Electrolux Professional AB (publ)

Good morning and welcome to Electrax Professional Group and our Q4 and full year result presentation. My name is Jakob Ruba. I'm Head of Investor Relations and Corporate Communication. With me, as always, I have Alberto Zanatta, the CEO, and Fabio Sarpolon, the CFO. I leave the floor for you, Alberto, to start. Please go ahead.

Thank you, Iapo. Good morning to everybody. And before moving to the comments of the queue for results, let me spend a few minutes about the year that we just closed. 2023 was a solid year for a letterless professional. where we have been step by step building a stronger company. And that is the meaning of that sentence is that in 2023, we delivered the historical high net sales, the historical high EBITDA value above 1.3 billion SEC and the historical high cash flow. So we have been growing the company, profitably growing the company, and it is something that happened all across the different business and geographies. We have been growing customer care, that is a strategic priority, more than double than the product sales. It is a quarter where we have been reaching, anticipating the achievement of the 50% reduction of the CO2 emission, scope 1 and 2, of two years. So instead of doing this in 2025, as it was planned, we deliver such a result in 2023. And last but not least, we have been also growing inorganically the company, signing the acquisition of Tosei, the Japanese company, laundry and food company, in December and closing it in January. So a year with a lot of things happening that have been making this company stronger than what it was before. moving to the quarter q4 q4 despite being a solid quarter it is still a quarter where we've been declining a trend in sales so what happened in q3 in some in some way happened also in q4 with with a slower pace and that is important because The sign of recovery that we were expecting in Q3, they materialized in Q4. Indeed, the order intake in Q4 is higher than the one we had the year before. And I can also anticipate that in January, this trend of order intake improving compared to last year continued. It is a quarter where... where the decline of the margin was impacted by the lower volume. We understand that you have to consider the comparison with laundry as we had to do in Q3. And as in Q3, it has been impacted negatively by the currency transaction effect. it is a quarter where we further improve the cash flow so also in Q4 we deliver more than 100% cash conversion and thanks to this one we've been able to further reduce the ratio between NEMTEPTH and EBITDA now it is below 1% obviously before the acquisition of TOSEI With all these things together, we also convene to propose the dividend of SEC 0.8, so improving it, growing it roughly 20% compared to the previous year, as it is in our financial target. Moving on to the market dynamics. So if you compare this picture with the one we presented three months ago after the Q3, you see that the different arrows are trending differently in the meaning that they were all down. Now we still see Europe flattening. We see APMEA, I don't mean flattening, but surely not the deep decline. And also the decline in the United States is less deep than what it was. This is what we see and it is confirmed also by the order intake that is improving compared to last year. We are still sitting on a good order stock. We have two months a little bit more than two months of orders in house that is giving confidence of what is in front of us talking about the two segments so if we start from food and beverage food and beverage has been affected again by the decline of the sales in the united states is mainly united states decline that is less deep than what it was in q3 The reasons of the decline are still the same. So it is the tale of the, let me say, readjustment of the market demand that was very strong during the first half of the year. So the two speed in some way. related to what was happening the year before with the missing components, a missing product, the customer afraid not to get the product and stocking the product and then readjusting their stock, readjusting their demand because the supply chain stabilized and the performance of the manufacturer were improving. postponement also related to the uncertainty related connected to the interest rate to the inflation things are getting better some of the tests that we were running with the American chains ended they have been converted in order they will not materialize in Q1 or if they will do it they will do it at the end of the quarter it will be mainly during the second quarter of the year What is really important is the margin improvement that we reported in food and beverage. The margin was a target to defend the margin and the margin improved thanks to the price contribution, thanks to the material contribution. So it is a good sign also this one. If we move to laundry, the decline also in laundry here is a consequence also of the comparison with the previous year performances. I repeat what I said in Q3. In 2022, we had a bunch of orders, 220 million orders. of order that had been moved from the first part of the year to the second one because we had no component. We pre-produced the product, they were unfinished, we finished them and delivered to customers during the second part of the year. Third in Q3 to third in Q4. So the comparison was even tougher than in Q3 and Q4. So, this is the reason why I'm confident that we are continuing to grow the business of laundry. It's a resilient business. Also, the drop in margin is related to the fact that the sales of this product that have been moved from the first to the second part of the year was very high because they were we produced them earlier so the operating cost that we had in Q4 they were the ones where we had on top these sales and in addition to that one we had also the currency the currency transaction factor that was negative in Q3 and it is negative and it was negative also in Q4 also for laundry we are reporting a positive order intake So with this said, I will let Fabio comment or comment a little bit more on the financial aspects.

Thank you, Alberto, and good morning to everybody. As anticipated by Alberto, Q4 was a solid quarter with an EBITDA over 10% or 300 million in the quarter. All along 2023, if you look at the trend quarter by quarter, we were stable over 10% EBITDA generated quarter by quarter. Despite declining sales, primarily in the US as anticipated by Alberto, and let me say material impact from currency transactions, we have been able to maintain the profitability also in quarter four despite the declining volume. positive contribution came consistently along the year from price, more than compensating deflational items like the labor cost. And then since the summer of last year, we see positive contribution from material and reduction of logistic cost. Our focus on growing customer care is definitely paying off. Alberto mentioned the faster growth of customer care on total sales compared to total sales, and clearly you understand this as a positive mix-up on the margin development. Then a few words about currency. Currency was an element highlighted already during the last quarter 3 presentation. During 2023 SEC, our reported currency, weakened against our major trading currencies that are Euro, US Dollar and Thai Baht. If we look into the two ingredients of the currency, currency translation, currency transaction, let me start giving a view about the currency translation first. Currency translation positive contributed for approximately 500 million second sales in the top line. and 55 million in EBITDA, therefore with no material impact for what concerns the margin development. At the same time, currency transactions, due to the weakening of the SEC, had a small positive impact on the net sales, on the top line, an impact that is below 50 million SEC on a full year base, but quite a negative impact for what concerns the EBITDA. Let me say, when I look into the impact on the currency transaction and full year base, the negative impact was around 100 million SEC. Let me say, majority of it equally impacting quarter 3 and quarter 4 performance and margin. What are the reasons behind this currency transaction impact and what are the actions that we are putting in place? During last call, I was mentioning about the business Laundry, where we have a large production facility here in Sweden, and several raw materials that we buy for production are Euro-based. The weakening of SEC versus Euro clearly creates an increase of the purchasing cost of raw materials. In Thailand, we have a large operation producing laundry and beverage products. The strengthening of the Thai baht against our major sales currency of this product, that is sec, that is euro, that is dollar, clearly increases the sourcing cost of this product. What are we doing? What did we already do? Considering this increase of the sourcing cost, we act selectively and we adjust price. We increase price, we expect benefit already to start positively contributing quarter one with a full effect in quarter two of this year. Thank you, Waltz, on the finance net. Happy to report that despite the increase of the interest rate that we faced in the market in 2023, thanks to the reduction of the debt, we have been able to reduce the finance net to 24 million sex, significantly lower than the same quarter of last year. Here we see the development of cash flow. Let me say, Electros Professional is back to historical good performance. You see that also quarter four, we generate a strong cash flow and we are back to a normalized cash flow generation. Overall, in 2023, we deliver, as about anticipated, record operating cash flow generation and it was over 1.4 billion sec here is about operating working capital let me say during 2022 and 2023 we have increased operating working capital on sales Last 12 months reported data at the end of December show an index that is at 18.1%, higher than last year, but started to see somehow an improvement compared to September that was 18.2%. it is a rolling 12 months index but when we look into the quarterly performance the picture is definitely better and it is proved by the fact that we are actually reducing year over year, the operating working capital. In December, it was 1.8 billion SEC, 4% below last year at the same currency. So activities of operating working capital reduction are starting to pay off. And here, I would like to spend a few words about one major offender in 2022 and 2023, that was the inventory development. With improved situation, the supply chain and the dedicated program we put in place, we deliver a significant, remarkable improvement for what concerns the inventory. And at the end of December, inventory was roughly $400 million. SEC lower than we pick, we reach in the middle of this year and 13% in value below December last year. And the action we have put in place and the stabilization of the supply chain are really creating the condition that this improvement is going to stay. Overall, as anticipated by Alberto, our financial position is pretty solid. We have a ratio net debt on EBITDA below 1, 0.9, and we have a cash availability at the end of December close to 1 billion SEC. When it comes to the reason of the reduction of the ratio net debt on EBITDA, Clearly, it has been influenced positively by the improved EBITDA generation, combined with a reduction of the net debt close to 1 billion SEC compared to December last year. And this remarkable improvement that you see from the graph has been consistent delivered in the last five quarters. has been done after having paid a dividend for 220 million SEC. In December we announced the acquisition of TOSEI. We closed the acquisition in January. Acquisition that has been initially now financed with a bridge finance, but we are evaluating the fact that we are going to finance it more term with let me say, long-term solution with access to the capital market. So overall, I would conclude here that electric professionals also from a balance sheet perspective And a cash flow generation capability is confirmed as definitely a solid group with the means to further support the profitable business growth. And with that, I give the word back to you, Alberto.