Electrolux: Electrolux Professional : Delrsrapport Q1 2025 Transcript

29-Apr-2025 Electrolux Professional AB (EPRO.B.SE) Q1 2025 Earnings Call CORPORATE PARTICIPANTS Jacob Broberg Chief Communication & Investor Relations Officer, Electrolux Professional AB Alberto Zanata President & Chief Executive Officer, Electrolux Professional AB Fabio Zarpellon Chief Financial Officer, Electrolux Professional AB ...................................................................................................................................................................................................................................................... OTHER PARTICIPANTS Gustav Hagéus Analyst, Skandinaviska Enskilda Banken AB Johan Eliason Analyst, Kepler Cheuvreux SA (Sweden) ...................................................................................................................................................................................................................................................... MANAGEMENT DISCUSSION SECTION Jacob Broberg Chief Communication & Investor Relations Officer, Electrolux Professional AB Good morning and welcome to Electrolux Professional Group Q1 Result Presentation. My name is Jacob Broberg. I'm Head of Corporate Communication and Investor Relations. With me, as always, I have Alberto Zanata, CEO; and Fabio Zarpellon, CFO. I leave the floor for you to start, Alberto. Please go ahead. ...................................................................................................................................................................................................................................................... Alberto Zanata President & Chief Executive Officer, Electrolux Professional AB Thank you, Jacob, and good morning. So, Q1 closed with the increased EBITA in an environment that showed an increased uncertainty. So, considering the geopolitical situation, I would say that we delivered a positive result, with sales more or less on the same level of the previous year and with an increased margin. The increased margin is coming from different elements like the raw material, the price and the growing sales in the Laundry and the Food & Beverage in North America. I think that the last two comments that saw the decreasing sales in Laundry and Food & Beverage in North America is the other positive elements of the quarter that I like to underline because they are confirming a trend that for Laundry has been going on for many quarter in a row. And, for North America, that was the area where we had some challenges in 2024, is confirming that we turn - in some way, we turned the curve and that the recovery started in Q3, with an improved sales in Q4 and confirming the improvement also in the first quarter of 2025. In addition to sales and the margin development, we also delivered a solid cash flow slightly below last year, but we have to consider that, as we already anticipated that in 2025, 2025 is a year where we will have massive investments for the new product line in Laundry, and that are going to be launched at the end of this year, beginning of next year. Last point about the overall picture of the result that we delivered is the order intake that was positive, positive and higher than last year in Food & Beverage. In Laundry, it was somewhat lower compared to the order intake that we had the last year, but we have to consider that in Q4 2024, we had a huge sales for Laundry in North America, and I always said that, in particular, North America, considering the setup and the go-to-market structure that we have, we have to consider this and we have to accept this fluctuation related to both the sales and order intake. Moving on to the geographical picture of our sales, out of this one, I would like to highlight the following point. The first one, as I already said, the continued growth in Food & Beverage Americas, the decline in Laundry, that seems to be quite significant and, again, it has to be matched. It has to be - we have to look at that one, matching it with what we saw in the last quarter, in the Q4 2024, where it was very high, the growth there, and also that, when we commented that the last quarter of last year, we said it that we should expect a rebalancing of the things. So, the good thing is that, if we look at the external sales, so from our distributor to the customer in North America, the flow is good, sales are doing well. Also, the collection of order is doing well. So, it seems that it is not reflected in this minus 14%. In Europe, we have a decline in Food & Beverage. Also here, I think everything is related to basically the beverage business in the Mediterranean area. The season was not so good at the end of the summer of last year, our distributor, they had a product in stock that they didn't deliver and, as a consequence, we had a weak start of the year. This is the pre-season, in particular, for beverage where, typically, the distributor are filling the stock for - to be prepared for the season that starts typically with the Easter time, so just a week ago. They didn't do this, this year in a significant way. The only thing, again, a comment that I can make is that April looks completely different from this picture. So, it seems that after the let me say, weak prices in beverage, now the situation is normalizing, with the April showing a good growth, both for sales and order intake, while the Food part, the remaining part of the Food & Beverage business was positive also in Europe. The third region is the APMEA, and here, it seems that the picture is not changing. A reality, also in this case, we see a change in the picture because in the APMEA region, we basically have a project business. The project business is a business that there is, obviously, a delay between the collection of the order and the invoicing. We already saw, at the end of last year, that the order intake was positive in the region, even in Middle East. That is the most affected area, the area that is, in reality, marking in some way the negative trend in the region. We saw a positive order intake, but it takes time between receiving the order and then invoicing the full project as we do in that region. Also, in this case, as well as for Beverage, a comment about April. In April, the region is providing a good positive development for the sales. So, we are starting to materialize there to invoice the order that we collect in the past. I believe now, we added this page because, as I said, I believe that this is, in some way, the subject of many discussions. So, how is the tariff that have been announced in the United States impacting our business? With this chart, we wanted to try at least to clarify the magnitude of the impact because the headline, in some way is that we expect a limited impact, a negative impact of the tariff during the full 2025. With the knowledge that we have today, obviously, but with knowledge that we have today and after the execution of the mitigating activities that we already have in place, we don't see a significant impact of the tariff in our business. And why is that? Several reason. The first is, obviously, because we already have many product in our warehouses in the United States and mainly out of water, and they are covering a large portion of the business that we have in the United States in 2025. Secondly, because, if you look at the first pie on the left, the group sales, it is true that 25% of our sales are generated in the Americas. Americas is including South America but, basically, it's more than 90%, 95% is North America. So, 25% of our sales are in North America. But half of these sales are generated with product that are produced in North America. So, we are competing in North America, like all the other player in the region. The other comment that, I think, is also relevant is that the 12% of sales generated with imported product, in reality, half of it is generated with imported product that are competing in North America against imported product. So, also our competitor, even if they are American companies, are importing the product, and I would say that, in some cases, for instance, Beverage, we could have even a competitive advantage because our competitor are importing products from China, while we are importing product from Thailand. And so, this means that the business that could potentially be negatively impacted by a competitive disadvantage that we have versus American competition is roughly 6% or 7% of the total group sales. On this 6% or 7%, not only on this one, but also on the other, where we have been putting in place already actions to, first, increase price. We are doing this, as well as all our competitor, including the one that are producing in North America, resourcing components because the negative impact is not only on the finished product that are imported, but also on the components that are used by American competitors. So, resourcing, and we already have in place actions because the supplier that are using that eventually are producing, for instance, in China electronic components. So, they have also facilities in Europe, in the Eastern European countries that are already active for our components. And the third one is to change the mix, so - or moving towards a product that are less impacted by the tariffs. And all these, to give a comment - and this is, by the way, is valid both for Laundry and Food & Beverage - all this to say that we estimate the impact of the tariff on our business being limited in 2025. If we move to the two segments, Food & Beverage, I think the comment we said is that we declined sales - we declined sales in Food & Beverage, and the decline is mainly related against to the APMEA Region, Middle East, in particular, with the comment that I made earlier about the recent trend that we saw and to the soft start of the Beverage in Europe and, in particular, in the South European countries. For the margin development, that was lower than a y