Electrolux Professional AB (publ)

Good morning and welcome to Electrolux Professional Q1 presentation. My name is Jakob Brubai, Head of Investor Relations. With me today I have Fabio Saperlán, our CFO, and Alberto Sonata, our CEO. So I will start with handing over to Alberto. Please go ahead, Alberto.

Thank you, Jakob, and good morning to everybody. Q1 ended... With a quite mixing trend in the meaning that sales decline and with the sales also the profitability in the quarter was below last year. But in some way Q1 had the two different trend along the quarter. The first part and when I mean first part I mean January, February and the first couple of weeks of the month of March. were more or less in line with the trend that we experienced during the last quarter of 2020. So with many countries into lockdown, a relatively negative mood inside of the industry. During the last part of the month of March, we have to say also, comparing our the performance of the industry with an already weakening industry in 2020, but during the last part of March we had a completely different trend with basically all businesses in a positive improvement in every region. both for what concerns the net sales and, even more important, the incoming order. Despite this trend during the second part of March, we have to say that profitability declined and the net sales declined a double digit. And profitability declined clearly because of the missing volumes, and also because in the month we had some negative currency headwinds, in addition to the competition of the spending for the factory in Rayong. If we move to the geography, the trend that we experienced in the geography, we see that what we experienced in Q4 is still there also during the first quarter of 2021. So the Asia Pacific region is more or less on the same level of Q1 last year with China, Australia, New Zealand, Singapore continuing the recovery still the Southeast Asian countries that are the ones that are still locking the borders, that are still countries where most of the business is generated by international tourists, international travelers that are not in these days allowed to enter the climate. If we want to look at the different dynamics inside of the other countries, in some way, Europe still, the South European countries are suffering more than the Nordic one. In general, still food and beverage declining throughout all the countries, while laundry, for instance in Europe, are growing somewhat. The big difference that we noticed in 2021 is recognized in the Americas, where while Latin America is basically there is no business these days, we recognize a growth of the food and beverage business in the United States. The United States in some ways head of the European countries for what concerns vaccination, for what concerns reopening of the business, and this is clearly seen with the restart of the activities also for what concerns our industry. That was very good. It was an healthy growth. Obviously, for us, the United States, for the metric business, is a relatively small business compared to the rest, but it was very positive. The laundry business in the United States, I believe, is following the trend of the food and beverage, but for us, the comparison was tough, because last year, during the first quarter of the year, and in particular in March, we have been building the stock to face the pandemic, the challenge of the pandemic during the remaining part of the year. With this said, I would note specifically the two, the analysis of the two segments, starting from the Food and beverage, as I already anticipated, the business food and beverage is suffering more than the loan. So this is confirmed also during the quarter, the first quarter, but the good things is that during the month of March, comparing with the month that was really partially impacted by the pandemic last year, But the sales increased versus last year. This is the first time after more than 12 months. So it is a positive sign, even if we have always looked at that one more in relation to the previous month than to last year. April and May will be, or better, last year there were terrible months. But it's even more important to look at how the trend is evolving compared to the previous month. And I have to say that in March, as well as during the first part of April, sales increased, and in particular, the order intake increased. This is valid throughout all the countries, Europe included. We have to say that during the month of March, also, profitability down. was positive for food and beverage. If we move to laundry, so to the other segment, laundry is confirming that it is a resilient business, declining, and in particular declining compared to last year because of the comparison with America, so with the United States. Remember that last year we built in particular in March. So the comparison is challenging for that one. Other than that, our largest market in Europe was somewhat positive compared to the previous year. But what is important in Hungary, we have to underline that the margin is in the double digit despite the negative effect of our currency and we have also a cost of the new factory So, laundry continues to be a good business, much positive during the coming quarter. We will not have anymore the comparison or the effect of the building stock in the United States, which is a positive, profitable part of the business that we have. Having said so, I would let Fabio comment on the financials. Thank you, Fabio.

Thank you, Alberto, and good morning to everybody. As anticipated by Alberto, the EBITDA margin in the quarter was 6.2%. We have been observing in the quarter as of somehow along 2020 different dynamics between the two segments. Laundry confirmed very solid profitability, double-digit profitability, despite somehow lower sales and one-time cost that Alberto mentioned related to the build-up of the new tie factory. If we exclude this one-time cost and the currency transaction impact, the profitability of laundry percentage-wise was even better than quarter one last year. The situation in food and beverage is somehow different. As you have seen, we have low single-digit profitability because of the large sales decline. In the group common cost, there is substantially no change in terms of cost year-over-year. When we look at the group overall, the reduction of EBITDA value and margin was driven mainly by two factors. lower sales and production volume, and negative currency. Contribution from price was positive, in particular in laundry and beverage, and we did continue in quarter one the cost containment action that overall mitigated significantly the impact on volume, compensating close to 40% of the negative impact from the volumes. When reading through the P&L, what we can see is that gross margin decline over three percentage points year over year, means the tractor were, as I mentioned earlier, the negative volumes development and the currency. Productivity and then logistic cost somehow need negatively impact the margin as well. When it comes to the development of raw material, I have to say that despite what is happening these days in the market, raw material did not impact the profit and loss of the group. But there are risks that if the situation stays as it is, we may face negative impact, I would say, starting more on water three of this year, considering that we have a pretty good coverage for the first two waters. When it comes to the selling administrative expenses, As overall cost will decline year-over-year whilst the weight of sales administration expenses on net sales somehow increase due to the reduced sales in the quarter. Now let me give you also an update for what concerns the structural cost reduction initiative. As you know, in the last 18 months we have launched two restructuring plans, the first one in September 2019 to compensate the increasing cost of the listed company that was expected to deliver a full impact from quarter three last year, a full year impact of 100 million SEC. The second restructuring will launch September last year that is expected to provide yearly savings of 110 million SEC already from the quarter two of this year. I'm reporting now that The execution of 2018 plan is now completed and the ones of 2020 is absolutely on schedule. As you see from this chart, the two restructuring plan did provide 100 million savings in 2020, fully compensating the merging cost that we had as a listed company. And looking into the future, in particular in 2021, additional $100 million of cost reduction, of structural cost reduction, are expected from this tourist structure plan. Now, a few words about the cost in Water 1. Overall, the cost reduction reported both in gross profit and G&A was around 60 million sec, or roughly 6% reduction of our cost base. Around 30 million, half of it, are structural cost reduction coming from the restructuring plant I mentioned earlier. We had no material cost variation in terms of stand-alone listed company, and the remaining 30 million SEC are what we call short-term savings. This amount of 30 million includes both roughly 15 million SEC additional government savings subsidies. We enjoy this quarter roughly 20 million government subsidies contribution. We had more or less 5 million in quarter one last year and roughly 10 million sec of one time cost related to the factory in Thailand. Market demand is improving. Alberto mentioned about all the intake that is improving. We are monitoring carefully the situation, the development, and we will still continue to be somehow disciplined in terms of cost management. Also, in the month to come, in order to secure that together with the sales recovery, we have also a profitability recovery. This said, when we will look into the development of cost in quarter two, I would expect an increase of cost in the second quarter of this year compared to the second quarter of last year, and this because we had a pretty low comparable last year when we reduced the activities to the minimum. Operating working capital, few words here, I would say pretty positive development also here. At the end of March, operating working capital in absolute term was down close to 20% compared to last year, the same currency. Operating working capital as a percentage of sales decreased to 19.4% compared to the peak we reached in September last year that was over 20%, 22%. And this improvement comes from reduced receivable in comparison to sales as well as longer payment term with the supplier. We are working also on the inventory and if we take the picture at the end of March of this year compared with the same period last year, same currency, inventory is down 13% as well. Our overall financial position remains pretty solid. Net debt at the end of March were 546 million SEC, in line with the level of December, and let me say half of the level we had in March 2020. Meaning that we have been able during the last four quarters, despite the difficult market conditions, generate good cash flow and repay half of the debt that we have. Overall, the situation in terms of liquidity of the group is confirmed very solid. We have cash for 630 million SEC and a revolving credit facility that is now of 175 million in terms of availability. credit facility that is overall of 200 million euro and that in the first quarter of this year we took also the decision to prolong by an additional year up to 2026. Last word on the development of the cash flow. Cash flow in the quarter was 23 million SEC compared to roughly 16 million we delivered in quarter one last year. We have been able to deliver this cash flow despite an EBITDA that was significantly behind last year and this was achieved thanks to reduced increase in terms of working capital, as well as reduced capital expenditure. When it comes to particular to the capital expenditure, 34 million was spent in the quarter, with majority of it close to around 20 million related to the build-up of the new production facility in Thailand. Production facility construction that is expected to be completed overall in terms of spending in the second quarter of this year. Once this initiative will be over, as we anticipate in the previous calls, I expect that the capex of this group compared to sales will go back to more the historical level around 2% on the sales. When it comes to the cash flow and the monitor of the situation, the liquidity of the group, I would add a last comment that we strictly monitor the development of the financial capabilities and capacity of our customers and our suppliers. because we want to continue to preserve the solidity and the quality of the balance sheet, also going forward, as well as the availability of our supplier base after a long period of business slowdown. And with that, back to you, Alberto.

Thank you, Fabio. Thanks a lot. And let me spend a couple of words on the things that we are bringing to market that we brought during Q1, and we will also help us to develop and to capture the growth of the business. In Q1, we started the production of, we completed, let me say, the land 6,000 washer and dryer range. This is a very successful line of washer and dryer that gave us the possibility to perform well in 2020. With this completion, we are increasing the features for what concerns the connectivity, the digitalization of the appliances that is far ahead in the laundry. You remember that our target is that by next year, we will have more than 90% of the laundry products that will be connectable. A large portion is also connected, we have to say, particularly in the United States where we have these larger coin shops, and it's performing, I would say, very well. The second product that we have been launching is the line of the frozen beverage dispenser. This is good for the season, good for the recovery. We have also to say that during the month of March, we finally saw a change of the trend, at least in this part of the business. For sure, new products are helping in this recovery. And this is a product besides giving more quality, of the drinks that are served is also ensuring the higher hygiene and safety. This is the idea to add the UV lamps for the sanitization of these appliances. It is something that came up during the innovation challenge last year. When during the pandemic, we involved all our people to generate innovative idea. And I'm very proud to say that our people came up with a lot of good innovative solution that now we are bringing to market to become a unique serving proposition. In addition to this one, we have to say that Fabio already mentioned, and I did so, that during the month of March, we freed the old factory, the old laundry factory. All the laundry lines are inside of the new factory in Réunion. And during the month of April, we started to move also the beverage lines into the new factory and we are going to complete this move by the middle of May so we will be ready the 1st of June to do the official opening of this new factory. We will not be able to do this in person because of the travel restrictions that are in place. For sure we will connect with our team and we are very proud that they've been able to complete the 220 million SAC investment that is if not the largest, one of the largest investments that we did on time and respecting the cost despite all the challenges that the pandemic posed to us. So very happy for that because this will be an important investment not only because we have been able to concentrate two factors into one because this could become the house of many new products that we are going to distribute globally. On the positive side, I want also to spend a couple of words on the trade show. For the first time after roughly a year, I would say, there have been two physical events in our industry, one in China, one in Dubai, where we attended and customers came and visited our booth as well as obviously the others. In this event, we took also the opportunity, they all happened in March, we took also the opportunity to introduce the new ovens, also the Skyline ovens that we launched just two years ago, but is already in the second release. Most of the innovation are related to, again, connected features. All the investment, I believe, will be in this area. not only our investments but investments in this industry to provide customers with connected solutions for the product but even more for the entire kitchen or laundry operations. So very proud for this product that again are at the right time now to give us the possibility to be even stronger during the recovery. With this said, I would like some way to summarize the Q1 in a few words. Sales improved in March, and this improvement continues now in April. Also, the order intake was relatively good in March. When I mean relatively, I mean improving compared to the previous month, still obviously lower to the level that we had in 2019. The other positive sign is that the order intake was higher than the net sales, so this means that we restarted to build the order stock. Majority of the order stock is in a relatively short term, in the meaning that we see that the market that is recovering is mainly the replacement, so operators that are reopening during this month and they are looking for single product to replace products that are down, that broke down, or that are completing already existing installation. There are still some projects, but not as much as we were used to see. This kind of trend, so both for the not safe order intake and order stock, apply to food and beverage and laundry. I have to say that, and it is normal, I would say, the recovery is faster and it is expected to be, or better, higher in the food and beverage market because it was the business that was suffering the most. During April and May, partially June, the food and beverage business was dramatically down. Less than half of the business was away. This recovery in general, we see this sign of recovery that are applying to businesses most of the geography, even if we clearly see that the United States is faster than the European market to recover, while Asian countries, Oceania, are confirming the positive trend already initiated during the last quarter of last year. Structural costs are coming in place and that is good. At the same time, and I believe Fabio was pretty clear with that chart, all the temporary costs or majority of the temporary costs that gave us the possibility to maintain a profitable level last year are fading away. Clearly, with the reopening of the activities, we will also reduce the number of government subsidies Obviously, and at the same time also, the working time reduction of this kind of activities, traveling or other things, this cost will restart already in Q2. We are continuing to invest. I was talking about the product, talking about the factory. During the Q2 we will complete the move of the beverage line and the factory in Thailand. We will roll out the new IT system. The first one was in the French factory. We will have the second one in the beverage Italian factory. we will continue to add the connected features to our product, in particular the Skype line, and we will continue to bring also other products to market in addition to the one that I just mentioned. This is what is going to happen, and before closing, I also want to take another opportunity to inform you that since we have been listed a year ago, March 23rd, 2020, We even have the possibility to travel, to visit and to meet with you all and with the financial community in general. And this is the reason why we are thinking to organize the Capital Market Day in September in Lundi. That is the place where we have our laundry factory. I believe it's a great place where we can see and we can give to whoever wants to join us in that place, an important idea of what the laundry business is, why the laundry business has been resilient, so much resilient during this very challenging past year, but also why we believe that we are leading the market through innovation and through the solution that we are offering to our customers. With this said, thanks a lot and We are back to possible questions.

Thank you. If you do wish to ask a question, please press 01 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 02 to cancel. Our first question is from Lucy Collier of Morgan Stanley. Please go ahead.

Good morning. Good morning, gentlemen, and thanks for taking my question. I have three questions, and I will go one at a time. The first one, I wanted to come back to the comments you've made on March and the fact that March was growing in food and beverages. You said that the trends were still quite positive in April, but I was hoping you could maybe help us understand the sequential trend between April and March, whether you were seeing an acceleration or whether the year-on-year acceleration was maybe more due to the comp effects. Just for us to be able to calibrate maybe a little bit better the magnitude of the recovery.

Yeah, so thanks for asking first. I'm talking about comparing to the previous months. So more than comparing to last year where you rightly said the percentages are becoming bigger these days. Because if I look at the next days in April compared to last year, we can see some way, yeah, let me say we can be misleading considering that the business last year was really low during the month of April and May. I was talking mainly compared to the previous month, so compared to the beginning of March, January, and February. We see a slight increase of the net sales And even more, an increase of the order intake. So the order that we are receiving, that is what is going to come in the following month. So that is the sign of recovery that I'm saying. I'm not only comparing that to last year because it would be a little bit misleading, I believe.

Thank you very much for that caller. I was hoping maybe you could also give a little bit more. I think you did, but the sound was not very good, so apologies if it's a reiteration. But I was hoping you could maybe give us some indication of the nature of the recovery you are seeing. So is it equipment? Is it maintenance where you are seeing an acceleration? Is it kind of a grading, existing setting? And also, do you see that across all of your markets in food and beverage? Or is it focused maybe on some specific part of the market or some product type as well, maybe?

So first, what we call customer care, that is the maintenance, what you describe as maintenance services, that in March declined less than the sales of product. And that is a very good sign because until now we had customer care declining more than the sales of the product because our customer didn't allow us to enter the site, their operation were closed. Also this one you can consider a sign of the coming recovery because this also means that many customers started to prepare to restart up their kitchen or their laundry operations. So customer care, in particular in March, recovered still not at the level of 2019, but we saw signs of recovery for this one. For what concerns the product, I said clearly food and beverage are recovering more than laundry, but that is not because of the difference. It's because food and beverage had a sharp I don't see major differences among the different categories. Clearly, where we see and we have new products, Skyline ovens, the Blast Chiller, the Line 6000 and Laundry, these new frozen beverage products, yes, you have something more to say to our customers, something more to say in the market, and this is making it easier. to have something to say, an opportunity to talk to customers. There is one area that is suffering more than any other. It's still suffering quite heavily. It is the area of the coffee. But this is more related to the fact that we are unbalanced towards France in particular and a specific roaster that is operating in France So it is our customer that is really suffering and as a consequence our business is significantly down. It's the only one where the sign of recovery are much weaker than in all the other businesses. Other than that I would say that in general we see a pretty flat and well distributed recovery of the business. I mentioned the United States and the concept of the product that are addressing the chain customers. During the past year, I mentioned more than once that this kind of segment was suffering because they were putting on hold investments. They were not allowing us to visit even the test sites. They restarted during the fall. This went on during the winter, and now they are coming to the season. So there will be an acceleration over there.

Thank you very much for that. And I guess my last question to Fabio, please, on the savings. Thanks for the helpful table you included on slide seven. I just was hoping you could remind us, you know, you had 60 million of savings in the first quarter. Based on that, how much do you expect for the rest of the year? And will you expect a different type of phasing as we go into 2021, i.e. with some quarters having higher savings than others?

Okay, here let me talk about what I expect to happen in the remaining part of the year. As I mentioned earlier, because of the restructuring plan we launched in 2018 and 2020, structurally we are going to reduce our fixed cost base going forward. At the same time, when comparing starting from Q2 last year, I expect overall the group cost to increase quarter on quarter because we are comparing with a pretty low, I would say, the historical low level in Q2 last year. What will happen in the remaining part of the year? In the remaining part of the year, as we did in the last quarter, we will continue to monitor strictly the cost of development. But I would say that if, as we see the market recovering, we will restart investing because our goal is to profitably grow this business. We will monitor the situation. We have a reduced fixed cost base that I will say it has been an important move to reduce the break-even point of this group. But for the future, I would look more into what we are going to invest to profitably grow this business.

Okay, thank you. Thank you. Our next question is from Matthias Poneri of DMV. Please go ahead.

Hi, thank you. Mattias Holmberg from D&B here. I have one question perhaps on the proposed combination of Middelby and Wellbuilt. How do you see this changing the market dynamics? And I recall you talking a lot about part of your strategy being to become a sort of recognized US player. If you see any obstacles or opportunities from these two players,

Okay, first I would say that it is quite early to comment about that one in the meaning that as it is clear they have to go through the DOJ's approvals and all the other processes that are normal in these kind of things. For what concerns our position in the United States, Obviously, it's not impacting the laundry one. For what concerns the food and beverage, we have a sort of pretty focused approach in the United States, this one. We are not going to the market. We are not serving the market with a full portfolio as we do in Europe or in Asia, Oceania. We have a pretty selected number of products that are targeting specific customer segments. In this case, I would say that it is not changing so much. It will not change our approach to the customers, this kind of merge. There could be impact then related to what is happening according to regulation, according to the dynamic of the distribution. Surely, yes, but in this moment, I would say that it's relatively too early to comment about that.

Great, that's a clear answer. And one follow-up, you discussed a bit about the sales decline in laundry and you talked about the comps effect from last year where you had a customer who did some pre-buying or stocked up. Can you first of all make any comment on if that comparable effect is isolated to Q1 or could we see any of that in Q2 as well? And also, if you could clarify the 45% sales decline that you had in America's in laundry, is that entirely related to that specific effect, or is there anything else in that?

Okay, so first, last year, just after the, let me say, the first sign in Asia of the spread of the virus, together with our distributor in the United States, it was decided to build up a stock in the United States. Remember that February, March, United States was not affected from the virus, or at least there were not, the effects were not so clear in the United States as they were coming to be clear at least in the South European countries. So with this said, Everybody was afraid about lack of component, lack of product coming from Asia, from China. Without having a factory in Thailand, it was a conscious decision to build up a stock in the United States to face the demand of this product in case there were disruptions during the supply chain. Disruption that in reality didn't happen, honestly. But it is what it is. And during that particular month of March, and it was pretty minimal, I would say, probably in April, if I remember well. So we didn't have so much in April. We built up the stock in the United States. The stock that in the United States, we have been in some way depleting, because then the pandemic hit the United States. So after the end of the month, the United States dropped significantly, also in London. So we have been using this stock for a quite long period of time. This is the reason why we are saying that our performance in laundry in the United States are quite significantly impacted. So we reported a drop because last year we had this peak. So we should see this not happening in Q2 and Q3 and so on. Secondly, the drop in the laundry in the quarter is mainly due to the United States, if not entirely. Because in Europe, in reality, somewhat we have been growing laundry. In Asia Park, in some countries, we have been growing the laundry business. Still, we have Thailand, all the Southeast Asian countries, That's an important market, by the way, for us. Thailand, Indonesia, Philippines, they are good markets for laundry. Malaysia, those markets are still very low level. Because I think I mentioned earlier, these are markets where the business is going around international travelers. And in this moment, you cannot enter this market. So other than that, I would say the laundry business was somewhat better than last year. but with this tough comparison with the United States, we reported a decline.

Thanks for that clarification. That's all for me.

Thank you. Our next question is from Augustus Hagius of SEB. Please go ahead.

Thanks. Good morning, guys. Thanks for taking my questions. I'm wondering, I think you previously stated that sort of input costs and raw material costs is not a major factor to you this year, because if I understood you correctly, you have agreed to terms on those input costs at an attractive level. But I understand it's a difficult question, but if you would try to look into 2022 and assume that raw material and input costs were flat from here. What roughly would be the impact earnings as you see from those items in 2022? Thank you.

I believe Fabio, you can... I can give some flavor how we see the situation. First of all, I confirm what I anticipated earlier. When we look into quarter one, raw material, price development in the market did not affect the profitability of the group, nor I expected that this would happen in Q2. And this is because we have, let me say, covered our purchasing in the first part of this year. In exactly these days, we are working with the supplier to negotiate new conditions for the second part of the year, and I would say that somehow today is too early to give an overview, even on the second part of the year. I would, let me say, bring this topic in terms of to give you more call on the quarter two call. I would say that in these days, it's too early to make an assessment, even on the second part of the year. It's clear that if price remain at this level, they will have an impact in the business, in the profitability of the group. All the rest equal, I would say, not really material overall for the P&L of the group, based on what we know today.

Okay. And thank you for the table for the temporary and structural cost savings overview. That's super helpful. Did you try to assess sort of the share of the temporary costs that are government support? How do you see that? Do you see that unwinding in H2 or in Q2? Or is your preliminary assessment that that's going to be something that you could probably maintain throughout the year? If you could give a little bit of color on that, that'd be helpful too, thanks.

Yes. Okay. Let me develop further more around it. So we have, let me divide our cost bucket into three parts. We have from one side the structural cost that are coming from the tourist structural plan, The execution of this initiative is according to plan and I expect overall in 2021 additional 100 million compared to what we had in 2020. That was another 100 million. We have the second piece that is the government subsidies. Government subsidies that contributed roughly 95 million in 2019. We report we have had 20 million in quarter one compared to five million in quarter one last year. I have to say that I hope they will decrease in the incoming quarter because this means that the market in our business will go back more towards a normalized level. So to answer to the second piece, I expect government subsidies to decrease as long as we increase the capacity of utilization of our factories. The third lag that is related to the discretionary spending, as I mentioned, we have a low comparable in the quarter 2020, where most of the activities were putting on hold, and I expect that this discretionary spending to increase already in the second quarter. is clear our duty to strictly monitor the development and investment in the discretionary spending according to the older intake development. I believe we have demonstrated along 2020, but also in this first quarter, that the cost management is a top priority of this group.

Okay. thank you uh if i could just add one final question uh relating to what we previously discussed on the merger happening at least seemingly happening in in the us then um they um they they explain in the rationale for for uh combining the two companies that that they aim to increase r d investments or innovation investments in specifically in so digital and iot solutions as well as ventless ovens could you talk your stoves could you talk a little bit about if you feel that there's a pressure on increased investments in those areas sending out to this coalition potentially whether or not you feel comfortable that you will be sort of top end and be in front of the market in these areas also a year from now if the merger is actually happening.

Okay. So first, I would say that both companies, Middleby and Welbit, already increase investment in the IoT solution. They are the only two companies that at least for the cooking side of the kitchen, they were already trying to to provide customer with a system approach. Even if, I have to say, I didn't see so many installation, but it's normal because we are at the beginning of the stage. So, we already did this one, and I'm pretty sure that as well as other companies, they will increase investment in IoT. So, I would say we know that. I believe we have to think to ourselves to what we can invest and bring them to market. The thing that is positive on our thinking is that we have been approaching the market as one company already for many years and as a consequence also in terms of architecture, structure and design, they are in some way already standardized. We are not there yet, but we are already in that path, let me say. But it's surely important to have a critical mass and to create solutions that are really adding value to the customer. Not only we are linking to this, to the program of Ascension, that we call Ascension, so that is our customer care program. But it's not my opinion, it is our opinion. We make a big difference when we talk about creating value for the customers.

Okay, can I just take in one final question? We talked a little bit before with your German competitor about some initial indications of price pressure in particular perhaps regarding a combi of them. Do you still see that or is that fading now as markets are seemingly improving?

Let's say, I've been talking about pressure in general. even if contribution from price was positive in Q1, so we still have positive contribution from price in Q1, what we see is that, and I think I mentioned that in this moment we see more replacements, so single-use models, more than the full project. Full projects are not so many. They are coming, but they are not so many. What we clearly see is that being few, everybody wants to get them and as a consequence competition price competition on the project is much higher than what it was a year ago that is what we see so when we talk about project in general the overall price of the entire laundry or kitchen solution So it's not specific on one product, but I would say that it is more related to the kind of business, let me say. And it is because of the current situation.

Okay. Thank you for taking all those questions. I appreciate that, guys. You're welcome.

Yes, Jakob Ruba here. We have a question from Stefan Scharnholm at Nordea, also coming back to raw material. Actually, three questions. Are we able to compensate raw material with price? That's the first question. The second one, how large will the extra cost for the factory in Thailand be in Q2? And the third question, when do you expect sales to be back to 2019 levels? What's your best guess?

Okay, so I would let Fabio comment about the raw material and the cost in the tile factory. I can give a comment about the trend of the sales. Sales are still below 2019 level. I believe the coming months will be very important because they will show us how fast the recovery can be. If I look at the market research that has been published in the middle of March, they are still working on a double scenario. They are all working on a scenario where we already have a recovery of the beginning of next year and there are some others a little bit later. One thing in my opinion is clear is that the speed in the different regions will be different. I believe the Asia-Pacific market, if we exclude Asia and Oceania, most probably we will be back to the 2019 level, end of this year, beginning of next year. The United States could be on a similar level considering the speed of the recovery during the past weeks, but I would say that it's too early to say that one. In some way it's Europe that is lagging behind in terms of recovery. We are also talking about stimulus. US government put a lot of money to stimulus the investments in the food industry. We are also looking at what could happen in the European market in order to help our customers, not NASA, but our customers to restart doing investments. We have always to remember that this is a business where our customers have to make investments to renovate a kitchen, to renovate a laundry operation, to open new installations during the coming weeks and months. Fabio?

Yes, on the two questions. As anticipated earlier, for what concerns raw material, Discussions are going on exactly in these hours, in these days with our supplier base. I confirmed what I anticipated earlier, so we will not see any material impact in the first part of this year. I expect if price will remain at the market price, will remain at the at this level also in the quarters to come to have an impact starting from a quarter three this year and in quarter four but i would say is somehow too early to give you an order of magnitude because if from one side there are requests from our supplier base on the other side we are strongly negotiated to keep the cost increase to the bare minimum. During, I believe, a quarter to call, we will be in condition to give you more flavor on what it means in terms of impact, in terms of profitability, that I expect will be all the rest equal negative but i would say not material for 2021 profit level of the group for what concern instead the thailand initiative to information the initiative will be completed by quarter two in quarter two we are going to have roughly a remaining capex of around 20 million sec And as I mentioned earlier, once this initiative is completed, CAPEX level will be back around 2% of sales going forward. For what concerns the one-time cost that will affect the P&L, I expect to have more or less the same level of cost that we had in quarter one. That was 10 million SEC in quarter two, and 10, I would say, from negative one-cost impact, the initiative is, I would call it, completed, and we should start to see the benefit coming out from the consolidation from Quarter 3 onwards.

Thank you. Our next question is from Ewan Elliott of Kepler Chevro. Please go ahead.

Hi, this is Johan Eliasson. Just a short question coming back on your comparison with your German oven here that's sort of guiding for a minus 10% decrease in Q1. I have to see what it ends up at. But you ended up obviously at minus 21%. You talked about beverage being very weak. But how about your ovens, the Skylands? Are you sort of performing in line with this, or do you think someone is gaining share on the back of new products introduced?

So, if I look at the single category of the oven in general, I would say that at least during the past quarter we have been performing in line with the competitors. So, I would not say that we have been losing market share. Again, on the opposite, as I think I mentioned earlier with the new things bringing to market, we want to gain market share. There is also a difference between the geographical differences, clearly. We are pretty strong on the South European market, North European market. competitors have a pretty large share of sales in the United States that is recovering faster. So if I look at the past results, again, the trends were very similar, following in some way the market trending of the product.

then if i may you at the captain market stay now two years ago you talked about this new skyline offering integrating ovens with the blast chillers have you sort of seen a good take up of of this combined of offering also during this yes yes yes students are doing very well uh also because their uh adoptance of the brush chiller is increasing

So this means not in every kitchen where ovens are used that there is a blast chiller. But the increase, there are more and more operators that are looking for both the oven and the blast chiller. We are the one offering, and you rightly remember the two-year-ago presentation when we had been talking about the tower, we call it, where there was the oven on top of a blast chiller and where the two products were connected and you could operate both products from one panel only. And this is doing very, very well. So we are very happy about that. I'm really looking for the reopening of the market because this could be a very compact saving space in the kitchen and high-performing solution for many customers.

Okay, thank you very much. That was awesome.

Our next question is from Kari Rintok of Handelsbanken. Please go ahead.

Yes, thank you. Thank you for taking my questions. Two, if I may. Firstly, if we look at Laundry Europe, you had 1% growth in the first quarter, and I think you also had growth in the first quarter of 2020. So the question is that is there any reason to expect that you wouldn't see growth in Laundry Europe for the whole of 2021? And then secondly, do you have any other sort of pockets where we actually might see 2021 sales higher than 2019? That's my first question.

Okay, so Laundry overall compared to 2019, we were not clearly on the same level. So we will see an improvement of laundry. Yes, laundry business, we are also bringing new products to the market. So the laundry business will increase. I don't see a reason why this trend should change. I think I mentioned also the effect on the U.S. where we were weak during the second quarter with the laundry U.S. while this year we should have a positive trend in this area. One comment that I think is important to make this reasoning is that if you look at our year-end result, the portion of the business from laundry became in relative terms to the overall professional business, much larger than the food and beverage. Not 50-50, but we were very close to be 60-40, something like that. With the coming months and the coming quarters, we are expecting that there will be a recovery on laundry. But there will be a much higher recovery on food and beverage because in the previous year the decline was sharp. So I'm expecting also that already in Q2 we will have a gradual rebalance of the mix between laundry and food and beverage products.

Okay, but specifically for Laundry Europe, is there any reason to believe that that part wouldn't be up 2021 compared to 2019?

There are no reason to see a change of the trend, let me say, but I mean, it is still something that I will not comment so long along the years. Yeah.

All right, fair enough, thanks. And then secondly, If you compare your pipeline of potential acquisition targets right now and if you compare that to the pre-COVID times, what can you say maybe about the number of potential targets and if you have done any reprioritization between those, maybe between different geographies, between different categories and so forth?

I would say that there are no major differences compared to the pre-COVID or post-COVID pipeline. I think I mentioned already in the past that since August, September, we restarted the discussion with all the contacts that we had. in particular in the United States because that's the area where we are clearly having a focus, but not only because there are opportunities to create value, adding profitable operations to our businesses. We are obviously looking at them. So no major differences and no major changes, I would say.

And then finally, the project business that you have mentioned a few times, in which geographies should we expect that to start first? Is it in the Asian markets and then maybe followed by the US and then the last one would then be Europe? Or how should we expect that part of the market to recover?

You said it in the meeting that the Asian market is probably the first one that is already out of the curve. More than the US, where I think I mentioned that our approach is more focused on a single solution, so targeting a single solution, in particular the chain ones. I would say Europe. In Europe, there are discussions about projects. Again, Asian first, and then hopefully also the European market, and we'll move back to the project business. Asian Middle East, sorry for not, so that is the area where we see the project business moving faster than in the other regions.

All right, thank you. Those were my questions. Welcome.

Thank you. Our final question is from Frederick Moragard of Pareto Securities. Please go ahead.

Thank you very much, operator. So just thinking about what has happened over the past year with obviously a lot of restaurants, hotels and so on having struggled, some bankruptcies and perhaps some change of ownership for a lot of those operators. Just thinking about the reopening here, do you think there's a potential for new ownerships wanting to upgrade hotels, wanting to upgrade restaurants, perhaps redesign menus and so on that could actually be sort of an opportunity for you? Or could you just share your thoughts on potential development in that direction?

Okay, there are many different trends, but yes, in the meaning that we saw already that in particular in the chain business, there have been aggregations. So some chains buying different brands that were struggling because of the pandemic. They've been incorporating some of these brands. I'm not talking about the big ones that are well known all around the world. in particular the regional ones that probably have been suffering more than the others. They've been aggregating or collecting this brand, and thanks to the, between brackets, economist case that the chain is able to create, they are clearly ready to relaunch. In fact, even in France, we saw this, that they are investing that two, re-launch the brand and sometimes it's changing also the menu. This is creating opportunity. The other opportunity is that in many cases this multi-unit operator are looking for, I think you heard this definition more than once, they call it dark kitchen. So they are kitchen that in some way are producing food for different brands. Also in this case they are refurbishing kitchens that were for one kind of food production only, to make it more flexible, to produce different kinds of things, to serve exactly only the delivery. Delivery will not disappear. This was an habitat that all of us, I think it was already in place in many geographies, but it became more let me say, adopted by many other people, and I don't think this will disappear at all. It will continue to be one of the ways of doing business for many of the catering operators. So there will be changes, yes. There will be reopening. In many cases, they will reuse what is left in the kitchen of the restaurant. But this will create, for sure, business for maintenance, customer care, and for what I was mentioning earlier in the meeting, unit space. In the meeting, if you take over, I don't know, an Italian restaurant, but then you want to convert it into a steakhouse, you clearly need also different appliances. This is just an example. Please don't take it literally back.

And just thinking about such a development, is that something that you actually started to see some trends coming through in your order book, or is this sort of still on a philosophical level?

Sorry, can you repeat the question?

Sure. So is this something that you're actually starting to see coming through in your order book?

I said that the order intake, we call it order intake. So the order that we are collecting, since the second or third week of March, it started to increase compared to the previous weeks, more than compared also to last year, and it is higher than the net phase. It is still lower than 2019, no question about that, but that is the signal that we are getting that operators in some way are re-looking at the business, they are preparing in some cases. The speed is still to be defined. I don't think it will be full speed at Q2, but it is something that we clearly see as a sign.

Sure, that's very clear. Thank you. You're welcome.

Thank you. There are no further questions, so I'll hand back over to our speakers for any closing remarks.

So thank you very much for listening and asking questions. I think this was it for now and I wish you a good day and speak to you next time. Thank you and goodbye.