Electrolux Professional AB (publ)

three report presentation. My name is Jakob Ruba. I'm head of investor relations. With me today I have Alberto Zanatta, who is the CEO, and Fabio Sarpolon, the CFO. And we will kick off immediately, and I'm leaving the floor to Alberto. Please go ahead, Alberto.

Thank you, Jakob, and good morning to everybody. During the quarter, We experience a recovery of the market, a continual recovery of the market with, in particular, North America, Europe, and China growing. While it is still a weak market, we experience a still market condition in Southeast Asia, in particular, Latin America, Middle East, and Africa. Even if there are clearly signs of recovery, we experience a project that we are put on hold that where we did restarted the discussion with the possibility to reactivate the activities. So market conditions that are improving in general, including the area that are still pretty weak. If we look at our sales, we develop, we do sales versus 2020. still not at the same level of 2019, even if there are some countries that are already at the 2019 level. What is also very positive is that the order intake, so the collection of orders, is pretty strong. It's higher than 2019. the net sales of what we are invoicing the customer, and this is resulting in a record level order stock. The profitability in the quarter was double digit profitability, and we improved the profitability thanks, the main reason are the growing volume, the benefit from the restructuring we launched in the past years. And the third important element is the mix up that we have been doing, growing the customer care sales. So sales of parts, accessories, consumable and service contract, more than the product sales. So remember that one of our strategic target is to improve the mix between the percentage of the customer care sales versus the total sales. This is what happened in Q3 after many quarters where we suffered sales of customer care because we were not allowed to serve the customer and to enter the site. So in Q3, we had a change of the trend that improved the mix. And improved profitability was despite some challenging condition that we faced in Q3 and they accelerated honestly during the last part of the quarter. The first one was well known and was already communicated earlier that we are growing our operational cost versus 2020. So we grew cost in R&D, marketing, we restarted traveling. So the operational costs are back to normal level, not 100%, but they are obviously growing versus 2020. We experienced material cost increase. In the previous meeting, we were talking about the impact of the raw material And we always said that we were able to cover this with a contract that we had. That is true, but it is also true that the material cost, the increase of the raw material cost is accelerating. And sometimes we are forced to buy out of the contract to make sure that we are able to keep the factory working. A third element or a third that we experienced in Q3 are the operational inefficiency. We are forced to reschedule productions to keep the factory working. I have to say that I'm proud to see how our operation has been able to manage the current conditions that are very challenging. with the scarcity of some components in particular electronic components because we never stopped production we have been forced to have some lines not working for one day but we never stopped production and never disappointing customers because we were not able to deliver the product and the last headwind still to be mentioned is that The missing government subsidies still during the Q3 of last year, we had government subsidies that we did not have this year. The last point is that the scenario, the order, as I said, the order intake is very good. It's continuing in October. And it's giving us confidence that the scenario to be back in 2022 to the 2019 level, it is still a valid scenario. I repeat, some countries in the quarter, they were already back to the 19 level, just to mention Italy, Turkey, Russia, UK, Australia, United States. our sales in the quarter went back to the 2019 level. Due to the fact that we are talking about geography, a picture about the different geography. So United States was driving the recovery, strong recovery in the quarter, as well as Europe that was close to 10%. While the Middle East and Africa, Asia Pacific, were more or less somewhat in the same level of 2020. We have to remember that that's also the region, in particular Oceania, China, that were already, that already started the recovery last year during this month. In the quarter, we have to say that some countries, they are closer to 2019 level, General Scandic, UK, There are some countries, some regions that are better than 2019 level, like China, Australia, New Zealand, France, and Norway. If we have a deep dive on the two segments, food and beverage. Food and beverage is growing compared to 2020 more. than the laundry segment. And the reason is because the food and beverage segment went down more in 2020 compared to the other segment. We always said that laundry performed better thanks to the resilience of the market and our business. The other important element is that food and beverage is again providing a double digit profitability despite all the challenges that I mentioned earlier for what concerned material, rescheduling and the growing cost. North America in food and beverage is already better than 2019. And that is something that we clearly see happening in the market and our sales are pretty strong in North America in the quarter. If we go to the other segment, laundry, laundry is confirming a profitability that is about 15%. So high profitability. A growing business, a growing turnover in the quarter. And in this case, we also mentioned the fact that the market went down less in 2020. And as a consequence, the recovery is less than in food and beverage during this year. In this segment, we have two big regions, North America and Europe, that are better or equal in the quarter compared to the 2019 level. We have to say that here today, Europe is better than 2019 level. So that is proving again the resilience of the of the business and our position in Europe, where we have a leading position, we can capitalize this kind of situation. With this said, I will let Fabio comment on the financial result.

Thank you, Alberto, and good morning to everybody. As Alberto anticipated a few seconds ago, EBIT margin in the quarter was 10.3%. Food and beverage further strengthened the profitability, reaching the 10.5% in the quarter, whilst laundry confirmed the historical and recent quarter good habitat development over the 15%. We had no material change in the group common cost if we exclude around 6 million SEC acquisition cost that we booked in the quarter in the group common cost. When we look into the profit development and if we exclude the item affecting comparability that were affected both last year, if you remember last year we booked a 77 million restructuring cost The year-over-year group EBITDA improvement, as anticipated by Alberto, was mainly driven by three factors. Higher sales and production of manufactured products, a mix-up, and mainly related to higher growth of the customer care business and the benefit on the cost base coming from the restructuring program. When reading through the details of the P&L, if we exclude the impact of item affected comparability, gross margin reached close to 35%, 0.7 points better than last year. Main driver was volumes and the mix-up customer care that Alberto mentioned. When we look into the product cost in the quarter, clearly raw material component as well as transportation costs to secure continuity in our production base have increased in the quarter. And they were, I would say, mostly compensated by price increase. When I look into the months to come, in particular on quarter four, we expect the raw material cost to increase as well as the comment cost and we see already now in october they needed to continue to have a spot purchasing the market to guarantee continuity in our production line and this spot purchasing are mainly affecting the component for the electronic component as we anticipated during the July call, we have proactively put in place an additional price increase with effectiveness July the 1st. Unfortunately, due to the speed in particular on the component and the spot market purchasing cost increase, we will not be able to fully compensate at least in quarter for this material and component cost increase. If we do a sort of projection, what will happen is that currently we estimate a negative impact in quarter four between the positive contribution from the price increase and the negative contribution of the component material cost increase in area of roughly 20 to 25 million sec for quarter four this year. Moving into the selling administrative expenses, the increase in value in the quarter, but now we are running below 25% on sales. When comparing year over year, we needed to consider two main dimensions. First, this year in quarter three, we had a positive contribution from the divestment of part of an old site in Thailand that positively contributed with 13 million sec in the quarter. But at the same time, we have booked acquisition cost for roughly 6 million. So the net impact of this, let me say, not recurring item was around 7 million positive in the quarter. To be said that also in quarter four, where we expect to finalize the acquisition of Unified Brand, we expect additional acquisition cost in area of approximately 40 million SEC. As anticipated earlier, when comparing the two quarter, we have to say that in 2020, quarter three, we were running with a quite reduced activity level. If you remember what we presented last year, we were significantly reducing the discretionary spending. 20 million was the reduction compared to 2019. Due to the low activity level, we received a subsidy for roughly 20 million, and there was, let me say, no material accrual for the people. This year, the picture is different. We are somehow back to a normalized level of activities. We invest on product development, on the digitalization, of the company and the labor cost includes also the accrual for the variable pay so within this picture where we reduced the weight of sgna on sales is clear that the company restart to invest and this cost increase that we face in quarter three is expected also to continue in quarter four, where also we do not expect as in quarter three, any contribution or any material contribution from government subsidies. When it comes to our financial position, happy to report that at the end of September, despite the growth of sales, we have been able to reduce in value and in term of weight on sales the operating working capital. In value, operating working capital was down 19% year over year, the same currency, and the weight on sales was 16%, meaning we are really very close to our financial goal of 15% operating working capital on sales. So we are managing also from an asset perspective very effectively our balance sheet. As you read from the data, our financial position has been further strengthening also in quarter three. and we have brought the net debt really close to zero at the end of september we have liquid formed for 868 million sec and we had a fully available revolving credit facility for 200 million euro meaning that we are fully equipped from a balance sheet perspective to support the organic development of this group as well as to manage the recent announced acquisition. On top of it, last week we also announced the signature of a loan with Northern Investment Bank. It is a seven year or 60 million euro sustainability related loan agreement with parameter related to reduction of CO2 emission water consumption, and the substitution of the hydro fluorocarbon gases that are used as a refrigerant. And this is, I would say, on top of the financial part, confirming the commitment of this group and this management to the sustainability. Overall, I expect that when completing the United Nations brand acquisition all the rest equal our ratio of net debt on EBITDA we range between roughly 2 and 2.5 times meaning we are operating within our financial targets maintaining a solid balance sheet let me conclude with a few words about the cash flow strong cash flow in the quarter 400 million For a strong cash flow along the year, we delivered 657 million sec cash flow so far. So really, we continue to deliver on the profitable growth as well as generating cash whilst continuing to invest on the business. So with that, let me say overall, my conclusion is good quarter. We did consolidate our profitability we deliver on an important piece of the strategy that is growth as with acquisition and we generate a strong cash flow so we are fully equipped also from a financial perspective to manage the organic growth as well as proper management of the recent announced acquisition And with that, back to you, Alberto.

Thank you, Fabio. Thanks a lot. And you started to introduce another important subject that didn't happen, or at least it was not finalized in the quarter, but just a few days after that one, that is the acquisition of a unified brand. I think it's worth to talk about this one because clearly the work was done during the quarter and even earlier, clearly. But it is another important step in delivering according to our strategic priority. I mentioned earlier that one of the reasons we have been able to compensate or mitigate the headwinds that we had to face in Q3 was the mix-up through the growth of customer care business more than product sales. That is one of our strategic pillars. The other strategic pillar that we had, and I remember a lot of questions from you during the previous call, is about accelerating the growth in North America with the chains. This acquisition is an important milestone in our business. process to grow our presence in North America and our presence with customers, with chain customers. Unifry Brand is a nice company, well known in the US market. It's a division that is part of the Dover Group, And we are expecting to close the deal during Q4. The cost of acquisition, as Fabio mentioned, are accounting to 46 million, and out of this 46 million, 40 will be booked in the last quarter, so in Q4. It is a nice acquisition because it's sizable in the U.S. market. The expected turnover, the expected net sales in the quarter are around $135 million. This company, under the umbrella of Unify brand, we have... important brands that are historical brands in the u.s market well recognized brand in the u.s market without mentioning all of them but in particular two of them growing and randell are well recognized and they are among the top three player in the respective category growing in steamer cattles pants and Randall in the custom refrigeration. So with growing, we believe we can increase the business in particular in the institutional segments. With Randall, we believe we can increase our presence in the chain business. It is also a well-organized company because production is concentrated in two sites. Historical one in Michigan where we mainly have production with a custom refrigeration product while the more standardized production are concentrated in the Mississippi factory where we work again is a new factory where Unified Brand concentrated production from different facility that they added in past and that is the one that is going to be developed. And by the way, it's also offering the opportunity for us to increase production. It can be the platform for new product that are addressing the US market. So all in all, well-recognized brands in the US market, sizable business that is changing our relative position in the market, manufacturing and R&D capabilities to further expand the business in US with chain customers. If we have been thinking about the strategic priority about customer care, even if it is just a first step. So we just turned the trend. Now we have obviously to continue to grow the business. If we have been addressing also the growth in North American chains with this significant acquisition, the other important area that we've been always saying is part of our strategic mission is to continuously bring to the market innovative solution. And also during this quarter, we have been introducing a brand new product. It's a brand new product that, by the way, is covering a segment of the food prep market that we just partially served with the current offer, with the old offer, because the current is now including this product. So we were missing this product that is compact, flexible, high-performing, that are exactly the three things that the customer are looking for these days. This is coming perfectly in time because during the last call, we introduced the new division that we created to push this kind of product together with the beverage one that are sold, yes, through the traditional products, Electrolux network, because this is part of the Electrolux network, but this product can also be pushed through other channels that are the ones that this new division is asked to open and to enlarge. So very good news, I'm very confident that with this product we will have a good push of the business of this new division and we will have another innovative solution bringing innovation to the customers. The other thing that I'm happy to report during the quarter is that we started the pilot test of the new digital platform that we are going to develop. I think we have been talking about this one, the project of digitalizing our offer, digitalizing our relation with the customer, digitalizing our processes. It is a trend. I don't think I'm the only one talking about these things, but it is really important to see that we are progressively doing this in uk we just launched the pilot to connect our partners with this one platform we call it one because it will put together all the needs of the customers the partners and all the features of our products so in uk we have been launching this one to digitalized interaction with our partners, so through this platform, the partners can place orders, can check the availability of the product, they can ask questions, support, they can have access real-time to any kind of information. It is a bilateral, obviously, communication that is very well appreciated, and it will be gradually completed also with all the features the data that we are getting from the product that are going to gradually connected so It is an important investment for us. The benefits are clear to everybody and we are continually investing to get this one fully implemented across the coming months. During the quarter Q4, we will extend the pilots to other two countries, Germany and Sweden, and then we have a plan to roll it out during 2022 in all the other regions that we serve and gradually connect and integrate also the product with the service provided to customers. So also this one is one of the activities that is clearly aligned with our strategic priority and is showing that we are progressing in line with what we have been declaring our strategic guidelines strategic cornerstones to grow the business to profitably grow the business so all in all if i have to look at the quarter the market showed the sign of recovery also the weak market southeast asia in particular Middle East and Africa, Latin America, even if particularly Latin America is a small market for us, but they are good market that are showing some sign of recovery. Some others are already on 2019 level. They were on 2019 level in the quarter, some also in the year today situation. In this condition, we deliver close to 13% organic growth with roughly 200 million sec every day or more than 10% margin. The good thing is the stock, the order stock, the order intake is stronger than our net sales. Consequently, we have an order stock at high level. We did not experience any order cancellation, so it's a growing order stock. We have to say that we have sometimes difficulty to invoice our customers and mainly is because our customers are late in preparing the site. It is something that probably we are experiencing in other industry and also in private lives in the meaning that there is shortage of manpower for plumbers, electricians, carpenters, and this is delaying the order. It's not cancelling the order. Obviously, the work will be completed. The kitchen or the laundry will be ready, but it's delaying. But we are sitting on a very healthy order stock. the headwinds that we experience in q3 are expected to continue fabio was talking about the pressure on the high raw material cost that is increasing that we did not completely compensate with the price increase implemented the july 1st and for this reason We already announced October 1st, a second price increase, effective January 1st. But that is a clear element, as well as the stress on the operations related to the scarcity of some components. Just to mention that one, I believe is important. What we are doing to... to compensate or to manage, let me say, this challenging situation, we created a task force, including R&D, purchasing, and engineering. They meet every morning. They look at the lines, the products globally that could suffer missing components, and they work to reprioritize all resources the critical components. This is giving us the possibility to continue to serve the customers, but clearly is putting the pressure and inefficiency in our organization. In Qtree, we experience higher running cost and this is a what we are going to experience also in q4 because the business is recovering and as a consequence the entire machine is is is running now basically at full speed last point i already mentioned it we are expecting to close the unified brand acquisition in the quarter The priority for Unified Brand as well as for our operation will be to work to complete the separation from the group, the Dover group. We know what it means because we went through such a process in 2019 when we separated from the group. So that has to be the focus because there are clear timelines to do this. as well as to deliver the business plan, the ambitious business plan to profitably grow the business that also our operational atlas professional in North America has. The market is growing. We said it that our sales in North America are already on the 2019 level in food. Remember that Unify brand is a food company. So these are clearly the priority, but at the same time, we will look at how we can create value having this company part of the Electrolux professional family. With this said, I would open for questions to all of you.

Thank you. If you have questions, you should go to the operator. Please go ahead, operator.

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. There will be a brief pause while questions are being registered. Our first question comes from Lucy Collier with Morgan Stanley. Please go ahead.

Good morning, gentlemen. Thanks for taking my question. I have three, and I will go one at a time. The first question I wanted to ask was around the dynamic on cost and the backlog. I think you're mentioning that your backlog is at all-time high, but you're also saying that the contracts you have negotiated for next year in terms of raw materials, the costs of this contract are also higher and you will need to pass price increase into 2022. So I was just hoping you could give us some indication on how the backlog margin currently compare with what you have delivered so far in the P&L if you think about your cost base into 2022 and which type of price increase you're expecting to pass next year to offset some of the headwind on the sourcing side. That's question number one.

Okay, I can start answering and eventually, Fabio, you can integrate if you think it's needed. Obviously, Fabio said that the price increase implemented in July did not compensate the raw material price increase, but is gradually more effective month after month. We are not disclosing the size of the price increase that we are going to implement because it is not one number valid for every market. It is different product category by product category and it's different geography by geography. So there is clearly a lag between the execution of the price increase and the benefit we will get from the price increase. But we have been clear mentioning the fact that we communicated in October that also the order, they have to be collected by a certain time to keep the old price. Because otherwise, this effect that you are mentioning could lag longer along the years.

Okay. And in terms of if you look at the orders you have now in the backlog and obviously the timeframe of those orders, how do their margins compare with what you have now delivered in the quarter, let's say the 10.3% margins?

It is a rolling in the meaning that what we invoice in particular in August was majority was with the old prices. What the order that we are collecting right now are with the new prices clearly. So they are all with the new prices. So the gap is shorter. And this is what we are going to invoice in the coming months.

Okay, but I guess if the orders you've collected now, let's say in the third quarter with the prices of July, but perhaps some of them get executed at the end of 2021 or early 2022 on a higher cost base from your raw materials, doesn't that suggest that those orders are potentially at a lower margin?

I think Fabio mentioned that we are expecting in Q4 a negative contribution from the delta between material and price, but please, Fabio.

Yes, as I was anticipating earlier, first of all, the execution on price has been done. Price increase has been done in July, and as Alberto announced earlier, As I said before, we announced a second, now beginning of October, an additional price increase with effective date, January 1st, 2022. Clearly, what we are going to face in quarter four is that more and more the new delivery will come at the new pricing level that we announced in July. So that will have a positive benefit. At the same time, if on raw material, as we anticipated, we edge, the cost increases are coming according to plan. What is not planned is the additional cost that we are facing due to the fact that to guarantee continuity of production in the lines, we have to buy spot on the market. so that that was unpredicted and somehow to somehow on top of it to secure also continuity in production we need to have extra transportation cost they some of the the two parts the price increase benefit according to plan and they faster fees or growing the cost will have a negative impact in quarter for around 20 to 25 million SEC in the gross margin.

Operator, we're waiting for Lucy's follow-up question, I think, because she had three questions.

Here I am. Yes, please go. Yes, I think I'm here. So the second question I had was around unified brands. I was hoping you could maybe share with us the share of service at the company or aftermarket and also some indication around profitability because I think you suggested maybe that after the deal you expect the leverage to be between two to two and a half times, which seems to suggest relatively modest profitability for the business. So just as we kind of model into 2022, if you could give us some indication around either potential dilution from the acquisition or the normalized profitability of the business, please.

We agreed that profitability is not going to be disclosed during this process between signing and closing, so we will be able to do this during the Q4 calls.

And the share of aftermarkets as presented yourselves for the business?

It is the same, so also the mix between one and the other, other than saying that roughly 50% is customer, 50% is chain business and roughly 50% is institutional business. For the time being, these are the only information we are disclosing about the company. And they have committed a turnover at the end of the year.

Okay, thank you very much. Maybe my last question was around the working capital. I think I was a bit surprised to see such a strong kind of working capital inflow into the quarter, considering kind of the high backlog and also a lot of supply chain constraints. Maybe I had expected a little bit of a building up of inventory or safety stocks. Can you maybe help us understand the working capital dynamic as you as you kind of head into executing on this high backlog in the current condition, please.

Yes, I can develop around it. I would say that on the inventory side, in this moment, our main goal is to secure the condition to feed our production line and serve at best level our customers. So this is our main goal when it comes to the inventory piece. To develop around the good development we had, I would say since September last year and has been accelerated this year on the overall working capital, I would like to mention two things. Management of receivable I will say that now, you remember that when we enter into the COVID time, I was raising the concern about payment term, financial strength of our customer. I will say that we went through the journey pretty well. We did not have any material credit losses. and after a journey during quarter two and quarter three last year where the past due was increasing secure whilst securing the quality of receivable now also in terms of past due we are back to the pre-covered time so improvement of receivable thanks to reduction past you The other leg of the improved operating working capital is coming from the account payable side, meaning related to higher purchasing volume as well as good management of the payment term with our supplier. And overall, we are now at 16%. percent on sales, pretty close to our financial targets of 15 percent, confirming also, I would say, pretty good management of the asset piece of this group.

Thank you very much.

Our next question comes from Gustav Hagels from SCB. Please go ahead.

Thank you. Good morning, guys. A few follow up corporate costs were higher year over year and sequentially. Could you talk a little bit about the delta here and give some indication what a good number is to put into our model models going forward? Thanks.

Okay. I can take this question. As you see, corporate costs in the quarter increase roughly 9 million sec year over year. Let me say The major, I would say, increase in corporate cost was driven by acquisition cost. Six million we have been booking in the cost. The remaining part is related to labor cost increase mainly related to the variable part of the salary. As you know, last year, due to the company performance, there was no material accrual for variable pay, while this year, this represents a delta year over year.

So you think a good number, perhaps, is to take the 39 and deduct the $6 million that relates to acquisitions and multiply it by four to get a good sense of where you're at going into 2022? Is it going to be a higher number now that you acquired Unify?

I believe logically the direction is right. Probably the end result I expect to be somehow lower than that. As you remember, when we announced the separation, we said that we were going to have roughly around 100, 110 million additional costs to operate as a standalone organization. And this was mainly related to central staff, central corporate costs, as much as local additional costs to operate as a standalone organization. I believe that this data directionally confirmed.

Okay. And then I'm going back to the acquisition of Unified. It'd be interesting to hear a little bit about the process, how it came about and found the company since it's been quite a consolidation game in the U.S. for some time. How did you end up with this asset and has it been for sale for a long time? Yeah, it'd be interesting to hear.

I think we mentioned that starting from summer last year, we reactivated the connections, contacts. So we have been discussing this with our contacts in the United States. And then we started approaching the group with this opportunity or possibility, if you want to say. Obviously, we presented a business plan, means that a business idea that was supposed to give opportunity to this part of a division, because the Unified brand is not even a division of the Dover Group, but is part of a division of the Dover Group, a new home that was focused on the core business of that of that of unified brand so it was uh it is still because remember we didn't do the closing yet so i have to use the right verb in some way it is still a small portion of the dover group inside the lateral professional is becoming an important element of our strategic plan and our presence in north america so the process is uh It's the process that we restarted after the COVID period. We have been running before the COVID when we completed some acquisition. It's a process that we have to keep going also during the coming months.

Okay. And coming back to the margins, is there an element to – It is that you're not 100% sure what the actual EBIT margin will be as a standalone company, as it's an integrated part today. And maybe it's not 100% clear what costs that need to be brought with them and what are costs that can be left behind. Or do you feel that you know what the EBIT margin is? You just can't say it.

You are talking about the margin of UAB, of United, the brand.

I appreciate that you might not be able to tell us, but are you very comfortable that you know what the margin is in this business? Yes. Yes. Okay. Okay. And then lastly, order book, all-time high, you're not able to really deliver them in accordance to underlying demand due to the reasons you mentioned, but is order intake also running at all-time high? Or is it also sort of an effect of not being able to deliver that brings the order book to an all-time high in the quarter?

Yeah, yeah, yeah. Order intake is high. Now, to say that it's all-time high, I should check. Honestly, I did not. But I tell you that day after day, we receive more order than what we invoice continuously. And this is the reason why we are growing the order stock in this way. So order intake is very good. And when I said that some markets are already performing better than 2019, and they perform better than 2019, During the quarter, also in those markets, we have an increasing order intake. So order intake is good. So it is clear that the market is showing sign of recovery.

And finally, in those markets that you see that you're back or above 19 levels, is that true also for volume? Or is it a price mix or price effect that brings it up there?

No, no, volume, also the volume is better than, so volume you mean units, they are higher than 2019. Okay.

All right, thank you for taking my questions, those were all that I had. Thank you.

I will take some questions from the web. There are two questions. The first one is from Stellan Hellström at Boden Capital, and it's also related to unified brands. Do you expect acquisition to be EBITDA margin dilutive in 2022, and to what extent? So dilutive was the question. And then from Stefan Janholm at Nordea, he's asking about the shortage of craftsmen to install equipment and how this is developing. Is it easing? Is it getting worse? And do we see any risk for cancellation of orders due to the shortage of craftsmen? Or do we only expect it to result in delays? Those were the two questions.

okay so the first one sorry to answer again we are not disclosing the information about the profitability so i'm not able to answer the second one about the the delay that we are experiencing on completing the site of our of our customer It is something that we still see happening today, and I believe it is a challenge that will affect, I repeat, not this industry, but also other industries during the quarter, the coming quarter, this quarter. Clearly, if we talk about order cancellation, For the time being, we don't see order cancellation. You have to consider that the kitchen in some way comes at the end. What I mean is that if you are refurbishing or building from scratch a restaurant, a laundrette, a hotel or whatever, The kitchen comes at the end. So majority of the investment has been done. Here we are just talking about the last mile. So the plumbers, the electricians, the carpenters for the furniture or the last detail of the environment. So the investment that our customers have been planning to do, in some way, most of it has been already done. So difficult to say that they will not complete the... their operation and as a consequence giving us the possibility to deliver the product. Also because the market is growing, so for them to stop would be to lose the opportunity to benefit from the development of the demand.

Okay, please operate through.

Thank you. Our next question comes from from . Please go ahead.

Yes, thank you very much. First, a clarification on this 20 to 25 million negative impact from cost price in Q4. Is that compared to Q3, or is that a year-on-year number?

It is a year-on-year number.

Okay. In that case, how much was that number in Q3, roughly?

It was definitely smaller than this, but we are not going to say. As I was wording it, we mostly compensate the direct material and component cost increase in quarter three with price.

Okay. And then these disruptions, inefficiencies that you mentioned in that sort of hampered you in Q3 related to all kinds of shortages that you have. How do you see that developing in fourth quarter? Or is that also included in this 2025 million guidance?

First, it is not included in this 20-25 million impact. It will have somehow a negative impact also in Q4, I expect. But let me say more than looking from this perspective. I mean, we wanted to drive productivity improvement. and somehow we miss the delivery of the expected productivity improvement in quarter four because of these difficulties on the supply chain. Clearly in this moment with the stronghold stock that we have, our priority is to secure the service level and the delivery to the customer at the best condition. Somehow this will generate or will lead us not to deliver on the productivity target but we set priority this moment that is service level to the customer and delivery of the top line with major contribution time on the bottom on that note then the what kind of potential you see from market share gains given that you are one of the large players in the market and probably especially the smaller players are

having even bigger problems in terms of their delivery capability. So are you seeing potential for market share gains and are you proactively going after market share in this climate?

Yes, in the meaning that we see the possibility to gain market share because we know that some of our competitor already declared that if they receive an order today, they will not be in the condition to deliver it within the year because of the shortage of components and the situation. Again, in our case, we are both reprioritizing production in our factory, as I said, and also using eventually the product that are in stock and a good portion of this product are booked for orders for quick delivery and replacing them pretty quickly from production. So it is a situation where case by case we are trying to handle the situation. We are still able to receive order and deliver. Within the year, we are still able to deliver also for replacement business using the product in stock. It is a situation that, at least from what I hear also from the market, is giving us the possibility also to gain market share.

All right. Thank you very much.

Our next question comes from Johan Eliasson with Capital Chiron.

Yeah, hello. Thank you for taking my question. I was just wondering about this 55% growth you talk about in the U.S., remembering that, you know, a few years ago, we had this big chain order subway that propelled organic growth very strongly, and then when this order was delivered, it sort of fell away. Is this strong growth in the U.S.? Is it sort of, once again, one single big order to a chain, or is it sort of broad-based just because the comps are so very low over there?

It is not related to a single large chain order. I personally would love to have another order like that one, but it is not the case. This is a general market, some chain rollout, but I would say normal business development, organic development of the organization. Please do consider also that last year and also 2019 in the United States we had a challenging situation. The United States was one of the countries where we suffered the most during the separation because we had to move everybody from Charlotte to Louisville. And then 2020 was affected by COVID. So the good thing is that we are in food and beverage above 2019 level. And this is coming from, I would call it the general market that is including chain rollout, but not a big one like the one we had during the first month of 2019.

Okay, good. And then I was just curious about your brand strategy. You obviously buy a company called Unified Brands, but you have been sort of propelling that. You have one brand, Electronics Professional. How will you deal with this going forward? I guess these brands are quite important assets in the U.S. market, obviously.

Absolutely, and they are strong brands and, as you said, important assets. So we will surely grow the brands as they are, support the development of the brands, leverage the strength of the brand in the market. Their brand, Rendell, is mainly recognized for custom refrigeration, growing for cutlery, steams, pans. Power Soak for this specific wear washing system. So they are specialized brands and they will remain as such. We have Electros that will continue to be the brand that is collecting under one umbrella. all the different products that you need, both in the kitchen and beverage installation and in the laundry installation. So they have a position in the market. There is room to position both of them in the right way. In North America specifically, We will for sure sit down also with the future colleagues and we will work around the specific brand strategy for that part of the world.

Okay, excellent. Thanks.

To remind you that if you do wish to ask a question, please press 01 on your telephone keypad. Our next question comes from Mattias Holmberg with DMB. Please go ahead.

Thank you. A final question from me. The price increases that you've implemented in July and the next hike now coming in January, is there any reason why there are six months in between those, given how dynamic the cost environment is, meaning that it seems like you could have had some benefit from doing more frequent price adjustments to stay on par with the underlying cost development?

Sorry, I didn't get exactly what you want to know.

So the question is essentially why don't you make price adjustments more frequently than from July until January?

Yeah, so Again, first we did that. In some part of the world, we have been implementing more than one price increase. One example is United States. So there are some countries that are giving us the possibility to do it. And when it's possible, we did it also in customer care. In some other countries, Part of the world, in particular the European countries, is more challenging to do it. So you need to have a certain time, let me call it, from the announcement to the execution. And that is the reason why we have a formal moment. I believe I answered also to one of your colleagues earlier that we don't give a number related to the price increase we implemented, even if In some part of the world, the United States is pretty easy to see how much we increase the price because it's a public information. You go into the the web, the auto quote, but it is because category by category and region by region, this price increase are different. So in some countries, where it's possible, we have been more proactive and fast in doing, in other, we are linked to the, also to contractual reasons.

That's clear. Thank you.

Welcome.

I think those were all questions for today. So with that, I say thank you to everyone who listened in and speak to you next time, hopefully at Q4 presentation. Thank you and have a good day.