Electrolux AB

Good morning. My name is Jonas Samuelsson and a warm welcome to Electrolux's first quarter 2023 results presentation. With me today, as usual, I have our CFO, Therese Fridberg, and our Head of Investor Relations, Sophie Arnius. And we also have with us today Anna Olsson-Leon, our Chief Commercial Officer, who many of you have met both in this role and previously as the CFO of Electrolux. So welcome, Anna. She will be with us in these calls going forward. Before we start, I'd like to mention that this session is recorded and will be available on our website as an on-demand version. So let's look at our performance in the first quarter of 2023. We had organic sales growth in the quarter, partly as a consequence of strong price carryover, despite continued soft demand driven by inflation and higher interest rates in key markets. In North America and Latin America, we increased volumes and gained market shares, supported by new competitive product ranges and improved product availability. For the whole group, volumes, however, declined. We also benefited from solid aftermarket sales growth, taking us one step closer to our target of 10% of total group sales in 2025. EBIT improved sequentially, although still declining compared to last year as a consequence of lower volumes and remaining high cost levels in products sold from inventory. Although the business area in North America still reported a loss, earnings improved significantly compared to last quarter, showing that our turnaround activities are gaining traction. Our number one priority this year, the implementation of the group-wide cost reduction and North America turnaround program, is progressing according to plan, contributing positively to earnings in the quarter. This was also one of our focus areas in our capital market update in March, which I encourage you to check out if you have not yet had the opportunity. As mentioned, price remained solid and largely offset the negative impact from products sold this quarter that were produced and transported at last year's higher cost levels, as well as additional headwinds from external factors. Product mix was flat as the negative market pressure combined with the strong mixed execution last year offset the favorable impact of new product offerings. EVIT included a non-recurring item of 561 million SEK related to the closure of the Niri Jasa factory in Hungary expected in 2024. Therese will now walk us through the main drivers behind the change in operating income compared to last year.

Yes, we had a strong organic contribution to earnings in the quarter, driven by a solid price development based on price realization, mainly from increases during last year, while promotional activity was back on normal levels. Mix was flat in the quarter while volumes were down as a result of the large demand drop in our main markets. Our investments in consumer experience, innovation, and marketing decreased as a result of implementation of the cost reduction program. And we started seeing effects of the cost reduction program also through positive cost efficiency, despite the negative impact from the products sold in this quarter were produced and transported at last year's higher cost levels. And Jonas will come back to progress of the different components of the program in a couple of slides. Price was almost offsetting the negative external factors, which was also exacerbated by high-cost inventory from last year consumed in this quarter. External factors here, beside the negative raw material and currency, also includes headwinds related to labor inflation and energy cost increases. And now let's take a deeper look at our price and mix development. The EBIT margin accretion for the group from price and mix was 6.1 percentage points. This was mainly a result of strong price year-over-year, while mix was essentially flat in the quarter, as we do see some pressure on mix from polarization when consumers are mixing down from low-end segments to even lower price points. If we look at the business areas, in Europe we had a strong price performance on the back of increases done during 2022 and some additional increases implemented in the beginning of the year to offset the inflation. The focus on our premium brands AEG and Electrolux is delivering positive mix also this quarter. In North America, the promotional activity is back to normal levels, hence this is offsetting the positive effects from the price increases made during last year. Mix was negative comparing to a very strong first quarter last year. In Latin America, the price development was positive, mainly related to price increases done during 2022 and continuous increases in Argentina. In Brazil, we see that the promotional activity is back on a normal level. Mix is positive based on successful product launches and growth in aftermarket. Also in Asia-Pacific and Middle East and Africa, we had a positive price year-over-year related to increases during 2022 and additional increases mainly in Egypt to offset the inflationary pressure. Mix was slightly negative due to consumers mixing that. As we previously communicated, the Group-wide Cost Reduction Program and North America Turnaround Program is expected to have a year-over-year earnings contribution of 4-5 billion SEK in 2023 from cost efficiency and innovation marketing combined. And Jonas will give an update on the progress.

Thank you, Therese. We have already presented our Group-wide Cost Reduction Program extensively, so I will mainly provide some highlights on the progress. Overall, we're fully aligned to our plan to achieve 4 to 5 billion SEC of net savings to the P&L in 2023 and achieving a savings run rate of 7 billion SEC in 2024. Some of the initiatives, such as reducing premium freight and spot buys and reducing sourcing and logistics costs, are almost fully executed, with the P&L benefits occurring once older inventory produced at higher cost is consumed. We also have very good progress on stabilizing manufacturing output and improving productivity, mainly in North America, leading to reduced headcounts, with blue-collar reductions of 58% of the targeted reduction achieved in the quarter. Also, in other areas, we are progressing to plan, with 70% of the white-collar reductions achieved. Switching topics, sustainability is at the core of our strategy and a key element for our innovation. This is as sustainability is becoming increasingly a premium qualifier for our consumers. And through strong, consistent work, we have already in 2022, as one of the first companies globally, achieved ambitious 2025 science-based sustainability targets. And this is not just the right thing to do, but it also drives profitability, as our most sustainable products are also our most profitable. With the 24% of sales representing our most sustainable products, contributing 39% of our gross profit in 2022. And we know from research that 93% of consumers want to live more sustainably, and now we can provide consumers with a strong return on investment on their sustainable choices through lower energy bills. We're now in the process of setting new and challenging science-based climate targets for 2030. Let's have a look at our cash flow and liquidity today.