The Swedish Polygiene Group reported lower third-quarter sales and profits as distributors tightened order and inventory levels. The company said net sales fell 21.7 percent to 41 million Swedish kronor (€3.75m) in the three months to Sept. 30, mainly attributed to reduced sales at the distributor level. Operating profit fell to SEK 5.1 million (€0.46m) from SEK 15.7 million, giving an operating margin of 12.5 percent from 30 percent last year. Gross margin increased to 65.6 percent from 64.3 percent.
Polygiene also revealed it had increased prices for customers in October as a direct result of increased raw material prices from its suppliers, saying it was “inevitable” to maintain the group’s margin structure.
“Our long-term target of SEK 1 billion [€91.5m] in sales within a five-year period remains even though the prevailing business climate in the short term has challenged us significantly,” said CEO Ulrika Björk. “Global economic conditions have changed drastically in recent months, impacting business in the third quarter. High inflation has created consumer uncertainty and decreased purchasing power, raising inventory levels, and this directly affects new production and pending orders, which in many cases have been revised.” Bjork added that Polygiene was seeing heightened caution among distributors with order intake over the last two quarters “significantly lower” than the previous year.
Inventory value almost doubled to SEK 37.1 million (€3.4m) due to stocking a new warehouse in Sweden due to Brexit so it can supply EU customers and ensure polymer availability.
Polygiene said the sport & outdoor segment reported a seasonal fall in volume, while products in home textiles were also losing ground as demand fell and customer inventory levels increased. However, both the fashion and workwear units showed currency-adjusted growth, while sales in Asia increased significantly, mainly driven by a couple of new customers in China.
“Product Protection also faced significant challenges this quarter, though the end products are not as sensitive to economic conditions as fast-moving consumer goods on the textile side. Here, too, there is some cautiousness from our customers affected by the global economic slowdown,” Bjork said. However, there was a good start to trade in October, “indicating a shift has taken place as we enter the last quarter of 2022”. Polymer supply had now stabilized and the shortages experienced in previous quarters were no longer directly impacting the business, she added.
