Electrolux Professional AB (publ)

Good morning and welcome to Electrolux Professional Group Q4 and full year result presentation. My name is Jakob Rybak. I'm heading up investor relations and communications. And as always with me, I have Alberto Zanatta, our CEO, and Fabio Sarpellon, our CFO. We start immediately and I hand over to you, Alberto.

Thank you, Jakob. Good morning to everybody. As it is in the highlight, we close the quarter with an additional improvement of our financial KPIs. And being the last quarter of the year also, we confirm the growth all along 2024. The highlights of the quarter. The highlights are that we grew sales overall but we increased also organically. The organic growth is coming from laundry that has been well performing all along the year. And that is the other good highlight of the quarter from US food and beverage. We will come back to the subject but during the past quarter we reported a continuous improvement, a sequential improvement of the performance of our operation food and beverage in the US. And we were predicting the change of the trend in Q4 and that is exactly what happened. In addition to the organic growth, we had also a margin improvement, a substantial margin improvement of close to 2 percentage points. And this one is coming from the good performance in laundry, the one in food and beverage in the United States, but I have to mention also the strong performance in terms of margin development that we had in food in Europe. So in food Europe we didn't grow organically, but we improved significantly the margin. The improvement of the margin is coming, and we will come back in detail about that, but it's coming from price, in general the efficiency in the operation and the reduction of the material cost from the volume growth in London and Food America. The other financials to be highlighted are the cash flow that has been strong during the quarter despite the increasing investments in CAPEX that we are doing to prepare for the launch of the product that will happen at the end of this year, beginning of the following one. This is important because as I said all the financial QPI have been improving in Q4 and along 2024 and this is despite the investment we are making both in terms of tools numbers to prepare for the new products but also the increasing R&D investments. In the quarter we have been around 5% of R&D cost versus on net sales. Last remark is about the order intake. Order intake was positive in both segments. if we go to the development of the sales also this picture is good to be compared to the ones that we had in the previous quarter so you see that laundry is positive all across the geographies very strong in north america in north america it has to be remarked the market is good for laundry at least, but I would say that our performance is clearly above the market trend. These are the sales that we are making to our partner, I would call partner more than distributor, the ones that we are working with in North America, but we know that also the external sales, the ones in the market are very strong and are giving us the possibility to gain market share. In food and beverage, we mentioned already the growth in North America. You see that also the one in Asia-Pac, Middle East and Africa is slightly negative. That is a positive signal. Still the negative contribution is coming from Middle East and Africa. Food and beverage is negative in Europe, still positive in the Mediterranean area, while negative in central North Europe related to the market conditions also that are more challenging or at least soft in that part of the continent. and you have to take account that inside of that one there is also the volume phase out of a line that helps us partially to improve the margin but has this effect on the business. Now, if we go into the detail of the food and beverage, food and beverage, we grew the business, but the growth is coming from the acquired businesses because organically we reported a decline. And the main decline is what I mentioned was mainly in Europe. What has to be noticed is that despite of the organic decline, we've been improving the margin. We've been improving the margin, in particular in Europe, the margin has been pretty strong. And this is coming from the continuous improvement that we are doing in the operations in this part of the organization. The challenging areas or the challenging markets are still the same and they are the central Nordic part of Europe and the Middle East and Africa, particularly the Middle East I would say. What is good to see is that even if uncertainty is still there, we see that the order intake is higher than a year ago. We have a particular comment about North America. We have been talking about the development of the business in the food and beverage business in North America and the sequential improvement is confirmed. It is mainly supported by a pretty good growth of chains still in a market that is softer. You know that North America is one of the few markets, Japan is the other one, but for sure not America, is one of the few markets where there are official statistics and that are not showing a market growing 2024, but they are predicting a growing 2025. So with this recovering of the situation, with this recovering also of our presence in North America that is becoming clearly stronger, not only the chains that have been growing healthily all along 2024 but also the institutional business that on the opposite have been declining during the past quarter but is showing sign of recovery, we believe that at least the situation that we've been experiencing at the end of 2023 and beginning of 2024 is in some way progressing towards a more positive situation. One word more about North America and also to preempt the possible question if you have clearly I'm here to answer about that I'm sure that everybody is talking about tariff or better what's possible impact of the tariff that the new administration is supposed to impose for the goods coming from outside North America, what's the possible impact on our business? The easy answer is that we don't know, in the meaning that we don't know yet which kind of tariff, which is the level of tariff that will be imposed and on the goods coming from which What we can say is that, at least listening to the first information that are mentioning tariff on product or components coming from Canada, Mexico and China, I would say that if this is confirmed, the impact on our business, overall business, would be not really material. We have to say that compared to eight years ago when a similar administration took over in the United States and they were claiming similar actions on the goods imported into the country, Now we have two manufacturing facilities. So yes, we are importing components from the three mentioned countries, but that is exactly the same situation of all the manufacturers that are operating in the United States. But at the same time, we have the possibility to assembly or five or performing final assembly of some products in the united states partially we are already doing on beverage products that are coming from thailand so we are in a situation that is putting us in a much better condition compared to eight years ago and and that is what we can say about the the subject of the tariff So if now move to laundry, again, another strong quarter for laundry. So when we were talking about the market development, all the geography developed very positively. In particular, Americas was very strong. Indeed, during Q4, even to say, had a good growth. TOSEI was a positive contribution to the result of the group of the overall group being a creative for the segment food and beverage in the case of laundry because of the very high profitability of the, let me say, organic business, clearly TOSE in this moment is still slightly below, but the contribution is coming. This year, 2025, will be the year of TOSE, in the meaning that... and now I'm not talking about only laundry but the coming week in Japan there is the large exhibition for food and beverage and during this exhibition we will start presenting all the products, Electrolux professional products that will be channeled through the TOSEI network in the food and beverage business in Japan. during the second quarter there will be a lot of activities to create value the famous integration of the laundry operation so important year where we should see we should start creating value delivery value from the acquisition that we completed in january 2024 margin improve again organically and not organically and the improvement of the margin is coming from price volume material all the elements that we can manage and control in the business good things as well as for food and beverage the order intake is still higher than the one we had at the end of 2023 With this said, I believe Fabio we can have a deep dive on the financials.

Thank you, Alberto, and good morning to everybody. As Alberto anticipated, Q4 was another step toward our margin expansion. EBITDA moved from 10% last year to 12%, up approximately 100 million SEC in value. So not only margin, but also important step forward in value. When we look at our cumulative performance for the full year, EBITDA margin increased from 11% in 2023 to 11.6%. But if we exclude the one-time cost related to the acquisition, the step-up cost, that are roughly 50 million second value, the underlying EBITDA margin performance of 2024 is already at 12%. As Alberto anticipated, in the quarter the improved EBITDA margin came from pricing across the two segments, both in food and beverage and in laundry. more than compensating for both the inflationary items, like, for example, the labor cost. We enjoy in both segments a reduced material cost. And in the, let me say, segment mix, remarkable was the increase of the laundry business, very profitable, who grew close to 12%, generating roughly plus of 45% in terms of EBITDA value. Despite the organic decline, and as Alberto mentioned, they are linked to specific geography, Central and North Europe, Middle East and Africa, also food and beverage strengthened the margin in the quarter. Thanks to remarkable recovery in food and beverage in the US, that was a creative also for the food segment margin, pricing and better product mix. And here let me say the phase out of the low margin product definitely is starting to step up and contributing positively to the margin expansion on top of the volumes expansion. When it comes to currency, both translation and transaction, they did not materially affect our performance in the quarter. Acquired companies overall contributed positively, with somehow a profitability altogether that was accretive at the group level. When we move to the other part of the P&L, finance net was 31.2 million in the quarter, higher in value than quarter for last year, because we have added additional borrowing required from the acquisition of Tosei and advantages. However, to be noted that the relative borrowing cost in percentage of the value decrease thanks to lower interest rate but also I would say a well-balanced funding structure. Tax rate for the quarter was higher than average, roughly 30% on income pre-taxes due to one-off tax costs. To give a sort of guidance going forward, we expect the tax rate to stabilize roughly around 26% on sales. APS overall thanks to the improvement in the EBITDA value increased to 0.75 sec per share, up 27% compared to last year. Cash flow, as Alberto anticipated, strong delivery in terms of operating cash flow, over 500 million SEC, showing, and you see in the graph, not only the high value in the quarter, but the consistent delivery of cash flow across the quarters. On a full year base, we deliver over 1.5 billion SEC in cash. That is the historical higher level of cash generation in this group, despite the increased investment in capital expenditure to support the innovation projects, product innovation projects, both in food and in beverage. To give you some guidance going forward, CAPEX will remain higher than the historical average in the incoming quarters, but at the same time I do not expect it will materially affect the cash generation power of this group. When it comes to asset efficiency, rolling 12 months operating working capital on sales has been reduced to 16.4%, roughly close to two points lower than December last year where we were north of 11%. The positive trend and the positive improvement came from a remarkable improvement in the inventory while with the stabilization of the supply chains we continue to drive improvement of the inventory turnover. When it comes to our financial position, as you see from the data and about anticipated, it remains strong with a ratio net debt on EBITDA at 1.4 times, driven by an EBITDA increase and combined with, let me say, a reduction of borrowing. In terms of overall summary, clearly we are entering 2025 with a pretty solid balance sheet, a consistent cash generation, a diversified funding structure, meaning with really the means to support the profitable growth of this group. Not only I would like also to bring to you to our attention also from let me say the fact that we are more and more well balanced from a geographical and business perspective. Europe today overall is below 60% of sales. America has reached 25% and Asia Park is at 17%. So more and more also from a geographical perspective we are well balanced towards also the attractive geography. And last but not least, the high margin laundry business reached 40% of sales. So I would say also from a market and product segment position perspective we are more and more well balanced to enjoy future development of this group and with that back to you alberto thank you fabio and