Turns out, a broader report contained a lot of good information on this.
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Monitoring this company is quite a bit of detective work - unfortunately 
Well, a change or observation has occurred in the companyâs international sales: alongside traditional storage boxes, new recycling or sorting boxes have appeared in at least one Castorama store 
Orthexâs concepts also appeal to customers, based on the comment.
Translations from LinkedIn, as I donât speak French myself. So, take those with a slight reservation 
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We expect cautious revenue growth despite weak sales development from Nordic retailers and lost distribution channels in growth markets.
We expect the company this year to achieve a more moderate 3% revenue growth, slightly below the targeted 5% growth, while our EBIT margin forecast of 11.2% clearly falls short of the companyâs ambitious adjusted EBITA target of over 18%. We will go through the interim report on Thursday in the earnings live stream starting at 8:55 AM.
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Consumer gloom affected sales and profitability
This release is a summary of Orthex Corporationâs interim report for January-March 2025. The full report is attached to this release in PDF format and is also available on Orthexâs website at Orthex sijoittajille - Orthex Group - Yhtiön verkkosivut.
January-March 2025
- Invoiced sales were EUR 21.8 million (22.9)
- Net sales decreased by 4.7% and were EUR 21.0 million (22.0)
- Adjusted EBITDA was EUR 2.9 million (3.8)
- Adjusted EBITA was EUR 1.7 million (2.8) or 8.2% of net sales (12.6)
- Operating profit was EUR 1.7 million (2.8)
- Cash flow from operations was EUR 4.7 million (4.1)
- Net debt / adjusted EBITDA was 1.2 (1.3)
- Earnings per share, undiluted, were EUR 0.07 (0.09)
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Future Outlook
The report does not provide short-term outlooks or updated guidance on future development. The company focuses on strategic growth and strengthening its presence in Europe, but geopolitical and macroeconomic challenges negatively impacted consumer confidence and, consequently, Orthexâs performance. Orthexâs important cash flow improved by 14.6%, which could be a sign of the companyâs ability to invest in future growth.
This quarter didnât go quite as planned.
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@Thomas_Westerholm: Alex has communicated in previous earnings reports that growth in the European market has been slower than anticipated from the companyâs perspective. The company doesnât really disclose or communicate much about its European marketing and growth efforts (just as it doesnât about much else). What are the underlying reasons why Orthexâs sales have been slow in Europe (if we donât consider this Q1)? Is it because there are few sales representatives, are buyers cautious about stocking new products, are the products too expensive compared to European counterparts, or whatâs behind this? One would think that Europe has large retail chains and stores to sell to. The internal market is genuinely huge.
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âOne would think that Europe has large retail chains and stores to sell to.â
Yes, there are chains there, but there is also competition, e.g., big players like Sistema and Rubbermaid, and a large number of smaller manufacturers, as well as, of course, private labels whose share in Europe is often much larger than in Finland. Mergers and acquisitions would certainly be the fastest way to penetrate new markets, but is there enough muscle?
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Alex seemed to state in the earnings info somehow that Europe has its own manufacturers whose products are simply cheaper. Iâll have to listen more carefully when the recording comes out. However, we cannot and should not engage in price competition with these. The only differentiating factors thus remain the raw materials used and/or design. This conquest of Europe seems to turn into a flop, unfortunately.
Addition: Alex goes through the market situation in the strategy section starting around 9:45 and for Europe starting around 10:30. In it, he mentions, among other things, that the market is very competitive and has many cheap products that retailers highlight for cautious consumers
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Rosenlewâs interview:
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Previously, the market price of oil was cited; now, consumer confidence. I would certainly understand appealing to weak consumer confidence if they were selling used cars, kitchen renovations, or even something a bit more significant than plastic containers. Now I donât buy these explanations; instead, it seems to be a more fundamental problem in marketing and product pricing.
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If people moved, renovated, started families, etc., more plastic products would also be consumed. General consumer confidence therefore has a very significant indirect impact on the plastic product markets as well.
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Or then simply the competitive situation is too tight. The companyâs products might have some brand value here in the Nordics, but tell that to a Central European consumer.
If thereâs no room to compete on price in this situation, then the prerequisites for doing business are indeed challenging.
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Between the lines, and quite directly in that interview, it was stated that they havenât reached the target group for whom purchases arenât just about a cheap price. Hunting for the cheapest freezer box is a long way from choosing a 60⏠sorting box. Orthex already has evidence of success with the latter, so why on earth wouldnât they continue to build on that?
However, Orthex has, in my opinion, consistently communicated that the goal is to build a brand, not to compete on the lowest price. International brands have all had the fundamental problem at the beginning that they are not international brands. The road is then inherently rocky and difficult.
Orthex has, however, been consistent and, from the perspective of its product profiles and history, wise to persistently pursue its goals without compromising on technical solutions. In the short term, the numbers could improve by profiling itself as the âbucket-and-binâ provider for the masses with high volumes, but then the companyâs investment story would go to waste.
As the company now continues to push its foot into Europeâs door crack despite bruised toes, itâs good that they are still striving with the brand and values they originally started with. If they were now to grab shelf space with simple plastic containers and cheap bins at any cost, it would be impossible to then start asking for a price premium if Europe finally someday wakes up and people establish homes and families as if this terribly chaotic crisis-ridden twenties had never happened.
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The obstacle to Orthexâs European expansion is the same as for Chinese expansion into Finland. Itâs not worth molding plastic in China into canisters and watering cans and then shipping them here. Freight costs per unit become so high that the products cannot compete on price with products molded locally, even if labor costs in the target country were higher. Orthex therefore succeeds in Finland not only with its quality perception but also because the location of its production facilities is optimal for the Finnish market compared to competitors.
When they go further afield, the only way to success is quality and quality perception. First, an image of high-quality products is built in more expensive product categories, and then they try to leverage this reputation to enter cheaper product segments.
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Orthexâs earnings report was also noted in Helsingin Sanomat, no paywall. The short article was written by Esa Juntunen, alias Omavaraisuushaaste.
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Thomas has prepared a new company report after Q1.
Orthexâs Q1 figures were disappointing, as credit risk management, fewer campaigns compared to the reference period, and the impact of strikes in Finland weighed down revenue and significantly lowered the result compared to the reference period. In our view, the shareâs valuation level is moderate, but with a subdued growth outlook for the current year, the shareâs price drivers are limited for now. We reiterate our Add recommendation but lower our target price to 5.5 euros (previously 6.0 euros).
Quoted from the report:
Balance sheet strengthened again
Despite the weak profitability in Q1, Orthexâs operating cash flow was strong at EUR 4.7 million during the review period, supported by capital released from trade receivables. At the end of the review period, Orthexâs balance sheet position was strong, and the companyâs net debt/adjusted EBITDA ratio was only 1.2x, with a target of below 2.5x. Considering Orthexâs goal to bring production closer to its key customers and the businessâs high return on invested capital, we consider strengthening the balance sheet and increasing financial flexibility justified. A strong balance sheet creates the prerequisites for implementing a reasonably sized corporate acquisition or a larger organic growth investment to bring production capacity closer to strategically key growth markets.
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The conquest of Europe continues, I guess. More or less a nice-to-know thing, this too. Judging by this, Denmark and Copenhagen have been chosen as some kind of base for b2b sales. The chairman of the board probably lives there too. But that probably has nothing to do with this.
Addition: have they woken up in the company after all? 
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It seems one shouldnât throw in the towel. The company is apparently going all out and will be featured twice this summer. Today, Consumer Goods Night starting at 4:00 PM online
Update: thanks @Thomas_Westerholm for the excellently sourced information 
Signed âWaiting for Orthexâs first CMDâ
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Haha 
Thanks also to the viewers for the good audience questions!
Iâve interviewed Alexander so much that coming up with new interesting questions is constantly becoming more challenging for me.
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Apparently, a factory visit for investors was recently organized at the Lohja factory. Thomas, did you have any information about this? Mainly from the perspective of what kind of investors this event was aimed at? I donât immediately recall seeing a general invitation anywhere? Or did I just miss it
Does anyone recognize the people in the picture? They are not familiar to me, at least.
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