Interim Report Q1 2021
Still strongly impacted by the pandemic, but signs of recovery
The slowdown of the market recovery we saw towards the end of the fourth quarter last year continued into the first quarter of 2021. On a positive note, we see signs of market recovery. In the month of March, sales grew year-over-year for the first time in more than 12 months, but still behind 2019 levels as several countries are still affected by the pandemic measures.
Sales in the quarter declined organically by 15.3%. Sales of Laundry continued to be less affected while sales of Food & Bev¬erage was more affected with a decline on the same level as the end of last year, primarily driven by a weak development in Europe.
Short-term savings, organic sales growth in March, a relatively good performance in Laundry together with the restructuring plan announced in September 2020, partially mitigated the effect from the sales decline. EBITA for the first quarter was SEK 103m (221) with a corresponding margin of 6.2% (10.6). Currency transactions burdened the result with approximately SEK 20m. Operat¬ing cash flow after investments amounted to SEK 23m (16).
From a segment view, sales of Food & Bev¬erage declined organically by 21.1% in the quarter, reporting an EBITA margin of 2.3% (7.9). However, sales of Food & Beverage grew in Asia-Pacific, Middle East and Africa. Sales of Laundry declined organically by 7.1%, reporting an EBITA margin of 14.7% (17.7). The sales decline in Laundry was mostly related to a strong reference quarter last year including a larger stock built-up in the US. Sales of Laundry grew in the Nordics, UK, Japan and China.
Sales of Customer Care is declining in line with product sales.
Product innovation in the period include an upgrade on the Line 6000 range of washers and dryers as well as the launch of the new SP Ultra Frozen Beverage Dispenser with its UV lighting for improved sanitization.
During the quarter, the new factory building in Thailand and the transfer of the produc¬tion of Laundry has been completed. The transfer of Beverage products is ongoing and is expected to be finalized in June.
Although it is too early to say that the effects from the pandemic are over – especially as some of our largest markets in Europe are still strongly affected by government measures – there are signs of business recovery. This is not only visible in the countries where the pandemic is under control and where vaccinations are progressing well. The recovery is also being demonstrated by traditional Hospitality and Foodservice trade shows that again took place physically, such as Gulfood in Dubai and Hotelex in Shanghai. I believe these to be strong examples of a comeback for the hospitality industry as soon as restrictions are lifted and confidence among people to socialize again returns.
Alberto Zanata, President and CEO
Annual Report 2020
“Strong and well positioned for the future”
2020 was set to be the year when we once again could focus on strengthening and growing the company after the process of separation from Electrolux in 2019 and the listing on Nasdaq Stockholm in March. Instead, the listing occurred at an unprecedented time when the global coronavirus pandemic affected every part of society, with the hospitality industry, where we have many customers, being one of the most heavily impacted industries. This forced us to change our focus in the short term.
Adapting to a new reality
The pandemic has affected us all, in both our professional and personal lives – but difficult times can lead to adaptation and improvement, and that is what we have been able to do during the last year.
Despite all the challenges that came with the pandemic, we managed to avoid both major interruptions in production and customer delivery disturbances. This is no small achievement given that a new plant was also being built in Thailand and investments in the digital transformation of our company were accelerated. At the same time, we were able to ensure a successful transition from office to remote working for almost all office staff during the lock-downs that affected most countries and that forced many to work from home.
It was not only our internal meetings that went digital. Our training (for our people, our customers, and technicians) went online, as did our product launches of new solutions that we had designed specifically to address the challenges our customers were facing.
Electrolux Professional is a leading global provider of food service, beverage, and laundry solutions, uniquely positioned with a strong single brand, serving a wide range of customers globally, from restaurants and hotels to healthcare, education, and other service facilities.
Our position, combined with both short-term and structural cost-saving measures, together with the strong performance of the less-affected Laundry segment, all helped us to remain reasonably profitable in 2020. To build for the future we also decided to continue to invest in the new plant in Thailand and the digitalization of our products and organization.
Long-term favourable underlying trends
Looking beyond the pandemic, several global trends favor the growth of our business. The increase in out-of-home spending, especially in emerging markets, means people are spending more money on dining out and less time on household chores such as cleaning. Many businesses are broadening their offerings and are becoming multi-function assets, for example, coffee shops offering food and laundromats offering coffee and food.
We are also seeing a change in consumer and customer behavior, accelerated by the pandemic.
Sustainability and hygiene are becoming even more important. Customers are more focused on: the total cost of ownership instead of the upfront investment cost; safe use of appliances; and the potential production output. Digitalization is increasing the demand for technologically advanced equipment that enables greater uptime through preventive remote maintenance. All this supports the operation and fleet control of the appliances, reducing the environmental impact, and enables more frequent changes in menus and ways of serving, such as take-away or in-house eating, which are a must nowadays.
Strategic direction remains valid
Although both sales and profitability declined substantially during 2020 due to the pandemic, for several years we have demonstrated that under normal circumstances we can grow the business with a healthy margin. Between 2013 and 2018 our business grew by approximately 50%, driven by both acquisitions and organic growth. During 2017-2019 profitability doubled to an average EBITA margin of 13%.
During 2019 and 2020 Electrolux Professional was clearly impacted by preparations for the listing and then the pandemic. Despite this, the strategic direction presented a year ago remains valid, although there is more emphasis on cost efficiency now. As such, our business strategy still consists of the four pillars below, built on a foundation of operational excellence to improve sales productivity and cost efficiency within the supply chain;
- Grow the business by developing sustainable, innovative solutions that have a low running cost.
- Expand in food service chains, especially in North America, grow in beverage and expand in emerging markets, with selective M&A acting as a further accelerator.
- Boost Customer care (aftermarket) sales by further developing the global service network and competence as a full-service provider.
- Leverage the OnE approach which is our global product and service offering, with both single and full solutions and services across Food & Beverage and Laundry – under one brand – allowing customers to manage their operations through connectivity and a digital ecosystem.
Build sustainability for the future
Sustainability is a key part of our strategy, culture and day-to-day operations. Our sustainability legacy provides a strong foundation for our operations and our sustainable customer offering. Electrolux Professional is a signatory of the UN Global Compact and our sustainability work is based on the United Nations Sustainability Development Goals.
We recognize the importance of taking action to mitigate climate change and we support the ambitions of the Paris Agreement. Consequently, we have an ambitious overarching target to become climate neutral in our own operations by 2030.
At a more operational level, the strategy aims to develop sustainable, more energy-efficient solutions, sustainable operations, and reduce our environmental impact. In terms of social impact, we seek to earn the trust of everyone affected by our operations, and demonstrate commitment to the environment, ethics, and human rights.
Electrolux Professional’s sustainability targets center on climate, health & safety, and diversity.
In parallel to the climate neutral target for our own operations, we are determined to continue developing low-resource consuming products so as to reduce the impact from the product-use phase as products consume energy, water, and detergents. This is good for both our customers’ running costs as well as for our planet.
It is only by understanding and managing the total impact of our business on people and the planet, that we can create the conditions to exceed our customers’ expectations and remain an attractive employer, thereby delivering long-term value creation.
Right foundation to stand strong
In the near term the pandemic will still affect us, but once the majority of the global population is vaccinated against the coronavirus, I am confident that over time, the business in the hospitality industry will return to pre-corona levels.
Our strategy and our mission will enable us to make our customers’ work-life easier, more profitable, and truly sustainable every day. We are proud to have been able to demonstrate resilience during the pandemic, and thanks to the dedication and flexibility of our employees as well as the cost-saving measures adopted, we have laid the foundation for our future.
If I take a moment to reflect on our company, I see that we have all the right ingredients to remain at the forefront of our industry. We are stable and profitable with a strong balance sheet. Our solutions live up to the tough demands required of high-performing, reliable machinery and include an exceptional Customer care offering. Electrolux Professional is a respected brand. We are working with continuous improvement through innovation and investments. We do all we can to contribute to our customers’ success. This is a strong platform for the future.
Alberto Zanata, President and CEO
Year-end report Q4 2020
Strong cash flow in a turbulent time
After the sales recovery in the third quarter, the second wave of the coronavirus pandemic has halted the recovery. However, the negative impact is more contained now compared to the first wave, as customers have learned to adapt to the new situation.
Sales in the quarter declined organically by 13.2%. Sales of Laundry was almost flat compared to the same quarter last year which shows both the resilience of the laundry market and our strong position. Sales of Food & Beverage declined compared to the same quarter last year, to a large extent driven by the weak development in Southern Europe.
Thanks to short-term savings, improvements from the structural cost saving programs and the stable development in Laundry, we have been able to deliver a margin in line with the same quarter last year. EBITA for the quarter was SEK 142m (181) with a corresponding margin of 7.3% (7.8). Operating cash flow after investments improved and amounted to SEK 460m (355) in the quarter.
Sales of Food & Beverage declined organically by 20.8% in the quarter, reporting an EBITA-margin of 1.0%. Laundry continued on a comparable sales level with an organic decline of 1.9%, but an improved EBITA-margin of 16.9%.
The restructuring plan announced in September is progressing in line with plan and is expected to generate annual savings of SEK 110m from the second quarter of 2021 and additional SEK 20m from the second quarter of 2022.
Product innovations play a key role in our business, but further investments have also been made to enhance efficiency. Hence, we have started a multi-year project to roll out a new common IT infrastructure to all factories in the Group. In addition, the consolidation of our beverage and laundry operations in Thailand into one factory is nearing completion.
We recently launched our sustainability commitments and targets focusing on climate, health & safety, as well as diversity. The overarching target is to become climate neutral within our industrial operations by 2030. We are fully committed to take further action to mitigate climate change and support the ambitions of the Paris Agreement.
After 2019 with its intense preparations for the separation from AB Electrolux, 2020 was positioned for strengthening and growing the business after the listing efforts being completed in March. However, the coronavirus pandemic forced us to radically change our focus since the hospitality industry has been one of the most affected industries.
We are proud to have demonstrated resilience during the pandemic turbulence in 2020. Thanks to the flexibility of our employees and the cost saving measures adopted, we have laid the foundation for the future. Short term the pandemic creates challenges, but when larger parts of the population world-wide are vaccinated against the coronavirus, I am confident that the business in restaurants, hotels and bars will come back – and when this happens, we will have the products, the service and dedicated people in place to support our customers.
Alberto Zanata, President and CEO
Q3 2020 interim report
Sales recovery and continued cost actions improved profit compared to Q2
During the third quarter we have seen a recovery after the significant negative impact the pandemic had on commercial restaurants, hotels, pubs and staff canteens during the second quarter. The Laundry market has shown more resilience, driven by the increased need for cleaning and disinfection.
Sales in the quarter declined organically by 16.1%. The decline in sales in July and August were in line with the levels reached in June, when the recovery began. In September, as well as in October, we have seen an improvement compared to the previous months.
After a challenging second quarter with its break-even results, I am pleased that the sales recovery and continued cost actions improved the profit in the quarter compared to the second quarter. EBITA for the quarter, excluding items affecting comparability, was SEK 173m with a corresponding margin of 9.9% (12.1%). Sales of Food & Beverage declined organically by 19.6% in the quarter, reporting an EBITA-margin, excluding items affecting comparability, of 9.1%. Laundry continued to be more resilient with an organic sales decline of 9.8% and an improved EBITA-margin, excluding items affecting comparability, of 14.9%.
Short-term savings and improvements from the 2019 and 2020 structural restructuring programs contributed positively. With sales gradually improving, temporary cost actions have, however, started to phase down versus the previous quarter. In total, cost-saving measures amounted to approximately SEK 75m in the quarter.
Several customer segments, in particular within the hospitality industry, will likely continue to be strongly affected by the pandemic. As digitalization, online sales and working from home change our everyday work, we have started to adapt our organization to this new reality in an effort to become leaner and more flexible. In support of these changes, structural measures generating yearly cost savings of SEK 130m have been launched. These savings are in addition to the SEK 100m saving measures announced in 2019, which have now been fully implemented.
Product innovation plays a crucial role in our business and as a result, several new products have been released, such as the NitroChrome3 High Productivity fry top, the new Espresso Coffee Machine range and the new line of ironers for Laundry.
Virtually every employee at Electrolux Professional has been affected by the pandemic. At the same time, our employees have continued to show commitment and flexibility in front of the challenges that this new reality brings forth. Combined with our measures, this brings confidence that we have a stronger organization that is well equipped to handle the continued uncertainty in the market going forward.
Alberto Zanata, President and CEO
Q2 2020 interim report
Swift actions contributed to break-even EBITA, despite significant sales decline
The global COVID-19 pandemic has had a substantial negative impact on commercial restaurants, hotels and pubs, representing approximately 50% of our sales. Sales to institutions as well as sales in Laundry have also been affected, but to a lesser extent.
Sales in the quarter declined by 40%, however improving throughout the quarter. In June, sales recovered and had a 20% organic decline after the significant 50% drop in April and May. Sales in the beginning of July are in line with the percentage decline registered in June. We interpret this as a sign of recovery.
Sales of Food & Beverage declined by 48% in the quarter, reporting a negative EBITA, while Laundry was more resilient with a sales decline of 22% and a good EBITA-margin of 13.5%.
EBITA for the period came in at break-even. The decline in EBITA is predominantly impacted by the large decline in sales volumes, but also a strong positive one-time-effect from a pension plan settlement in the second quarter of 2019. Short-term savings and improvements from the 2019 restructuring program contributed positively. I am proud of the swift actions taken by the team in this unprecedented time to keep EBITA at break-even and even have a small positive cash flow given the severity of the market decline.
Several actions have been put in place to reduce costs short-term, which only partially compensated for the rapid drop in sales. The cost-saving measures, including some structural savings and government support, have reduced our cost in the quarter by approximately SEK 200m.
In order to be more flexible and to adapt our cost structure, we are reviewing structural cost-saving initiatives. In addition, structural cost-reduction activities have already been implemented in the US and Industrial Operations. The ambition is to define and start to implement new measures during the second half of 2020 that together with the already implemented activities will generate yearly cost savings of SEK 100–150m. The structural measures under review will imply one-off costs which will be communicated later.
Many countries have gradually begun to reopen after the pandemic restrictions. This had a positive effect on our customers, although it is too early to say how fast the continued recovery will be, as the general market uncertainty is still significant. We continue to stay flexible, to rapidly adapt our ways of working and our organization to the changing market dynamics.
The flexibility of our organization has been demonstrated by the release of several new product and service initiatives, for example “Two pairs of eyes” which makes it possible for service technicians to provide remote support with augmented reality, but also new products within hygiene and clean.
I am particularly proud of how our employees have continued to show commitment, perseverance and flexibility during this unprecedented crisis. This is a demonstration that we will continue to stand strong also in the future.
Alberto Zanata, President and CEO
Q1 2020 interim report
Stock-listing in a challenging time but with the right foundations to stand strong also after the crisis
The listing of Electrolux Professional on March 23 occurred at an unprecedented time, with the global COVID-19 pandemic heavily affecting not just individuals, but communities and companies alike. Safety is our top priority during this time and several important measures have been taken to secure the health and safety of our employees, as well as that of our customers.
The coronavirus has already heavily affected the hospitality industry, such as hotels, restaurants and pubs, an area representing approximately 50% of our sales. Sales to institutions as well as sales in Laundry have, however, so far been less affected thanks to the installations in coin-operated and in institutional and multi-housing laundries. In total, sales for the quarter declined organically by 13.7%.
Consequently, several measures have been implemented to reduce cost and to apply stricter cash management. Actions have been put in place to secure the operational cash flow, with focus on accounts receivables and cash collection. All investments have been re-evaluated and product and purchasing plans have been adjusted.
EBITA for the period amounted to SEK 221m (316), representing a margin of 10.6% (13.7). The decline in EBITA is primarily impacted by lower volumes in Food & Beverage and higher cost for corporate functions related to operating as a stand-alone company. Savings and efficiency improvements contributed positively.
In January and February, sales and EBITA were only partly impacted by the coronavirus, driven by the development in China and, to some extent, Italy. From March, the impact due to the coronavirus became more evident in most markets. Sales in March declined organically by approximately 25%.
Currently, all factories are operational, but with reduced production. Warehouses have increased stock to ensure quick delivery of parts and products, but also to handle potential supply chain disruptions.
The general market uncertainty is significant. Since the extent of the pandemic cannot be predicted, it is also not possible to make a forecast for the financial development.
We have a strong balance sheet and access to credit lines which makes us resilient and well equipped to handle a longer period of downturn.
The strategic direction presented in March remains valid. However, the short-term focus is on mitigating the sharp decline in demand. At the same time, it is important to emphasize that Laundry, the most profitable segment, so far has been less affected.
Many of us are currently living in what probably is the most challenging period of our lives, both professionally and personally. This said, once the crisis will end, companies with solid financials, committed employees and the right strategy will have an advantage. I am confident that we have the right foundations to stand strong, also after the crisis.
Alberto Zanata, President and CEO
On March 23, 2020 Electrolux Professional was separated from AB Electrolux and listed as a separate company on NASDAQ Stockholm. Having spent most of my professional career in AB Electrolux, I am proud and happy to have been given the opportunity to represent Electrolux Professional in its new role as a stand-alone company. Without doubt, the long-standing heritage and experience we bring with us from the AB Electrolux will be of great benefit to us.
Electrolux Professional is one of the leading global providers of food service, beverage and laundry solutions, serving a wide range of customers globally, from restaurants and hotels to healthcare, education and other service facilities. Our solutions meet the need for high-performing, reliable equipment, with significant aftermarket requirements over the equipment’ lifecycle and for customers focused on productivity and total cost of ownership. The Electrolux Professional brand will continue to be our main brand. We aim to stay at the forefront, offering unique, innovative solutions that help our customers to be successful.
Several global trends favor the growth of our business. The increase in out-of-home spending, especially in emerging markets, means people are spending more money on dining out and less time a on household chores such as laundry. Many businesses are broadening their offerings and are becoming multi-function assets, for example, coffee shops offering food and laundromats offering coffee and food.
At the same time, the importance of sustainability is growing significantly. In addition to general awareness of the climate and our environment, ergonomic and sustainable solutions save money for our customers. This is an area where we can be truly valuable to our customers. Our new, innovative products are efficient and ergonomic, saving time, waste, energy, detergent and decreasing sick leave. The foundations for Electrolux Professional’s future growth are in place and we are ready to seize the opportunities!
The spin-off will enable Electrolux Professional to successfully realize our strategies under the leadership of a separate management team, with our own Board of Directors and independent access to capital. Electrolux Professional and the Electrolux Group have different end markets, customers and drivers for success and, as separate companies, both are better positioned to meet the varied drivers and challenges in our respective end markets.
Although we are experiencing challenging times with the global impact of the coronavirus, it is with a lot of energy and passion that we are starting the exciting journey to develop Electrolux Professional’s business as an independent company.
A warmly welcome to Electrolux Professional!
President and CEO