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.