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.