Ann-Sofi Jönsson: Good morning, and welcome to Electrolux Group and the presentation of our Q3 report. I am Ann-Sofi Jönsson, and I am Head of Investor Relations and Sustainability Reporting. I am here in the studio with our CEO, Yannick Fierling, and our CFO, Therese Friberg. We will go through the presentation, and after that, we will open up for a Q&A session. For those of you who are viewing on the web, feel free to also enter your questions in the chat, and we will try to make sure we take them in the Q&A session. Very welcome, and with that, I hand over to you, Yannick.
Yannick Fierling: Thank you very much, Ann-Sofi. Good day to all of you. Very glad to be with you for these Q3 results. This quarter can be best characterized as a very strong execution and a resilient performance. I would start with the strong strategical execution. First, the three joint ventures in North America are operational. We kept on optimizing our organization by moving more people from the corporate side of the equation to the frontline for sales and marketing, and we have been executing in this quarter, once again, our footprint. We have been closing the factory in Argentina, in Rosario. We have been closing the Anderson factory on 31 July, and we have constructive exchanges with the institution in Italy and with our social partners. The markets have been very challenging.
Yannick Fierling: North America has been down by 5%, Europe has been flat, and Brazil has been slowing down with a growth of 2%. But despite this difficult environment, we kept on growing. Our organic growth in the quarter has been 3.5%. We have been also delivering one of the strongest Q3 cash flow in the past years here. Very strong headwinds from an external side of the equation, but we have been delivering strong cost reduction. We keep on focusing on what we can control, which is execution for our strategical side of the equation and profitable growth. Let me move now through the group results. First, from the transformational side of the equation, as I said previously, we have been executing our footprint with the closure of Anderson on 31 July, the closure of the Rosario factory in Argentina, and again, constructive discussion in Italy.
Yannick Fierling: The markets have been, as I said, flat, down, slightly up in Brazil, but we kept on growing organically at the level of 3.5% with higher volume in EMEA, APAC, and Latin America. We have been keeping the price increase we put in place beginning of May in North America. In Europe especially, we are very proud to say that we gained market share in Electrolux, AEG, targeting the premium price levels we have been in for the last months and years. On the earnings side of the equation, very strong performance from cost reduction side of the equation. We have been delivering SEK 1.4 billion second cost reduction here, mainly coming from product cost reduction. In this quarter, we have been, of course, facing a very significant level of headwinds. First coming from the tariff in North America, but not only.
Yannick Fierling: We have been impacting fully by the Middle East conflict here, not being protected any longer by hedging. These significant external headwinds will remain in the coming quarters. Moving now to Europe, Middle East, and Africa, and APAC. We will be closing our factory in Hungary at the year-end. We have very good discussion with the trade unions and the institutions in Italy, constructive discussions, which are moving according to plan. The demand in Europe has been very much subdued. We do not see any signal of recovery from the construction market side of equation. But despite all of that, we kept on growing. We kept on growing with an organic growth of 2.8%. We kept on gaining market share with our premium brands, Electrolux and AEG, keeping the high price index we had built in the last months and years.
Yannick Fierling: From an EBIT side of equation, stable operating income, despite, again, a hit we have been getting due to the Middle East conflict with higher logistic cost here and higher raw material cost. If you look at the market evolution, pretty impactful picture here. Europe has been flat once again. Western Europe has been down by 1%. That is where we are selling 80% of our products, and Eastern Europe has been up by 3%, but overall flat. If you compare the volume we did have in Q1 2026, we are 8% down versus Q3 2019 here, which was pre-COVID. If you are taking the volume we delivered in this quarter versus the volume we delivered 10 years ago in Q3 2016, we are 4% down versus what we delivered 10 years ago. So we are back at the level of 2014 in terms of volume in Europe.
Yannick Fierling: Consumer confidence have been very low, impacted, of course, by the higher level of inflation we have seen here and the inflation we have been experiencing in Europe. I would like to share with you now a very interesting commercial campaign we have been launching in the UK here. The aim of AEG is really to be able to offer products which are expressing the identity of every single customer, expressing your taste, your home. Let us watch this video. Now moving to North America, and again, we are very proud of that. The three joint ventures are operational as we speak today. The partnership with Midea is moving in a very constructive manner. From a market side of equation, the market was down 5%. What we see is our volume have been slightly less down than the market.
Yannick Fierling: We kept the price increase we have been implementing in Q2 here. But as we have been communicating a quarter ago, we have been impacted by mix. Purchasing power in North America has been going down, and our customers are orienting themselves to lower price points in the market. In terms of EBIT, we had, of course, significant external headwinds coming from tariff, raw material, again, through the Middle East impact here, but the price increase have been partly compensating for these very significant external factors. Looking at the market, very depressed market. Consumer confidence in North America is on a 10-years low.
Yannick Fierling: After a decrease of 10% in Q1, a decrease of 3% in Q2, the market has been going down once again in North America by 5% in Q3, with, again, consumer confidence being very highly impacted by the geopolitical position. That's a nice picture. It's a picture which is illustrating the day 1 of the different joint ventures. We have been closing Anderson according to plan on 31 July. We have been launching the manufacturing joint venture in Anderson on 1 September. We have been launching the sales JV and the manufacturing joint venture of Juarez on 1 October, and we're still planning to start production in Anderson with top loader at the end of H1 2027. So the execution is on plan with Midea, with a very constructive cooperation with our partner.
Yannick Fierling: Moving now to Latin America, another strong quarter for Latin America. Again, from a transformation side of the equation, we have been closing the plant in Rosario, Argentina. We have been keeping on extending and reinforcing our D2C channel in the region as well. Brazil has been slowing down. Brazil's growth has been at the level of 2% in Q3. However, in the region, if you look at our organic growth, we have been growing by 6.6%, gaining market share at the price points we are targeting, aligned with our brand positioning here. From an external factors, of course, the market is impacted by high interest rates, which is driving a high level of inflation. And again, the impact we see in terms of raw material and logistic cost. From an EBIT side of equation, we have been delivering on cost efficiency here.
Yannick Fierling: We have been recovering as well, an overpaid tax from the past years here. And I think these two factors are more than offsetting a provision we had to make due to the restructuring of one of the main retailer in Brazil. Moving to cost reduction, again, another strong quarter. We have been delivering SEK 1.4 billion in Q3 in terms of cost reduction, mainly again, due to a better engineering of our product, a better sourcing of our components, and additional productivity out of our factories. We have been adding here some numbers as well about the optimization we are undergoing in our organization. If you're looking year to date, we have been reducing our staff by more than 2,000 people. Since 1 January, we went from 41,000 people to 39,000 people. And with that, I'm passing it to you, Therese.
Therese Friberg: Thank you, Yannick. Starting with the sales and the EBIT bridge. As you heard, we did grow by 3.5% in the quarter, and we generated an EBIT of SEK 912 million, which was slightly better than last year, with a margin of 2.7% compared to 2.8% last year. Going through the larger items here, we have a positive impact from the volume, price, and mix, but the main contributor to the result was related to a strong cost efficiency of almost SEK 1.4 billion in the quarter. This was offsetting the headwind that we continue to see from external factors, both from the tariff 232 in US, but also related to the full effect of the Middle East crisis. Overall, a quarter with continued strong cost efficiency that is managing to battle continued strong external headwinds.
Therese Friberg: Taking a look at the non-recurring items we had in the quarter with around SEK 150 million each for both North America and Latin America. Starting with Latin America, this is related to the closure of the plant in Argentina that was mentioned before. North America, this was related to that we finally closed the Anderson factory at the end of July. This was now the second part of the non-recurring item related to the partnership with Midea. We are now year to date at around SEK 2.1 billion of NRI. As you heard, we did go live with the sales JV and the manufacturing JV in Juarez in October. There will come a third and final portion of this in the Q4. Operating cash flow.
Therese Friberg: We had a strong operating cash flow in the Q3 of SEK 3.6 billion compared to SEK 0.6 billion last year, which is now taking the year-to-date cash flow after investment to SEK 600 million year to date. What is behind the strong cash flow is an optimization in net operating working capital, where we have been optimizing our inventory both going into the quarter but also further during the quarter, while at the same time we have been procuring for the sales related to the Q4. Receivables are pretty much flat, which is still encompassing the growth that we see but is offset by a positive customer mix in the quarter in terms of payment terms.
Therese Friberg: With this, we can say that part of the positive effect we usually see from net operating working capital in the Q4, we already have captured now in the Q3. You remember that we disclosed in connection to the Q2 a tariff refund related to the IEEPA tariff paid earlier in the year and also during 2025. We did now get the full cash payment of around SEK 1 billion related to this overpaid tariff in the Q3. All in all, it is showing a good progress with working capital optimization and focus on capital efficiency. I will try to briefly explain the impacts that we see now from the JV with Midea.
Therese Friberg: As you heard, we did go live with the manufacturing joint venture in Anderson in September, therefore we are fully consolidating the impacts of this transaction in our financial statement in the quarter. How do you see then in the quarter? You see a controlling interest from Midea of SEK 413 million that you see in equity and change in non-controlling interest in the quarter. We have received a cash payment related to this of SEK 261 million, that you see under divestment and partnership transactions in the cash flow statement. The remaining part you then see as a receivable in other current assets.
Therese Friberg: If we then move to the manufacturing joint venture in Juarez that you heard went live on 1 October, this has now been reclassified end of Q3 to assets held for sale and liabilities related to assets held for sale. Then moving into Q4, we did go live with the sales joint venture, as you know, this will be fully consolidated in our financial statement, and the stake related to Midea will be part of a non-controlling interest in net income. The manufacturing joint venture in Juarez, where you know we have an ownership of 35%, will be included in results from shares in associates in EBIT.
Therese Friberg: Also as part of this transaction where we sold the 65% stake, we did get the cash payment of this of around SEK 1 billion that you will see in Q4. Then ending from my part with the balance sheet side where we have a solid liquidity and a good maturity profile. We have liquidity, including revolving credit facilities of SEK 34.7 billion by the end of September. As you know, we are aiming at continuing to strengthen our balance sheet and to continue to be a solid investment grade rated company. We have a net debt to EBITDA of 2.2x at the end of September. Over time, you know that we should come down and stay below 2x net debt to EBITDA. With that, I hand back over to Yannick. Thank you.
Yannick Fierling: It's not easy. Thank you so much. Let me just go now through the market and business outlook moving forward. We maintain a neutral market outlook for Europe. During the quarter, demand for core appliances was unchanged in Europe with a decline in Western Europe. Consumer sentiment in Europe remained weak, reflecting elevated geopolitical tensions, energy driven inflation and high interest rates, while concerns about household purchasing power weighted on consumer confidence. As a result, consumer continued to postpone discretionary spending and demand for built-in kitchen product in Europe remained at a low level. We also maintain a negative market outlook for North America. Market demand for core appliances declined by approximately 5%, as I said previously here, with declines across major product categories.
Yannick Fierling: Market prices levels in the quarters are estimated to have increased year-over-year in the industry, although not reflecting the cost impact of implemented US tariff. Economic uncertainty and inflation are still a concern. Demand was predominantly replacement driven and with continued consumer preference for lower relative price points. In Brazil, our positive full-year market outlook remains unchanged, although market growth slowed significantly during the quarter. Elevated interest rates and inflation continued to constrain consumer credit and spending. Competitive pressure remained high, with continued promotional activities and a strong focus on affordability. Moving now to the business outlook. Our business outlook for a full year has been partly revised. Looking ahead, geopolitical uncertainty and macroeconomic volatility remain, continuing to weigh on consumer demand.
Yannick Fierling: The Q3 was also the first quarter to fully reflect the impact of the conflict in the Middle East, including high raw material and logistic costs. We now expect the combined contribution from volume, price, and mix to be neutral compared with previously positive, reflecting the changing market environment across regions. Our outlook for investment in consumer experience, innovation and marketing, external factors, and capital expenditure remain unchanged. We want to fuel our innovation. At the same time, we now expect approximately SEK 4 billion from cost efficiency, reflecting the strong traction in our cost efficiency initiatives. With that, I just would like to conclude. I think the most important message we're trying to carry today here is the strong strategic execution the organization has been doing for the last month, for the last quarters. We're turning around North America.
Yannick Fierling: The three joint ventures have been operational in the Q3. Our focus remains on profitable growth. We have been growing organically once again by 3.5% in markets which have been depressed, highly impacted by high level of inflation and a very low consumer confidence. We're strengthening our market position. We have been gaining market share with Electrolux, with AEG, maintaining our price position as we have been doing for the last month. We keep on winning in this market. Last but not least, cost reduction and increased efficiency. We have been delivering once again SEK 1.4 billion in the Q3, but more importantly, we are executing in terms of organizational optimization and in terms of footprint across the globe. We're building a more agile and fast organization to deliver better results moving forward. With that, I will go for Q&A. Thank you very much.
Operator: Thank you.
Ann-Sofi Jönsson: Now we will open up for questions on the conference call.
Operator: Thank you. To ask a question on the phone, please press star one one and wait for your name to be announced. To withdraw your question, please press star one one again. Once again, please press star one one and wait for your name to be announced. To withdraw your question, please press star one one again. If you wish to ask a question via the webcast, please type them in the question box and click submit. We are now going to proceed with our first question. The questions come from the line of John Kim from Deutsche Bank. Please ask your question.
John Kim: Hi. Good morning. Thanks for the opportunity. Firstly, could we speak a little bit about the sales JV with Midea? Just kind of what your expectations or ambitions are for how much that can add to the North American revenue footprint.
Yannick Fierling: Yeah. Thanks, John. Good morning. Absolutely. The sales JV has several advantages for us in food preservation. The first one is that, we will be finally able to align with Midea on price points going into the market. That means we will avoid any overlap we may have between Electrolux and Midea. The second one is that this sales joint venture will be able to source products from the manufacturing joint venture in Juarez, but not only. This sales venture will be able to extend the product offer we do have in North America by getting and sourcing additional platforms from the other Midea locations and from our locations in footprint as well. So it is really a go-to market, which would be pretty different, very complementary with Midea. It is about extending the range we do have and giving a better offer to the end consumer.
Yannick Fierling: I just want to make one additional comment here. We have been aligning with Midea that the sales force, which will be facing and interfacing with our end consumers, will be distinct. We will have an Electrolux sales force interfacing with Home Depot, Lowe's, and other big players, and we will have a Midea sales force here. But everything will be consolidated in the sales JV, and we will be aligning on the strategy in the sales JV, being able to leverage the full scale and footprint we will have by partnering with Midea.
John Kim: Okay. Helpful. A follow-up question, if I may. On the updated guidance for price mix and volume, what is the bigger driver, or the color on those various components on the revision to the guidance?
Yannick Fierling: Yeah, absolutely. A very fair question here. As we have been trying to explain during the review, we have been going up in terms of volume. We have been growing as a group by 3.5%, outperforming the market. We went up in terms of volume in EMEA, APAC, Latin America here, and we have been going up in terms of prices in North America, as we have been disclosing in Q2. I think what is happening is more of the environment, the geopolitical environment here. Purchase power across the globe is getting reduced, with tariff, with the impact on the Middle East side of the equation, and we see an impact on the mix side on the market. Very simply, customers are orienting themselves towards lower-end products, which for Frigidaire is not entirely bad, because Frigidaire is below a price index of 100.
Yannick Fierling: But even within the Frigidaire brands, Frigidaire, Gallery, and Pro, we see a poorer mix moving forward. But that is a general comment, I would say, across the globe in the different markets here, which is purely linked with low consumer confidence and high level of inflation.
John Kim: Okay. Thank you.
Operator: We are now going to proceed with our next question. The question comes from the line of Akash Gupta from JPMorgan. Please ask your question.
Akash Gupta: Yes. Hi. Hi. Morning, Yannick, Therese, and Ann-Sofi. I got a couple as well. The first one is on cost efficiency guidance. I think when we look at the first 9 months, you are around SEK 3.4 billion, and now you are guiding SEK 4 billion for the year. I am just curious why you decided to keep just SEK 4 billion rather than at least SEK 4 billion, because your implied Q4 is quite conservative. Again, I know you have a tough comp for Q4 when it comes to year-on-year cost savings, but you have announced several measures this year, like closing down plants in Hungary and Latin America. I think all of those together with what is going in Anderson should be giving you better cost base than Q4 of last year. Maybe if you can talk about what are we missing in cost efficiency guidance?
Akash Gupta: That is the first one.
Yannick Fierling: Good morning, Akash Gupta. The first thing I would say is we are not missing anything, in the sense that we are very happy about the SEK 1.4 billion we are delivering in Q3. The main reason why we are giving a guidance around SEK 4 billion is that it is a year-over-year improvement, and Q4 2025 was a very strong quarter for us as well in terms of cost efficiency. I think we are aiming to have a Q4 which would be even stronger than the one we had basically last year, and I think we believe that we will be landing at SEK 4 billion, which again, I want to remind is in the upper range of what we have been guiding, SEK 3.5 billion to SEK 4 billion.
Yannick Fierling: I think that is one part, and it is mainly coming from, as I said, better engineering, better sourcing, and better level of efficiency in our factories here. Certainly, what is very important for us is to prepare what is coming. I think what is coming is certainly the results and the savings we are targeting out of JV, which will be in year 3, as we said, 2028, a SEK 600 million saving out of the JV and out of the footprint and the entire reorganization. We are expecting a SEK 1.4 billion saving in year 3 with a contribution in 2027 as well. But for Q4 of this year, what we are really looking at is really a SEK 4 billion, which we believe again is a good result.
Therese Friberg: And maybe just one comment there. You are right that, of course, Anderson has closed and we are starting to see some of those savings, but they are coming a little bit slowly piece by piece. The Hungary factory, we are not closing until the end of December, so we will not see any impact or any savings related to the Hungary closing this year.
Akash Gupta: Thank you. My follow-up is on channel inventories in North America, if you can talk about that, given we will be soon entering in very active promotional activity period. What do you expect this year compared to what we have seen in recent years? I think a couple of years back we had a very heavy promotional activity, but just curious to hear your thoughts on what you expect in Q4. Thank you.
Yannick Fierling: No, of course, Akash Gupta, price movements in North America are absolutely key, especially when you are looking at the level of external factors we are facing, combining the tariff and the Middle East conflict impact. We have been increasing, as we said, on 1 May, prices between 5% and 20% on the North American market. We were leading in Q2. As I have been alluding previously, our competition landscape has been moving at the beginning of Q3. What I would say today is that we are probably average in terms of price increase in the North American market. So it is good news. The entire landscape or industry has been increasing prices to face the additional tariff coming out of Mexico in the month of April here. In all fairness, we are not expecting the level of aggressiveness we saw last year.
Yannick Fierling: As a reminder, we had to go down in terms of pricing in Q4 2025 here because we saw, I would say, an unreasonable level of aggressiveness in terms of prices. Right now, the feeling we have is that the market is behaving in a far more reasonable manner.
Therese Friberg: On channel inventory, of course, the market in the beginning of the year, and specifically Q1, was very, very depressed, as you recall in North America. We believe that we as well as everyone has been trying to optimize inventory during the year. Also, of course, with the high logistic cost right now, specifically if you need to ship with short notice, we believe that the channel inventory is on a relatively normal level. Of course, to ship even more at this point in time would be very expensive.
Akash Gupta: Thank you.
Operator: We are now going to proceed with our next question. The question comes from the line of Ope Otanwi from Goldman Sachs. Please ask your question.
Ope Otaniyi: Hi. Good morning Yannick, Therese, and Ann-Sofi. Thanks for taking my question, and apologies if these have already been asked. Could you give some color on current trading, what you see in the quarter and the extent to which the various markets remain promotional in terms of pricing from customers?
Yannick Fierling: Ope, good morning, Ope. I think in terms of pricing overall, I have been commenting on North America here. Again, I just want to repeat that we have been increasing prices by 5% to 20%, and we are maintaining this price level right now. Of course, we are taking the opportunity or we are grabbing any opportunity if we see one in the market. Price levels in Latin America, Europe, and APAC remain pretty aggressive in this Q1 here overall. We have seen price going down. We are not seeing any sign of dumping. I am getting this question quite often in Europe, but the level of price aggressiveness remains pretty high in all the regions besides North America.
Ope Otaniyi: Great. Thanks very much. Maybe just on free cash flow, performance in the quarter was quite strong. How should we think of Q4 in terms of working capital ramp, but also expectations in terms of cash conversion?
Therese Friberg: Yeah. First of all, of course, in other working capital, you see the impact of SEK 1 billion that was related to the IEEPA tariff refund, which was for sure in Q3, sort of an extraordinary, even though year to date, of course, part of this tariff was actually paid in Q1. So year to date, the full SEK 1 billion is not an extraordinary. But for the quarter as such, it was. So that is of course no indication of what we will see in Q4. Then, as I mentioned, we have been working on optimizing inventory both during the quarter but also going into the quarter.
Therese Friberg: You can say that part of the normal seasonal positive effect that we see in Q4 in net operating working capital, we have already seen part of that coming into Q3.
Ope Otaniyi: Okay. Maybe more sort of housekeeping questions. Tariffs for the year, are they sort of done or you expect sort of a small tailwind in Q4 and then non-recurring items? I suppose there is a tiny bit left based on what you talked about, the IEEPA issue. Should we expect all that in Q4?
Yannick Fierling: I think in all fairness, first, we are not controlling tariff. We wish we could, but we are not controlling tariff here. The last wave we got is out of Canada. We have a very high level of external factor with tariffs and the Middle East impact. We are believing that this level of external factors will remain in the coming quarter. We do not have any indication that they may go down.
Therese Friberg: If the question was related to refund, as we communicated earlier when we booked the revenue related to the refund and now also received the cash in Q3, there is a small portion left, but that is not material and will hopefully come, let's say, over time, but it is not material.
Ope Otaniyi: Great. Thanks for taking my questions.
Yannick Fierling: Thanks, Robert.
Operator: We are now going to proceed with the next question. The question comes from the line of Uma Samlin from Bank of America. Please ask your question.
Uma Samlin: Hi. Good morning, everyone. Thank you very much for taking my question. My first one is on the external factors. Just going into Q4, would you be able to give us some ideas of what are the moving parts in terms of the external factors, in terms of cost of logistics, raw materials, tariffs, et cetera? We can start with that. Thank you very much.
Yannick Fierling: First thing I would like to say is that we were very transparent about the level of hedging we had on chemical here. We have 3 to 6 months of hedging in terms of chemical. Unfortunately, in the first quarter, it is the first quarter, where we don't have any protection in terms of hedging. So we have, if you wish, a full impact on the chemical side of equation due to the Middle East conflict. The second point, of course, the Middle East conflict has a direct impact on logistic cost, primary, secondary, and sea freight. But here again, we were fully impacted in this quarter. We don't see right now any movements in this respect, and that's why, unfortunately, the level of external factor we saw in the first quarter is what we're expecting or counting on, at least in the coming quarters.
Uma Samlin: Okay, that's super clear. Thank you very much. My second one is on South America. I guess you did very strong margins in South America this quarter. Would you be able to talk a bit about the momentum you see in terms of the trading? Because you have that as a negative flag about the market being very challenging. How should we think about the margin profile going forward, and what are the competitive landscape there?
Yannick Fierling: Okay. Very good. Thank you very much for your question. Again, a very strong quarter for us in Latin America. That's the first thing I would be, again, underlying with an organic growth of 6.6%, and we are transforming in Latin America with the closure of a plant in Argentina, a market which has been opening up, which is far more competitive today. I think we have been closing Argentina. We are as well executing very well the expansion we do have in terms of direct to consumer in Brazil. Brazil, we said it, Brazil has been slowing down. Brazil had a growth at the level of 2%, which is linked to several factors. One of them, without any doubt, is the very high level of interest rate, which has been happening in Brazil.
Yannick Fierling: We had as well, one of our main retailer, the main retailer in Brazil, which has been filing for restructuring in Q3 here. As I was underlying, with cost efficiency and the recovery of the overpaid tax, we have been more than covering the provision we had to make in order to phase basically for the restructuring of this main retailer in Brazil. The situation remains pretty tense. We've, of course, elections, which will be happening this weekend here. However, I am absolutely positive that we do have a right strategy as a company here, that we keep on winning in terms of market share, the price points we are targeting here, and that we have an incredibly strong organization over there, which is executing month after month.
Yannick Fierling: We're focusing on what we can control, and I believe we're doing that reasonably well, and I think we will be coping in a very agile manner on whatever may be happening in the market.
Uma Samlin: That's super clear. Thank you very much. My last one's just a follow-up on your efficiencies. I guess, in the past few years, every year you've generated SEK 4 billion, SEK 5 billion efficiencies. I was wondering, looking into next year, what are the things that you can continue to cut or save in terms of efficiencies? Should we expect a similar kind of level of efficiencies going forward? Are there ways that you can continue to extract from the different setup that you have today versus previously?
Yannick Fierling: Well, first of all, I've been saying that all along. Despite we are a premium company with AEG and Electrolux, and we're mixing up in North America with Gallery and Pro, cost efficiency is a very strategic pillar for us moving forward. It is a very strong pillar in the strategy we are embedding in the entire organization. That's the first point. Yes, we will be delivering around SEK 4 billion in 2026. We have a process which is delivering this number, a process which is well set in the entire organization, in engineering, in procurement, in manufacturing, in the entire supply chain side of the equation. There is no reason why we would be slowing down in terms of effort on the cost efficiency side of the equation.
Yannick Fierling: We're not disclosing yet the number we will be targeting for 2027, but certainly, we have an organization in place, and we have a process which is working. I think what I want to underline here is the rest of the strategy which will be contributing moving forward in terms of cost efficiency. The first point is the organization re-optimization. Again, we are focusing on reinforcing the frontline sales and marketing in Electrolux to serve our customer in a better manner moving forward. We're also aiming to get more efficient using tools like artificial intelligence, shared service centers on the corporate side of the equation. So we are really trying to gain traction, being closer to the end consumer here, faster, more agile from an organizational side of the equation.
Yannick Fierling: The other big pillar in terms of cost efficiency is without any doubt the manufacturing footprint we're executing as we speak. We have been closing Chile in the last quarters. We're closing Rosario in Q3. We have been closing Anderson on 31 July. We have constructive exchanges with the institution and our social partners in Italy in order to execute Italy. As Therese said, we will be closing our Hungary platform at the end of 2026. All these efforts, which is always a painful effort, but all these efforts will bring SEK 1.4 billion in year three here, which will be 2028. So certainly, my message is, we cannot afford today, in the current environment, to slow down in any way in our efforts in becoming more efficient, agile, and faster moving forward.
Uma Samlin: That's super clear. Thank you so much. That's all from me.
Yannick Fierling: Thank you.
Operator: We are now going to take our next question. The question comes from the line of Hai Huynh from UBS. Please ask your question.
Hai Huynh: Good morning. Thank you for taking my questions. I am just going to try again on the sales JV, please. I know it is a 50-50 split at the NCI level, and you are fully consolidating it, but could you give us some color in terms of the potential impact on the consolidation itself on the top line, whether we should be expecting similar top-line contribution from Midea's side to your side in terms of top-line revenue when you consolidate?
Therese Friberg: No. Unfortunately, that is a number that we are not disclosing in advance. You will patiently need to wait and follow the Q4 report to see the contribution from the sales of the Midea products.
Hai Huynh: No problem. Thank you. My question for North America. I have heard that you said the industry is becoming more rational recently, and Q4, despite being promotional, you feel like there is less pressure in terms of pricing. But you also mentioned that pricing has not fully covered tariffs yet. Is the intention to also have pricing actions in the future to fully cover the tariffs, or do you think pricing is okay where they are at the moment?
Yannick Fierling: Yeah. I would just remind you that tariff has had several waves and significant waves, and we had to face a significant level of tariff in 2025. IEEPA was refunded but replaced right away by 232. On 6 April, what has been hitting the industry is the level of tariff we got suddenly out of Mexico. The communication we always had is that the price increase we were intending, we are intending, and we executed in the market, starting in May. The aim was to cover most of the part of the latest wave coming from the Mexican side of the equation. That is exactly what we did by increasing between 5% and 20% here.
Yannick Fierling: Certainly, we will be taking any opportunity moving forward to increase further prices and cover more the tariff amount we are hit with in 2025 here, but we need to follow some rationale and preserve a good equilibrium between volume and price increase. Want to add anything to that?
Hai Huynh: Thank you. My last question, just a little bit on the mechanics of how you hedge. You mentioned that Q3 is the first quarter where you do not have any hedging, at least hedging benefits from previous contracts. Are you starting to hedge again in Q3 with current prices? How long will these contracts be? Is it usually one to two quarters lead, or are you taking a view that these are prices that are not sustainable?
Yannick Fierling: Very good. As we communicated previously, we are hedging chemicals between three to six months, depending on the region and the market. It is closer to three months on average here. On steel, we have usually yearly contracts. Of course, the market is very volatile as we speak today, and we are negotiating with the different suppliers, but our aim certainly is to take advantage of the scale we do have as Electrolux here and have, again, contracts moving forward, both for chemicals and certainly for steel. It is becoming a little bit more complicated. Tariff is coming into a loop as well. We have CBAM in Europe and quotas in Europe as well. I think the landscape is a little bit more complicated than in the past. Certainly, thanks to scale and procurement power we do have in Electrolux, we will be getting the best out of it.
Hai Huynh: Thank you.
Operator: We are now going to proceed with our next question. The question comes from the line of Timothy Lee from Barclays. Please ask your question.
Timothy Lee: Hi. Thanks for taking my question. Maybe a follow-up on the Latin America business and the retailers that are going to restructuring, what would be the sales contribution to your Latin America business at this point in time? Are you still selling your products to them at this moment? Going forward, do you have plans to diversify your sales channel and not going to these retailers, and how easy would that be? Thank you.
Yannick Fierling: Can you give the question to Bette's question?
Therese Friberg: Yeah, I can start. So, of course, first of all, as you know, we already have a relevant direct-to-consumer business in Latin America. With the large retailer that are right now in a restructuring process, they were a large part of the market. We had a slightly lower stake than their average of the market as impact for our sales. What we can say is that we are not selling to the retailer unless we would be able to get fully covered cash in advance at this point in time, which, as you can understand, in Q3 has been quite difficult. Of course, how we have been reacting is to then try to sell as much as possible through other channels and to increase our participation of D2C.
Therese Friberg: I think we should not speculate about the future, but of course, if we can get paid, let's say, cash on delivery, we are happy to participate in still the sales with the retailer. Of course, we are actively participating in the restructuring process.
Timothy Lee: Understood. Very helpful. Also a follow-up on the North America sales review with Midea. Do we already have some contribution in Q3 to contribute to the 2.4% organic growth in the quarter?
Therese Friberg: No. As we said, we did go live 1 October with the sales JV, so no impact of that in Q3.
Timothy Lee: Okay, understood. Very helpful. Thank you.
Operator: We are now going to proceed with our next question. The question comes from the line of James Moore from Rothschild & Co Redburn. Please ask your question.
James Moore: Yes. Thanks for the time. Morning, everybody. I wondered if I could start with Anderson and North American margins, one on Anderson savings, one on price, really. On Anderson, I think, Therese, you said they are coming a little bit slowly, piece by piece. There is a lot of moving parts here. My sense was Anderson was quite a loss-making plant. Could you say how much of that loss has come out in the P&L in Q3, and how much will be out in Q4? Is it that you are still carrying wages through? I understand that there is also P&L effect from the cold inventory sell-down, and then we have got the top loader production ramp-up costs next year. Just trying to think about this net net. Should North American EBIT step up in Q4?
James Moore: Is the real step up in the H2 when the laundry ramp starts? If I could dive to that separately, how much Anderson cold revenue is lost, totally lost, versus replaced by sourced volume through the sales JV? That is on Anderson.
Yannick Fierling: Yeah. Good morning, James. Good question. First of all, in terms of product, I would start with the product side of equation. As you can imagine, even if we stop production on 31 July, we had to build, and we have been building inventory here in terms of transition. I think we will have to sell these higher cost products for quite some months until the stock would be running out. I think we will not have an immediate cost advantage through the product we will be selling coming out of Anderson, since we have been building inventory. In all fairness, the market has been down. You know very well, in Q1 in food preservation by more than 16% and remain to be down in Q2 and Q3. That is on the product side of equation.
Yannick Fierling: Certainly, closing Anderson in end of July, we have some fixed cost advantages in Q3 because we have been laying off the 1,500 people we had in Anderson on 31 July. We will be restarting to hire people in Anderson beginning of next year. The equipment for the production of a top loader is on its way. We are executing this project absolutely according and perfectly according to plan here. We remain committed to start production on the top loader at the end of H1 in 2027. That is when we will be regenerating basically money out of the Anderson production. Anything I missed there as on Anderson?
Therese Friberg: No, so you are absolutely right. We will be starting to see the savings will come through as we are depleting the inventory that we prebuilt.
James Moore: Thanks. Maybe just on US pricing. I think you said that price net of tariffs, 232 input costs was still a sort of net negative. Do you expect that to turn positive in Q4? Sorry if that was already asked earlier. How much have you recovered so far, and do you need to do another material hike at the start of next year in the US? Obviously that is industry dependent. Just trying to understand where you are, and what has been recovered, what you expect to recover, and how you expect price to move to achieve that.
Yannick Fierling: Yeah, we have been very clear. Ulf Erlandsson price increase of 15% to 20% we have been executing 1 May is not covering the full tariff structure we had between 2025 and before, and 2026. What we always said is the 5% to 20% price increase would mostly be covering the impact we are getting out of the latest tariff structure we have on the Mexican side of the equation, which has been pretty massive for the industry, not in the US. We are not the biggest producer of home appliances in Mexico. So we have been very clear that price, we will not be covering the full extent of tariff 232 and 2026 only for price. That is why we are working as well on many other dimensions, which is cost reduction on the product side of equation and organizational efficiency moving forward.
Yannick Fierling: On the cost side of equation, as I mentioned, we will need always to balance volume with price increase. We will not be hesitating, of course, to grab any opportunity to increase further prices if we see the opportunity in Q4. As I said, today, we are placed at average price increase level, I would say, in the North American market.
James Moore: Thank you very much.
Operator: We are now going to proceed with our next question. The question comes from the line of Fredrik Iwansson from ABG Sundal Collier. Please ask your question.
Fredrik Ivarsson: Thank you. Good morning. Maybe first a follow-up on the previous question about trade inventory as we now approach Black Week and all of that. What messages do you get from the retailers, and maybe especially in the US, where the price inflation has had a negative impact on volumes lately? Is the trade sort of more or less reluctant to stock up on inventory into the season as there could be some, I presume, pent-up demand?
Yannick Fierling: Yeah. I think on trade side of equation, it is very difficult to answer right now. What Thérèse has been saying earlier on is certainly when market has been going down very significantly in Q1 and in Q2. I am sure the entire industry has been adapting the production tool to not produce too much for 2026. Today, with additional container cost increase we see in the market, sea freight cost. We do not see any overstocking, I would say, in the North American market at this point of time.
Fredrik Ivarsson: Right. But do you think some retailers could be even somewhat opportunistic ahead of the season? Or is it more cautiousness across the board?
Yannick Fierling: In all fact, we do not have any indication about that on all fairness. We do not see anything which is coming out of the ordinary in terms of stock level at retail level. We do not have any information about that.
Fredrik Ivarsson: Okay, fair. Coming back to cash flow, and sorry if I missed anything, but you just said part of the positive effect we usually see in Q4 has already been captured in Q3. How big was this timing effect, would you say, as we think about Q4 cash flow, please?
Therese Friberg: Yeah. I wouldn't give any indications, but, of course, if you would compare year over year or to any other normal quarter, or normal quarter going back in the days in net operating working capital, I guess you get a sense. Of course, for us mentioning it is, of course, that we believe that the number at least is relevant to be aware of.
Fredrik Ivarsson: Okay. Thank you.
Operator: We are now going to proceed with our next question. The question's come from the line of David MacGregor from Longbow Research. Please ask your question.
David MacGregor: Yes. Good morning, everyone. Yannick, congratulations on the progress on the execution side here. I know it is early stages here, but it is all encouraging. I wanted to ask the North American pricing question at the risk of beating this issue to death, if I could just maybe ask the question a different way. I wonder if you could just talk about your pricing realizations on a sequential basis. I know the implied 6% to 7% growth is a year-over-year number, but how should we think about the improvement you saw from Q2 into Q3, and then what you might expect into Q4? Whether you are seeing any change in terms of the competitive reaction around the leadership on pricing. Thank you very much for the question.
Yannick Fierling: First of all, we did not increase prices in a more generous way across product category between 5% and 20%, because the tariff impact we had to face very much depended on the location where the products were manufactured. Of course, you are adapting your price increase as well to relative movements in the market. So we have product categories which have been increasing significantly more than other product categories. In a nutshell, we have been deploying the increase we planned for 5% to 20% on 1 May, and I think the price increase we have been announcing to the retailers have been kept stable in terms of magnitude and in terms of quantity throughout the Q3. So we have been leading price increase, I would say, in the Q2.
Yannick Fierling: The rest of the industry has been moving at the beginning of the Q3 today. As I said today, we would be at average price increase. I am not expecting major movements over there, but certainly, I said previously here, we will be looking at taking full advantage and opportunities of any kind of price realization we can perform in the market moving forward.
David MacGregor: Okay. That is helpful. Thank you very much. Second question is just as we get ready to see the sales JV kick into the numbers here in the Q4, how should we think about transfer pricing? Are these manufacturing JVs on a cost-plus model, or how does that work?
Therese Friberg: Yes. The relevant flow that you will see is from the manufacturing joint venture from Juarez, which will have a transfer price then going into the sales joint venture. As you know, the sales joint venture we will fully consolidate, while we will then get the portion of the results related to partly then the transfer price from the manufacturing joint venture in Juarez.
David MacGregor: Okay. Perfect. Thank you very much.
Ann-Sofi Jönsson: Very much. That was the last question from this session today. Thank you very much for those of you who have listened in to us. Thank you, Yannick, and thank you, Thijs.
Yannick Fierling: Thank you very much. Have a great day.
Ann-Sofi Jönsson: Thank you. Thank you.
