AB Electrolux (publ)

Good morning, and a warm welcome to the third quarter 2024 results presentation. With me today, I have Therese Ryberg, our CFO, and Oskar Skjerngren from Investor Relations. Before I continue, I'd like to mention that this session is recorded and will be available on our website as an on-demand version. Organic sales increased by 6.2%, driven by higher volumes in all the group's business areas. Organic growth was strong in Latin America, especially in Brazil, which continues on the trajectory started in the fourth quarter of 2023. In Europe, market demand declined slightly, with continued weakness in the important built-in kitchen category. Despite challenging market conditions, volume and mix were favorable, supported by the attractive product offer in the mass premium segment. Price was negative, partly as a consequence of weak consumer demand in Europe, however, less negative than the market as a whole. In the US, promotional activity increased year over year, although continued to stabilize consequentially. Aftermarket sales decreased slightly year over year, mainly as a consequence of weather impacts on shipments in the US. Excluding non-recurring items, operating income amounted to $717 million sec, up from $314 last year, corresponding to a margin of 2.2%. Operating income improved in Europe, Asia, to 610 million SEC from 434. In Latin America, operating margin increased to 6.5% from 5.6% prior year. And the gradual improvement in North America continued with a reduction in operating losses to 249 million SEC from 440 million in the prior year. Cost reduction activities contributed to a positive earnings effect from cost efficiency of approximately 1.2 billion SEC year over year. although negatively impacted by higher logistics costs. A negative effect on earnings from lower price year over year was partly offset by higher volumes. Investments increased in innovation marketing to support the group's strong product range. Lower raw material costs partly offset negative currency effects and labor cost inflation. Our strategic divestment initiatives on non-core assets are progressing at different speeds. with the pace being adapted to the geopolitical situation and market environment. We have, during the preparation phase, assessed that the value of the Zanussi brand would be better monetized as part of the group's licensing business, and is therefore presently not being divested. The total potential divestment value is consequently currently expected to be below the previously communicated 10 billion SEK. Closing of the divestment of the water heater business in South Africa is anticipated during the fourth quarter of 2024. Therese will now walk us through the results for the quarter.

Despite having an organic sales growth in the quarter, we had a negative organic contribution to earnings. This was driven by a negative effect from price and mix combined of 2.7 percentage points in the quarter, with negative price mainly in Europe and in North America. We have seen the price levels in North America stabilize throughout the year and also in the third quarter, while there has been a higher promotional activity in Europe with a larger share of the market volume sold as replacement sales. Sales mix continued to be positive overall for the group, based on a strong product portfolio and high consumer star ratings. This was also supported by an increase in marketing investments in the quarter. Volume grew in the quarter in all business areas, but mainly on the back of strong growth in Latin America. Cost efficiency was positive by 1.2 billion Swedish krona. The cost reduction program is on track, and Jonas will go into some more details on the next page. External factors turned negative in the third quarter as currency headwinds increased, which was more than offsetting positive raw materials. As last quarter external factors also including labor inflation as well as the effects related to Argentina and Egypt. And Jonas will now give an update on the progress of the cost reduction.

Cost reduction activities are developing more or less according to plan despite the negative impact from logistics. We're continuing to reduce our headcount and are now at 40,000 employees globally compared to 53,000 in second quarter of 2022 when cost efficiency measures were first initiated. The Springfield ramp-up is continuing, and we are now in the beginning of the fourth quarter producing according to plan, although still working to improve productivity further. Year-to-date, cost efficiencies amount to 2 billion SEK, and we are on track to reach around 4 billion SEK for the full year. The new organization is fully implemented, and staff-related savings are developing as planned. Cost reduction activities are now and going forward mainly focused on product costs through low-cost country sourcing, value engineering, and supply-based consolidation in all of our factories globally. As we look forward, we plan to continue to drive product cost reduction activity at similar levels as in 2023 and 2024 in the coming years through further acceleration of these activities. Let's have a look at our cash flow and liquidity today.

Cash flow after investments in the quarter was positive 1.1 billion SEK in line with last year. We are now back to cash flow reflecting what could be considered to be a normal seasonal cash flow. And operating working capital by the end of the third quarter is at 5.8% of annualized sales compared to 7.4% last year. And looking at our liquidity and maturity profile. From a balance sheet perspective, we have solid liquidity of 33.9 billion Swedish krona, including revolving credit facilities as of the end of September. In the third quarter, a sustainability-linked loan of 100 million US dollars was issued, and we also prolonged one of our revolving credit facilities of 3 billion Swedish krona by one additional year, so now maturing in 2026 instead of 2025. And we have a well-balanced maturity profile, and we have no financial governance. And the focus to maintain a solid investment rate remains. Jonas will now go into the business area's performance in Q3, starting with Europe, Asia-Pacific, Middle East, and Africa.

The business area reported an organic sales increase of 2.9%. Despite challenging market conditions, volumes increased and mix improved. mainly through the clear focus on premium brands and higher-value product categories. The subdued market demand continued to negatively affect, especially built-in kitchen products, a key segment to the business area. Together with predominantly replacement-driven demand, this contributed to increased promotions and negative price year-over-year, however, less negative than the market as a whole. Operating income included a negative non-recurring item of 368 million SEK, related to the divestment of the water heater business in South Africa. Operating income excluding non-recurring items increased significantly year-over-year to 610 million SEK. Volume growth and favorable mix supported by the attractive product offering partly offset the effect of negative price. The impact from cost efficiency was positive and lower raw material and energy costs more than offset labor cost inflation. Let's have a look at the European market. Market demand in Europe declined slightly in the quarter and was down 1% year over year, with a decline of 1% in Western Europe and an increase of 1% in Eastern Europe. Compared to the third quarter of 2019, demand in Europe decreased by about 13%, a similar decline as seen in recent quarters compared to 2019. In Europe, consumer confidence has improved slightly, but remained below its long-time average still negatively impacted by the cumulative effects of inflationary pressure, high interest rates, and geopolitical tensions. Subdued purchasing power continued to result in consumers shifting to lower price points and postponing purchases in discretionary categories. Weak residential construction and remodeling activity continued to have a significant negative impact on demand within the European built-in kitchen category. In Asia Pacific, consumer demand is estimated to have increased year over year. Let's continue with our business area in North America. The business area reported an organic sales decline of 0.3% with a negative impact from price due to lower market price levels and increased promotions year over year. Slightly higher volumes contributed positively to sales supported by the attractive product offering and the focus on growth in high value categories. With industry leading consumer star ratings, All key categories contributed to an overall rating of 4.6 on a five-point scale. The business area reported an operating loss of 249 million SEC, an improvement year-over-year, as well as sequentially. The loss was primarily due to price pressure year-over-year. Sequentially, market price levels were largely unchanged at the lower levels established in the latter part of 2023. The lower market price levels have been enabled by input cost discrepancies between North America and certain parts of Asia, particularly in the refrigeration category. Reduced aftermarket product availability due to hurricane-related disruptions had a negative effect on earnings late in the quarter. Investments in marketing increased to support recent launches. Cost savings impacted earnings positively, although benefits from cost efficiency were somewhat limited by headwinds from increased logistics costs. While the ramp-up of the new cooking factory in Springfield resulted in some production inefficiencies, productivity is gradually improving. Production output and efficiency is expected to be normalized by the end of 2024. Lower raw material costs partly offset the negative effect from labor cost inflation.

Now we'll take a look at the US market.

Market demand for core appliances in the US was flat in terms of units for the first nine months of the year, a relatively stable development overall, but with variations between quarters. In the third quarter, market demand increased by 5%. The cumulative effect of high inflationary pressure and high interest rates continued to negatively impact consumer sentiment, with demand remaining resilient, but with consumer shifting to lower price points. Housing construction-driven demand remained at low level.

Let's move on to Latin America.

During the quarter, consumer demand for core appliances is estimated to have increased in the region, driven by Brazil, where growth rates started to accelerate in the fourth quarter of 2023. Higher consumer confidence and better economic conditions continue to support growth in demand. In Argentina, consumer demand started to recover compared to previous quarters, with an estimated slight increase in the third quarter. However, still a decline year to date. In Chile, consumer demand increased. The business area reported an organic sales increase of 25.8%, mainly driven by higher volumes in Brazil. Price was positive year over year and mainly driven by price increases in Argentina. Mix was essentially flat. Aftermarket sales continued to develop strongly. Operating income significantly increased year over year, mainly driven by the high organic sales growth. Cost efficiency contributed positively to earnings. Currency effects had a negative impact on earnings, with a material adverse impact from the weakening of the Brazilian real, partly mitigated by lower raw material costs. Investments increased in brand building activities and consumer direct capabilities.

And now, let's go over to our market outlook for 2024.

In the third quarter, housing construction and kitchen remodeling, in particular in Europe, remained at very subdued levels, while replacement demand continued to be relatively stable, with high promotional intensity. Demand in North America has been stable year to date, supported by the aggressive pricing environment, despite the weak housing markets. Although somewhat later than anticipated, interest rates have started to come down, and disposable incomes are expected to improve further. Consumer confidence in Europe has improved throughout 2024, but remains below its long-term average. Lower interest rates are positive for remodeling and new construction, which are key drivers for applying demand in mature markets like Europe and North America. However, there's always a lag before this shows in demand. Having said this, we're well positioned for a sustained recovery in construction and housing transactions in both Europe and in North America. In Latin America, the strength of the Brazilian market, where growth rates started to accelerate in the fourth quarter of 2023, has continued during the third quarter. Consumer demand in most other markets in Latin America improved in the quarter. On the back of this, we maintain our previously communicated regional market outlook. Market demand for appliances in North America in 2024 full year compared to 2023 is expected to be relatively neutral. For Latin America, we have a positive outlook driven by the strength in the Brazilian market. For Europe and Asia-Pacific, the outlook remains negative as a consequence of the weak markets in Europe year-to-date. Let's look at our business outlook. We've made some minor adjustments to the business outlook for full year 2024, provided in the second quarter 2024 interim report. Guidance on organic contribution from volume, price, and mix combined for the group is unchanged, and it's expected to be negative in 2024, full year driven by negative price. As expected, price was negative for the first nine months of 2024, with price pressure in North America and high promotional activity in Europe. As previously communicated, we expect price to be negative full year 2024, also impacting the fourth quarter negatively. The promotional intensity in North America has stabilized sequentially year to date, and in Latin America, price was positive in the third quarter as a result of pricing actions to compensate for currency and wins. In Europe, we expect the replacement driven promotional intensity to continue. For the full year, the negative price is anticipated to be partially offset by growth in our focus categories such as premium laundry and kitchen products under our main brands, Electrox, AEG and Frigidaire. The recent investments in new product architectures provide us with a great platform to drive growth in these focus categories going forward, even though the challenging macro environment remains a limiting factor. Our new products are very well received by consumers, and we have a favorable mix in the first nine months of 2024, even though disposable income has been under pressure. We anticipate to continue delivering a positive mix during the remainder of the year, and to accelerate this further, as consumer sentiment recovers and new housing and renovations take a larger share of sales. With spec external factors to be relatively neutral for the full year 2024, a change from positive in previous guidance with a negative contribution to earnings in the fourth quarter 2024. As communicated previously, headwinds from currencies have gradually increased throughout the year driven by Latin America. Although the expected positive impact from raw materials remains relatively unchanged, We expect this to be offset mainly by currency headwinds for the full year 2024. We started to see a more material reduction of material costs during the fourth quarter of 2023. And consequently, we have lower real material costs in the comparison base for the fourth quarter of 2024. It's important to emphasize that the geopolitical context gives rise to uncertainty on the impact of the current We continue to execute well on the cost reduction activities and have delivered cost savings of 1.2 billion SEC in the third quarter and 2 billion SEC in the first nine months. We reiterate our target to reach cost savings of approximately 4 billion SEC in the full year 2024, excluding investments in innovation and marketing. Investments to strengthen our competitiveness through innovation, digitalization, automation, and modularization continue in 2024. and we estimate total capital expenditure to be around 5 billion SEK, a slight reduction versus previous guidance of 5 to 6 billion SEK. To sum up the quarter and the strategic drivers that we have delivered on, we saw volume growth in very challenging markets, and this indicates a strong position and product offer ahead of a coming recovery in housing in Europe and North America. We saw improvements in all business areas, with significantly increased EBIT excluding non-recurring items in Euro APAC. We had good traction on our products, and we saw a launch of a new premium kitchen range from AEG, which has been extremely well received. Our cost reduction efforts are yielding increasing benefits across all business areas. And with that, we'll go to Q&A.

Thank you, Jonas, and thank you, Therese. We'll now start the Q&A session. As usual, please limit yourself to one question, and if you have additional questions, please dial back into the Q&A queue. Sharon, can you please facilitate the Q&A session?

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will now go to your first question. One moment, please. And your first question comes from Yuma Samlin from Bank of America. Please go ahead.

Hi, good morning, everyone. Thank you so much for taking my question. So my first question is on your planned savings. So you have guidance of $4 billion for the year, which would imply, I guess, a higher saving in Q4 to about $2 billion. So can you give us a bit more color on the saving plans and how do you plan to achieve that? And how should we think about your savings into 2025 as well? Thank you.

Thanks for the question. It's really a question of kind of accelerating the pace of cost reductions, both from the impacts of headcount reductions, which has been kind of building gradually over the course of the year, and also the product cost out initiatives that we're driving that I mentioned, including value engineering, local country sourcing, and so on. So that takes bit of time to fall through to the bottom line, let's say, in the P&L. And so we've seen that gathering pace throughout the year, and we expect that to have a favorable impact also in the fourth quarter. And that's why we have a high confidence that we will be around the $4 billion for the full year. And then as we go forward into 2025, obviously, these activities, particularly on product cost, as I mentioned, remains a very, very strong focus, not just for 2025, but for coming years. We've talked about this cost discrepancy that has built up between, say, North America and Europe on the one hand, and Asia on the other. And that is driven by just lower raw material costs, energy costs, and so on in Asia. As a consequence, we're increasing our sourcing of components and materials from that region. So we have significant additional cost savings opportunities going forward. However, it takes a little bit of time to translate that change sourcing footprint into our P&L. So we see strong opportunities also going forward.

Thank you very much. Just to follow up on that. So I remember you said that you had around 20% sourcing from Asia previously. Do you have any target on how much sourcing do you plan to have from Asia going forward?

No, we don't. Even though there's significant opportunities based on the current cost discrepancies, as I mentioned. But of course, we also have to take into account geopolitical possibilities of trade tariffs and so on. So we're we're modulating exactly how and where we source based, of course, on the external environment. So as I mentioned also in my comments, there is an unusually high level of uncertainty around trade policy, especially relating to North America, which has potential positive and negative impacts depending on how it's implemented. And that has an impact on where we source from as well.

Thank you very much.

Thank you. Your next question comes from the line of Gustav Hargis from SEB. Please go ahead.

Thanks for taking my question. I have a question on the competitive environment in the U.S. from Asia that you speak of in the report. Can you get some more clarity on your reference that refrigerators are particularly tough, but the Is this more towards the low end of the market still, or do you feel that the competition is also quite well spread in the upper parts of the Frigidae Gallery and so forth? And do you see any trend? You say that promotional activity is flattish, but do you see any pressure down or that prices are actually coming up into Q4?

Yeah, no, I mean, as we indicated, the promotional intensity has been relatively stable sequentially over the course of the year and at the lower levels that really happened towards really the end of last year and again particularly impacting refrigeration as you mentioned. So what we see there is obviously refrigeration products are very global categories let's say and with very significant part of the world's refrigeration manufacturing happening in Asia, that category is especially taking advantage of the low cost that we see in Asia. And those lower costs are being exported really around the world and particularly to, in our case, then impacting our North America business through a lower price level in the market. I would say that impact has already happened. And that's why we've seen that promotional environment that we've seen during 2024. We're not at this point seeing any significant changes to that behavior. When it comes to our higher price point on categories, we are gaining share in those, and we have a really strong offering. So I think that's really combined with sourcing more components out of Asia, unless there's significant trade policy action, and focusing on the on the more premium categories is really the way forward here in combination with continuous strong focus on productivity and so on.

Thank you.

Thank you. Your next question comes from the line of Bjorn Ennesen from Danske Bank. Please go ahead.

Yes. Hello. Maybe you can help me a little bit. Looking at your savings program, you have your target of $4 billion and that's a quite strong incremental development from Q3 going into Q4. Is it possible to give some indication? I mean, you're stressing the FX situation in Q4. That is a negative but looking at the volume price mix etc is that do you see that this going in stabilizing or is that going in a very different direction from what we have seen so far? Thank you.

So obviously as we talked about starting with the external factors Raw material is still going to be favorable for the year, and that's not really changing from prior guidance. However, the pacing over the course of the year means that as raw material costs were lower in the base of the fourth quarter of 23, the year-over-year impact is lower in the fourth quarter. And then on top of that, we have this negative currency impact mainly from Latin America. So that's more of a Brazil or Latin America. factor. In terms of the volume outlook, we have the guidance that North America is neutral for the year. It's neutral year-to-date, so we expect that more or less to continue on a similar pace. If you look at Europe, we've seen a gradual improvement in the year-over-year comparison, so I think there's good reason to believe that that gradual improvement will continue, even though the year as a whole will still be negative as a consequence of the week's start to the year. And then in Latin America, we see strong continued growth, even though we saw that growth starting really in the fourth quarter of last year. So from a year-over-year perspective, the pace of is relatively speaking impacted from that. Mix, we are continuing to sell more of our higher priced categories, and we saw a little bit less of a fall through on mix on the quarterly result in Q3, mainly driven by softness in aftermarket sales in North America, particularly where our main parts distribution warehouse was in a zone impacted by the hurricane, which really impacted our ability to shift towards the end of the quarter. That is likely to be recovered in the fourth quarter as the operation itself was not damaged by the hurricane. It was just shut down for a week or so. So I think that's about the guidance that I can give you based on your question there.

I think it was good, very good. So basically, what you have been talking about all year is quite material sequential improvement throughout the year, and that goes, as I read it, also into Q4.

Oh, yeah, specifically on the material cost, yeah, or cost efficiency, exactly. You know, the reality is that we have sort of one cost improvement program two years ago that had its impact. Now we started a year ago a second one. Of course, it takes time before those initiatives hit the P&L, partially because it takes time for people to access and partially because, of course, cost reduction in product takes time to work its way through inventory and so on before it hits the P&L. So we have pretty good visibility on the guidance that we're giving here for the year.

Perfect. Thank you.

Thank you. Your next question comes from the line of James Moore, Redburn Atlantic. Please go ahead.

Morning, everybody. Morning, Jonas. I've got a couple, if I could. One was on external factors and pricing. I wondered if you could I guess you won't want to put a number on it at this stage, but given current spot prices and exchange rates, how we should think about material costs and currency and price in 25. And the other one, if I could tag it on was on trade policy, given the election coming up in the instance that Trump is the next president. I wondered if you could help us think about your us revenue and how much is made up of stuff coming out of Mexico. versus Asia in terms of source, just to remind us of the exposures.

So obviously on 2025, as you know, we usually give that guidance in the Q4 report, and I think we'll stick to that. Of course, you can make extrapolations on current spot prices, but that's not usually how it works, right? And, you know, depending on contract structures and so on, so I don't want to preempt that. On the trade policy, it's of course, as I said, very, very difficult to predict, you know, partly because if new tariffs are implemented, it matters a lot how they are implemented and on what goods and on what sources. So we really don't have very good visibility there. It could be favorable for operations, could also in certain instances be unfavorable to our operations in North America, depending on how they're implemented. So on the sourcing, we haven't broken up exactly what we source out of Mexico versus the US. We have two factories in Mexico in food preservation and in fabric care. We also have certain component suppliers there, although not a huge amount. And then we source, and we have said this before, approximately 20 percent of our sourcing out of Asia into the US. Certainly both risks and opportunities, but more than anything, uncertainty around the trade policy.

Thanks very much.

Thank you. We will now take the next question. And your next question comes from the line of Timothy Lee from Barclays. Please go ahead.

Hi, can you hear me?

We can hear you, but barely.

Hi, is this better now? Okay, cool. Yeah, thanks for taking my question. I would like to ask a bit about Latin America. So you also mentioned that, you know, growth will continue, but probably, you know, the momentum or the comps will become a little bit more difficult in the fourth quarter. So I'm trying to see if you're seeing the overall market developments in the Latin How do you see the over demand going forward? And in particular, if we see some more competition probably coming from the other players like the Chinese players? uh gaining uh exposure in the region including new plans from the chinese players how do you see the overall uh condition like and also international margin we saw that in latin america uh ebit margin in the third quarter uh it came down a bit uh from the previous quarter uh so apart from the ethics uh impact uh do you see other factors that will impact the margin in the region potentially. Thank you.

Thank you. I mean, we have a very strong position in the region, particularly in Brazil, of course, which is by far the largest share of our total sales in Latin America. And if we look at macro developments in Latin America, or particularly in Brazil, they remain quite favorable. So we have a positive outlook on consumer sentiment and demand in Brazil. We see growth in Chile and also recovery in Argentina. So the overall context is quite favorable, remains quite favorable. When it comes to the competitive strength, we've broadened our offering and premiumized our offering over the last several years. very strong position now to face any competition in the region. I'm not concerned about our competitive position in Latin America. And then on the margin, on the EBIT margin in the quarter, yeah, you're right in looking at the exchange rate. The immediate impact of the exchange, the weakening of the Brazilian REI in particular, had an effect in the quarter. We are raising prices.

We have raised prices to compensate for that going forward. All right. Thank you very much. Thank you.

Your next question comes from the line from Mads Lindegaard-Rosendahl from Danske Bank. Please go ahead.

Good morning. Thank you for taking my question. Can you hear me? Good morning. Yeah. So my question pertains to your credit rating. Today you announced that you will not be selling Sanusi. I think the rating agencies have modeled in that you will do 10 billion in investments. So how do you intend to make up for this gap and what other things can you do to preserve your credit rating and also just give some thoughts on how important your credit rating is to you and how far we need to go to preserve it.

Right. So as Therese mentioned, we don't have any covenants or any other restrictions that are related to credit ratings in our debt portfolio. So in that sense, it has limited immediate impact what our credit rating is. Of course, we want to maintain a solid investment grade rating. And that's our policy, and we will continue to work towards that. The investment program, as we discussed, has more to do with focusing on our core strategic priorities. And that gave us an opportunity as we were exiting effectively the Zanussi brand in Europe to look at monetizing that brand in a different way. So what we've looked at is assessing what would an outright sale mean versus adding the Senussi brand to our licensing portfolio. We have a fairly broad portfolio of brands that we are no longer using for appliances that we license out. And given the geopolitical and macro context, we feel that now is not the right time to divest it. It's better to monetize through licensing. And then we'll see later on if... if the time is more appropriate to monetize the brand through a sale. So that's still on the table. When it comes to the other divestitures, they're progressing well. On the rating agency side, I obviously will not do their job for them, but it's a very all-encompassing analysis that they do, looking at the balance sheet, looking at the earnings and cash flow. And as you know, we have established a fairly solid cash flow performance this year. Working capital is down significantly, two percentage points year over year. And we're seeing significant sequential earnings power improvement, particularly in Latin America and Europe. We're now, given the weak context in Europe, I would say in a strong position. And we're improving significantly. our earnings power in North America, even though it's still not where we want it to be, of course. So when you put all that together, I would say that we have a strong position to defend our investment grade rating. And then, of course, I won't speculate specifically in what S&P would do, but that's our position.

Okay, thank you.

Thank you. Your next question comes from the line of Martin Wilkie from Citi. Please go ahead.

Yeah, thank you. Good morning. It's Martin from Citi. The question I had was on promotional activity. In the past, it was often very much focused on the fourth quarter. But I think that over time, the promotional activity has been spread around a bit more. So it's no longer just simply Black Friday and Cyber Monday and these kind of things. when do you begin to get a sense of how promotion activity is going in the fourth quarter? And is it something that we think this is going to be a sort of typical year for Q4 or any other effects we should think about in terms of how we might see that impacting pricing in the fourth quarter? Thank you.

Yeah, I mean, at this point, we don't really have any indication of any unusual activity on Black Friday promotion. So, yeah, no... No indications of that. So, you know, you're right. The promotional intensity has increased throughout the course of the year. I think it's driven by a couple of factors. One is that the overall demand is very replacement driven, both in Europe and in North America. And replacement sales are very often made on promotion. So as an average sort of share of our total sales, promotional sales, has become a higher share. That impacts the total. Then we have this situation that we've highlighted where there's a cost discrepancy between Asia and Europe and North America, which has allowed Asian competition to be more promotional. Of course, the other players are responding to that. The combination of those two factors has led to a fairly promotional environment. We're not seeing that change sequentially. That's the key point, right, to your question. It's just the reality we're in right now.

And for Q4, I guess what we can add is also for the last couple of years, we've really seen the Black Friday promotion being extended, so becoming kind of Black November. And then if that is not gaining full traction, we've also seen that, of course, going into almost a full month of December. But that is something that, of course, we would not have visibility to at this point in time. That is more something that has happened.

And you can say that's the baseline, right?

Yeah, exactly.

Great. Thank you. That's very helpful. And if I'm allowed to ask a second question, just on Europe. So profitability came in better than expected. It sounds like some of that was mixed. I don't know how much of that was this more emphasis on the Electrolux brand, less on things like Zanussi, and therefore it's sort of a permanent step up in terms of the mix effect, or was there a sort of temporary effect there for some particular new models being launched, things like that? How should we think about the durability of that better mix in Europe?

I think it's very solid. We're gaining share with the Electros brand and with the AEG brand in Europe, and that's driven by continuous product innovation and strength in our offering in premium laundry and built-in kitchen in particular. And I see significant further opportunity there as the built-in kitchen retail segments recover in the coming years. I think it's fair to say that the overall mix of the market in Europe right now is at a quite weak point, you know, with a high share of sales being forced replacement driven, which typically drives down mix. And then that in combination with subdued purchasing power in Europe for the factors that we all know, the starting point for the market as a whole is very low. So I expect as we go forward, the market mix having an upward opportunity and us being very well positioned inside of that.

And when it comes to the launch of our new kitchen range under the AG brand, we don't see any results of that in this quarter.

That will mainly start to impact next year.

Great. Thank you very much.

Thank you. Your next question comes from the line of Johan Eliasson from Kepler Chauvin. Please go ahead.

Good morning, Jonas. This is Johan at Kepler Chauvin. I think you're doing a great job in Europe and Latin America, but obviously North America remains an issue. Do you think with the current actions you have implemented or are on track to implement that you can actually regain profitability without the help of, let's call it, well-designed import tariffs?

Right. So, I mean, if you start with the basics, we've invested heavily in our product offering in North America. Consumers really, really like our product. We have industry leading consumer star ratings. So the fundamentals are really there. We're improving our mix. We're selling more of the higher value categories in North America. Having said that, we are still, of course, impacted, as you know, by the ramp-up cost and volume restrictions related to Springfield. That's going to improve sequentially. And we're still sort of step-by-step getting more traction from the new products and getting wider distribution of the more premium parts of our offering. On the cost side, we've been pretty transparent on the fact that There is a big cost discrepancy between North America and Asia, and that is really the main challenge that we're facing there. There are two ways to address it. One is to source more in Asia, more components, and more finished goods out of Asia into the US. We're already doing that, and we're accelerating that, as mentioned, through looking at our supply base more strongly out of Asia. The uncertainty, to your point, is at this point we don't know what will happen in terms of trade policy. So that could either speed up or slow down that migration. But on the other hand, it also changes the competitive position of manufacturing in the US, which is by far the majority of our production. So I would say if Either there are limited trade policies, which means that we will source more lower-cost input, which has an upside opportunity, or there is trade policy actions, and then we're positioned with a strong manufacturing base in North America. Of course, we are already sourcing both finished goods and components out of Asia, so any sort of trade actions would, of course, impact that. So it's a balance of what the ups and the downs. At this point, it's anybody's guess what that environment will look like. Either way, we have opportunities. In conclusion, I would say the fundamentals are there for us to recover profitability to a sustainable, profitable base in North America.

I think your market share in North America was 10% last year. It's half of where it was a decade ago. How have has the market share development looked like so far this year?

Market share is about flat this year, year to date, actually almost exactly flat. But we are continuing to improve the mix of our offer, where we're selling less of our low-end products and more of our higher mix, higher category products. So overall, value share is improving year over year, while the volume share is stable.

Okay, thanks and good luck with your next endeavors Jonas.

Thank you, appreciate it.

Thank you. As a reminder, if you would like to ask a question, please press star 1 and 1 on your telephone and and wait for your name to be announced. That is star one and one to ask a question. We will now take the next question. And your next question comes from Uma Samlin from Bank of America. Please go ahead.

Hi, thank you so much for taking my follow up. So I just wanted to have a bit more color on the Springfield ramp up. You mentioned that the productivity has been gradually improving. But how should we think about that impact in relation to your margins in Q4 and perhaps in 2025? When do we expect the ramp-up to complete?

Thank you. So Springfield produces the majority of our food preparation, our cooking products in North America, except for some parts that are sourced, like microwaves and so on. important factory for us. However, it's just one of our categories. So it's important to mention that it's one factory out of a total of five in North America. So it's important, but it's one factory. But it's an important category for us. And the products that we produce in Springfield are extremely well received in the market and allow us to improve mix sequentially as we go forward the production startup of any new factory especially highly automated like this one will be you know requiring you know continued work on productivity efficiency and so on and we're doing that we're seeing that progress as I mentioned right now and in in October here we're now up to the to the needed production rate in terms of output so we can meet market demand for the first time this year, which is a positive. In terms of productivity, though, there's still work to be done. So in terms of the amount of labor and hours going into each product, there's significant additional opportunity to improve that. But we are able to meet market demand, which is one important milestone. And then as we go in, um we have um you know into next year we certainly have a much better running operation than we have had on on average for for 2024. thank you very much that's really appreciated thank you thank you your next question comes from the line of james moore from redburn atlantic please go ahead yeah thanks for the follow-up i just got one if i could uh

The headcount reduction that you're doing, and as you mentioned, some of that takes time. Is it possible just to quantify what percentage of the current plan is done in terms of heads out to the end and what's still to come?

Yeah, there's still, in terms of actual sort of cost impact, there's still, I would say, a couple of thousand that have, I mean, in terms of the actual impact on the P&L. But it's not more than that. We reduced headcounts, again, as I mentioned, from 53,000 two years ago to about 40,000. And from here on, compared to that number, there's not that much more. But the impact of it is still to come to some extent. So we'll see most of it, let's say, by Q4.

Well, OK. And if I could say, thanks a lot for all your help over the last 20 years. And best of luck to the people.

It's been a pleasure. Thank you very much.

Thank you. That was the final question. I will now hand the call back to Jonas for closing remarks.

I guess that was an appropriate final question because, again, James, we have been exchanging thoughts over many years. And as this will be my last quarterly results presentation, I really wanted to take the opportunity to thank our investors and our analysts for your interest and support over the years. I have to say I'm very happy to welcome Yannick Fierling as our incoming CEO, and I know that he, together with the leadership team, will take Electrox to the next level, building on the foundation of excellent products that our consumers tell us they really appreciate through our industry-leading consumer star ratings. Our cost reduction activities will be further intensified, and our speed of innovation and market agility will be enhanced by a modularized set of product architectures and a simplified organization structure. There's a lot of hard work in a challenging market environment that remains, but we are on the right track. And with that, thank you, and my best wishes to all of you.