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.

Thank you, Fabio. And I'm connected to what you just said about investments, because despite the savings that we've been delivering along the border, we continue to invest, to invest in building the new factory that will give a surely competitive advantage, starting from Q1, Q2 next year, but also on products. And during the past weeks, we introduced in the market new solutions that we continue to develop despite the need to take down the cost. We continue to develop addressing the rising needs of our customers, such as hygiene, sanitization, remote monitoring of the appliances. We've been introducing a new line of dishwashers, warewashing, hygiene and cleaner that are able to guarantee higher level of sanitization of the cutlery, of all the stuff that are used into the kitchens. We introduced what we call serenity cabinet. Cabinet that can be used in shops, in retail malls, whatever, to sanitize the clothing after having used it. You know what the regulations that are imposed in the shopping activities to make sure that if you try a dress, a shirt, whatever, then it has to be sanitized. And last but not least, we also work hard to speed up the digitalization of our offers. In many cases, they have been suffering the need to serve our appliances without the possibility to enter the site. And that is the reason why, during the past month, we developed the so-called two pair of eyes, where we have been able to serve our appliances from remote. Talking about customer care, what we call serving our appliances, I want to make a special note about this one because from the past experience, we always saw that during the crisis, the drop of the demand of the market, normally customer care was performing better. So customers were trying to keep going with the product, repairing them. maintaining them. This crisis was different. We said unprecedented challenges because the reality is that our technicians were not allowed to enter the site, so we suffered even more on the customer care side during the past month. Why June was a recovery not only for the sales of the product, but was a recovery also for our customer care business because we have been free to go with the lift of the different lockdowns. And with this product and the existing one, clearly, here is how we see the coming months, even if the uncertainty is pretty high. We see clearly that the opening in the countries is is having a positive effect on our customers. Some more than others, in some geography, more than others. The order stock that we have is still good, and it is related to the fact that, yes, the sites reopened, the lockdown, they were lifted, but in some cases, there is a delay of what was supposed to be installed last quarter that is going along the year. The other good thing is that the order that we had in house, they are still confirmed. We are not experiencing order cancellations. I think I mentioned the other time that we had some order cancellation beginning of the crisis, but not now. So, as I said, So far, July is trending like June. But the uncertainty is still high. And that is the reason why we already started to transform some of the temporary cost reduction activity into structural cost reductions. We already started in the US, in the industrial operation, and we have an ambition to define a plan during the Q3 for a total amount of roughly 100, 150 million sec. We don't know it yet, but we are clearly reviewing the plan also because most probably it will imply one-off cost that we will communicate later. With this said, I would say that again, Thanks to the commitment and dedication of our people, we closed the quarter break-even despite the large drop of sales. Focusing on the cost reduction, capturing every possible opportunity offered by the market, mainly in June when the market reopened, and clearly at least the first weeks of July. But we also started to work to prepare this company to the uncertain situation that are in front of us, starting to define a plan that has the ambition to transform temporary cost reduction in structural saving that we will define in the coming quarter. With this said, Jacob, back to you for the Q&A.

Thank you, Alberto, and thank you, Fabio. With that, we open up for questions, and I'll leave the mic back to the operator. Please go ahead, operator.

Thank you. Our first question comes from Matthias Holmberg from D&B Markets. Please go ahead. Your line is now open.

Hello, everyone. Thanks for taking my questions. When you say that you saw sales decline in July being in line with June and that you interpreted this development as a sign of recovery. I'm just curious why is not the year-on-year decline in July smaller compared to June? This, to me at least, sounds more like a stabilization rather than a recovery.

Stabilization of the market, I can imagine, or the demand you're saying. The point is that right now you see that by geography there are pretty big differences. not only in the month of July and August, they are, I would call it, special months, in the meaning that some countries, in Europe at least, they are closing because of the vacation period, the Nordic mainly, during the July, and the South European, Mediterranean, during the month of August. So the relationship of the demand also related to this effect. In addition, to the different speed of opening of the different regions. Then we have also to say that what is increasing the uncertainty are the events that are showing some regions of the world that are going back into the lockdown or at least partial lockdown. So we see that the market is recovering, but it's really remaining on the level of June, at least the gap versus last year. Until now, in July, it's on the same level of June.

Perfect. Also, to the structural savings that you intend to implement during H2, which is combined with already implemented activity, should generate yearly savings of $100 million to $150 million. I'm a bit confused to what these earlier measures include. Is this including the 100 million cost reduction program lost in September last year, or how should I think about what pieces goes into this sum?

Okay, Fabio. Okay, first of all, we have actually two initiatives. The first one that we launched in September last year that was supposed to generate over 100 million savings on yearly basis is the one that I reported earlier that we completed execution and already in quarter three this year is expected to fully compensate the emerging cost from separation. On top of it, Alberto mentioned that we are evaluating additional initiative to reduce the running cost of this group for an additional 100 to 150 million. Part of this additional initiative have already been executed, in particular in the second part of in the second quarter of this year through reorganization of our operation in the United States and additional cost reduction into the operational area. So the sum of the ones already implemented in this area, North America and industrial operation, plus the ones that we are evaluating, we are aiming overall as a package to to deliver 100 to 150 million yearly savings.

That's clear. And a final one for me, if I may. You mentioned some delayed deliveries. Would you like at all to comment on approximately what part or how big share of sales have slipped from the first half into the second half due to these delayed deliveries?

Let's say that in this moment, the order stock that we have is a healthy order stock that is even higher than what we had in the same period of last year. And this is related to the fact that a good portion of these orders, the orders that we were supposed to deliver during the month of the lockdown, they've been moved to the to the Q3 or Q4, because some of them are not only related to just the installation of the product, but some were projects where the refurbishment or the rebuilding of the space were done. So we don't disclose the exact quantity of that one, but it is a stock that is healthy, or the stock that is healthy, and the good thing is that the orders have not been canceled.

Okay. Thank you so much.

Okay, Jakob Ruba here in Stockholm. I have a question from the web from Stefan Schjernholm at Nordea. Three questions, actually. Provision for customer losses in Q2, if they have been taken, and also risking the coming quarter for additional provisions. Order backlog and cancellation, I think, Ablatia spoke about. But, I mean, how it differs today compared to the Q1 report. and also the new cost-saving program, $100 million to $150 million, are you prepared to say how much of that was realized in Q2? Those sort of questions.

Okay. I believe Fabio can answer about the provision and the cost. I can comment again on the order stock, even if I already did it.

Part of the order stock we had at the end of March was delivered during the quarter, but it didn't change significantly, I would say, because in particular during the month of June we started also again to collect new orders.

Okay. Coming back to the two remaining questions. First of all, yes, we increased the provision on accounts receivable in quarter two. Overall, it is... I would consider not a material amount, but what I can secure is that we have had a deep review of our risk situation, taking all the accounting provision that were necessary. In particular, on the customer side, and this is from, let me say, a poor reporting perspective. From a customer perspective, When requested, we review case by case the new payment term, securing that at least we were protecting or we were keeping the same level of protection that we had before. Let me also remind a comment that I was making also during quarter one report. That is that I would say that More than 50% of our business is somehow all related to government or state customers. Alberto was mentioning the healthcare, for example, to institutions. But also within this large portion, we have a large use of credit insurance. So I would say that at least as it looks today, I'm pretty confident that the reserves we put in the balance sheet are well representing the risk we have. Just to add also some more colors, at least so far we have had few limited bankruptcy from our customer side, but these have not any material impact, I would say, on the P&L of the company. Then the second question is how much of the $100 and $150 million of ambition in terms of cost reduction did we have into quarter two? I would say still a limited portion because as anticipated, the actions that we implemented in the United States and the industrial operation were being executed during quarter two. So I expect that they will start to, we will start to see the benefit of this action from this quarter, meaning quarter three.

Thank you. Operator?

Thank you. As a reminder, if you wish to register for a question, please press zero followed by the one on your telephone keypad. Our next question comes from Gustav Sandstrom from SAB. Please go ahead. Your line is open.

Thank you, operator. Good morning, guys. Thank you for taking my questions. I have a few if I may. Firstly, on the cost savings in Q2, you broke it down, but if we could perhaps elaborate a little bit. Firstly, I didn't quite hear if you said 15 or 50 million from governmental subsidies, so if you could clarify that, that would be helpful. And then, secondly, on the remaining parts, to what extent do you think these savings will carry into Q3 and longer, or if they were solely related to Q2?

Okay. So, after this bucket of 200 million cost savings in the quarter, 20 million are structural cost reduction that are coming from the restructuring plan we launched in September last year. The plan is completed and I expect full savings from this quarter, meaning quarter three. The second piece, roughly 50 million, 5-0, is a contribution we have had from government subsidies. And we had three major countries that, by the way, is also the one where we have the larger manufacturing operation, Italy, Sweden, and France. The remaining part comes from two main areas, R&D and marketing for the reduction, compared to last year where we had as I mentioned earlier, at peak related to the launch of the new ovens and the new generation of washer. And the remaining part is coming to overall reduction of personnel cost. We put in place an iron freeze, not replacing the people. We stop over time. We release the temporary people, and we consume the previous year holidays. And this one has had a clear effect to sum up to the 200 million that we reported in the quarter. When it comes to what is happening about this cost saving in the quarter three, I would say that the part related to the 20 million that is structural will continue and it will become somehow even larger because full action will be in place. The 50 million about the government subsidies is difficult to predict the amount, but at least I expect at least that according to the legislation we still have some benefit I cannot judge and I will not speculate on it, but we will continue to leverage all possibilities that we have according to the legislation in the different countries. And for what remains the main cost bucket, as we did proactively already at the end of quarter one and we extensively applied in quarter two, we will continue to manage the discretionary spending in marketing in R&D and for the labor cost in order to preserve our P&L.

Thank you. That's very clear. And I'm sorry for coming back to the order stock, but perhaps one more question that I'm interested to hear. You say you haven't had any real cancellations, but if you could quantify perhaps how much of your June and July sales relate to orders that have been taken in Q1 or earlier, and perhaps to what extent you have gotten new orders this year.

Okay. Let's say that in particular June, I would say it has been a month where we have been using part of this order stock. Now, the exact percentage I don't have it here, but we have been using the order stock, yes, also because the orders that are coming, and this is something that we would have expected clearly, are mainly for replacement business, in the meaning that we are expecting that with the reopening of many sites, but the uncertainty that is in the market and in the industry in general, our customer will be more inclined to replace part of their operations, either in laundry or in the kitchen. And as a consequence, the product availability is strategically important, and it is the reason why we built the inventory. So part of this is that one, but in June, we delivered a good portion of the order stock. But as I said, if I compare March and June, the order stock we had at the end of March and the end of June, we've been able to rebuild, let me say, part of this order stock with the new orders. So the difference is not big, in particular on the food and laundry side, I would say. The beverage, we have been depleting more the order stock than in the other two.

Great, thanks. And lastly, perhaps coming back a little bit to your saying that you decreased R&D spend to protect your earnings. Two of your main competitors launched sort of compact and very versatile tilting fans during Q2. I guess your assortment here relates to the thermal line, but mainly focusing on the larger volumes. Do you see this product category, they seem to have high hopes for it, to partly subsidize other parts in the kitchen, but do you expect also to get into this niche category, or do you feel good about your assortment here?

Sorry, you're talking about the niche category or the pressure brazing pan category?

I'm talking about the I-Vario Pro.

Both of them.

Sorry?

Sorry, your question is really, you said that competitor launched a product in the, I understand, the pressure kettle or something like that, and we have our thermal offer on that matter. But you were talking also about the dish category, or did I get you wrong?

No, sorry, no, I didn't mention the dish category.

I'm sorry, I'm sorry, yes. So, I know what we are referring to, obviously, because we saw the launch of the product of our competitors. We have to say that, in particular, on the combi side, during the first part of this year, so also in Q2, we completed the launch of our new range of combi steamer and the blast chiller. So we launched not only the oven, but we launched also the blast chiller that is completing the offer, because now I would say If not every combi oven, but a good portion of the combi oven, majority of the combi oven is sold together with the blast chiller. And now we have a very competitive product. Competitor came out with some news, but we still believe that our product is highly competitive with several unique selling propositions. The other product you mentioned was the pressure panes. We also have an offer targeting medium-large installations. It's still a very competitive product, that one. And by the way, we are working also because it is on the line, not only of the pressure brazing pen, but in the complete thermal line, we call it, because it is in some way a high-end part of our offer that we consider making a difference in the market. So also... A comment about the cut in R&D that you said. Fabio was mentioning that one, but we have also to say that it is a comparison between this year and last year where we had a pretty high peak because exactly in Q2 last year we completed a large project in laundry and in food. The combi oven that I mentioned, the blast chiller, but the so-called line 6000 in laundry that are giving us a lot of a lot of positive results despite the decline of the market, and we completed exactly in that period of the year, both for both marketing introduction and R&D activities. So it is a comparison, I would say, a little bit skewed because of the time.

All right. Thank you.

You're welcome.

Thank you. Our next question comes from Harry Rinto from Handelsbanken. Please go ahead. Your line is now open.

Yes, thank you. Thank you very much, Harry Rinto, Handelsbanken. Firstly, about the destocking that you mentioned in laundry, can you in any ways quantify how much of the organic sales decline seen in Q2 was due to the destocking impact, and do you expect this to continue in Q3? That's my first question.

Okay. First, what happened? When the spread of the virus, we had the spread of the virus in China, so we are talking about already January, and there was the risk to have supply, the supply chain problem with the supply chains. The distributor, together with the distributor, we also worked to build up stock in the United States, both for the products that are produced in our factory in Sweden, and the risk there was the components, but also the product coming from the factory we have in Thailand where we produce the dryers and some washers specifically developed for the market. So we have been building the stock in that time, considering that at that time, the United States was not so much affected by the spread of the virus. So the combination of the stock that we have been building and the fallout, obviously it takes time to get the product to the United States, and the spread of the virus in the United States basically forced many locations to the lockdown, to the lockdown, left our distributor with a significant stock. We had a talk with that one. The level of the stock and the investment they did, and I have to thank them, honestly, for what they are currently doing is unprecedented. It is a stock that they started to deplete. And we are expecting that already from August, we should restart filling the the product for the United States.

Okay, thanks. That's helpful. Then again on the order stock, you mentioned that order stock at the end of June was up year on year, and then you also mentioned that you have depleted the beverage order stock quite a bit during the quarter. So then my question is, and that to me sounds like the beverage order stock probably is down on a year on year basis. Can you comment on the categories where you actually see higher order stock year on year?

So you are perfectly right about the comment about beverage. You have also to consider that in the other stock that we had in March, beverage of the stock that we had in March last year, there was still the tail of the Subway order. So we are talking about big orders, not only. I think I mentioned that beverage is... highly affected by seasonality. So this means that typically you build an order stock already in February, and then you deliver February, March, April, May, and partially June. I think that we didn't clearly have the possibility to do about that. Comments about that, the few order cancellations that we got at the beginning of the crisis were mainly affecting the beverage business, exactly for this reason, because of, between brackets, the lost seasonality. So that is the most affected business, even if in June also beverages show a recovery in terms of collecting new orders that are coming in. In terms of category, I would say that... The laundry business is surely the healthy one, but I would say no surprise about the fact that it is a resilient business. Whatever was planned to be installed during Q2, something we started to install in June. If the site was not ready yet because of construction also has been delayed, I would say that it is postponed to July or later on. But that one is one of the areas where we experience basically no order cancellation.

All right, thanks. And then finally, the replacement business that you mentioned, can you remind us of what is the typical split of replacement versus new projects, both for food and beverage as well as for

Yes, I would say that it's typically the same. Normally, you have roughly 60% replacement and 40% new project in Europe and in North America, also in Japan if you want that area. while you have the way around, basically, in the other part of the world. So if we talk about Middle East and Africa, Southeast Asia, Latin America, it's more new projects, new installations than replacement. In this period, I would say since the sites, the countries reopened and lifted the lockdown, we are expecting, again, I'm based on the experience we had during the past crisis, that the replacement could get up to 70% to 80% instead of being close to 50%, 60%.

All right. Thank you very much. You're welcome.

Thank you. Our next question comes from Johan Eliasson from Kepler Sherwood. Please go ahead. Your line is now open.

Hi, this is Johan. Thanks for taking my question. Just coming back to this point about replacement share, is that typically a higher margin than the project?

I would say majority of our sales, as you well know, they go through dealer and distributors. So in some way, I would say the margin is not different. Obviously, the margin is different category from category, in the meaning that not all the products, they are delivering the same margin. But again, going Through dealer, the business, I would say the margin is not the same. If you want to say the cost to sell is different in the meaning that the cost to sell the product, the entire cost to sell the product, going through projects, installation, and so on, is typically higher in the project business than in the replacement business. but also the competitiveness. So this means the discount you do to the end user is clearly different between a project and a replacement one.

Okay, good. Then just on your food and beverage exposure, we are starting to get early channel checks from, for example, the U.S. restaurant market where It looks like the fast food single-serve type of restaurants is recovering rapidly, showing some positive growth in June, actually, while the full-service restaurants are still seeing run rates 30% down year-over-year in June. Now, what is your exposure to sort of these fast food chains like Subway, And what are you doing to increase that exposure near term? Is there any particular activities? I know it's a growth area for you, but are you accelerating anything to get into this chain in a bigger scale? Thank you.

Absolutely. So what you are reporting is exactly what we are experiencing. The fast food chains are – or the quick service restaurant segment is recovering faster than the casual dining segment. You know that to develop change in North America, but not only, is one of our strategic priorities, so we are working both from the organization point of view, so this means how to to approach the chains, how to get to the chains, how to get testing the chains, our product with the chains, but also from the product point of view, so bringing to market products that are specifically addressing the needs of the chains. So it is a strategic priority. We are focusing on what we are experiencing these days is that many tests that we had ongoing with the chains in North America, in Asia in particular, that were put on hold, I would say, since February. They've been very early in reacting to this crisis. Many of these tests restarted. And what I mean test is the test in their lab, but also the market test, where they are installing the product in the field. So obviously, we cannot comment on which kind of test. But I tell you that, in terms of product, They are using beverage products in many cases, and that is very good. They are using the Speedy Lights, our product that is reducing the cooking time of toasting and the sandwiches and the other things. They are the bubblers, the one that we have been delivering to subways under test in other places. We have developed solutions together with some chains to have the remote monitoring on these supplies, that is a need that they are looking for in order to guarantee the control, but also higher level of hygiene. So many products that have been unlocked, let me say, during the past weeks, and we clearly see that they are planning and they are delivering a faster recovery than others.

And can you share roughly your overall exposure to them?

We don't share that one, but again, we know that considering our presence in North America, that is the reason why we have The development of the chain business as a strategic priority, the reason why we acquired a company like Grindmaster that has a legacy relation with the chains that we want to leverage to speed up the growth. Let me say we are relatively new in that segment compared to others, but at the same time we are bringing product with innovative solutions that are clearly appealing to the chains as well as the global presence. So it is a strategic priority. We are focusing. We got some success not only last year, but also this year. In the U.S., we have been Chicken Filet or Chipotle. They are both chains that we acquired beginning of the year. We put on hold the rollout because of the COVID spread, and we restarted right now. These are examples. We are clearly looking for many others.

Good. We are seeing some companies restarting M&A activity where they have good balance sheets, and you have a fairly solid balance sheet. What's your view on M&A? Is there an opportunity for you caused by this pandemic, or will you wait and see? what happens.

Also, M&A is an area where we are, we always said that we've been using M&A during the past year to accelerate the growth, and we will use, we will continue to use, thanks also to the balance sheet, as you rightly said, the M&A and the accelerator of our growth. Clearly, during the past month, it was pretty useless to use To continue to, we cultivated the relation, absolutely, yes. But we have also to say that in this moment, what we face is that the valuation of the companies is in some way the big challenge, in the meaning that clearly with what happened during the past quarters, the turnover, the margin of the company went down. But at the same time, the value of the company is considered in particularly when we talk about privately owned company, is considered the same before the crisis. And this is creating some challenges. But I think it's the right time to restart all the relations that in some way we put on hold during the past three, four months, because opportunity can arise again. The dialogue will be challenging. At least this is what we feel it will happen. But it is in our agenda.

Okay. Thank you very much.

You're welcome.

Thank you. The last question comes from Gustav Sandestrom from SAB. Please go ahead. Your line is open.

Thank you so much for taking my follow-up. I'm just curious about the cost savings related to U.S. You did some restructuring there, if I'm not misinformed, a few quarters ago when you consolidated your two facilities into the one in Kentucky. So does this still relate to that, or does it relate to personnel reductions and so forth? And the second part of that question is, if you're happy with that setup being situated in Kentucky, a longer-term plan where you might also look to perhaps move the front end of your business outside of Kentucky to a more central location?

Thank you. Okay. First, yes, it is part of the consolidation of the operations and part is related to activities that we took after the consolidation to reorganize the staff in the operations that we have in Kentucky and in Louisville. For the time being, we are happy with the situation we have in Louisville where we have our factory. We have now all our operations in terms of administration, service, customer support, sales. So logistically, it's It's a good place to be. Particularly, I repeat, we have a manufacturing facility over there, and in our business, it's good to combine the two things. So that is the place where we are, and we do not have other plans. For sure, we have a plan that now that we are together to review how we are set in Louisville, in the meaning that we want to have... what we call center of excellence, so the place where we host people and we do the demonstration that are strategically important for our business that we have in Charlotte, and now we are evaluating how to do it also in the new place.

Great. Thank you.

I have one final question or basically a few final questions from the web from Peter Testa. The first one is if you can give us a view on the different performance of food and beverage and laundry in June and particularly July within the 20% down. I mean, if there is a difference in the performance between the segments. Do we have a view on the reorder pattern from our distributors into Q3? And has there been any discussions on price? Those are the three final questions for today.

Three questions in this case. Okay, performance in June, recovery of food and partially beverage was stronger than laundry. No surprise, I would say, also because... the drop of the sales of food and beverage in April and May was much deeper in Laundrie. We already said that Laundrie is a resilient business in the meaning that the up and down, the curve, let me say, of the development stage is much smoother compared to the food and beverage business. So in June, the recovery of the business in food and beverage was significant. higher than what it was in laundry. The second part was related to the pattern of the reorder or the reorder from our distributor in the United States. As I said, I mean, with this company, we have a relation that go back more than 60 years. They are really working and they are collaborating with us also on the development of the product. It is an open relation where they are weekly discussing the planning of the factory. And what we see is that it should be after the middle of August that we should restart to refill the stock that is in the United States. The third part is about price. Fabio was talking about price in the meaning that we have been holding price along the quarter. We have to say that we are experiencing pressure on price, in particular for the new orders, because competition is looking for volume. But for the time being, we are holding the price pretty well.

Thank you, Alberto, and thank you, Fabio. I think with that we say thank you for today and speak to you next time. Thank you and goodbye.