LEGO's Czech factory is working harder to keep less

More bricks out of Kladno, less profit per koruna

If a child in Europe unwrapped a LEGO set last Christmas, there is a fair chance the box passed through Kladno, the industrial town west of Prague where the Danish toy maker runs one of its large factories. The Czech company behind it, LEGO Production s.r.o. (an s.r.o. is the Czech limited liability company), had a busy 2025. Its revenue rose 15.2% to CZK 20.4bn, up from CZK 17.7bn a year earlier. The figures are for the company on its own, under Czech accounting rules, in Czech koruna, for the calendar year.

Busy did not mean more profitable. Operating profit, what is left after running the factory and before interest and tax, fell 12.6% to CZK 670m from CZK 766m. The operating margin, the share of each koruna of sales kept as operating profit, slipped from 4.3% to 3.3%.

So the plant got bigger by CZK 2.7bn of revenue and ended up with CZK 96.3m less operating profit. Every extra koruna it earned cost slightly more than a koruna to produce.

Where the margin went, and where it did not

The first suspect in any factory is the machinery. New moulding lines and packing halls bring depreciation, the yearly cost of wearing out equipment, and that can eat a margin before the new capacity earns anything. Here that suspect has an alibi. Depreciation and amortisation was CZK 628m in 2025, against CZK 626m in 2024: practically flat.

The pressure sits higher up the income statement. EBITDA, operating profit with depreciation added back, fell 6.8% to CZK 1.3bn, and the EBITDA margin fell from 7.9% to 6.4%. In plain words, the costs of actually making and packing the product, such as plastic, cardboard, energy, wages and logistics, grew faster than the revenue they produced.

Why would a factory let that happen? A plant like this does not sell bricks in toy shops. Factories inside a multinational group typically sell almost all of their output to the group itself, often at prices set to cover costs plus an agreed mark-up. In that world, revenue follows volume and costs, and the margin is as much a group decision as a local result. A thinner margin can mean costs ran ahead of the agreed prices, a change in the product mix towards work that pays less per koruna, or the start-up costs of more volume through the same halls. The accounts do not break revenue or costs down by product or customer, so which of these applies stays open.

A better bottom line than the factory floor

The turn comes at the bottom of the income statement. Net profit rose 53.1% to CZK 371m, from CZK 242m. The net margin edged up from 1.4% to 1.8%, even as the operating margin fell.

That improvement did not come from making toys. It came from the lines below operating profit: financial items and tax. For a plant that buys and sells in several currencies inside a group, those lines can swing with exchange rates and interest from year to year. I would not read the jump in net profit as a sign the factory got better at its job. The operating line says the opposite.

The balance sheet is calm. Total assets grew to CZK 14.8bn and equity to CZK 6.2bn, which leaves an equity ratio, the share of assets funded by the owner rather than by creditors, of 41.7%, almost unchanged from 41.5%. Equity grew by exactly the year's net profit, CZK 371m, which suggests the profit stayed in the company. The auditor, PricewaterhouseCoopers Audit, signed the statements without reservations.

What the next expansion has to prove

Management says it plans a targeted expansion of capacity in processing and packaging. That is where the story gets interesting. More capacity means more volume, and volume is exactly what 2025 delivered without lifting profit. Expansion also brings new depreciation, the one cost line that stayed still this year. If the new lines arrive while operating costs keep outrunning revenue, the margin has less room to absorb them.

For the families buying the sets, none of this shows on the shelf. The price of a LEGO box is set by the group, far from Kladno. What the numbers do show is plain: the factory's sales rose 15.2% in a year, and the cost of making what it sold rose even faster. Growth in physical goods is not free, even for one of the best-known brands in the toy aisle.

For anyone running a business that makes things, the useful check is the one this plant failed in 2025. Take your revenue growth for the last year and set each major cost line against it: materials, energy, wages, transport. Any line that grew faster than sales is the line that quietly took your margin, and it usually does so in a good year, when nobody is looking.

LEGO's Kladno factory had a year that would look like success on a sales chart. On the operating line it looks like a plant working harder to keep less. The bottom line was rescued by finance, not by the factory floor, and I would watch whether the coming expansion fixes that or simply makes it bigger.