Q2 2025 AB Electrolux (publ) Earnings Call
We Suites are more than just 1 thing, we're beautiful. Of course.
But we will so tough.
We are cool and practical.
Just like the beautiful. Scratch resistant, Sapphire mask. It's the Electrolux hub for Batteries designed in Sweden.
Speaker Change: Very welcome to the presentation of our second quarter result today.
Speaker Change: I'm answer the answer head of investor relations and with me today I have our CEO, Yanik, furling, and our CFO.
Speaker Change: We will run through the presentation and then we will open up for a Q&A session.
Speaker Change: for those of you who are viewing on the web,
Speaker Change: Please feel free to put your questions in the chat throughout the whole presentation and we pick it up after in the Q&A session. So with that.
Yanik: Very welcome again and over to you Yanik.
Speaker Change: Quarter, uh, results.
Speaker Change: I will start with a few highlights. Uh, the first uh positive news. We have to share with you is that we have been outperforming the markets with our Free Major Brands Electrolux AG, uh and uh frigid air.
The second point is about our operating margin. We have been improving, our operating margin from 1.2 to 2.5% with a highlight, which is a positive operating margin in North America. And we have been delivering these results in an environment which has been pretty challenging with a very volatile, uh, geopolitical environment.
So good progress on the short term side of the equation, but we have been making as well. Pretty good progress together with a team on the Ambitions. We want to develop mid and long term.
Speaker Change: Let me deep dive into the numbers. First, we are reporting an organic growth of 1.8%. Many driven by North America and Latin America and partly offset by a slight decline in Europe, Asia Pacific Middle East and Africa here the price was overall positive mainly driven by price increases in the North American market and in Latin with a slight negative development in Europe asia-pacific Middle East and Africa. Again, I mean, the market in Europe as you will hear it in a second was this especially depressed and and difficult.
Speaker Change: From an operating margin perspective. Here again, positive, uh, margin in North America, for quite some quarters. We're so glad to report that we're making good progress in our cost efficient objective by delivering an additional 0.6 billion sec year-over-year.
We organic sales contribution was mainly due to North America and Latin. Once again, we have been increasing prices in North America to compensate for tariff impact. Exactly. As we have been announcing it in the first quarter,
Speaker Change: We had some headwinds, we had some headwinds in terms of currencies, uh, in Brazil, some headwinds, in terms of currencies in Argentina with pesos. But again, we have been compensating these headwinds by price increases.
Speaker Change: I also want to report the cell of our trade brand Calvin, nature in India, for an amount of 180 million sec.
Speaker Change: With that, let me deep dive into Europe, Asia Pacific, Middle East and Africa.
Speaker Change: So we had a slight organic sales decrease, I mean, on the other hand, the good news on the good side of equation, the electric trucks. And the AG brand has been have been outperforming the European market. The market was extremely depressed. I mean lower than in 2024 here, the market was predominantly replacement driven with a high level of promotion. So big pressure on the prices. We're also making good progress in phasing out. This anusi band, which again was an entry price.
Speaker Change: Men brand in in the past.
So positive earnings um across positive contribution from cost Savings in the region, pretty strong here. We had a negative price development. The market was extremely competitive. Here, we have been drawn down in terms of prices by competition.
Speaker Change: However, we kept the marketing investment level at a pretty uh strong level because we want to make sure that we will be passing, the right message in terms of products. And just before uh, we have been opening this call, you could see 1 of the main campaign we're launching.
Speaker Change: Uh and again I just want to repeat the fact that we have been divesting from the trade man trade brand, cabinet of an amount of 180 million sec.
Speaker Change: Once again, we're used to show this slide here. Uh, we have been the market has been declining by 1% across Europe. I mean, it has been flat in Eastern Europe and it has been declining by 1% a little bit more than 1% in Western Europe.
Speaker Change: So, I mean, absolutely no improvement versus 2024 with 4 is already a very depressed Market.
We are 11% lower than 2019 in terms of volume in the second quarter here. So once again, 11% lower than 2019 tax at back to 2014, in terms of volume, I've been repeating that the European market is used to an organic growth 2 to 3%. If you look at the 10 or 11 years between
Between 2014 and 2025. We are missing about 20 to 30% of the volume. We have been forecasting, preco so very depressed Market. Still in Europe subdued Market. We did not see any movement in terms of kitchen and new constructions which is again 1 of the stronghold we do have as electrons.
Speaker Change: Um, the product, which is, uh, tough. A new induction Hub, which is anti scratch anti-fingerprint very successful launch in the market, which is completing, basically, the kitchen launches, we have been announcing, uh, in Germany, uh, and in Europe,
We also very proud to say that we have been awarded 16 Awards in terms of design design remains a very strong trade for Electrolux it is, a trade. We want to differentiate ourself from competition moving forward. I'm also very glad to underline that many of these Awards went to vacuum cleaner. Vacuum cleaner a product we have been invented inventing as electric trucks and it is a product. Certainly we will be revamping moving forward uh in the coming months and in the coming years. So very uh big success in achievement from a design side of the equation.
Speaker Change: Moving into North America. I mean North America. Um, definitely has been outperforming the market, I mean, the market is down. 1%, the organic growth. We had in North America is at the level of 4.1%. It is. Again testifying about the good reception. We're having, uh, from the new products we're launching out of the Springfield and and the Sun Factory. So, very good momentum from a product launch. We do have, uh, in North America, we have a positive, uh, price movements. We have been announcing price increase. At the beginning of first quarter. We have been executing this price increase. We were not followed by all our competitors, but I mean,
Speaker Change: These strategy paid back and that's explaining why we are able to basically report out a positive ebit for the second quarter. Good progress as well. In terms of efficiency, we're glad to say that. I mean we have been achieving our Target Target in terms of cost saving and efficiencies in in our Factory. Uh here price list, um have been uh, increased and we will be keeping on increasing this price list, as long as we will be impacted by tariffs. So, our ambition is truly to fully compensate tariff impact, through price increases. We had some negative impact from the currency, which were compensated by a positive, uh, impact on the raw material side of equation.
Speaker Change: Just looking at the market Evolution here once again, minus 1%. Um, it is a picture is very different from Europe because I mean, North America was hit by a high level of inflation due to the trade War here. And the North American Market has been pretty resilient in the first quarter 2025. And in this second quarter here, we've only a decrease of 1%
Speaker Change: I very happy to announce today a major launch of an innovation, we have been actually putting on the market last Monday.
Uh, it is pizza. I mean a few years ago, North America has been launching the air fried cooking, which was extremely successful here. And here, we're announcing probably an innovation, which is at the same level, but rather than a lot of words, let me show you a short video.
Speaker Change: Re-imagine, pizza night with frigid, Air's new, stone-baked pizza mode. The only oven that reaches 750° for restaurant quality pizzas, and as little as 2 minutes,
Speaker Change: Your oven comes with everything. You need to start making pizzas right away, a Pizza, Peel Pizza, shield and stones.
Speaker Change: When you select stone-baked Pizza mode, the shield and stone are used to create a brick oven atmosphere in the upper part of the oven.
Speaker Change: That's how we can safely reach temperatures of over 750°.
At that temperature, your pizza bakes in as little as 2 minutes resulting in a beautifully Airy chewy crispy crust and perfectly caramelized topics.
Only frigid air can take your Peach and night to a whole new level. But our new pizza mode is just 1 option. Within our most advanced Cooking System total convection, which offers over 15 ways to cook. So, frigid air has you covered, no matter what your family is craving.
You need to taste it to believe it, and I had the opportunity to test it several times. It is really like, in, in a restaurant. And that's thanks to a unique technology, which is allowing part of the oven to reach a 400 degree celsius. Um, in in a short amount of time, you're able to cook your pizza only in a couple of minutes.
Speaker Change: Amazing reception from the North American Market. We are uh, available by 1 of our main retailer in North America. Since last Monday, we will be present on more than 4,000 shop floors for North America uh, in and and North America and Canada here. So major launch again. Uh, in North America moving forward. And we have quite a lot of expectations out of this feature.
Speaker Change: I mean, let's not forget when you're looking at these numbers. That Latin America had an exceptional 2024 year, with a heat wave here. A significant level of growth, we were hit end of 2024 by uh currency. Um, depreciation, we have been increasing our prices, right where at beginning of 2025 here and that's explaining why we're able to deliver the numbers you see on on this page
Speaker Change: Interest rate, I have been increasing pretty significantly in the second quarter which has been forcing, some of our retailers to reduce the level of stock. Uh they had on on the market, that's 1 of the major event and changes in the second quarter for Latin America, but still
Speaker Change: Very good results above the 6 6 6% in terms of of margin.
Moving to cost reduction and cost efficiency. We're glad to announce that we have been reaching uh a cost efficiency of 0.6 billion sec in the second quarter which is taking us to 2 billion SEC, for the first half of the year. And again, I mean the recipe is the same as the 1. I have been describing uh in during the last reviews and we accelerating in terms of product cost takeout, we are sourcing in a better manner, from best cost countries. We're designing the product in a much better manner. We are driving for efficiencies in our factories. We're taking our cost down in logistic and quality. So good momentum here. And we're still very much committed to deliver the 3.5 to 4 million.
A sec by your any terms of cost efficiency.
Speaker Change: We're very proud of that. Uh, we absolutely we leader in terms of sustainability for home. Appliance makers across the world, and we are getting a lot of recognition. Significant recognitions. We have been recognized 3 times by the financial times in 2023 24 and 2025 we just got awarded as well by news week. And we got, we got medal in Echo Valley this year, which is taking us among the 5% more sustainable company in the world out of 70,000 companies. Lots of recognition, big Ambitions, big Investments, but that's what we are or who we are as a company.
With that, I'm passing it to TZ.
TZ: Yes, unique.
Speaker Change: Uh, if we then move into the next, uh, slide. Uh,
we had an organic growth in the quarter, which also generated a positive contribution to earnings and this was mainly driven by Price. Uh, and as Nick mentioned, we increased price in the beginning of the quarter in North America to offset the Tariff headwinds and in the beginning of the year, we have increased prices in Latin America to offset currency headwinds. So these were both positive to earnings. As often mentioned earlier, we had a negative price in Europe, Asia Pacific, Middle East and Africa. And this is really contributed to quite tough market conditions in Europe.
Where the, where the market volume is still very much replacement driven and therefore, a large part of the sales volume is sold under promotions.
Speaker Change: Uh, if we move to Innovation and the marketing, this was a small slight, uh, the slight uh, decline in marketing spend year over year. But this is really a timing impact between quarter 1 and quarter 2. Since if we look at the first half year, we are increasing marketing to support our strong Brands and product portfolio.
Speaker Change: With cost efficiency. We are on track and delivering 600 million sec in the quarter and then are at 2 billion for the first half.
Speaker Change: External factors is negative where the main impacts are the negative from tariffs in North America as well as currency in, Latin America. And on top of that, we are seeing some, uh, uh, some inflation on labor cost across the across the different regions.
Uh, acquisition.
Speaker Change: That we made from the sale of the Kelvinator, uh, trade brand in uh, India in the quarter.
Speaker Change: and if we then take a look at the cash flow,
Speaker Change: Approximately fine that we have paid uh, related to the antitrust case in France that we have previously communicated uh and we also had a negative impact from tariffs. Uh, in North America related to that, we are paying the terrorists much earlier than what we're able to recover them through collection, uh, throughout the value chain.
Speaker Change: Uh, underlying.
Speaker Change: A quarter. This is partly related to seasonal buildup but also partly related to that the markets in the second quarter was below what we believe then would be at the beginning of the year. And also very volatile volatile Market uh conditions. So this has also led to that uh operating working capital in relation to net sales is now at 6.1% compared to 5.1% 1 year ago.
Speaker Change: And if we then look at our liquidity and maturity profile,
Speaker Change: Uh, we have a strong liquidity of 28 billion in uh, including RFS uh, at the end of June.
And, uh, uh, we, uh, including the, uh, pre-financing of the loan with EB of 200 million. At the end of 2024, we have pretty much, uh, refinanced all of the maturities in 2025 and during the quarter, we have also extended 1 of our RCF of 3 billion. Swedish krona up until 2027.
Speaker Change: Uh, we have a very balanced maturity profile and no Financial covenants. Uh, as you know, and the the net debt to ebitda is now at 3.5 times, uh, compared to 3.4 Times by the end of 2024, despite a weak start to the year, in terms of cash flow, and for sure, uh, we have a Target to remain, uh, solid in terms of our, uh, uh, of our investment. Graduating
Speaker Change: And with that over to you. Why? Thank you very much terz. Let me take you through the Outlook and and summary.
In the second quarter, demand for home. Appliances in Europe, continued to be predominantly replacement driven with high promotional intensity.
Speaker Change: Following increased economic uncertainty and Market declined, slightly. And the competitive pressure remained High.
Speaker Change: As we have stated earlier of increased Market uncertainty risk, delaying, a recovery of discretionary purchases in the important built-in kitchen segment.
Housing, construction, and kitchen remodeling remained subdued, and the Kitchen Market in Europe was weak, but stable at a low level.
In a longer perspective, it is important to remember that the European market is on a 10 year low.
Speaker Change: For fully year 2025, we reiterate our new front Market Outlook for Co appliances in Europe.
We increase the economic uncertainty in North America waiting on consumer confidence and the market decline slightly in the quarter with consumers, continuing to shift to lower price points.
Speaker Change: List price is increased in the market to compensate for tariff related cost inflation. At the same time as underlying promotional pressure remained High.
Speaker Change: The demand outlook for a full year, remains uncertain as the market price increases, and general inflation due to tariff risk. Having a damping effect on consumer demand,
Speaker Change: Consequently, we maintain our Outlook of neutral to negative market demand for North America.
Speaker Change: In Latin America, consumer demand in the main Market is estimated to have increased slightly in the quarter.
Speaker Change: Growth rates in Brazil were lower due to inflationary pressure and higher interest rates.
Growth in Latin America, slowed as expected. And for full year, we reiterate our Outlook of neutral market demand, for core appliances
Moving to electrox business Outlook.
Speaker Change: Electrox group has a predental in North American manufacturing footprint for sales in the region.
Speaker Change: We have a current tariff structure. We are in the favorable competitive position and continue to implement price increases with ambition to offset the impact for higher cost due to us tariff.
Speaker Change: we reiterate that we expect organic contribution to aid from volume price and mix combined for the group in the full year, 2025 to be positive driven by positive price to compensate for tariffs and currency related cost increases
Speaker Change: The cost inflation related to increased tariffs is included in external factors in our Aid Bridge.
On back of the currency in post tariffs, we stick with our Outlook of significantly negative contribution to earning from external factors.
Speaker Change: It is important to note however that we are confident of offsetting tariff related cost with increased prices.
Speaker Change: Currency remains a headwind and the impact from raw material cost is expected to be relatively neutral.
Speaker Change: Growth and good capacity. Utilization of our factories is key for a long-term profitability.
Speaker Change: New product launches provides us with a great platform to continue driving growth in our Focus categories.
Speaker Change: we're getting good traction from The increased marketing spend and will
Speaker Change: as we have said, earlier increased investment in Innovation and marketing in full year 2025 our focus on cost reduction is high
Speaker Change: Product cost in particular, but we need to focus on all cost items.
Speaker Change: we have had a good traction on cost reduction during the first half of the year and we stick to our Outlook of 3.5 to 4 billion sec in earnings contribution from cost efficiency in the full year 2025
Investments to strengthen our competitiveness through Innovation Automation, and Manufacturing efficiency are essential to support growth and improving efficiency.
Speaker Change: Total Capital expenditures for a full year. 2025 are estimated to be between 4 and 5 billion sec.
Speaker Change: I just would like to conclude on the 5th. I have been mentioning, uh, through the last 2 quarters and just give you an update on how we have been performing versus the 5 pillars. The first 1 was improved. North America, we first priority, we have
Speaker Change: I have, I'm glad to say that. I mean, in the second quarter, we have been outperforming the markets here with an organic growth of 4.1%. And we're delivering for quite some time positive operating income in the second quarter.
Speaker Change: The second period is profitable growth. As I mentioned earlier, we have been losing in the past years, too much substance, especially in the market, which is depressed and subdued. In terms of volume, we had a slide already growth in average challenging Market, truly impacted by the geopolitical environment where in
Speaker Change: we have been improving our Market position in North America and in Europe, in terms of market share,
Speaker Change: strengthening our Market position here. We did not save on marketing spending. We truly believe we need to fuel growth through basically the new marketing launches and the new product launches we do have in the different regions. We are keep on innovating, we keep on innovating in a consumer relevant manner here and we pizza lunch, we have in North America is probably a good illustration.
Cost reduction and increase efficiency.
Speaker Change: Positive effect again in the second quarter here, we have been delivering up to 2 billion sec in the first half of 2025 and we're committed to deliver. 3.5 to 4 billion SEC through improved efficiency mainly in the North American Market but across all the markets
Speaker Change: Our transformation critical for the products. And again, I've been mentioning that it would be the best combination would be.
Speaker Change: The 120 Years of Legacy we do have as electrons, but knowledge, we do have with customers with a Speed and Agility, we need to gain moving forward in a very volatile market. So we will be increasing our focus. On this transformation will be accelerating this transformation to deliver even better results moving forward.
Speaker Change: That's concluding my presentation.
Speaker Change: Hey.
Speaker Change: so,
amberlynn: Move over to the Q&A session, very good and we start with the uh opening up for those of you who are on the conference call. So I would ask uh, amberlynn to take over and open up.
amberlynn: Thank you.
amberlynn: To all the questions. I had a telephone, please press star 1 and 1 on your telephone keypad and wait for your name to be announced to withdraw your question. Please press star 1 and 1. Again, please limit to 2 questions at a time. If you have follow-up questions, please request to rejoin to ask a question. Via the webcast, please type it into the box and click submit
amberlynn: A moment for fists question.
We will now take our first question from the line of Gustav haggis from Seb. Please go ahead, sir.
Gustav Haggis: Thank you, operator. Good morning. Uh thanks for taking my question. Um I have a a question on pricing in US versus uh competition in Europe. You seem to to experience a bit more competition and tougher markets in Europe. If I understand your
Your comments correctly given that we're quite far down in the cycle. Um, it's important it would be interesting to hear what you think the reasons are for for Europe um in the competition. And if there's a link here between
Gustav Haggis: Redirection sort of of competition from us to into Europe from from Asia.
Yeah, thanks a lot for your question. I, I don't believe in all fairness that the competitive landscape is extremely different between Europe and North America. Um, I think we find a lot of the same players across, uh, both regions. I think what we have been noticing is, is a very different reactions in all fairness. At the end of the first quarter versus the geopolitical uncertainty and volatility we saw in in the market, I mean in Europe, consumer confidence, has been going down exactly like in in North America. But what we have been seeing is that I mean the the level of promotional. Um, we had in Europe was even more intense than what we have been observing in North America. Moreover, I mean rather than going and buying appliances, I mean, the European consumer has been saving actually uh, quite a lot of money. So the reaction was pretty different. We are pretty impressed by the resilience. We see in the North American Market on the other hand because we the level of inflation, we observing 1 could expect uh higher impact.
Gustav Haggis: On the demand side of the equation. So the minus 1% was rather, um, I mean, a positive, um, view on, on our side of the equation, I think the strategy we have been, um, exposing I mean, at the end of the first quarter was pretty straightforward, we truly believe that we do have indeed an advantage by producing most of our appliances in North America on the North America.
Gustav Haggis: American ground and we have basically very good launches and Innovation heating the floor. The shop floors in North America. That's why we were well positioned to increase prices in North America at the beginning of the second quarter, you know, to fully compensate for the tar shift. Unfortunately, I mean, I mean I mean, competitors are not always rational in all fairness in following us we had a couple of competitors who have been following us in terms of price increase but definitely I mean our strategy has been paying back and delivering on expectation. AI. It has been fully compensating for the tariffs impact. We have been observing in the second quarter now. Very logically because I mean we have been selling some of the stock in the second quarter. A tariff impact will be even more important in value in the third and fourth quarter here. But I mean we're very much ready to apply exactly the same recipe here and increase further prices moving forward in order to make sure uh that. I mean, we will be compensating for
Gustav Haggis: Again, for tariffs, the big question mark is obviously, I mean how we market demand would be reacting but the latest Star structure has been um, relatively speaking, putting North American producer in a better position by taxing more production out of Safe, East Asia. So I think we, we are pretty confident that we are in a good position. Again to execute further strategy, we put in place in the second quarter.
Gustav Haggis: And a follow up on that in us. As you say, there are probably some inventories and and the other items impacting now, short term. But have you seen a gradual, uh, Improvement in the pricing environment? The US and, and promotional activity in US throughout the quarter, to the expect, the pricing environment for local producers, like yourself and yours to be gradually improving. Also, in the second half or where you already there in terms of the full impact, you think versus non domestic, uh, competitors in Q2? Yeah. Great. Great question. Um, in, in all fairness, I mean, we have been, of course, observing the promotional intensity during the fourth quarter, uh, the Fourth of July, uh, week. And, um, it, it has been basically be at the level we were expecting not more aggressive, uh, than what we have been expecting. And we see some gradual movements as well now. Um, uh, post for, for July, of course. I mean, some of the, the new tariff structure would be important.
Gustav Haggis: Implemented in on August 1st. So we expecting to see more rationality, I would say in this market, I mean in the coming weeks
Speaker Change: Thanks. That's very helpful. Thanks for taking my questions.
Thank you.
Johann: Our next question comes from the line of Johann. Elias from capitalist River. Please go ahead Johan.
All the specific actions that uh seems to be driving more of the cost cutting uh impacts in the second half of this year, rather.
Johann: Yeah, thanks for that question. Outstanding question. Uh, I think we should not be forgetting that we are uh reporting a year-over-year Improvement. And um I think the second half of the year was very strong in 2024. We had as well. I mean we were ramping up in the second quarter that's probably why. You see an improvement versus last year in the second quarter which is relatively speaking. Again, uh, are not as important as what you have seen, uh, in the first quarter. However, I mean, we are gathering in the first half an amount of money, which is 2 billion, which is a more basically, more than half of what we are. Um, what our Target is by year, end. What I can tell you is again, we will see you over your improvement. Certainly in Q3 Q4, we are not slowing down at all. In all the activities, we are carrying forward in terms of better, uh, better cost for our products better sourcing for our products here. And I think we can expect, basically the same level of focus, attention and delivery.
Johann: Is, uh, in the coming quarters as well. But let's not forget. It's a year-over-year uh, Improvement. We we are reporting.
Speaker Change: Good. And, and then on the cost subject as well, your marketing, obviously a bit better than than I had in my numbers now in the in, in Q2. But, but your guiding for increased marketing cost overall. Uh, should we expect the second half, uh, to be on the same sort of level as, as the first half? Or will this, uh, Pizza launched in the US? Bring a marketing cost in the second half to be significantly higher than what you've seen in the first half.
Speaker Change: Yeah, I think in all fairness, I hope you will agree with me. We may have been a little bit too shy in the last year, on the marketing side of the equation, we have been investing massively on the operational side of the equation. I mean, enhancing our factories in all the free regions. Now, we have a product out of this beautiful factories. Now, we need to Market them and we need to communicate around the the features. And I think that's only, I mean, I'm always used to say that its refueling the growth here and you probably saw the new tone of our marketing campaign here with the safiya. Matt, uh, induction Hub that we have been showing previously here, which is these anti scratch anti-fingerprint very resistant type of a hop. So it's it's a new, uh, it's a new tone. We're giving it's extremely important to communicate about the advantages and The Innovation, we do have, when we're bringing to the market, which again, are consumer relevant Innovations. But the pizza feature would be 1 where we would be cooking at
Speaker Change: Actually repeat the outside of the stores for people in our customers to taste this pizza. That's the way I think we should be communicating and marketing the new Innovations. We we do have here which are rich Innovation. We should be able to take full advantage of them.
Speaker Change: Maybe, maybe to have 1 Thing.
Speaker Change: We expected to be significantly higher in the second half. I guess we we don't say that because of course in tough market conditions which we also have in some parts of the of the world. Of course we will be. Yeah looking at the external environment I completely agree with Yanik. That I mean this new innovation in in North America it's really a unique opportunity that we definitely don't want to want to waste. And just as an anecdote, when we launched the air frying in in the oven a few years ago, we can say that when we turned on the marketing campaign, actually the web page with our largest retailer, that we co-partner the way the crashed at that moment. We also see what a type of reception we can really get from turning on the, the marketing campaign and we will not lose that opportunity. Thanks s. And you are on just to be very clear. We're always looking at, what is the return on investment on any investment? We're making on marketing. So that's something.
Speaker Change: Where certainly closely watching and we keep on watching.
Speaker Change: Excellent. And yeah. Finally in Europe can you see are closing down that brand? How, how much did it impact in terms of Revenue or growth in the first half? And, and how will will, uh, will that pan out in the second half?
Who are really uh, uh, fight on the market, with all the ammunitions. We do have, you know, to keep on, on winning them.
Time. We are.
Speaker Change: essentially now,
Speaker Change: There might be still some of course volume out in trade that needs to be sold through. So we still have a let's say tiny tiny market share. If you look at the uh external Delta but uh from from our own sales we are pretty much uh through the face out.
Speaker Change: Okay, excellent. Thank you very much. Thank you Johan.
Speaker Change: Thank you. Our next question. Comes from Frederick Iverson from ABG. Please. Go ahead, sir.
Thank you, good morning. Um, maybe. Uh, first coming back to the uh, the pricing in the US. I mean, you were, I guess quite quick on, on reacting to the tariffs. Uh have you sort of revised any of these price hikes due to the uh say recent developments.
Speaker Change: Yeah, absolutely Frank. Thanks. Thanks for mentioning it because I, I said it, it was not a butter spreading type of price increase we made in the US, we had platforms which were more impacted than others, uh, from tariffs. And we have been adapting our price list, basically, on the impact. We were, uh, expecting and we had the memorial um, day as well, in terms of promotions. And in all fairness, we had to adapt some of our prices in order to keep on competing with, with the aggressiveness, we saw around us. And as I said, many competitors,
Did not increase prices. So I I have to recognize that the North American team was extremely agile and fast in reacting to market conditions, which have been allowing us to keep both the organic growth. We are reporting today, which is these 4.1% and keep a price level. Now, I think, uh, there will be the new structure, a tariff structure will be fully implemented on August 1st, and again, we'll be taxing more appliances which are produced today in Southeast, Asia, and who were benefiting from very low, um, manufacturing prices and commodity prices out of China. So, that's a positive news. Uh, certainly for North American builders, uh, here and I, we should see an advantage here but I, I want to repeat it. I will never never repeat it enough. Our commitment as electrox is to fully compensate tariff.
Speaker Change: Tariffs by price increase in the market moving forward.
Okay, great. Uh, thanks. And and second. And, and sorry, if you talked about this also, right? I fell out of the call a minute. Uh, but, but I wonder if you can talk about what you see in the European market, in terms of volumes coming in from Asia, have you, have you seen any increase in Q2 to, to, to the tariffs or or not?
Speaker Change: Now what what we see certainly is a competitive environment which is getting more aggressive in Europe. And certainly I mean despite interest rate has been going down, I mean the purchasing power in Europe is is pretty low so we have seen a movement more towards, I mean low price points here, low price points which can be fed in a very easy manner by Asian competitors. In the sense that I mean production in. Asia is as I explained previously, significantly cheaper and what we can produce currently in Europe and in North America. And that's exactly why I think the decision to leave entry price points. I mean, a couple of years ago on electrons was the right decision. I truly believe that with the level of innovation, we do have with a quality of the products we do. Have, I mean, we're much better place to feed basically core and premium ranges in Europe and that's what we're doing. And again, we're gaining more market share through via trucks and AG brand when we're losing by phasing out, the new see. So, absolutely right is
Decision. But to your point. Yes, indeed pressure is increasing seems to increase in Europe out of, I mean um low low price level type of products.
Speaker Change: Thank you. That's my questions.
Beyond Anderson: Thank you. Our next question comes from Beyond Anderson. From D Bank, please go ahead.
Speaker Change: Be anything. Your line is open. Please go ahead.
Speaker Change: Okay, thank you. Yes. Uh, any comments on FX headings in the second half and also, if not maybe a combination of FX headwinds and, and raw material, uh, for for the second, half combined, if that's possible, is there something we should be a little bit more worried about uh, versus the the first off?
Speaker Change: In my point.
Specifically on Latin America. I think the team is doing a good job to set it in uh, in price increases. Uh, but we've really seen uh, that currency had been being very strong from the beginning of the year and yeah, we do see that that environment is is continuing but I would say not currently worsening. And when it comes to the raw material, the main part of the raw material, we have locked for for the year. So not large movements in the second half as as we see it.
And thank you and a question on marketing spent again. Um, should we think about this as a, a fair term negative impact on on ebit or, uh, do you get the
Speaker Change: Leverage on the spend uh quite quickly or how how to look upon that. Now looking into the second half, I, I just want to repeat the message because they're very important. First of all, we are not spending for marketing if we don't have a return on investment. So I think we are, we are really scrutinizing the return. We do have an investment. However, indeed, I mean, we have major Innovations sitting the market. I mean, in Via coming weeks and in the last quarter and we truly believe that it's worth for the company and for the group to invest in marketing, right now, you know, to fuel the launch of these new Innovations and new products.
Speaker Change: Yeah, so they might, of course, be a timing impact between when you spend marketing, uh, a little bit up front before you get the return. So you don't always get the return in the, in the same. Uh, same quarter that is naturally.
Speaker Change: But are we talking, uh, weeks months or quarters?
Speaker Change: It really depends on what type of marketing. Uh, yeah. But I mean we usually I mean we we I mean well not looking at quarters and I think again we are not looking at Major fluctuation, we really want to fuel these Innovations. So I think we really believe that. I mean, when you are with 4,000, we have 4,000 shop floors on this new innovation, on the pizza side of equation. It is basically a available since since last Monday with 1 of our main customers, we really are looking forward to see basically sales picking up, uh, thanks to the fuel marketing fuel. We're injecting
Speaker Change: Perfect. Thank you and uh could you say anything about? I mean I heard what you have said about the market conditions in in the different regions. Uh
Speaker Change: But if you can, uh, talk a little bit about the seasonality. I mean, normally we have a uh, yeah. Of course, a little bit of a strong market for seasonal reasons in in the second half. Is that something we should uh,
Speaker Change: Also consider this year or is all the the the weak situation in primarily Europe uh of setting that door. Are there any comments on on that? Thank you know, I think thanks for the question. I would just reiterate, what I said, previously here a normal season it for us is to have a progression throughout the year in terms of sales and in terms of earning, unfortunately, I mean we have several factors which are abnormal today and that's what is a little bit concerning us. The first abnormality is, I mean the reaction on the tire side of equation, we're very confident on the strategy we are putting in place but I mean we we are known is how resilient the market will be moving forward. It has been very resilient in the first half. But certainly, I mean, we need to watch out on how how these additional level of inflation will be absorbed by the North American Market in Europe. As I said, Europe is extremely sensitive to external factors. We have seen that in the second quarter. So if these external factors would be normal,
I want to say just normal for Europe. Again, without major concern on the geopolitical side of equation. There is no reason why we should not see basically uh uh normal type of seasonality. Now I um I think it is a bumpy road. It is a very volatile and uncertain markets as you know, overall
Speaker Change: Thank you, perfect.
Speaker Change: Clear.
Speaker Change: Thank you.
Be so we will now take some questions, uh, from the web.
Speaker Change: But we will come back to the conference call, uh, for more, uh, questions from those of you who are on the call. So that we have a question from, uh, Daniel at RBC. And the question is in the first half year, you had a working capital, um, outflow of more than 6 billion. How much of this do you expect to reverse by the end of the year?
And then of course uh we are still having some of the rest restructuring payments so that we all do still doing mainly related them to what we executed last year, but still, some of the cash outflow has been going out this year and that, of course will not be reversed.
Speaker Change: Otherwise when it comes to inventory, of course, this is our main focus. I think uh, we have built inventory as mentioned before uh, both related to seasonal. And this of course, we will sell out during the the second half as we always do when we come into the high season on top of that as well. It's fair to say that the market environment and market conditions has been again, extremely volatile in the second quarter and the week, then what we plan for, in the beginning of of the year, when we did the production planning and the purchases and uh, uh, and all of that,
Speaker Change: It's nothing new. Uh, I would say, I think we have been living at tough and volatile Market environment. Uh, many, many quarters, uh, during this last years. Uh, so I feel confident that we will be able to take out a large part of the, uh, the inventory with, of course, not panicking. Not doing any strange, sellouts or anything like that, because the inventory is still fresh and of good quality and we have the right, uh, products in, uh, in stock. So we will take it down, uh, gradually. Uh, over time as we have done many times before,
Speaker Change: Great. Thank you. We also have a question from Honda spankin Stefan Crown Hall,
uh, and the question is, if there are any, if we see any early signs of recovery of the new bill segment on any markets,
Thanks Stefan for a question, unfortunately. I would say no. Uh, we uh, despite the low interest rates, uh, we have in Europe and we're all hoping that basically construction will be going down. But I mean, when we see construction overall, I mean, we have 1 number. I mean, we basically Improvement is lower than 1%. Uh, so I think it is very much subdued right now and it is hurting, certainly our margins in the sense that I mean, we have a very strong foothold in kitchen and Inn in construction. So I think we are really hoping that. I mean there will be a turnaround at some point of time. We have a low interest rate here. We absolutely ready to take full benefit of it. I mean, as a company.
Speaker Change: Great. So now we turn over to the cam.
Speaker Change: Question, from the line of Jeremy Casper from JP Morgan. Please go ahead Jeremy.
Jeremy Casper: Hi, good morning.
Jeremy Casper: For taking my question, I've got 1 on your outlook and Latin America. Um, and You released today, you mentioned some softness in Brazil on inflation and interest rates. And I'm just wondering if in your Market Outlook, you do expect any Improvement in market conditions, in HQ, compared to what we saw in the second quarter. Um, any color on
Jeremy Casper: On what you're seeing in the region, would be very helpful.
Jeremy Casper: I think few things on on Latin America and I have been saying it. I think it's important to repeat it. 24 was an exceptional year because of the Heat Wave and that's exactly why we have been guiding neutral in terms of Market. I mean, uh we 2024 was very strong, there was the devaluation of the real at the end of 2024 as well. The price increase, we had beginning of the year. I mean, the higher interest rate, um, in the second quarter. And as a consequence of the higher interest rate, our main customers reducing pretty significantly the level of stock. They do have over. So what we believe in Latin America is that I mean we have been reaching a lower level in terms of stock by our customers and we said in should be restarting, I would say at a normal Pace moving forward in in Q3. So I we don't, um, I think north of Latin. America is reacting as we are expecting in all fairness here and we just believe and that I mean it will be 20205, would be as strong as 2020.
Jeremy Casper: Before was, I mean, um, and we just need to go through the inflation and interest rate increase. We have been impacted with in the last month, but again, we took actions and I think the actions are basically bringing the results we're expecting.
Thanks for that helpful.
Jeremy Casper: Thank you.
Speaker Change: As a reminder to ask a question, via the telephone, please press star 1 and 1 on your telephone keypad to ask a question via the webcast, please type it into the box and click submit next, is the follow-up question from the line of Gusto haggis from Seb. Please go ahead, sir.
Gustav Haggis: To July or end of the Q2 versus versus beginning of the year.
Gustav Haggis: Very difficult to say at this point of time. What I said earlier on is that, I mean we saw a very strong reaction from the
Gustav Haggis: Uh, from the geopolitical environment in Europe. And we see some, we saw some improvement throughout the quarter. Uh, here. So I think, uh, uh, we saw some improvement especially towards the end of, of the quarter here. So I think we, uh, right now we hope that. I mean, um, we this positive move will be, uh, uh,
Gustav Haggis: Holding in, in July and August, and in the third quarter. But it's early. It's very early to really, um, I mean, say anything about the market condition in the third quarter in Europe, and the common
Speaker Change: and when you on related to
Market volume not related to price.
Speaker Change: Okay. So and how about pricing? Do you see any of of that impact also is that uh, isolated the volume? Yeah, pricing again. There is a pro. The the market is entirely replacement driven today. I mean with very high promotional pressure and and a a tough competitive, uh, landscape. So the good news is that, I mean, on the electrons and a g side of a question, we're holding our price index, which is a very good news, and we're growing market, share on a, on a value, on the value side of the equation. Uh, so that's pretty good. That's exactly where we we want to be, we don't want to to fight where only cost is the, the purchase driver. But I mean, indeed, I mean we see more
Speaker Change: Price pressure in the European market lately.
Speaker Change: Okay, thanks for clarifying.
Speaker Change: Thank you. Our next question comes from the line of James Moore from Ross, Charles and Company Redbarn please. Go ahead James.
James Moore: Yes, good morning everyone. I hope you're well, great. Share gains and some savings momentum. But can I ask a couple of questions on tariffs? Please, uh, go 1 at a time. If that helps you mentioned to raise on the cash flow. The negative tariff impact in the US?
James Moore: As you're paying earlier than collecting in prices. Is that to say that the negative tariff cost is not on the p&l. So just to be clear with the North American margin be less than the half a percent. If
James Moore: The full tariff cost was on the p&l and if so by how much you just want to be clear about that? Yeah.
James Moore: Tariff impact on the on ebit in our, in our result, which we have been able to offset through price increases that we were proactive and did in the beginning of the quarter. Having said that you are right, that part of the Tariff impact that we've had is right now, in our, in our stock, and has not been sold out yet to, uh, to trade. That's why we have a higher impact in terms of tariffs in in cash flow. So that's also why the sequential
James Moore: Increase that we will see in this in the third quarter, compared to the second quarter, with the current tariff structure than in place will be higher on, uh, on the bottom line, which means that there are needed additional, uh, price increases, uh, coming through to the bottom line to offset the higher level. We are expecting in the third quarter affected. And again, I mean, we're fully committed to keep on increasing prices, you know, to fully compensate tariff. I want to repeat that once again. Yeah. And just 1 last comment. I think you also mentioned it. That of course we were proactive increasing prices but then we also had to meet competition in some some of the promotional periods. And this of course we really hope now with some better uh discipline uh will also ease over time.
Speaker Change: That's great. Thanks. And I understand, secondly, that you're in a favorable position on the terrorists, with over half of your appliances coming from China Korea, Vietnam Thailand, but and I had to understand your aim to mitigate, but if others are not moving, then it will be harder. Um, could could you say, how many of the US Big 5 have moved and
Speaker Change: How many hasn't and what what is this first of August date? Because I thought section 232 was already in place by copper. I guess you're talking about reciprocals but isn't the key issue. Still an, add a million.
Speaker Change: Uh, normally see, we had in the past, which was southeast Asia. Because southeast Asia was only taxed at a level of 10%, but they were sourcing the entire commodity and components out of China. So I think with 10% only, I mean, of course I mean that was still. Um, there were still basically producing as a cheaper cost or lending as a cheaper cost and what we were producing in North America. Now with the latest Star of structure here, it is leveling the playground. It is leveling the playground for um this I mean starting August 1st and we can expect basically more competitors to follow our symptoms of price increase. If there is a rational in that and I I believe there is a rational in that
Speaker Change: That that great just to cover because I'm big stupid here. Maybe you can just help me. I thought that the change that we saw in July or June uh was that we shifted from a 25%, still an hour, a million to 50 that was not either or since that, no, you're a different wave. I mean, the 50, the 50% on aluminum and still is implemented today. That's 1 part which is implemented today. But I mean, the tar from Southeast Asia is basically on August 1st would be concerned on August 1st.
And could you remind us what it goes from to from 10?
Speaker Change: Sorry, you're good.
Speaker Change: if it's, I it was from 10 to 36% in Thailand and from 10 to 25% in Korea just to give you a couple plus the 50% on steel and aluminium
Speaker Change: great, that's really helpful. Thank you so much.
Speaker Change: Peace.
Speaker Change: Thank you.
I am showing no.
Speaker Change: So now turn back to the speakers in the room. Please continue.
Speaker Change: Thank you very much.
Speaker Change: Well, thank you very much for your attention and the questions once again. And I think all what we can wish you is a is a great summer. So, thank you very much.
Speaker Change: Thank you. And we look forward to seeing you again in October when we present our third quarter results and we will also have a capital market update on the 4th of December.
Speaker Change: Okay, great. Thank you. Thank you. Thank you.
Mm.