Electrolux Professional AB (publ)

Good morning and welcome to Electrolux Professional Q2 presentation. My name is Jakob Rubai. I'm Head of Investor Relations. With me today, I have Alberto Sonato as President and CEO of Electrolux Professional, Fabio Sarpoloni as CFO. And I start with handing over to Alberto. Please go ahead, Alberto.

Thank you, Jakob. Good morning to everybody. Going straight to today. Quarter results. We had a challenging quarter with the sales dropping 40%. And with a challenging quarter that we closed breakeven and with a positive cash flow, thanks to basically three major areas of our activities. The first one is the swift actions on the cost that we took in Q2, with the 200 million sec of saving in the quarter. The second is that we captured the opportunity offered by the recovery in June with a strong development considering the situation during the month. The third one is the laundry business. There's a resilient laundry business that has been performing, again, in relative terms well along the entire quarter. Before entering the detail, let me say that our people reacted quickly and showed a lot of commitment and dedication, passion, and I'm particularly proud for this. The crisis we are living in is presenting unprecedented challenges, and the way we reacted shows that we can stand strong also in the future. Now all our operations are up and running. The supply chain is up and running. We are managing all the operations in the office in a way to guarantee the health and safety of our people. How are we developing the quarter? Geographically, let's start from a geographical perspective. As you see also in the map, not every region performs in the same way. We have the Asian or part of the Asian region, China, Japan, Korea, that are the countries that have been affected early. They have declined less in Q2 than any other region. On the opposite, we have the North American region that has a deep decline in Q2, being late in the spread of the virus. Also, Europe has different dynamics, with the Nordic Central, North European countries declining less than the Mediterranean are in general. But there are also regions and countries where we even perform better than last year. I'd like to mention Turkey, that is in the Mediterranean area, but where we perform better than last year in the quarter, in the month, capturing opportunity in the healthcare segment, where we deliver large projects for both food and kitchen and laundry installations. Also in Germany, with the rental business that we acquired when we acquired Schneiderite a year ago, also that business has been growing all along the quarter. And in some countries like France, Sweden, and Switzerland, in the month of June, we have been performing better. than what we did last year. So it's a very scattered picture, this one, that is confirming also the uncertainty that is present in the market these days. Looking at the sales, so we said that sales were down roughly 40%. Food and beverage affected, deeply affected than laundry, 48% down food and beverage, 22% laundry. With an improvement, a clear improvement of the trend after two months like April and May where we are roughly 50% down compared to the same period of last year, in June where we closed 20% down. So far in July, we can see that the gap versus the same month of last year is in line. The decline is in line with the one we expected in June. Looking at the two segments, the food and beverage, as we said, was the most affected. And also here, geographically, we can see that the decline was pretty deep in Europe and United States, but less in Asia, Middle East, and Africa, that, as I showed earlier, are the regions that have been affected, at least the Asian one, earlier in the year. We have also to consider that, in particular, this is referring to the U.S. performance, that we are still comparing the result of the performance of this year versus last year. Not only the difference is due to the spread of the virus, but we have also to consider that last year we had a large rollout. It was the tail of the large rollout that we had in Q1. or better, Q4, Q1, and partially Q2 2019. Also here in June, also for food and beverage, we reported a recovery of the business, and a recovery of the business that gave us the possibility in the month to deliver positive results. A few words about beverage. Beverage is the part that is more affected inside of this segment, and that is related to the fact that beverage has a higher seasonality than the food and the laundry businesses. It's related to the characteristic of the product, the kind of customer that are using this product. High seasonality in terms of production and delivery of the beverage product is between February and May, typically. So those were the months where the lockdown didn't give us the possibility to deliver to the customer, to get to the customers. We have to say that also beverage in June showed a sign of recovery. If we look at laundry, I define it as a steady, resilient business. And we can see that the decline in laundry was much less than... was around 10% in Europe. With some regions, I mentioned Sweden, but the Nordic and the Central Europe has changed compared to 2019. The decline was particularly significant in North America. And here, we have to say that the reason is, one, clearly related to the spread of the virus in that part of the world. But it's also related to the fact that, as I mentioned earlier, we have been building stock to make sure that we were able to serve the customers, as we did, by the way, in June, and we are doing in July with prompt delivery. And in the case of the United States, we have been building the stock during the month of February, March, and so now our distributor is using that stock. So it's a combination of market condition, but also the fact that we are destocking in the United States. With this said, I would let Fabio to comment the financial part.

Thank you, Alberto, and good morning to everybody. As you heard from Alberto, sales declined 40% in the quarter. but the swift cost measure allows us to deliver a break-even in terms of EBITDA. And I believe that this is somehow confirming our historical capabilities to promptly react to adverse market conditions. When reading through the P&L, we reported a declining gross margin and this is mainly because of lower sales and production volumes. Whilst happy to report that price increase and direct material cost reduction have positively contributed. Selling expenses declined over 30% year over year, whilst administrative expenses were up, as expected, due to the additional cost to operate as a standalone corporation. We added a new function that we receive as a service from Electros Group before, like tax, ER, legal, and so on. And we add additional cost in IT to operate as a standalone corporation. To be also added for comparability, two things. Unique, the espresso coffee machine we bought last year was not yet reported in terms of P&L in the second quarter. And also for comparability reasons, last year in June, we had a large positive one-off for roughly 90 million SEC related to the pension scheme transaction in Sweden. As Alberto anticipated, the strong action on cost generated approximately $200 million saving in the quarter. This $200 million compensated more than one-third of reduced margin due to volumes. We find this saving both in the lending cost and through the SG&A. To give you some more flavor on this saving, we have roughly 20 million that we consider absolutely structural. And these are generated from the restructuring plan that we launched in September 2019, last year. Happy to report that the execution now is completed. And we expect that... The benefit of this plan will fully compensate as plan the emerging costs from separation already in Q3. Additional 50 million are coming from government subsidies, mainly but not limited to three major countries, Italy, Sweden and France. The remaining part is coming mainly from two areas. First, reduction of R&D and marketing spending. I have to say, for comparability, that in the second quarter of last year, we had somehow a peak of spend in this area because we finalized two major projects, one in food and the launch of the new skyline ovens and one laundry that was the launch of the new generation 6000. But I'm also happy to report that in this context we have been able anyway to bring forward few selected project of innovation as well as introducing the market new solution to meet new customer requirements that Alberto will elaborate in a while. The second bucket comes from reduction of costs related to people via previous year's holiday consumption, stop of overtime, iron freeze, and so on. Operating working capital was down 9% year over year, the same currency. Account receivable significantly decreased in the quarter compared to last year and compared also to March, but somehow less in sales. And this was somehow anticipated because we face several requests of prolongation of the payment term, especially in the South European countries. When doing this, and this is a decision that we take case by case, our focus has been the ones that when granting longer payment term to secure the protection of these receivables. Inventory overall was slightly up compared to June 2019 due to I will say two main facts. One that is now coming from the market because we have received along the quarter, particularly in April and May, requests of customers to postpone the delivery due to the fact that their operations were not up and running and the infrastructure not yet ready, but also our conscious decision to secure good product availability for replacement sales. Having said so, I'm also proud, let me say, and here very proud to report that the financial position of the group remains very solid through this difficult time. Net debt value is unchanged compared to December and somehow even lower than March this year. After June 30, we have more than 800 million sacks of liquid fonds and still available revolving credit facilities unutilized for 168 million euros. Definitely, with this picture, we have a pretty low leverage company with a ratio of net debt on EBITDA of 1.3. Cash flow. As Alberto said, we delivered in the quarter a positive cash flow of 31 million SEC. CapEx in the quarter was 43 million, somehow higher than last year. But the majority of it, close to 30 million, is related to the project that we anticipated during the previous call, related to the construction and production site in Thailand, where we are going to merge our two operations, one in laundry and one for beverage, create a state-of-the-art plan. This investment is proceeding according to plan, and it is expected to be completed in quarter one next year. Overall, once this project is completed, I expect that the ratio of CAPEX on sales will go back to the historical level of roughly 2% on sales. Overall, also in this area, I believe that this is confirming our financial capacity to invest also in difficult market conditions on key strategic initiatives while continuing to generate cash and keep a strong balance sheet. And with that, back to you, Alberto.