Electrolux AB

Warm welcome, everybody, to the first quarter 2022 electoral results presentation. With me today, I have Therese Friedberg, 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. The beginning of the year has been dominated by the terrible situation in Ukraine. Russia's invasion is a serious violation of international law, and we are very concerned about the suffering it is causing our employees and the people of Ukraine. When the war commenced, we paused our operations in Russia and Ukraine, and after careful assessment in Ukraine, we restarted in the second half of April, with limited sales and production in our factory located in the western part of the country. In Russia and Belarus, we do not have any factories. In 2021, Russia, Belarus and Ukraine represented approximately 2% of total net sales for the group, and as per March 31st, 2022, assets accounted for approximately 1% of total assets. From a group perspective, there are no key direct suppliers located in any of these three countries. Now, let's look at our performance in the first quarter of 2022. Organic sales declined by 3.4%, and the decline in sales was the result of lower volumes, not fully offset by strong price and mix, As expected, the global supply constraints continue to significantly impact our production and sales volumes, particularly of higher feature products. Market demand was down in most regions compared to a strong last year, which benefited from increasing spending on home improvement. Our strong price realisation continued. We've implemented further list price increases in all regions during this quarter, generating a year-over-year impact of over 8%, together with the increases from previous quarters. With this level, we managed to largely offset the significant cost inflation, mainly in raw materials and logistics. Mix was positive across all business areas, and we are now in our most launch-intensive year ever, and I'm very pleased with the strong consumer demand for our new and innovative premium products. In addition to the cost inflation that we largely offset with price, the supply constraints also resulted in substantial costs for express logistics and spot buys. Our North American business area continued to be especially affected since the congestion at the important U.S. ports amplified the constraints. We estimate that the supply situation in the second quarter will be as challenging as the first quarter, with significant risks of disruptions related to the resurgence of the coronavirus in China. We then expect sequential improvements from mid-2022. Operating income amounted to 0.9 billion sec, or 3.1% of net sales. Therese will now walk us through the main drivers behind the changes in operating income.

We had a strong organic contribution to earnings in the quarter. And as Jonas mentioned, we continue to have very good price realization from our list price increases implemented both during this quarter and previous quarters. And in addition, promotional levels remained low. Our attractive product and brand offering generated a positive mix despite limitations from the supply chain constraints. and aftermarket sales decreased slightly in the quarter. Volumes declined following a demand normalization compared to a strong first quarter last year as the seasonal market demand pattern returned across regions to a pre-pandemic situation. In addition, the global supply chain constraints impacted product availability negatively and resulted in difficulties to meet the underlying market demand. Our investments in consumer experience innovation and marketing increased to support strategic growth initiatives and product launches. The cost efficiency was negative. The supply chain constraints resulted in significantly increased costs for mainly logistics, but also for components. This higher cost was both inflation-driven and due to increased use of express freight and spot buys of components. Price largely offset the continued significant cost inflation, mainly in raw material that is included in the external factors and in logistics that is part of the cost efficiency. Let's take a deeper look at price and mix development. The EBIT margin accretion for the group from price and mix in the quarter was 10.4 percentage points, mainly from a very strong price execution, but also mix developed favorably. And in Europe, we had strong price development, mainly driven by list price increases implemented during this first quarter of 2022, but also from previous quarters. And mix increased, mainly driven by built-in products, despite the negative impact from supply chain constraints. In North America, price continued to develop favorably, mainly from list price increases implemented in previous quarters, but also additional increases implemented this year starting to have an effect towards the end of the quarter, and promotional discounts remained at the low level. Strong mixed execution with increased sales of the tall twins and built-in kitchen products being important drivers. Aftermarket sales declined slightly compared to a strong quarter last year. In Latin America, contribution from price was strong, driven both by list price increases implemented in previous quarters and during this quarter, and promotional activity also here continued to be at low levels. Mix was positive despite the softer market in Brazil and Chile and negative impact from supply constraints. In Asia-Pacific, Middle East and Africa, list price increases implemented in this quarter was the main driver for the higher price and added to the increases implemented in previous quarters. Mix increased slightly, however, supply constraints impacted our ability to fully drive mix. An attractive product and brand offering is essential for our profitable growth, and Jonas will now give you some concrete examples of what we do.

Yes, one aspect I'd like to bring up is how the investments we've done in our new fridge and freezer factory in Anderson in the U.S. really has enabled us to take a step up in competitiveness in the market with a sharpened offering. The new products have been very well received. As an example, the highest volume top freezer has a consumer star rating of 4.4 out of 5 and is among the most sold in that category at major US retail chains, valued particularly for its design and features. By using modularized product architectures, we can bring innovation to the market at a much faster pace and leverage our global scale. Together with increased automation, it also gives increased flexibility a lower cost for raw material and efficiency gains. Finally, I would also like to lift the substantial environmental gains, both in our own production and throughout the entire lifecycle of the product. The investment allows us to take yet another step towards the target of being climate neutral across the whole value chain by 2050. And if we move to another region, I'd like to highlight the largest product launch ever in Latin America, to illustrate the first quarter of our most launch-intensive year ever. The launch included 16 new products across our innovation areas, taste, care, and well-being in our main markets, Brazil, Chile, and Argentina, and also in the NDNs. During the coming two quarters, over 100 additional products will be launched. The products cover both the premium segment under the Electrox brand and the mass segment under the Continental brand. We introduced these new products at a launch event in March in Brazil. The event was very well attended by more than 70 retailers, and we also got great feedback on our innovative solutions. I would especially like to highlight our new product portfolio for the Continental brand, which was acquired in Brazil five years ago to increase our competitiveness in the mass segment and allow us to keep the Electrox brand positioned at higher price points. In the current market environment, this dual brand positioning is even more important for continued profitable growth in Latin America. Through the new products, we bring relevant consumer innovation to the market through 10 pre-sending cooker models and 10 built-in oven models. They offer easier interaction, control, and cleaning benefits, all locally produced in our factory in San Carlos, with new product architecture as part of our investment programs.