Electrolux Professional AB (publ)

Good morning and welcome to Electrax Professional Group Q1 presentation. My name is Jakob Rubai. I'm heading up investor relations. With me I have Alberto Zanatta, CEO of Electrax Professional and Fabio Sarpelon, CFO. And as always, I start by handing over to Alberto. Please go ahead, Alberto. Thank you, Jakob.

Morning to everybody and welcome to the call. Q1 was a strong quarter, strong from the net sales development point of view, roughly 20% up, but also strong from the profitability margin and earning points of view. We grew earnings EBITDA by 44% with a margin that is above the 10%, double digit, 11.4%. So good quarter driven mainly by strong performance in particular in Europe and also Asia-Pac, Middle East and Africa recovering pretty well. In the quarter, we also improved the cash flow. Operating cash flow was positive. I would say in the normalized range, in the meaning that compared to last year that was negative, it's clearly improving. But if also compare it to the past years, it is on a normalized level. Thanks to this performance, we also reduced the ratio between net theft and EBITDA. If you look at the geography, here we can clearly see that we had the different dynamics and they are different also by segment in the meaning that while laundry grew in every segment, in every region, so we had a good development of laundry. in Europe, in Asia-Pac, Middle East and Africa, and also in North America. If I look at food and beverage, we had extremely good performance in Europe. I would say even above our expectations. very good performance also in Asia-Pac, Middle East and Africa confirming the recovery of the regions with one exception that was China. China is still late to come back. We see right now sign of recovery in April with the with the with good business in China but again it's late to come but in particular we had food and beverage declining compared to last year sales in North America. And this is specifically, as I said, in food and beverage. If we look at the performance of the food and beverage segment, overall we deliver a good increase, a good sales increase, roughly 10%, with a 40% increase of the EBITDA, so also in this case a profitable growth, that mainly came from price, but also volume development in this case in Europe and another important thing was the development of the mix so we've been able to mix up focusing and growing particularly sales of high margin product Food and beverage, and I mentioned earlier when we discussed or when we looked at the different dynamics in the region, we declined sales in North America compared to last year. And this is mainly because of a specific event happening in that part of the world, in the meaning that in North America in 2022, due to the fact that customers and stocking dealers, at least the ones building the stock, they were concerned about the product availability, they built up stocks, not trusting in some way suppliers, they built up stocks. Now, with the normalization of the supply chains, with the performance of a manufacturer back to normal in terms of delivery time, all these customers, I repeat, both the chains and suppliers, the distributors, they are reducing the stock. They are doing exactly what we are doing in our factories where we have been building up stock of components and now we are going back to the normal way of managing the supply chain and the flow of the components. This is an effect that we believe is temporary, probably going into Q2.2. but for sure it is something that is related to a specific dynamic of the market. Things that are not affecting the laundry business. Not at all. The laundry business is doing very well. As I said, growing up to close to 20%. And basically everywhere, in every region. Also in terms of margin, the margin improves significantly. And again, driven by price again, as in the case of food and beverage. As in the case of food and beverage, because of the mix, in this case we sold mainly the product providing significant benefit for what energy saving, water saving are concerned. that are not only providing good advantages or competitive advantages to our customers, but are also the products that are, at the end, delivering higher margins to us. And in the case of laundry, also an important impact of volume. I believe I always mention the fact that In this business, volumes are super important for the expansion of the margin, and I would say that in laundry it is the case of proving it. With this said, I would leave the floor to Fabio for additional comments about the financials.

Thank you, Alberto, and good morning to everybody. Since Q2 2021, professional quarter-on-quarter has been able to consistently increase both the top line and EBITDA compared to the previous year quarter. Also in this quarter, overall, we increased the habitat generation by 100 million sacks. 60 million came from food and beverage, plus 40% compared to the previous year, reaching 180 million sacks of habitat generated in a quarter, with a margin of 9.6%. Additional 34 million came from laundry, plus 28%, reaching close to 200 million second habitat generation in a quarter, with a margin of over 18%. For laundry, this represents the best historical quarter, or the best historical quarter one. Group common costs were 38 million SEK, roughly 9 million SEK below Q1 last year, where we had a specific consultancy cost. I've already mentioned about the ingredients of such a beta improvement. definitely price play an important role, more than compensating the inflationary item, not only related to material, but also related to labor costs as such. Volume growth definitely supported the development of EBITDA, in particular in laundry and the food service in Europe. And as I mentioned, we were also mixing up in particular in the food service business in Europe, increasing in our portfolio product the sales of the higher margin product categories. With the stabilization also of the supply chain, we also saw a reduction of the logistic costs on the sales. So this is definitely a good signal going forward. We continue to invest in the company for our future. The investment in innovation in particular on product development as well of sales. the digitalization of our processes and interface with the customer continuing but overall we have reduced the weight of sdna on sales to 24 roughly one percentage point below the same period last year Income in the quarter reached 190 million or 0.66 sec per share, meaning an increase of 23% year over year. Finance net was close to 40 million sec, clearly negatively impacted by the increase of the interest rate. When it comes to the balance sheet development, let me start with the operating working capital. Operating working capital was 2.2 billion SEC at the end of March, an increase of 38% compared with the same period last year. Currency translation contributed negatively with an increase of roughly 7% to 8%, but also the pricing of the component and the product we have in stock negatively affected the value of the operating working capital, in particular on the inventory side. At the same time, I expect that with the stabilization of the supply chain and the action that we have put in place in particular on the inventory, in the second part of the year we should start seeing a reduction of the weight of the inventory and the overall operating working capital. Quality of receivable is and I expect will remain good also in the rest of the year. Overall, our finance position was solid and remained pretty solid. Our ratio on EBITDA, we closed the quarter 1.4 times against 1.5 times at the end. In the quarter in particular, thanks to the cash available and the cash generation, we have been repaying a portion of our short-term loan for roughly €35 million. And we ended up the quarter with roughly €800 million in cash and we have a revolving credit facility fully available for €200 million. meaning that we have the means to sustain and support the development of this group going forward. Alberto mentioned about cash flow. Cash flow was pretty solid in quarter one, close to 90 million SEC cash generation against minus 42 on the same period last year. Cash compared to the EBIT generation was pretty negatively affected by the increase in working capital related in particular to the support increase in receivable inventory related to the business growth. Cash flow, as you see from the chart, is historically weak in Q1, but as anticipated during last call and the message was already there for Q4 last year and confirming Q1 this year, I expect a stabilization of the cash generation going forward, more reflecting a trend that you see in this chart of 2021.