Electrolux Professional AB (publ)

Welcome to Electrolux Group and the presentation of our Q1 report. I'm Ann-Sofie Jönsson, Head of IR. And with me today, I have Yannick Fierling, our CEO, and our CFO, Therese Friberg. After the presentation, we will open up for Q&A. For those of you who are viewing on the web, do feel free to place your questions in the chat throughout the presentation, and we'll pick them up afterwards. So welcome, and now over to you, Yannick.

Thank you very much, Anne-Sophie, and good day to all of you. I'm very happy to present the Q1 2025 Electronics Group Report. We are glad to report a solid organic growth of 7.9% here, which has been leading us to an operating margin of 1.4%, with a year-over-year improvement of 1.2 billion SEC. We have been improving in every single business area. And no need to say, I mean, we have been delivering these results in an environment which has been rapidly changing, which has been very volatile and uncertain. Moving to the global perspective, again, 7.9% organic growth, mainly driven by North America and Latin America. We had overall a favorable product mix in every single region. Unfortunately for Europe, as for the last quarters, the market was mainly replacement-driven. Looking at the operating margin, again, 1.4%, the main positive factor we had and the main positive contributor for this operating margin has been the efficiency and cost change we delivered in the first quarter at a level of 1.4 billion. The increase in sales and product mix have been more than offsetting the negativity we had on prices. The single big external factor we had to face was the devaluation of the Brazilian real in Latin America. And here, once again, we acted quickly by increasing prices in the first quarter. So in a nutshell, Latin America continued to perform well. We have been improving significantly the results in North America and in Europe. Deep diving into Europe, Asia-Pacific, Middle East and Africa. Again, the market was largely unchanged. The organic growth we had there was 1.2%. We're glad to say that we have been outperforming the market with the Electrox and the AEG brand. As I mentioned previously, quite a lot of pressure on prices, promotional. The market was mainly replacement driven. The kitchen channel remained very weak, but stable versus the last part of 2024. In terms of operating margin, once again, the main positive contributor has been the efficiency and the cost reduction we have been bringing in this first quarter. The higher volume and the product mix partly offset the negativity we had in terms of pricing. Europe was one of a single region where actually currency had a positive effect and we have been benefiting from a lower raw material cost. These two factors have been offsetting the impact we had to face in terms of labor cost. Lots of new land launches, lots of innovation which are consumer relevant in this market here and we decided to keep on investing on marketing and keep on accelerating actually the spending we had in this area. Just looking at the market, once again, the market was largely unchanged in Europe. But I would like to draw your attention on the evolution of the market. If you look at Q1 2025, in terms of volume, we have been 12% lower than in Q1 2019, previous to COVID. That's taking us back to the volume we had in 2014. So the subdued price pressure and subdued basically purchase power we have in this market have been pulling the customers to go towards lower price points. Moving to North America, we're glad to say that we have been growing by 12.2% in terms of organic growth. This growth has been fueled by major launches in the premium segment of laundry. We have been launching new products in refrigeration and in cooking as well. We should be putting that into perspective, and Q1 2024 was pretty weak for North America. However, we have been outperforming the market. Our mix was largely favorable, again, fueled by the strength we do have with Frigida Gallery and Frigida Pro. In terms of operating margin, we are certainly not where we wish to be. But again, I would like to underline the progress and the improvement we have been making in this market. We have been improving versus Q1 2024 operating margin by 1.2 billion SEC. One of the main drivers, again, besides mix, was cost saving and efficiency. We have been driving in North America. The increased volume was supported by marketing investments, and we had great innovation, again, which we have been launching in North America. Labor costs, inflation, and currency have been headwinds in these markets. Now moving into the North American market, and exactly like Europe, I mean, the North American market has been largely unchanged versus Q1 2024. However, what we have been observing is a clear deterioration in consumer confidence in these three first months. And we have to say that the market demand has been pretty resilient to this lack of consumer confidence. More to come. I mean, we will be facing additional tariffs moving forward. We will be compensating these tariffs by price increases here. And we are expecting demand to suffer from these inflationary tendencies. Latin America, strong performance, once again, 16.3% in terms of organic growth. However, I would like to draw your attention that this growth rate has been slowing down versus the previous quarters. I think the main reason why this slowed down is the inflationary tendency we had in Latin America with the devaluation. of the real in Brazil in end of 2024 and beginning of 2025, which has been forcing many of us, and Electrolux was one of them, to increase prices right away in Q1. What we have been observing as well in Latin America, and especially in Brazil, is an increased competitive pressure, mainly in the low-end segment, driven by Chinese competitors. However, strong mix, great product launches have been driving the results we see on these pages here. Cost reduction was once again a very positive factor in driving the operating margin we see in North America. We kept on investing on the marketing side of the equation in order to support the launches we had in the region. Cost reduction. And I've been mentioning cost reduction several times. We are heading to deliver the 3.5 to 4 billion SEC we are committing to deliver for 2025. And that's thanks to the cost excellence program we have been launching end of 2023. This cost excellence program is accelerating. We are designing for a better cost our product. We're sourcing components out of best-cost country sourcing, and we're gaining efficiency in every single factory we have around the world. And that's why we're glad to report out a saving of $1.4 billion in the first quarter. This saving will be positively impacting the operating margin of every single business area, among which, of course, North America. I mentioned several great innovations, all of them customer-focused in every single business area. I would like to point out the new Electrolux kitchen range we are launching right now in Europe. All the products will be connected with a great feature, which would be AI-assisted cooking. One of the brand pillars of Electrolux is human centricity. And a great illustration is certainly the seamless user interface we will have on these products. And all of them will have leading energy tag, sustaining basically the targets we have in terms of energy consumption. Speaking about sustainability, I mean, there is absolutely no doubt Electrux is a leader in terms of sustainability for home appliance manufacturers. And we have been yesterday once again recognized by Financial Times as one of the leaders. Actually, we were ranked 32 out of 500 companies leading in this area. We have very ambitious targets. I mean, 85 percent reduction between 2021 and 2030 in scope one and two and 42 reduction in the same period in scope three here, which is basically during the usage of the product. We made great progress in 2024. We have been reducing scope 1 and 2 by 36% between 2021 and 2024, and we have been reducing scope 3 by 31% in the same time period. Sustainability is one of the growing purchase drivers we see worldwide. And globally, as mentioned on this slide, two out of three consumers consider sustainability as an important factor when buying electrical appliances. So we are very proud to be leading in this field. With this positive note, I will hand it out to Therese.

Thank you, Yannick. And if we then take a look at the sales and EBIT bridge, we had an organic sales growth of 7.9%, which was generating a positive contribution to earnings in the quarter. And this was generated by a slightly positive price and mix combined. Driven by a negative impact in Europe, as we have mentioned, the market is very much replacement driven and also with a still high promotional activity in the market. North America, from a pricing perspective, we have seen stabilizing during 2024. So now in the first quarter, we essentially saw a flat price year over year in North America. While, as mentioned in Latin America, we have done price increases to offset the negative headwinds from currency. Mix across all the business areas once again in the quarter was positive, driven by really the strong product portfolio we have and also very strong consumer star ratings. This was supported by an increase in innovation and marketing, mainly in marketing to support the products on the market. We had as mentioned as well a positive cost efficiency of 1.4 billion Swedish krona in the quarter and we are well on our way to deliver on the full year target of 3.5 to 4 billion. And then to end with external factors was negative mainly with the currency headwind in Latin America but also some negative effects from labor inflation in the quarter. And then taking a look at the cash flow. Cash flow after investments was negative 3.1 billion in the quarter. We did see an improvement in EBIT year over year, and we also saw some slightly lower impact of investments in the quarter. But we had a higher seasonal outflow in operating working capital. And what we can say is that the cash flow right now is really back to what could be considered a normal seasonal cash flow, which means a strong outflow of working capital in the first quarter. Year over year, though, if we look at the end point in the first quarter of operating working capital in percent of annualized sales, we are down to a level of 4.6% now compared to 5.2% last year. And then if we look at the liquidity and the maturity profile, as of the end of March, we have a liquidity of 29.5 billion Swedish krona involving revolving credit facilities. And on top of this, we also have the loan of 200 million euro with EIB that we signed at the end of 2024 that we have still not drawn on, but we will do later in the year. And as you can see, we have a well-balanced maturity profile and we have no financial covenants. Despite the seasonally weak cash flow in the first quarter, we have stabilized the net debt to EBITDA at the same level as we had at the end of 2024 at 3.4 times. And of course, our focus is to maintain a solid investment grade rating. And with that, I hand back over to Yannick to go through the outlook.

Thank you very much, Thijs. In the first quarter, demand for home appliances in Europe continued to be predominantly replacement-driven and was relatively stable with high promotional intensity. Housing construction and kitchen remodeling remained subdued, and the built-in kitchen market in Europe was weak but stable on a low level. The increased economic uncertainty in North America weighted on consumer confidence, but the market in North America was largely unchanged in the first quarter. In Latin America, consumer demand in the main markets is estimated to have increased in the quarter, with slowing growth rates in Brazil. Price was positive, supported by price increases to compensate for currency-driven cost inflation. The geopolitical and economic uncertainty has increased with consumer confidence deteriorating in North America and Europe as the quarter progressed, driven by concerns around U.S. trade policy development. For North America, the demand outlook for full year 2025 is increasingly uncertain. Market price increases and general inflation due to tariff risk having a dampened effect on consumer demand. Consequently, we have revised our market outlook for core appliances in North America from neutral to neutral to negative. The European market is on a 10-year load and demand is predominantly replacement-driven. The increased uncertainty risk delaying a recovery of discretionary purchases in the important built-in kitchen segment. For full year 2025, we reiterate, however, our neutral market outlook for core appliances in Europe. In Latin America and Brazil, growth has slowed as we expected, and we reiterate our outlook of neutral market demand for core appliances in the full year 2025. Now moving to a business outlook. Electrolux Group has a mainly North American manufacturing footprint for sales in the region. Assuming current level of imposed tariff on imports to the U.S., however, we are implementing price increases with the ambition to offset the impact of higher costs due to the tariff. Also in Latin America, our ambition is to offset currency headwinds with price. We now expect organic contribution to EBIT from volume, price and mix combined for the group in the full year 2025 to be positive, primarily due to price increases. These marks an increase from the previous neutralized outlook. The cost inflation related to increased tariff is included in external factors in our EBIT bridge. On back of the currently imposed increase in tariff, we have altered the outlook for earnings contribution from external factor from negative to significantly negative. Currency remains a material headwind, while the impact from raw material cost is expected to be relatively neutral. The recent investment in new product provides us with a great platform to continue driving growth in our focus categories. We're getting good fraction from the increased marketing spend and reiterate that we expect investment in innovation and marketing to increase in full year 2025 compared to 2024. The intent is to capitalize on the product and the service leadership supported by brand building to create value long-term for our customers. We have a high focus on reducing costs across the value chain while maintaining consumer preferences. With this as the main driver, we reiterate the outlook of 3.5 to 4 billion SEC in earnings contribution from cost efficiency in the full year 2025. Investments to strengthen our competitiveness for innovation, automation and manufacturing efficiency will continue in 2025 and total capital expenditures is estimated to be between 4 to 5 billion SEC. Listen, I mean, I just would like to summarize a little bit what we said last quarter in terms of strategy and pillars. Certainly, I mean, our focus is to improve North America moving forward. I mean, we want to grow in a profitable manner as well. We're improving our product mix and we want to keep high level of focus on cost reduction and increased efficiency. The world we're moving in is extremely volatile and uncertain, and that's requesting a high level of agility and speed. I truly believe as a CEO that we have been performing according to these five pillars in the first quarter. We have been outperforming the markets in every single region. We have been significantly reducing the operating loss in North America. We have been growing in an organic manner in every single region once again, outperforming the market. We have been improving our mix and we have been delivering 1.4 billion in cost reduction. And I have to say that I have been very proud to see how fast and with agility our team have been moving in coping with the ongoing changes in the market. With that, thank you very much. And I hand it out to Anne-Sophie for Q&As.

Thank you very much. So, we will open up for questions on the conference call. So, Evan, please go ahead.

Thank you. As a reminder, to ask a question, you will need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. If you wish to ask a question via the webcast, please type it into the box and click submit. Please stand by while we compile a Q&A roster. Our first question comes from the line of Bjorn Andersen of Danske Bank. Please go ahead. Your line is open.

Bjorn Andersen Yeah, thank you. I wonder if you can walk us through a little bit on the external factors per quarter here and if there is a mix versus potential price hikes that we should be aware of? I mean, are we talking about quite early price hikes, and then we're going to see a negative impact from tariffs, more pronounced, so looking ahead, or how would that play out? Thank you.

I will start and let Thérèse complement basically my answers. Again, I mean, in the environment we are in today, it's of prime importance to react very fast to any potential impact we have on the profit side of the equation. And that's why I think we have been increasing beginning of Q1 in Brazil. When the Brazilian oil has been devaluating end of last year, beginning of this year, we reacted right away. And we have been increasing prices. And this price increase has been sticking. And it is compensating basically for the impact we had in terms of currency. Exactly in the same way for North America, tariff is going, is one of the main factors impacting the external side of the equation. And our ambition here is to fully complement the impact, or basically go against this impact through price increase in North America. So we are implementing, as we speak, price increase in North America, and they should be fully compensating, again, from the negative impact we see from tariff. Again, Tariff is at 170% out of China. Like all our competitors, we're importing some components out of the Chinese market. You have product categories as well, like air conditioning and microwave, which are primarily manufactured in North America here. But our commitment or our ambition is to compensate again for this negative impact coming from tariff through price increase. And we have been reacting in a very fast manner in this respect. Do you guys have anything you want to add to that? No. Very good.

And have you seen anything kind of consumers pre-buying ahead of tariffs, or is that the sense that you have?

Thanks for the question. I think in all fairness, we didn't see major changes in terms of sellout from what we have been looking at in North America. It seems pretty logical, of course, when you're expecting tariffs to hit a market to build inventory here. But from a sellout perspective... We didn't see any major changes.

Perfect. Thank you. Thank you. We'll now take our next question. Please stand by. Our next question comes from the line of James Moore of Redburn Atlantic. Please go ahead. Your line is open.

Good morning, everybody. Yannick, hi. I have a number of questions, if I could. I was wondering if you could help, please, On the breakdown of your U.S. cost of goods sold or purchases, many companies have now broken that out. You've mentioned in the past that 20% is sourced from Asia, largely China. But I wondered if you could just update us with what the percentage of local U.S. exposure is, what's localized. How much is Mexico? We estimate 25%, but some quantification on that would be helpful. And whether you could give what some are saying, which is what percentage of your Mexico import into the US is USMCA compliant? Is it 97%, 85%, etc.? So I guess that's the first question on just breaking down the pie chart. My second question is, of the import from China, close to 20%, everybody's got a choice to put the 170% price hike on or cease business or reroute? Could you just try to lay out what degree you are thinking of ceasing business or rerouting. Of course.

Absolutely. Makes sense. I mean, I will disappoint you. I will not give you precise percentages. However, what I can give you is how our footprint looks like in North America. And the first very important factor is that, I mean, most of the products we are selling in North America today are produced in North America. I mean, we have three factories in In the U.S., we have one big factory today in Mexico, and these four factories represent the vast majority of what we are selling today in North America. The second question, and I think it's a very relevant question, thanks for asking it, 100% of the products we're producing in Mexico are U.S. MCA. So I think we don't have tariff, we're not impacted by tariff out of our Mexican plant in North America. The second point is a very important one because, of course, 170% tariff impact out of China is high, very, very high. And as I mentioned previously, we have a certain number of components we're sourcing out of China, like any single of our competitors. And here we had the entire procurement organization mobilized for the last quarter in order to understand what is best-cost country sourcing. Because best-cost country sourcing, when you have 170% of tariff, may not be China. I mean, we need to look around China. We are leveraging our global scale, and I think we have a strong global scale here. We're looking at many countries outside of China as well to source this product, to have multiple sourcing possibilities here in terms of components. Same thing in terms of product. I think we are managing the flow of product in a very efficient manner. Our procurement organization reacted in a very efficient manner to reduce the impact we'll have out of products we're sourcing out of China. And we're looking at alternative products. type of sourcing and footprint. What I want to underline is, I mean, Chinese producers are not only producing in China. I mean, they're also producing products in Southeast Asia and they're starting to produce in Africa where level of tariff are lower. And I think that's important to consider.

Thanks. Just to follow up on that, when it comes to the stuff that's coming from China, in my memory, it's mostly microwaves, air conditioning and small domestic appliances, which is your source product business. Are you going to cease trading on some of that stuff just because it's effectively an embargo or are you going to predominantly put the price hike up?

Yeah, I think you're right. And I think when we say we'd be increasing prices, it's not. I mean, we would not be butter spreading, butter price increase here. We'd be increasing prices depending on how much the product category is affected. So I think to your point, you could expect product categories, which are sourced out of China with very high tariff, to face higher price increase than other product categories, which may not be impacted as much. So I think that's something we are working on and playing with. I mean, to your point, you have product categories which are almost only produced in China today. And I think I would be expecting to see inflation on these products to be pretty material and significant moving forward.

And just finally, if I could, I mean, net net, do you see North American margins deteriorating when the timing issues of this bite in the second half? Or do you think you can still continue to progress with your internal savings actions?

I think the first thing I would like to underline is the seasonal effect. I mean, we see a certain level of normality coming back in terms of seasonality. And that's important to mention, especially in North America, because indeed, I mean, we have an operating profit, which is significant. a loss in Q1, and we don't like that. However, we see that we have been making progress in all single dimensions in North America. There is a seasonal effect here, which is usually putting the first quarter as the weakest quarter. Now to predict what will be happening moving forward, the way we see it is that, I mean, price increase would be overall pretty material. And I think the North American market, as I mentioned previously, has been resilient in the first quarter to a deterioration which was significant in terms of consumer confidence. Now, if you combine consumer confidence dropping or reducing plus significant level of price increase, I think it's pretty logical to expect an impact moving forward on demand.

But just to reiterate what we mentioned in the call, our ambition is to offset the negative effect from tariffs through price increases. So you could say our ambition is that that combination should be neutral, which then means that our underlying performance should really be what we can control ourselves.

Absolutely. Thank you very much. Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Akash Gupta of JP Morgan. Please go ahead. Your line is open.

Yes, hi. Good morning, everybody, and thanks for your time. I have two questions as well. The first one is a follow-up on the U.S. So we have your U.S. peer Whirlpool commenting earlier that they have seen significant sourcing or significant inflows from Asian players ahead of tariffs coming in, in both Q4 and Q1. And because of that, they see a bit of weaker pricing in first half before potentially benefiting in the second half from their U.S. production footprint. My question is more like when we look at your U.S. production footprint versus competitor, in which categories do you see advantage and where do you see disadvantage? I mean, today you are talking about raising prices to offset the impact, but You have invested heavily in North American factory transition. I'm just wondering whether there would be incremental need for CapEx to strengthen your U.S. footprint. So that's the first question.

Thank you very much for the question. We're glad to say that we are among the biggest producers in North America. As I mentioned previously, the vast majority of our products are produced in North America, and that's a conscious choice. I mean, we have a brand which is a legacy brand. fridge there in North America. So we're well-placed. We're producing dishwasher in North America. We are producing a refrigerator and a washing machine in North America. And we just, as you all know, ramped up a great, very modern plan in cooking in Springfield. So we are pretty well set up with a large range of products which are produced locally over there. In terms, I think, of stock and inventory, I mean, I have been mentioning that previously in the previous question here. We did not see major changes in terms of sellout in the first quarter. However, I mean, very logically, we could expect, I mean, some of the players on the market who have anticipated some of the tariff increase we see right now, which have been hitting basically in the first quarter. I think, yes, I mean, stock has been probably increased. I mean, from the Asian play on the North American market to which extent is very difficult to say.

Thank you. And my second question is on European competition picture. So in the past, when we have these trade-related headwinds and if Chinese components are not going in the U.S., they will likely end up elsewhere. Do you see any risk in Europe, both positive and negative? Maybe you can benefit from lower sourcing costs, but at the same time, you may also see some competitive pressure. So any second derivative effect that you expect in Europe in the rest of the year? Thank you.

Thanks for the question. Very relevant question in my book. First, I would like to underline, once again, we said it during the review, but I mean, during the first quarter in North America, tariffs had only a very minor impact. In Europe, I think what we see is much more consumer confidence exactly like in North America, which has been deteriorating during the first quarter. And I think this consumer confidence deteriorating is most probably due to the fact that, I mean, there is the geopolitical environment, which is very uncertain right now, and there is the tariff impact out of North America. Indeed, I mean, there is a risk that, I mean, part of the volume which was supposed to go into the North American market will be entering into Europe. Now, And I really want to underline that's one of the strengths of Electrox. We have two great brands, Electrox and AEG. These two great brands are mainly playing into the core plus and premium segment. We are gaining a market share with these two brands overall, but especially in these segments here. We are expecting more Asian volume if it would be dumped into Europe to hit hardly the entry price points here where we have been investing with the Zanussi brand in the previous months. So we truly believe that, I mean, with consumer-relevant innovations and we have a great pipeline of innovations coming into the market, plus the strength of our brand and where we are playing here, we should be better protected than many others if appliances would be dumped out of Asia soon. following basically the tariff implications in North America.

Thank you, Yannick.

Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Uma Samlin of Bank of America. Please go ahead. Your line is open.

Hi, good morning, everyone. Thank you so much for taking my question. So my first question is on your view of the competitive landscape in the U.S. and how have you been able to gain some market share and to what extent you have done so? And also, maybe if you could give us some insight on your pricing strategy there. I have seen from... you know, in the past quarter that some of your competitors had already done a few rounds of price increases. And it seems like pricing was more flat for you in Q1. And, you know, what do you plan to do in terms of pricing? And, you know, what kind of like, What timeline are you expecting that to be? That's my first question.

Thanks for the question. Again, as we had in the previous question here, we have been investing massively in new products and footprints in North America for the past years. And I think we have been investing massively in new platforms, new innovations, consumer-relevant innovations here. And we are glad to see how well these products are currently received on the market. And of course, I mean, Q1 2024 was a pretty weak quarter. However, we have been growing organically in North America by 12.2%. I mean, and that's mainly due to a positive mix we have with Frigida, Pro and Galerie. And thanks to all the innovation we're launching in North America from a product perspective here. So very strong mix. I mean, more to come, I would say, on the product innovation. And as we said many, many times in terms of price, I mean, we will be increasing. We're increasing prices right now to fully offset the impact we do have in tariff. And I think having the strength in terms of product offers and all these new launches in North America and all these new launches will be fueled with additional marketing spending. We have been basically reporting about that. I mean, that should be helping us in order to get to higher price points here and price increase and compensate for tariff. So it's a complete equation. It's not only about blindly increasing prices. It is increasing prices where we need to increase prices in a pretty material manner here, launching new product innovations on the market in order to fully compensate the impact we have on a tariff perspective. And I think we are very confident that it will be working.

Thank you very much. That's very helpful. My second question is a follow-up on the tariff impact. Would you be able to just give us a bit more detailed breakdown on what are the sort of tariff impact on raw materials and components costs in North America? So to help us understand how much price increases potentially need to be able to offset that.

Yeah, absolutely. Good question. An important question, because, I mean, the biggest impact we do have out of tariff, as I mentioned previously, components mainly coming out of China and some product categories here. I think you were asking about the competitive landscape here. The biggest threat we do have are products. asian competitors producing out of china in southeast asia or in korea using basically commodities out of asia for much lower cost than we have right now in europe or in north america or components and being only basically tariff 10 percent going into north america that's right now where where there will be the biggest tension moving forward However, again, thanks to the strength of the brand, the innovation, and the fact that we're producing in North America, I think we're well-placed to compete against in this landscape.

And when it comes to the rate of tariffs, since this has been changing almost on a daily basis, we won't be so explicit to give you a number, but really our intention is to offset whatever rate will be there with price in the market.

Thanks, Therese.

Thank you very much.

Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Martin Willeke from Citi. Please go ahead. Your line is open.

Thank you, yes. Good morning. It's Martin from Citi. Coming back to the North America business, obviously, you've made a lot of footprint changes there with investing in Anderson and some other automation investments. If we are going to be seeing a potential volume risk from higher pricing, is your footprint in terms of the fixed capacity absorption, is it more flexible now? How do you think about how you can ramp up and ramp down capacity as the volume outlook changes because of tariffs? And just if you could talk a little bit now about how that manufacturing is set up relative to how it was a few years ago? Thank you.

Thanks for the question. We believe, I mean, that the overall price increase, not only from outside, will be material enough to impact demand. However, what I want to underline once again is that in Q1, I think the North American market has been very resilient and we did not see the market to be largely affected from the consumer confidence drop here. But again, price increase, maybe affecting the volume moving forward. The level of innovation we do have in front of us here will be allowing us to grow capacity. And from a footprint perspective here, I think we have been investing massively in automation in Springfield, Anderson, and Kingston here. And I think having invested massively in automation will allow us to have quite a lot of flexibility and agility as well in our production tool here. So we don't see really a big risk on adapting our volume, I mean, up or down. Again, very modern production tools we do have in North America today.

Okay, thank you very much. Thank you. We will now take our next question. Please stand by. Our next question comes from the line of Timothy Lee from Barclays. Please go ahead. Your line is open.

Hey, hi, morning. Thanks for taking my questions. My first question will be on North America again. So apart from the tariff impact, so in the first quarter, you still make some loss in the region, despite you also have the $1.4 billion cost saving, which is mainly in North America. And previously, you also mentioned that the Springfield factory would have reached an optimal level of efficiency by the end of last year. So where are we now in terms of efficiency? And what do you think will be the normalised margin level in North America going forward?

Thanks for the question. I would like to underline again the normality coming back from a seasonal effect in our industry. I don't know if you can speak about normality today, but we see some normality coming back. Normality is a weaker Q1, but I want to underline that in every single dimension we see progress in North America. I think Springfield has been delivering good results in the first quarter. That doesn't mean that we don't have pockets of efficiency still to be gained. I mean, we have pockets of efficiencies to be gained in every single factory we have worldwide. But, I mean, we are at cruising altitude on the Springfield side of the equation. In terms of cost change, and you mentioned it, yes, we have been delivering 1.4 billion SEC in terms of cost change. And that's pretty equally spread across the different BA. But North America has been benefiting from that. So we're expecting these benefits. this progress to carry on in the coming quarter in terms of efficiency and cost reduction. I mean, we have a very good manufacturing tool in North America, manufacturing tool, which is, again, as I said, very modern and highly automated.

So just to be specific, the 1.4 billion that we mentioned in cost efficiency was for the total group, not for North America specifically. And of course, we're working cost efficiency across the business areas.

Of course. Thanks, Therese.

Thank you very much. And my second question will be on Latin America. And I think you mentioned that demand is slow in Brazil. In the quarter, you still have positive organic sales growth, but in the outlook, you maintain the usual outlook. Should I consider that in the coming quarters, we would probably see the organic sales growth in Latin America, especially in Brazil, to gradually come down and maybe even go to negativity?

Yeah, I think first, I mean, we have been mentioning that we're getting neutral for the markets here. Let's not forget that 2024 was an exceptional year for Latin America with a heat wave which had no precedent here. We have been selling a lot of air conditioner, a lot of refrigerator in 2024. So I think we... we don't see a major growth moving forward in Latin America. I think our organic growth in the first quarter was 16.4. But, I mean, again, it has been lower than in the previous quarter. The second impact we underline is currency. And I think we still have some instability in the region as well. And we have to react. So inflation had a negative impact as well on demand. So, again, I mean, our guidance remains neutral for the region. But that doesn't mean that, I mean, we are gaining, we are outperforming the market in the premium segment. And I think we're very happy about the progress we're making on the region and the results we're having.

Yeah, and we have done price increases and we are improving mix in the market.

And we're improving mix. So again, I mean, we have a big focus on the premium segment, core and premium segment in Latin America.

Thank you. Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by while we take our next question. Our next question comes from the line of Johan Eliasson of Kepler Chevro. Please go ahead. Your line is open.

Yes, good morning, everyone. There is an answer fee. Just to follow up, sorry to bother you about tariffs again, back and forth. But we obviously know what the world will talk about tariffs and the price compensation they need. But you have, I mean, that profit pool are in the wet products and your category, more important categories, the cold product and to some extent the hot product. Would you say in those product categories, you need to hike prices? less than your specific competitors in those segments in order to offset your tariff impact.

Yeah, Johan, thanks for the question. Again, I mentioned it previously here. We will not be butter spreading a price increase. We are not. I mean, because we should not be speaking about the future. We're executing price increase as we speak. So we the team has been extremely reactive in every single structural change we saw on the type side of the equation. We have been adapting basically the equation in terms of which product category we should take. Which price increase here ought to remain, of course, very competitive on the market. We're very proud about the Springfield factory. You're mentioning hot and the cooking products. Indeed, we are outperforming the market with these product categories with quite a lot of innovations. We have been mixing up as well in these product categories. Many examples to give. We have back control, front control rather than back control in several of the platforms we do have out of Springfield. And again, I mean, the reception we're getting out of these products is outstanding. It's really, really good. We have very high customer confidence level, customer rating, my apologies. So it's not about the spread. It would not be spread across. I mean, we would be adapting price increase depending on the need on every single product category.

Excellent. And then tariffs aside, you have a partial gain in your anti-dumping tariffs on top-mounted fridges from Thailand with some rates between 13% and 36% already as of early February. Have you seen any impact from that? Do you think the final decision will be more – related to the i think 136 percent you were asking for is or is this this sort of anti-dumping duties that you think will prevail for this important product category for you

Yeah, thanks for the question. Again, I mean, indeed, I mean, we tend to focus on China, but Southeast Asia is one area certainly we need to watch. And we were very glad to get basically this anti-damping decision here. We were hoping for a higher percentage in all fairness, but I mean, this decision at least will oblige our competitors who are manufacturing top mount in Thailand to watch basically the price that we'd be inducing in the market. So to us, I mean, this decision is an important decision going in the right direction in terms of fair trade in North America. And it will be bringing quite a lot of attention, I would say, from competition for top mount. Anything you want to add?

No, I guess just one comment. You remember, of course, at the end of 2023 and the beginning of 2024, the extremely high price competitiveness we saw in the market. And now in the first quarter, we're not seeing the pressure increasing compared to that level. So I guess that is just an indication of not that it's stopping, but at least it's not intensifying further.

Thanks, Therese.

Excellent. And then finally, a question for Therese, maybe on the cash flow. I mean, I understand these sort of tariffs are supposed to be paid within 10 days for the products entering the US. Does that have any significant impact on your seasonal cash flow profile going forward, considering that you are running with a fairly high debt level already?

It's a very good question. As Nick mentioned, we have not seen any impact from tariffs in the first quarter in EBIT. When it comes to cash flow, and you are absolutely correct, that of course the payment terms for the tariffs is very, very quick. So, even though we are planning to offset the tariffs, we will have a lag effect from a cash flow perspective because, of course, we will be able to offset the negative impact from tariffs when we collect the receivables. So, yes, you are correct that we will see a time lag in terms of cash flow.

And how will that sort of impact your business? Your seasonal cash flow, I think typically, you know, the end of the year is the strongest. Will there be an even more accentuated development of your cash flow profile this year because of this?

Yeah, I mean, since the tariffs right now are in place with a high rate, of course, the first payments we will do essentially is mid-May. So you would say that if the current tariff level remains, we will see a negative impact from tariffs on our Q2 cash flow, which we will then, to your point, then catch up during the year. So the answer is yes.

Okay, thank you very much.

And I could also mention here that you of course know about the French antitrust case that has been decided and we will now pay the fine here as well in Q2 as a heads up on the cash flow.

Okay, thank you. Before turning over to the conference call again, we will have one question from the web. And it is a question that comes from Lovisa Runge at AP4. And she has a question for you, Janik, about your thoughts since you now have been with Electrolux for some time. where you see the company in a longer term, like three years ahead, and if the 6% margin target is still realistic.

Very good. Thank you very much for the question. I mean, we are certainly building all together with a team, with a group management team, with a market. I mean, what should be our longer term strategy here? And I think it's extremely important to have a collaborative construction of how we want Electronics to look like in three to five years from now. The process is working well. Pretty well. I think the five pillars are the one you have basically in front of us from a short term. There is absolutely no doubt that, I mean, we want to get North America to an EBIT level it deserves. I want to repeat what I said many times. I mean, it is the richest market in terms of home appliances. And I think with brands like Frigidaire, we deserve a different level of operating profit. I also believe that we have been losing too much substance in the last years. And we have the products. We have a customer loyalty we need in order to grow again in the different business areas here. So there is a renewed focus on growing in a profitable manner, launching. By investing into marketing spending here, launching the products and get our customers excited about the innovation we're bringing here, it will all be built on the brands. I think versus many of our competitors, which may have a better cost right now. in terms of raw material and components. But we have great brands. We have three great brands here with AEG, Electrolux, and Frigidaire, brands people have been knowing for many, many years. People trust these brands here. And we will be focusing, again, on in the value segment moving forward in the free markets. which doesn't take anything away from the focus we may have on getting more efficient as a company here and raise a lot of communication around cost containment, cost takeout as well here. So we need to be a very efficient company. And what I said many, many times, I wish to have a combination of the legacy we have, this richness we have as an actual brand, with more speed and agility moving forward. We need to be able to react faster to the needs our end consumers are expressing in the different markets. That's what we are or where we're heading.

Okay, very good. Now I would like to turn over to the conference call again. We have, I believe, one more question.

Thank you. Please stand by. Our next question comes from the line of Bjorn Andersson of Danske Bank. Please go ahead. Your line is open.

Yeah, thank you. If I may ask on LATAM again, I mean, we're talking about Chinese volumes entering Europe, but also LATAM, and perhaps increasing that more than we have seen in the past. What kind of... What kind of change to the market will that have on you? And what can you do to keep your, I mean, quite robust operations that you have had for quite many years, despite the volatile market?

I think, thanks a lot for your question. I think LATAM is a very important business area for us moving forward. And we're extremely glad of the progress we have been making in the last years. I mean, in all fairness, we are extremely well positioned in the region today. We want to keep this leadership position in the entire region. But I would just link it with the previous question. I mean, what we see today is really the fruit of a well-thought strategy. Electronics has been put in place in Latin America strategy on the brands, on the product side of the equation and on the go to market. We have a big share of D2C in Latin America, for instance, that we are developing and that we have been developing moving forward. So I think North Latin America, where much I would say we would be. more concerned about the environment and the economical environment and the economical uncertainty here than really on our own strategy, because I assess this strategy to be very robust moving forward and be very competitive. We have been investing as well in these markets in terms of footprint and new product launches, which are bringing basically return on investment currently. So I think to me, we have a very solid strategy in this region.

And with that, do you mean that you have a very strong position in segments that perhaps you are not seeing the same kind of new competition? If that's the case, that we see new competition in the region, maybe more entry level and your position is more robust or?

Yeah, I think, again, I mean, our position is very strong, not in entry level, but in core plus and premium segment. That's where we are focusing, especially with the electronics brand. So that doesn't mean that we are not able to play at the entry level. But where we are really strong, where we're leveraging our strength today is not at entry level. It is basically at core plus and premium level. And that's why we will probably be less impacted by the penetration we see at entry point level. But, I mean, competition, I've been mentioning it in my speech during the presentation, the competitive landscape in Latin America is becoming more aggressive, but mainly in the entry price points where we don't have the bulk of the value in Latin America.

Thank you. Thank you.

Thank you. There are no further questions. Speakers, please continue.

Thank you very much, Evan. So with this, we would conclude the Q&A session and I hand over to you.

Thank you very much, Sophie. I think, again, I'm very glad to be here and present basically these reports for Q1 2025. I mean, strong organic growth. I mean, that's how I would be concluding. I mean, we... We are gaining again in every single market. We're making progress in every single market as well on the bottom line of the equation. We're not where we wish to be in North America, but we're making progress. And I think we're well equipped in order to compensate for the impact we will be facing on the tariff side of the equation. Well prepared. And I'm very much looking forward to being with you again to report out for the second quarter. With that, thank you very much. Have a good day.

Thank you very much.