are higher than before the pandemic situation and we continuously gain market shares in all our key markets. This means that we will see a gradual increase in demand during the last six months of the year. We assess that the third quarter will continue to be challenging but expect to see a stronger fourth quarter and therefore show growth for second half of the year. With our significant customer base and models equipped with Mips solutions, we will gradually return to growth in the second half of the year, as helmet manufacturers produce helmets for the next cycling season.
 
Operating profit decreased by 78 percent, amounting to SEK 23m (107) in the quarter. During the first six months of the year the operating profit has decreased by 77 percent to SEK 38m (168). The operating margin was 23 percent (52) and during the first six months it was 20 percent (49). The lower operating margin can largely be explained by the lower sales, ongoing investments within our strategic initiatives in marketing, research and development, as well as the negative impact of currencies.
 
The operating cash flow amounted to SEK 9m (55) in the quarter, and during the first six months of the year it amounted to SEK -33m (92).

Helmet category Sport – gradual recovery in the bike market
The bike market was still challenging in the quarter, despite a gradual improvement in demand during the period. There was a slow start to the quarter, and we saw that our customers were more cautious with new orders as inventory levels remained high and the bike season had a slightly late start due to a cold and rainy spring. Once the season got going, demand gradually grew during the quarter.
 
The inventory situation is still unbalanced for our customers and retailers around the world, with an excess of inventory of helmets at lower price points. On the positive side, we note that on most markets, the inventory levels have returned to historic levels for helmets at medium and higher price points. The unbalanced inventory situation continues to be a challenge for our customers and resellers due to how it impacts their cash flow, which also makes them more restrictive when it comes to purchasing large volumes of new products.
 
This quarter we exhibited at Eurobike, the largest fair in the world for bike-related products. There were substantially more exhibitors and visitors this year than last year. Most exhibitors share the same view; it has been four challenging quarters and markets in general will continue to be volatile for a while longer, but the bike market will return to growth going forward and everybody is preparing for this upturn in the market. We also find it reassuring that three long-term trends from the market are evident; cycling will continue, the use of bicycle helmet increases daily and the interest for better helmet solutions has an impact on what consumers are looking for.
 
Within the sub-category snow we continued to supply many Mips solutions after a strong winter season, especially in the North American market. We will also deliver a lot of products within snow next quarter as not all of the helmets have yet been manufactured for the upcoming season.
 
Helmet category Motorcycle – soft quarter but our view of the opportunities has not changed
We saw a soft quarter within Motorcycle with a decrease compared to previous years due to a changed purchasing pattern among our most important customers.
 
We are obviously not satisfied that we have not shown growth in the Motorcycle category during the first half-year. The major reason is that the shift to the sector’s new ECE 22.06 standard has taken many manufacturers longer to implement than we had anticipated, but also that they chose to postpone orders to us for the coming season. The changed purchasing pattern does not mean lost sales but that orders are placed in the coming quarters instead of this quarter.
 
We have a strong customer platform within Motorcycle, with many recent customers wins and new models equipped with Mips solutions that will be able to deliver strong future growth and deliver on our long-term ambition. For this reason, we have great confidence in the Motorcycle category going forward.
 
Helmet category Safety – continued strong development in line with our ambitious plans
We continued to see good progress within the category Safety both in terms of new customers and actual increase in sales compared to the same period last year.
 
We participated in ASSP this quarter, a large construction industry fair for the North American market. The fair confirmed once again that we have started to create a strong position on the North American market, and we received great interest from both existing and potential customers. On the European market we started to establish ourselves through several product listings at major distributors during the quarter. This will lead to future increased volumes in this region too. I am happy with the progress we have made so far this year and that we are sticking to the ambitious plan we have set within Safety.
 
Challenging times but our outlook for the future remains positive
The first six months of the year have been challenging, and as we predicted we have seen a decrease in sales. We are nevertheless confident that nothing has substantially changed from a long-term perspective.
 
We are convinced that we can continue to grow our share on a growing market. For that reason, we are still investing in our strategic growth initiatives. We have continued to implement record-high levels of new customer projects, and we look forward to launching many new helmet models in the coming years.
 
Despite being challenged by external factors to a degree we have not seen in many years, I am convinced that we have the right strategy and organisation to drive profitable growth going forward. This means that our plan remains. Together with the team at Mips, I look forward to continuing to deliver towards our long-term goals for 2027.
 
Stockholm, July 2023
 
Max Strandwitz
President and CEO