Electrolux Professional AB (publ)

Good morning and welcome to Electrolux Professional Group Q3 result presentation. My name is Jakob Rubai. I'm heading up investor relations and communication. With me today I have, as always, Alberto Zanatta, our CEO, and Fabio Sarpellon, our CFO. And I hand over to you to start. Alberto, please go ahead.

Thank you, Jakob. Morning to everybody. So Q3, as the headline says, in Q3 we're profitability so another step towards the achievement of our financial target and different from the previous quarter we also develop organically organic sales I would summarize the quarter as in the quarter where all the financial KPI has been improved we grew sales organic sales we improve the EVTA and we improve the EVTA margin. We also continue to generate strong cash flow, more than 100% cash conversion, taking down the operating working capital on sales and further improving also the order intake, so the collection of orders. So a positive quarter in the right direction despite the negative impact of the currency that was hitting us negatively in the quarter, in particular in the laundry business. If we look at the sales, the development of the sales by region, we have different dynamics in the meaning that overall sales were positively organically positively growing both in europe and in the americas while they've been declining both in food and beverage and laundry in the asia park middle eastern africa region I take also the opportunity to give some headlights about the market, because if this hour says, where is the market? Europe is still holding. In general, Europe is still holding, mainly driven by the South European markets that are or the Mediterranean region that have been performing extremely well during the summer thanks to the touristic season, but it seems to be holding well also during the fall. The Asia-Pac region, I'm talking about the market again, the by far largest market that is Japan is soft, still soft for different reasons because of the increasing interest rate that is in some ways slowing down the investment because of the inflation that for at least that market is high because of, let me say, the softening of the demand after the peak of the pre-COVID recovery. In the other countries of the of the Asian region, Southeast Asia in general, China, we see improving market condition. Still pretty tough the situation in Middle East. We have a big region, Middle East and Africa, but I would focus on Middle East mainly, where the situation is still pretty challenging, as I believe everybody can clearly understand. In America, we see an improvement of the situation. It is still not as good as obviously we would like to see the American market, but as we said also the other time, we are living on certain days, so days where many decisions are postponed because of what is going to happen during the coming weeks. If we go to the segment food and beverage, we have some words about the two segments, starting from the food and beverage asset. The first thing I want to say is that both segments have been improving the profitability and the margin. In the food and beverage, We did this despite an organic decline. And I think it's important to spend a little bit of time on this one because the decline, the organic decline of the sales is entirely due to the situation in the Middle East. If I would have excluded the Middle East and Africa, not Africa, only the Middle East, I would have delivered organic growth. And in this region, in particular in the Asia-Pac region, the Middle East is the most profitable, or at least it was the most profitable market. So the organic decline is coming from this specific region. An additional comment about the sales development in Asia. In food and beverage, I want to make it about an action that we consciously took. What I mean is that since the beginning of the year, or last year, we took the decision to phase out a product family that we call semi-pro with refrigerators. This is a sub-family in the cold line that we decided to phase out because the margin was very low. So we consciously decided to lose sales to improve the profitability. And indeed you see that despite the organic decline, the margin improved. And the other important thing is that the order intake is improving, and it is improving in particular in North America, because we already commented that the Asia-Pac region, Europe is doing well, continuing to do well, generating profitable growth, and Europe is the largest market that we have. But again, North America is still suffering. I have a specific comment about or deep dive in North America because we always had, at least I always receive a question about that. North America is improving. It's still negative. So we are still declining sales. but much less than in the previous quarter. And what we are doing is starting to provide the good result. You know that 50% of our business is chains and chains are growing 5%. So finally, chains are starting to... let me say to convert the test that we have been doing since the beginning of the year or better since last year into orders. And this is obviously very, very good. The other thing that I want to mention is that since September last year, we reviewed our or we relaunch revamped our go-to-market re-establishing all the processes i call them back to basic in the meaning demonstration training support and so on and the results are coming we started from the largest region that is Texas. And the results are very good because we collected orders for the combi oven that you know is being one of the most profitable line that we have. million dollar for the coming two quarters so very very good result that are giving confidence that finally the situation should turn into a positive for us food and beverage too If we move to the other segment, here the picture is quite different. I believe that in the laundry we are confirming our strong position in the market, our leading position in the market with a strong growth of the sales but also a strong organic growth. I would say that the market is not growing so much. You know that this is an industry where it's tough to have a hard number. We have them for US and Japan, typically these two markets, but not for the overall market. Nevertheless, for the information that we are able to collect from what has been in the past year, the market is not growing so much. Clearly our position is becoming even stronger and it is across the different regions, across the different markets. Also in this case, Asia-Pac, Middle East and Africa is the one suffering, so reflecting the same picture that we had for food and beverage and is mainly due to the situation in the Middle East. A couple of words about the profitability because I believe it has to be mentioned, this one. was slightly creative at group level. It has to be said that because in Q2 it was dilutive. So it is slightly creative. It is good despite the market conditions that are not so good. But thanks to the fact that in the two categories where we play laundry and vacuum, we are market leader. We have been able to hold the market share. And as a consequence, we have been able also to take action defend the profitability so slightly a creative group level but for the laundry business TOSE is dilutive so if i don't look the organic let me say profitability of our laundry business is one point more and again you know that we said it also when we acquired TOSE that TOSE would have been dilutive to laundry before synergies so we are still expecting synergies to kick in we started we started replacing the external supplier for the combo machine but that is just the first step of a long line of process that in some way will find the peak between the first and the second quarter of next year when all this project we should turn into actions and then starting to deliver the synergy. One point more, basically, in terms of organic. And when I mentioned at the beginning that our quarter was affected negatively by currency, I was mainly referring to laundry. Because in the case of laundry, the currency impact is a couple of points. So this means that the quarter of laundry would have been around 20%. So very, very good. In addition to that, laundry is giving us confidence that we will be able to continue to perform pretty well also the coming quarter because the order intakes continue to be strong. With this said, I believe I'll let you comment in detail the financial, Fabio.

Thank you, Alberto, and good morning to everybody. As Alberto anticipated, quarter three was another step toward our margin expansion. As you see, EBITDA moved from 10.5% of last year to 11.5% of this year, up in absolute value by 12%. Acquisition and integration cost for the advanced industry but the result for roughly 3 million SEC. When we look at the accumulated performance, meaning moving from the quarter to measure the performance of the three quarters together, EBITDA margin is currently 11.5%, up roughly 5% in value compared to the same period of last year. if we somehow for we do the exercise to exclude the acquisition cost and the integration cost that the burden the result of this year for roughly 50 million sec to be noted that the underlying business performance this year is already at 12 percent so let me say a remarkable step forward in the quarter We improve margin thanks to pricing, more than compensating inflationary items like the labor cost. We continue to enjoy lower material cost. And as Alberto just mentioned, we have a remarkable sales increase of the high margin laundry business that grew organically over 5%, generating more than 20% EBITDA value. and definitely also a very good performance of food and beverage in Europe. Currency negative affected the quarter. This quarter together was negative impact both in terms of translation and transaction. Currently translation reduced top line roughly a couple of points and somehow in the same order of magnitude for what concerns the EBITDA. but, let me say, with a neutral effect in terms of margin. Currency transactions instead had a minimal effect on the top line, but a significant burden on the bottom line, the EBITDA, with roughly 30 million second negative impact in the quarter, mainly in laundry. And this is specifically due to the, I would say, swift strengthening of the Thai Baht, that is our sourcing currency, versus Euro, US Dollar and SEC, combined with the continuing weakening of US Dollar, in particular versus SEC. As in the past, we are not still facing this situation, but we have already taken proactive action on price to compensate the weaknesses in particular of the Thai baht. Alberto mentioned that the acquired companies overall in the quarter had a reasonable good improvement in terms of margin. They are creative on a group perspective. And even if they were not part of the group, besides the softer development of the market, they were expanding the margin compared to the same period last year. Moving into the other part of the balance sheet, the final net was 29 million SEC lower than last year, despite roughly 1 billion SEC more in terms of borrowing. Borrowing that we have enlarged to support the acquisition of Tosei and Adventis. This, I would say, remarkable result has been achieved thanks to a well-structured funding structure. For example, in the quarter we have closed fully the bridge facility that we were activating for the acquisition today and replaced it with a medium-term loan. Currently, a large portion of the debt is in yen-based, let me say, currency, and also we enjoy the reduction of the interest cost in the market. Tax rate for the quarter was approximately 22%. It's somehow, let me say, a down weight in this quarter, but overall I give you a guidance that on a full year base, the expected guidance of 25-26% is still valid also going forward. EPS was 0.66 sec per share, up roughly 18% compared to the same period last year. As you see in the graph, we continue to deliver good cash flow performance. In the quarter, we delivered over 440 million, confirming somehow the consistent cash generation quarter on quarter that this group is able to provide. A note on CAPEX. Here you see in the quarter, CAPEX was somehow relatively low. lower than the same quarter of last year but somehow I want to give some sort of guidance going forward because of significant investment in particular on the product that we are doing both in laundry and in food and beverage we should expect somehow an increase of capex on sales compared to the historical average. In terms of asset management, we continue to improve. Operating working capital on sales was reduced to 16.8%. And you see, we are continuing to trend in the right direction. And with, let me say, the major improvement coming from the inventory that, as you know, was the area where we suffered the most, in particular during 2022 and 2023. Our financial position after the acquisition of Tosein Adventis remains strong and you see that we are continuing to improve also in terms of balance sheet solidity with the ratio net debt on EBITDA down. at 1.7 times so i would say that overall we are closing a quarter as about anticipated with all the financial kpi moving in the right direction a pretty solid balance sheet meaning with the right condition to deliver continue to deliver both in quarter four and in coming year and with that back to you alberto thank you fabio and uh