Electrolux Professional AB (publ)

Good morning and welcome to Electrolux professional Q3 presentation. My name is Jakob Rybak. I'm heading up investor relations and with me as always I have Alberto Zanatta the CEO and Fabrizio Bellon the CFO. And I start with handing over to Alberto. Please go ahead Alberto.

Thank you Jakob and good morning to everybody. Q3 in a summary it is another quarter with the continuous sales growth with the margin and earning expansion and development. It is a quarter where we had to face some challenges that limited the development of both the top and bottom line in particular the supply chain that is much better than what it was months ago but is still creating some destruction in some specific area and production facility we had to face the increasing energy cost that is not impacting the material way our business but obviously is impacting the business of our customer and we had to face the logistic transportation cost the third element limiting the expansion was also the inefficiency in our factory inefficiency due to the strictly related to the supply chain challenges On the other hand, the negative elements that we mentioned have been compensated by positive activities. The first one is the price. The price is now offsetting the material cost in the quarter and in the right direction as we mentioned already beginning of the year to have a complete offset of the negative development of the material cost along the entire year. We had a positive effect of currency and we had clearly a positive effect of the recovery of volume and sales in laundry. Last quarter we had the laundry business underperforming our expectation because of missing components the electronic board that was not made available because of the lockdown in Shanghai in China now the components are available We mentioned that on that quarter we pre-produced product to make sure that we were in the condition to increase production as soon as the components were made available. It is what happened and during the Q3 we have been increasing significantly the sales of laundry appliances. The other element to note during the quarter is the development of the cash flow that is still limited and is mainly because of the growing operating working capital, in particular account receivable and inventory. One comment and then Fabio will go deeper into the analysis about the inventory. the inventory is also increasing because we had a significant increase of this safety stock of components so the components that created problem in production during the previous quarter now we increase the safety stock and this has an impact obviously on the inventory still high is the inventory of booked product so product that are already sold with the name of the customer but we still have in our inventory because of delay in completing the setup of the place where they have to be delivered the third element in the inventory development that is i would see i would call it a positive one is that we increase we finally increase the what we call free stock so stock of product that are not booked for customer but that we can make available to for the replacement business this is important in particular if we have to prepare for a possible downturn when typically the replacement business is the one prevailing on project and other kind of business if we look at the development of the sales i would say that it is strong in every area i would point out obviously the development in north america that continue to be far above the development of the other region and the development of laundry, partially pushed by the recovery of the volume of the production that we didn't complete in Q2, but also because it is a good business developing all across the continent in a quite good way. the area that presented a softening of the development of the sales is Europe and in particular food and beverage the order stock so the order that we have in house and that we have to deliver to customer is still good higher than last year significantly higher of last year and it is still equivalent to roughly three months of sales again as a reference last year it was two and a half months and in the pre-pandemic so normal time let me say is typically one and a half months order intake compared to last year in particular in europe food and beverage is softening compared to last year but it's still in on the level of the pre-pandemic period level Other comment about the market because we just received the result of market research, the official data that are reporting the development of the out-of-home market, the out-of-home spending. So what we as consumer spend out of home for traveling, eating, sleeping in the hotel and so on. And we see that on a yearly basis, so considering From January 1st to the expected December of 2022, it is a market that is still not completely back to the 2019 level, but the gap is clearly closing. and the closing of the gap is mainly due to the fact that also the segment that beginning of the year suffered or didn't restart the growth business traveler for instance in Primis they are now recovering pretty fast airports are full not only with tourists but also with people traveling for business Entering the detail of the two segments about the food and beverage. Food and beverage developed very well in North America. We are pleased and I repeat this one and during the investor day in a couple of weeks we will have the possibility to further comment the result of the recently acquired operation Unify Brand but we are very pleased of the development of the business in North America. In food and beverage we could have done even better because in particular Unify Brand had the most significant supply issues in the quarter missing components we had exactly the same problem that we had in laundry a component missing and we pre-produce product that we are going to finish to deliver to the customer mainly chains during the coming weeks not of the magnitude of laundry, but still significant for the business, for our business in North America. The other area that deserves a mention is the oven. The daily production of our combi oven is close to double than what it was before summer. also here we are paying this significant increase of the demand and the output with some inefficiency because the supply chain is not stable it doesn't allow us to further increase production as we would love to do on the positive side material cost increases are compensated by price and we are in line with what we said to have the overall delta offset by year end. Comments about the laundry quarter. In this case, I have to say that the development of the sales is strong. It was expected because it was expected to have a strong development of the laundry business because in addition to the, let me say, day-to-day business, we have also the recovery of the pre-produced product of the sales coming from the pre-produced product. also in this case as well as in food the north american market deserves a mention as the market where performance have been significantly higher than in the other region also in laundry in this case finally the price is compensating the cost of the material in laundry We clearly had to report inefficiency, so this means that we could have done better. The inefficiencies are related to the activities to recuperate the product that we reproduce during the last part of spring, beginning of summer. Last comment about laundry is one of the offender of the increase of the inventory because in particular in laundry we significantly increase the component safety stock of the electronic parts the ones that we are missing during the spring summer this year. With this said I would say that Fabio up to you to enter into the detail of the financial

Thank you, Alberto, and good morning to everybody. As you have seen the material, electric professionals reach 11.4% EBITDA margin in the quarter, over 300 million SEC in value. We need to go back to the first part of 2019, so meaning pre the pandemic, to see such level of EBITDA generated in a single quarter. Food and beverage further strengthen the profitability reaching the 10.5% and laundry deliver a strong quarter over 17%. Unify Brands, the recent acquired company, delivered also a strong quarter, being accretive for the food and beverage, but also for the overall group profitability. And we did report no material change in the group common cost. When we move from the quarter into more a year-to-date picture, if we exclude the provision for Russian divestment, year-to-date we deliver over 800 million in EBITDA. we are over 10%, 10.2% is the year-to-date profitability compared to 499 million SEC of last year year-to-date, meaning a growth of 65% in EBITDA year-on-year. When we look into the P&L structure, we face a decline of the gross margin. The gross margin was 33.2% in the quarter compared to 34.9% in the quarter of last year. I would bring to your attention two components of declining of gross margin. One, or let me say half of it, is related to the fact that now we have a unified brands as part of Electrus Group. As I mentioned earlier, from a profitability perspective, a unified brand is a creative for the group, but has a different P&L structure. large part of the business of unified brand is changed and we change we operate with lower gross margin but i would say with a pretty lean cost to sell that is bringing the profitability of this organization and the chain business that we know at a very attractive level The remaining part of the decline of the gross margin is back to what Alberto mentioned. Even if in these days the disruption of the supply chain have been significantly mitigated, we suffer for it into the quarter and this has affected the productivity and the product cost into the quarter. On top of it, we also face increase of the transportation cost. Back on price, price in the quarter more than compensated the material and the bought-in product cost increase, both in food and beverage and in laundry. In quarter four, the positive gap between price and material cost is expected to further improve delivery but already anticipated a full coverage by year-end of the price with all the material and bought-in product cost increase. On the sale administrative expenses in value they increase year over year because also they add on only five brands but the weight on sales reduced below 22% compared to 24.6% of last year. The investment of the company Continuum, in particular the investment on the digitalization of our product offer as well as the digitalization of our process in the companies. When it comes to the structure of our balance sheet, at the end of September our operating working capital sales was 15.6% on sales compared to 16% of September last year, slightly up compared to the level we reached in June. we continue to operate with, let me say, low utilization of operating working capital on sales. When we compare the two quarters, meaning the quarter of September this year to the quarter of September last year, we have a significant increase in operating working capital or roughly 1.1 billion SEC. There are, let me say, four components behind it. Two, let me say, are not daily operational related, meaning we have a significant impact from currency translation, SEC getting weaker against other currencies that contribute to roughly 100 million SEC. We have Unified Brands that are now part of Electros Professional perimeter, adding on another 400 million. The remaining 600 million comes from, let me call it, the remaining business department and two areas to point it out. Receivable increase, yes, receivable increase because also sales increase significantly year over year organically. What I'm happy to report is that the quality of our receivable is and is expected to remain good. Inventory increased as well, and the increase was part of a conscious decision to increase the safety stock of four components as well as to have a higher stock of finished products to secure product availability. On top of this let me say business decision clearly as you may guess the value of the stock increase also because of the higher material cost that is incorporated into it. When it comes to our capital structure, our ratio net debt on EBITDA is at 2.3 times and value that is still well below our financial target of 2.5 times. Clearly net debt increased compared to the same quarter of last year and let me say the main reason behind it is the spending, the cash out that we had for the acquisition of Unified Brands. I have also to report that in the quarter we have had a further push up of the net debt value because of an EFRS-19 adjustment of the Swiss pension fund that we have and this adjustment is roughly 256 million SEK. It is an accounting adjustment that has no impact on the financial debt of the group, on the cash flow, as well as for the income of the group. I was mentioning earlier about the acquisition of Unifi Brands. Back in December we acquired the company leveraging the cash available as well as the utilization of the revolving credit facilities. As we announced in September we have replaced the utilization of the credit facility with a term loan of 140 million euro that has a pretty interesting duration of 18 months with the possibility to extend two times additional six and six months. As per today, October 27, we have completely reimbursed the revolving credit facility so we have in place the full extent of revolving credit facility that is 200 million euro. As you can see from the chart, we have a pretty sounded financial and debt duration. We have no covenant in place and we have a situation that allows us to enter 2023 with strong financial power and no maturity obligation for what concerns our loan. Last comment on my side is on the cash flow. Alberto already mentioned we have had a limited cash flow for the quarter and for the year to date. Despite the good EBITDA performance the operating working capital increase absorb majority of the cash generated. My expectation is that now that the supply chain is stabilizing, we are already started to review the safety stock requirement. This means that already in quarter four, I expect a reduction of operating working capital as well as a return to a solid cash flow generation already from quarter four. And with that, back to you Alberto.