Electrolux AB

Good morning and a warm welcome to Electra's fourth quarter 2021 results presentation. With me this morning, I have Therese Fridberg, our CFO, and Sofia Arneas, our Head of Investor Relations. I would like to mention that this session is recorded and will be available on our website as an on-demand version. Let's look at our performance in 2021. I'm proud of our achievements in 2021. We had record sales and earnings, meeting or exceeding all of our financial targets and delivering strong profitable growth. Market demand was strong for the full year. As consumers continue to invest in their homes, demand remains above pre-pandemic levels, even though we saw a normalization in the second part of 2021. Organic sales growth for the year was over 14%. Our attractive product and brand offering continued to deliver an improved mix, and global consumer star ratings increased to 4.65 out of 5 in 2021, driven by well-accepted product innovations. We continue to grow our strategic aftermarket business in absolute numbers. It remained at 7% of group sales for the year, given our significant growth in total net sales. We strengthened the direct-to-consumer platform with opportunities to further interact directly with consumers. We're now active in nearly 40 markets by the end of 2021, and we're scaling up the business in many of those markets. We successfully offset significant cost inflation through strong price execution. Supply chain situation was increasingly challenging during the year. And through hard work, we had to mitigate that impact. It limited our ability to fully meet the high consumer demand, both in terms of volumes and mix. The constraints also generated significant increased costs. In this dynamic environment, we delivered an EBIT excluding non-recurring items of $7.5 billion SEC with a margin of 6%. And we saw EBIT and margin increases across all business areas. in addition to the ordinary dividend of 8 kronor per share, who made an additional cash distribution of 17 kronor per share and repurchased over 4 million shares for 900 million Swedish kronor. The Board proposes the 2022 AGM to resolve on a dividend for 2021 of 920 per share and to resolve on cancellation of all shares of Series B that Electros owns as per December 31st, 2021, and to renew the mandate to acquire own shares. The board intends to thereafter initiate a new share buyback program for approximately 2.5 billion Swedish kronor. Additional details on the intended buyback program will be communicated as and when decided. So, if we then move into the fourth quarter specifically, demand declined in most markets in the fourth quarter compared to a strong development last year, with the normalization still above pre-pandemic levels. Retailers' inventory levels are in general normal, with some imbalances, with the exception of North America, where their levels are assessed to still be low. We had organic sales growth of 4.8%, and compared to the fourth quarter of 2019, it was over 23%. The growth was driven by strong price realization across the business areas, mainly driven by list price increases implemented during the previous quarters. Through price, we managed to offset the significant cost inflation in raw material, as well as in electronic components and logistics. The challenging situation from a supply chain perspective continued in the quarter, impacting volumes and mix, but also resulting in additional costs. In addition to the ongoing cost inflation, which was fully offset by price, we also faced more temporary costs, such as spot buys and more air freight, as well as production inefficiencies due to limited planning visibility. We estimate the impact on production output to be on the same level in the fourth quarter as in the third quarter, while the cost for spot buys and express freight have increased compared to the third quarter. As in the third quarter, particularly our North American business area was affected since the congestion at important U.S. ports amplified the supply constraints. Operating income amounted to $1.6 billion or 4.5% of net sales. Therese will now walk us through the main drivers behind the change in operating income.

Yes, we had a strong contribution from the organic sales growth in the quarter. And as Jonas mentioned, we continued to have very good price execution from list price increases implemented during the year. And the promotional discounts remained at the very low level as it has been for the past year. Our attractive product and brand offering continued to generate a positive mix, despite the limitations from the supply and logistics constraints. and we increased aftermarket sales. Volumes declined following a demand normalization compared to a strong fourth quarter last year. In addition, the global supply and logistic constraints impacted product availability negatively and resulted in difficulties to fully meet underlying market demand. Our investments in consumer experience innovation and marketing increased to support strategic growth initiatives. Cost efficiency was negative. The supply chain constraints resulted in production inefficiencies due to low planning visibility, as well as increased costs for logistics and electronic components, with additional temporary costs for air freight and component spot buys further deteriorating the cost performance, as mentioned before. Price was offsetting the significant headwind from external factors, mainly driven by raw material, as well as cost inflation in electronic components and logistics. and the later cost inflation is included in cost efficiency definition, aligned with our previous methodology. Let's also take a brief look at the EBIT bridge for the full year. We made a record year in terms of both sales and EBIT with a significant organic contribution. We had very strong price development with well-executed list price increases during the year across all business areas, and promotions continued to be on a very low level. Price was offsetting the significant cost inflation in raw material, electronic components, and logistics, as well as currency headwinds. We continued to deliver on mix across business areas, and this was partly through continued growth in aftermarket sales. Volumes increased for the year, which was driven by the significant increase in the first half of the year. In the second half, volumes declined compared to a strong second half in 2020, as demand started to normalize. and in addition, supply chain constraints amplified the decline through impacted product availability. We increased our investments in innovation and marketing, partly in relation to significant reduction last year following the market situation, but partly also to further support strategic growth initiatives. Cost efficiency was negative for the year, as we had accelerating costs related to supply chain constraints, partly mitigated by continuous efficiency gains. And we had significant headwinds from external factors, mainly driven by raw material, but also an unfavorable currency development. Let's take a deeper look at price and mix development, focusing on the fourth quarter. The EBIT margin accretion for the group from price and mix in the quarter was 6.2 percentage points, mainly from a very strong price execution, but also mix developed favorably. And in Europe, we had a positive price development driven by list price increases implemented during the year, including in the fourth quarter. Mix was flat in the quarter compared to a strong development last year, but also negatively impacted by supply chain constraints, especially in laundry. In North America, price continued to develop strongly from list price increases implemented earlier in the year. but also additional increases in the fourth quarter started to have an effect towards the end of the year, and promotional discounts remained at a very low level. Mix was slightly positive despite the supply and logistics constraints, which specifically impacted our premium products produced in Juarez in Mexico. In Latin America, contribution from price was strong, driven by list price increases implemented in previous quarters, Promotional activity increased slightly, driven by the softer consumer demand, and mix was slightly positive despite consumers mixing down in the relatively weak Brazilian market. In Asia-Pacific, Middle East, and Africa, price was favorable, driven by list price increases implemented in previous quarters, and mix continued to improve. Sales from premium cooking products in Australia, a strong performance of our AG brand in China, and successful product launches in Egypt are some of the highlights I would like to mention here. An attractive product and brand offering is essential for our profitable growth, and Jonas will now give you some concrete examples on what we do.

Thank you, Therese. I'd like to really recommend you to read our case in the fourth quarter report regarding the launch of our new electrics range in Australia. where we launched the concept of Swedish thinking better living in 2019. This is a complete new premium range of Electrox products across the home, and we're strongly emphasizing the Swedish heritage and our credibility around sustainability, which we know Australian consumers are responding extremely favorably to. Our Electrox branded sales in Australia have grown CAGR 6% since 2019, and EBIT has grown with a CAGR of 27%. When it comes to recent examples of successful product launches, I'd like to mention our new AEG-branded extractor hob models that we launched in Germany in Q4. These are our first in-house produced induction hobs with integrated extractor fan that allows much more freedom when planning your kitchen while still removing fumes and odors efficiently. They also have flexible cooking zones and offer a connected experience for filter maintenance with notifications and a remote fan control. We previously did not have in-house kitchen fan production, and we added that a few years ago with the acquisition of Best. With this in-house production, we can offer more premium features in this segment, benefiting from innovations for induction hobs. We will also be able to bring a complete range, including different sizes in the coming years, also while reducing costs. Another benefit for kitchen retailers is that it's much easier to install, both compared to our previous models, which were sourced, and with less than half of the installation steps, but also compared to other brands. During the first quarter of 2022, the house will be launched in additional European markets, and an Electrox brand version will be available by Q2. By the end of the year, we also plan to bring it to APAC MIA. So these are some examples of how we drive profitable growth.