Electrolux Professional AB (publ)

Good morning and welcome to Electrolux Professional Q2 result presentation. My name is Jakob Rubay, Head of Investor Relations. With me I have Alberto Zanatta, CEO of Electrolux Professional and Fabio Sarpolon, CFO. We'll start the presentation with Alberto. Please go ahead, Alberto.

Thank you, Jakob, and good morning to everybody. To comment on the second quarter, I would start from the industry, a picture about the industry. And clearly, we can see that the industry had a recovery. The recovery already started in March and accelerated during the quarter. The recovery is driven by the lifting of the restrictions and the reopening of the operation of our customers. Mainly, the recovery was seen in North America. If you remember, recovery has already started in Q1 in North America. And during the quarter, mainly towards the second part of the quarter, also in Europe, with an acceleration that was higher than expected. The business, not all businesses are up and running. We still have some segments, customer segments, such as, for instance, the business travelers, conventions, exhibition, this kind of customers that are still suffering. But we have to say that all the other segments are moving really well. It is mainly replacement business. Even if we can see that also the project business or the complete renovation of the operations of our customer are coming up and are under evaluation. If this is the industry, an Atlas professional captured the opportunity offered by the growth or the recovery of the industry growing sales. We developed sales Compared to last year, we have to say that the second quarter of 2020 was a bad quarter. I remember one, if not the worst, for sure one of the worst of the history. So very impacted by the pandemic. While in 2021, the second quarter, we developed sales mainly again in Europe and North America because of the recovery of the industry, still not at the level of 2019. We have some countries and some businesses, for instance, the laundry in the Nordic, that are very close to the 2019 levels. But still in general, our sales are not on the 2019 level. Even if we have to say that the order intake, so the collection of the orders, and the order stock, so the order that we have in house at the end of the month of June, are higher than 2019. The third point is that thanks to this volume development, also our profitability is back over 10%. So we are again over 10% with a cash conversion more than 100%. If now we go into the geographies, I think I already introduced the fact that the sales was particularly strong in Europe and in North America. Again, if I look at the comparison with the same quarter of last year, it's very strong in Southern Europe, but also because the South Europe was the most affected in 2020 by the pandemic, by the restriction imposed by the different countries. The same applied to North America, where the percentage is very high, both in laundry and in the food and beverage. But in the laundry last year, for instance, we had the distributor in North America that was destocking during the second quarter. And as a consequence, the comparison is not the fair one. The growth is lower than in North America and Europe in the Asia-Pac region, Asia-Pac and Middle East region, because that is the area that started earlier the recovery already during the second part of 2020. And now, in some ways, suffering. A country like Japan, for instance, we all read what is happening with the Olympic Games, is suffering. And Japan, for us, is an important market. China is doing extremely good. It's the market that is developing faster, but surely is doing very well in the eyes. A good A good comment about the business development in all the region in this case is that also customer care. So all our business that is coming after having sold and delivered the product to our customers is growing at this stage and same level of the product. Customer care was suffering all along the period, all along 2020 and during the first part of this year because you remember we were not allowed to enter the site of our customers. Now with the reopening, with the restart of the business, with the need to restart the product, also the customer care business developed and is back to a trajectory that is very positive. A couple of words about the two different segments, starting from the food and beverage. Food and beverage was the one suffering more during the pandemic. Also, the recovery is more positive, obviously, for what concerns these segments. Good development of the sales across all regions, I would say. In particular, again, the South European, Europe in general and South European in particular, because they've been the ones more affected last year. Also, in food and beverage, we have a situation where we are collecting orders And we are sitting on another stock at the end of June that is on the same level of 2019. If we go to laundry, laundry, in this case, the development of the sales is more soft. We have to consider that we always said during the bad and good time that the laundry business is a good business that is that is developing, that is less impacted by what happened during the pandemic. The good thing to show the laundry business, and it's nice to see also in this chart about the profitability, you see that all along the period, we have been always keeping the laundry business in a double digit area. So it's a highly profitable business that is developing nicely. With this said, I would let Fabio comment the financials.

Thank you, Alberto, and good morning to everybody. As anticipated by Alberto, EBITDA in the quarter was 10.1%. Food and beverage with the recovery of sales show a continued recovery of profitability that was 9% in the quarter. And as Alberto just mentioned, Laundry confirmed the good and stable EBITDA margin ranging around 16%. When it comes to the group common cost, we had no material change year over year. In absolute term, operating income increased by roughly $200 million in the quarter. The main contributor was increased sales and production volume. but also price as well as the recovery of the high-margin customer care business that Alberto just mentioned were the main contributors to this $200 million. When reading through the P&L, we see a significant increase of the gross margin. Gross margin was 5.5 percentage points, higher than quarter to last year, and is now running, let me call it, at a more normalized level. The improvement in gross margin was mainly driven by area sales and production volume, but also happy to report that we have a significant increase in the productivity across our plants in food, in beverage, and in laundry. When it comes to the raw material development as well as transportation costs, we have had no material impact for what concerns Q2 profitability. Nevertheless, as we anticipated during last call, we expect an impact from increase of the second part of the year. Because of this, We have already implemented an additional price increase for orders to be received from 1st of July, price increase that we expect to fully compensate the direct material and the transportation cost increase. Few words on the operating cost, both in gross margin as well as G&A, cost increase compared to the low level we had in Q2 last year where most of the activity were put on hold. And this increase is a deliberate decision to support the restart of activities. Overall, and this is what is matter to secure productivity in our organization, the weight operating cost on sales decrease. A few words on the balance sheet. At the end of June, operating working capital in value was roughly 10% below June last year at the same currency, despite 38% higher growth in terms of sales. When it comes to the operating working capital of sales, we are now running at 17.4%. I would say quite an improvement compared to the peak we had in September last year when operating working capital and sales were reaching 20%. Main improvement came from inventory management, but also happy to report that one offender that was the increase of past due that we had during the pandemic period in 2020 now is normalized. I would say moving towards the pre-COVID situation. As you see in the graph, now we are running operating working capital back at the level we had in 2019. When it comes to the financial position, the financial position has been further strengthened in the quarter. Now we are running the business with a net debt level that is just above 400 million, and it has been reduced by 80 percent, a zero, compared to the date of listing. Our group has liquid funds available for 750 million. We have a revolving credit facility available for 175 million euro, confirming that we are well equipped to support the business development of this group going forward. Happy also to report that the current level of net debt on EBITDA is at 0.5. Few words on the operating cash flow. As I better anticipated, we deliver good cash flow in the quarter, 224 $3 million was the amount with over 100% cash conversion on EBITDA. No material change on operating working capital. CapEx for the quarter was around $20 million, roughly one-third related to the completion of the Thai New Planet. Going forward, we expect, as we anticipated also in the previous call, CapEx on sales will be in line with the historical level around 2% of sales. So my conclusion, overall good quarter. We deliver double DT profitability, good cash flow generation, and we deliver all this whilst continuing to invest for the future development of this group. And with that, back to you, Alberto.