Earnings Transcript for ELUX-B.ST - Q4 Fiscal Year 2023

Jonas Samuelson: Good morning and a warm welcome to Electrolux Group's Fourth Quarter 2023 Results Presentation. With me today I have our CFO, Therese Friberg, and for the final time our Head of Investor Relations, Sophie Arnius. I'd like to mention that this session is recorded and will be available on our website as an on-demand version. For the full year 2023, challenging market conditions have continued to pressure profitability, most significantly in North America, but also to some extent in Europe and Asia Pacific, while Latin America has performed very well in a more stable market environment than we have experienced in recent years in most countries there. Consumer demand was impacted by inflation and interest rates in most parts of the world, resulting in lower unit volumes. Overall, price remained a slightly positive factor for the calendar year, but increasing promotional activity progressively turned net price negative in the second half of the year. Specifically, in North America, unit volume demand held up at relatively good levels, but only because of significantly reduced market transaction prices. We saw continued positive contribution from product mix as we focused on leveraging our attractive and innovative product offering despite an overall negative market mix development as consumers increasingly looked for lower price products. The Groupwide cost reduction and North America turnaround program delivered SEK 5.5 billion of savings, but this was partially offset by negative external factors, primarily from currency but also excess inflation and energy cost increases. Full year EBIT of SEK 0.4 billion was not satisfactory and heavily impacted by a weak Q4 in North America as previously communicated. Given the continued and accelerating headwinds, a further step up in our cost reduction measures was announced in the fall. Focus on organizational simplification and delayering and strong focus on product cost reductions. So if we then move into the fourth quarter specifically, our performance in Q4 was heavily impacted by strong price pressure in North America as well as temporary transition impacts from our new factor in Springfield. Overall volumes were slightly lower, a strong growth in Latin America offset weakness in North America and soft but sequentially stable demand in Europe. And we continued to improve our sales mix. The significant loss in North America was mainly driven by price pressure despite continued cost reduction performance. We also saw quite high promotional activity in Europe impacting EBIT negatively there while Latin America delivered strong organic growth and financial performance. As a consequence, we reported a loss of SEK 724 million before nonrecurring items and as previously communicated, we took a nonrecurring item of SEK 2.5 billion in Q4 for the expanded cost reduction program. Therese will now walk us through the nonrecurring items in Q4.

Therese Friberg: In the quarter, we had nonrecurring items with impact across business areas and group common costs. SEK 2.5 billion in total was related to the cost reduction program with a regional charge reflecting country-specific legislation. And SEK 0.2 billion was related to the impairment of assets related to the organizational change. We also had a positive effect from the Memphis real estate sales as previously announced. And having clarified this, let's go into the results for the quarter. We had a negative organic contribution to earnings in the quarter, driven by negative effects from price and mix combined of 4.4 percentage points, with negative price in our main markets. Mix continued to be positive despite consumers mixing down based on a strong product portfolio. Volumes declined slightly in the quarter. Cost was in total reduced by SEK 1.1 billion with cost efficiency and innovation and marketing combined. This was somewhat lower than previous quarter related to that we ordered the last year in the fourth quarter had implemented reduction in the use of express rate and spot buys of components. We also had a temporary transition cost related to the closure of the legacy factory in Springfield in the quarter. External factors turned positive in the fourth quarter driven by positive raw material. This was accepting currency headwinds and headwinds related to labor inflation and energy cost increases. And to improve transparency, the net impact on earnings from currency related price increases in Argentina is from the fourth quarter included in external factors. Hence, both the negative currency effect and cost inflation as well as the corresponding positive effect from price increases. And reported organic sales growth however includes price increases in Argentina. And if we take a quick look also at the full year. For the full year, we had negative organic contribution to earnings driven by a significant volume decline as a result of large demand drops in our main market. Especially in infras important product categories. And the positive effect from price and mix combined was 1.2 percentage points for the full year with positive mix also for the full year. Price was positive in all business areas except for North America where we have experienced large price pressure during the year. Also in Europe price turned negative in the later part of the year. Cost was in total reduced by SEK 5.5 billion as a result of the focused execution of the cost reduction program which we will come back to the different components of. External factors despite being positive in the fourth quarter was negative for the full year driven primarily by currency but also excess inflation and energy cost increases. And the group wide cost reduction and North America turnaround program delivered savings exceeding target and Jonas will delve more into this.

Jonas Samuelson: Thank you. As mentioned, we delivered cost reductions of SEK 5.5 billion in 2023. Well ahead of our initial target of SEK 4 billion to SEK 5 billion. But behind slightly our revised ambition of SEK 6 billion due to ramp up issues in Springfield and some other temporary headwinds. In particular, we were successful in reversing many of the inefficiencies built up during the pandemic and improved manufacturing productivity. We also streamlined the organization and reduced the total of 9, 000 positions from Q2 2022 to Q4 2023 from 53, 000 employees to 44, 000. As we go into 2024, we have the ambition to reduce and an additional SEK 4 billion to SEK 5 billion through organizational simplification, focus, productivity efforts and ramp up and stabilization of Springfield, resulting in anticipated headcount reductions of 3, 800, of which approximately 3, 000 required the restructuring cost that were taken in Q4 2023. We have strong focus on material cost through sourcing activities and leveraging modelization and scale. We're also accelerating medium term product cost reduction efforts to continue to drive similar productivity performance in the coming years. Let's have a look at our cash flow on liquidity, Therese.

Therese Friberg: Yes, cash flow after investments was positive SEK 3.1 billion for the full year driven by a strong cash generation in the fourth quarter amounting to SEK 3.9 billion. This is compared to significantly negative full year cash flow last year of SEK 6.1 billion. And the significant year-over-year improvement is driven by continuing to reduce the inventory level after resolving the supply chain constraints during 2022 and then further optimizing it during 2023. We also have a lower level of investments in 2023 contributing to the improvement. And for the full year, we have a positive impact from the divestment of the manufacturing facility in Hungary of SEK 0.5 billion in the third quarter and the sale of Memphis of SEK 0.4 billion that was executed now in the fourth quarter. Looking at our liquidity and maturity profile. From a balance sheet perspective, we have solid liquidity of SEK 32.8 billion including revolving credit facilities as of the end of December. And we have a well-balanced maturity profile and we have no financial covenants. The target remains to maintain a solid investment grade rating by delivering on the enhanced cost reduction program in 2024 and beyond as well as divesting the previously communicated non-core assets over the coming years. And Jonas will now go into the business areas performance in the fourth quarter starting with Europe.

Jonas Samuelson: Consumer demand continued to be soft in Q4 but was sequentially quite stable versus Q3. However, versus Q4 2022, this still had a negative impact on sales, especially as for us very important kitchen built-in market remained heavily impacted by weak consumer confidence and high interest rates. Prices turned negative in the quarter as promotional activity increased, but we were able to deliver a positive mixed contribution through a focus on innovative products and categories. The EBIT decrease was driven by volume and price, while cost savings and external factors contributed positively, mainly due to lower raw material costs. Now let's take a look at the European market. As mentioned, the Q4 market was still down versus last year by 4%. But if we compare to the run rate in Q3 and versus 2019 pre-pandemic demand, the demand amount was relatively stable at approximately 12% below Q4 2019. The market in fabric care recovered somewhat, driven by demand for dryers, but demand for built-in kitchen appliances remained very weak as the order pipeline in kitchen retail was very low in most European countries. Let's continue with our business area in North America. In Q4, price pressure accelerated further as heavy Black Friday promotions were extended throughout the end of the year. This also impacted our volumes negatively as we only participated selectively in these extended promotions. Additionally, we were not able to participate fully in the market demand for cooking appliances as the final transition of production to the new factory in Springfield was conducted in Q4. Despite these headwinds, we were able to increase our mix of higher value products in the quarter. The significant operating loss was driven by the significant negative price and volume impact. It is clear that the promotional intensity is at least partially and temporarily driven by significant discrepancies in cumulative cost inflation impact and currencies exacerbated by low ocean freight cost between North America-based production and certain parts of Asia. This is mainly impacting us in the important refrigeration category. The higher cost levels driven by the Springfield transition impacted the otherwise strong cost savings somewhat negatively. The full ramp up and stabilization of Springfield is expected to take until late 2024 to complete. The turnaround program continued to deliver strong benefits and additional productivity and product cost measures launched would further impact cost favorably mainly in the second half of 2024. Now let's take a look at the US appliance market. Unit volume demand in the US market have been supported by heavy promotions impacting transaction prices while the total market value has been impacted negatively. Demand has also been favorably impacted by a positive replacement cycle. Demand from new housing has been subdued but renovations in existing homes have held up better than for example in Europe as many households are locked into low rate long term mortgages and GDP growth has developed more strongly than anticipated. There are signs in the market that new housing demand is recovering somewhat from the low levels experience. Let's move on to Latin America. The very strong organic growth was driven by demand in mainly Brazil and Chile while Argentina was strong before the devaluation hit. Electrolux sales growth was also helped by positive timing effect in volumes of retailers towards the end of the quarter as well as positive product mix and strong aftermarket sales growth despite relatively high promotional activity. EBIT improved significantly as strong organic contribution was supported by cost reductions and the negative impact of devaluation in Argentina was neutralized by aggressive price management. Finally, turn to Asia-Pacific, Middle East and Africa. Low consumer confidence in Australia and Southeast Asia impacted demand and promotional pricing negatively, while we were successful in implementing price increases in high inflation markets such as Egypt. EBIT increased year-over-year due to price and impact from cost reduction program while currency was negative. And now let's go to our market outlook for 2024. Looking into the beginning of 2024, weak consumer sentiment is anticipated to continue, with consumers shifting to lower price points and postponing purchases in discretionary categories. Forced replacement is expected to continue to be the main demand driver. However, as inflationary pressure is subsiding, and the interest rates are expected to come down, we expect demand in major markets to stabilize in the course of the year. As interest rates come down, this is positive for remodeling and new construction, which are key drivers for appliance demand in mature markets like Europe and North America. However, there's always a lag before this shows in demand. Demand for core appliances in 2024 full year is therefore expected to be relatively neutral for all major regions compared to 2023. Let's look at our business outlook. Organic contribution from volume price and mix combined for the group is expected to be negative in 2024 full year driven by negative price. This as the new price levels established at the end of 2023 in the market are assessed to remain in 2024. Looking at the facing of this impact for negative price, we expect most of this to impact the first half of the year and especially the first quarter. This as we last year benefited from list price increases in that part of the year. For the full year, the negative price is anticipated to be partially offset by growth in our focus categories such as premium laundry and kitchen product under our main brands, Electrolux AEG and Frigidaire. The recent investments in new product architectures provides us with a great platform to drive growth in these focus categories going forward. Even if a challenging macroenvironment with more consumers shifting to lower price points and demand driven to a larger standby report replacement is however a limiting factor. We expect external factors to be positive for the year mainly driven by lower raw material costs. Normally, we have a lag impact in the first quarter as raw material procured at last year's rate is consumed in the beginning of the year. As we enter 2024 with significantly lower inventories of supplies compared to last year, we expect this lag to be much smaller this year. As mentioned, external factors also comprise the net effect of currency development including pricing adjustments in Argentina. As outlined previously, we are implementing aggressive additional cost reduction activities with the objective to generate total positive year-over-year earnings impact of SEK 4 billion to SEK 5 billion from cost efficiency and investments in innovation and marketing combined in 2024. However, in light of the Red Sea situation, there is a degree of uncertainty related to ocean freight costs. The cost reduction activities implemented will primarily contribute to earnings during the second half of 2024. Given the time lag before the actions will have full earnings impact, we do not expect sequential improvement of underlying operating income in the first quarter. Investments to strengthen our competitiveness through innovation, automation and modernization continue in 2024 and total capital expenditure are estimated to be around SEK billion 5 to SEK 6 billion. Before I sum up the quarter, I would like to shortly mention that as we go into 2024, we would like to highlight our new structure of three business areas where the previous Europe and APAC, MEA business areas are consolidated into one, driving strong synergies along organization, product offering and brands. This new structure is implemented from the 1st of January and will be externally reported from the first quarter 2024 report. The pro forma historical numbers for Europe and APAC, MEA will be released prior to the Q1 release. So, to sum up the quarter and strategic drivers that we have delivered on, we can say that despite the very challenging external environment in Q4, we continue to execute on our strategic drivers. As mentioned, we were able to drive positive product mix contribution in most markets on the back of our new innovative product architectures focused on the mass premium market. We also saw continued good contribution from the cost reductions in North America turnaround program despite some headwinds for production transitions. We launched an expanded cost reduction program targeted to implementing a more focused and simplified organization as well as accelerated product cost productivity for the coming years. Finally, our new ambitious science-based climate targets were approved by the Science Based Target Initiative after us having completed the first program three years ahead of time. And with that and while thanking Sophie for several years of great contributions to our Investor Relations community and ourselves, we would like then Sophie to turn to Q&A.

Sophie Arnius : Thank you, Jonas. Thank you, Therese. We will now continue with the Q &A. [Operator Instructions] Operator please go ahead.

Operator: [Operator Instructions] Your first question comes from the line of Johan Eliason from Kepler Cheuvreux.

Johan Eliason: Yes, good morning. This is Johan Eliason from Kepler Cheuvreux. I hope you all well Jonas, Therese and Sophie. I was a bit curious on the cost saving sort of initiatives. You came in a bit short in the fourth quarter and you say there was some extra cost again in this cooking transition in North America. But aren't those costs falling away? So we should get those in 2024 instead or how should I think about this bridge? Are there some underlying costs that are improving above your calculations you announced in Q3 when I think you mentioned the total savings to be SEK 11 billion over these two years or so?

Jonas Samuelson: Yes, so the savings are there. However, the ramp up speed in Springfield is impacted to some extent for the full year. So those let's call it temporary cost increases will also impact 2024. That's what we're including in the guidance there. But as then Springfield operates at full speed by the end of the year, those savings will come as we go forward into the future years.

Johan Eliason: Into 2025.

Jonas Samuelson: Oh, yes.

Operator: And your next question comes from the line of James Moore from Redburn.

James Moore: Oh, hello everybody and good morning. And thanks for taking my question. I just got cut off, so I don't know if this is a repeat of the previous question, but when you talk about the underlying profit in the first quarter, are we talking about adjusted EBIT or some other definition? Just to check that you mean adjusted EBIT will be a bigger loss than $724 million in the first quarter. And tied to that, for the full year ‘23, could you talk about the overall group margin and whether you would expect to increase this year versus the 0.3% margin last year? Thanks.

Jonas Samuelson: Yes, so on the first part of the question, we're comparing to the adjusted operating loss in Q4 of $724 million. And the indication is that we don't see that improving in Q1 of 2024. That's the comparison. And then in terms of full year, as you know, we don't provide further guidance than what we just went through in the business outlook. So lots of different factors, of course, impacting profitability also in Q4. But continued negative impact from price, as mentioned. Strong continued performance on cost reductions. A bit more favorable external factors than we saw last year. Those are the main drivers coming into 2024.

James Moore: Thanks. If I could just follow up, because the moving parts are quite significant. Is there any way you can help us think about the magnitude of price this year, I could see a scenario of 3% to 4% or 1% to 2%, it's very difficult. I don't know if you have any parameters by which you could help us quantify that.

Jonas Samuelson: Yes, so I would say the indication that we're giving is that the price levels that we established in the fourth quarter in the main markets, particularly North America and Europe, is more or less what we expect to continue to see in 2024, of course there will be variations. But that, of course, indicates a year-over-year fairly substantial price pressure in the first half of the year and then progressively less as we go into the end of the year. But we're not going to give exact percentages.

James Moore: Actually, that's very, very helpful. Just to clarify, I understand what you mean. Are you saying that the price level is like an index, you think, to stay at the same level of pricing or the year-on-year percentage change to be the same for the year.

Jonas Samuelson: No, the price, the absolute index price let's say.

Operator: And your next question comes from the line of Akash Gupta from JPMorgan.

Akash Gupta: Yes, hi. Good morning, everybody. My one question is on Europe. So here we saw 10% industry demand decline in ‘22, 9% in ‘23. And looking at your guidance, you're not guiding any meaningful recovery here. So maybe if you can talk about what sort of picture do you see at a country level in Europe, because I assume that there may be a mix of picture between various parts in Europe and more focused on Scandinavia where you have a strong market which it presents in other countries where you are more stronger than Southern Europe, for example. Thank you.

Jonas Samuelson: Yes, I would say, unusually, the downturn in Europe compared to the peak of 2021 is fairly universal across our main markets with some limited exceptions like Switzerland and a few others. But other than that, it's fairly similar and fairly universal, which is not the case back in, let's say, the global financial crisis. And we had very big differences. And I think it's pretty clear that it's driven by the universally high inflationary pressure that we've seen and the related interest rate increases impacting remodeling activity. And then, of course, the overhang that we saw from the high levels of remodeling activity during the pandemic. So we think that a good comparison is versus that 2019 baseline that I touched upon. And we've been kind of bouncing along throughout the year, 2023, around, let's call it 10% to 12%, minus versus 2019. And as we go into the ‘24 year, we expect those sort of drivers to remain for a large part of the year as most likely, interest rates and real disposable income will not really start to increase meaningfully until the second half of the year. And then there's a time lag until that really plays through into actual unit sales. So for the full year, we expect that to lead to more or less neutral impact. I'm sure that's going to bounce around a bit quarter to quarter, but that's our best guess. I think the underlying demand drivers, to your point, are now then hopefully progressively throughout the course of the year going to start to point more positively back to kind of a more normalized demand levels in the coming years but we don't really see that shifting in ’24, yes.

Operator: And the question comes from the line of Martin Wilkie from Citi.

Martin Wilkie: Yes, thank you. Good morning. It's Martin from Citi. My question was just to drill down further in North America. It sounds like by the end of the year, you're expecting your footprint there to give you both the volume and the cost set up that you're looking for but you're having a couple of comments, one in the release and then earlier in the call, about refrigeration. I just wanted to understand whether you think there's a cost differential with agent-based suppliers that is eroding your profitability. That is the sort of the next sort of structural issue with your cost base in North America or is that more of a temporary feature that you're seeing at the moment? Thank you.

Jonas Samuelson: Yes, we're seeing that as more of a temporary issue but yes. If you look at the cost, the fundamental cost drivers in North America over the recent years versus the same cost drivers in large parts of Asia over the same period of year, you can see that we've had fairly significant cost inflation in North America in combination with an historically very, very strong exchange rate. So the US dollar is at 15-year highs versus most Asian currencies. And then commercially, particularly in China and in related countries, in ‘23 year, you basically see a deflationary environment. And that impacts everything from steel prices to labor costs. So there is for now a fairly sizeable discrepancy and then why it's impacting the refrigeration categories because those are fairly sort of standardized products that can be exported to, not all of them, but the baseline, the base products are fairly standardized that can be exported easily from Asia to North America. And there the factor of very low transportation prices are enabling that. Those are quite bulky products, so with normalized exchange rate and freight costs, the benefit of producing a nation of shipping to North America is usually lower, right? And over time those things tend to balance out. So that's why, yes, it's fairly substantial, but we also see it as temporary.

Martin Wilkie: Thank you. And then just on that point of competition, we've had lots of industry comments about promotion activity in the second half of 2023, it's very difficult to gauge was that back to sort of normalized levels of promotion or was it sort of even worse than what you might have seen in sort of 2017, 2018, 2019, just to get some sort of sense as to start thinking about the holiday period in 2024, is the promotion comp, is it sort of hard or easy or how should we think about that?

Jonas Samuelson: I would say the promotion level is both sort of high and extended at that, yes, probably among the higher levels that we've seen in many years. I think it's fair to say that what's happening though is that the, let's call it the average transaction prices in the market are coming down more towards the pre-pandemic level. So where a lot of the inflationary and temporary pressures that we saw during and after the pandemic are starting to subside and we and others are able to work out those costs from the product. So I think this is more of a, it is more of a normalization, but it's happening in North America a bit faster than what we're able to get the cost out, given the factors that I just mentioned.

Therese Friberg: And I think what we can say, historically, we used to talk about Black Friday and that period, which was usually then a high promotion during one week. And then I think we've seen over the last year that we have more become like Black November, so somewhat extended, and now then we saw it more being also extended into a large part of December. So it's more that promotional period has also been really extended compared to historical.

Jonas Samuelson: Which indicates then kind of a lower average transaction price in general, yes.

Therese Friberg: Yes.

Operator: And your next question comes from the line of Alex Virgo from Bank of America.

Alex Virgo: Thanks very much. Good morning, everyone. Yes, trust you’re well. I wondered if you could just talk a little bit to the ramp up in the US on the operational side. And just some of the things that you're looking at in terms of, I guess, obstacles or roadblocks. What can we be looking at tracking to try and understand the trajectory of how that looks as we go through this year? Because it feels like it just keeps getting pushed a little bit to the right. And I want to understand what are we likely to see as a sort of cadence through the year in terms of benefits?

Jonas Samuelson: Yes. So, indeed, it's a complex operation to transition to a completely new product architecture and manufacturing facility. As we see production inefficiencies in that, those production inefficiencies have to be compensated by more shifts and more overtime. So that results in higher costs. And it's always difficult to predict precisely how much that impact will be. I think we, I mean, obviously we have a very sort of highly skilled factory in Springfield. So that's a positive as we work through those normal ramp-up challenges. But it is going to take the better part of this year to get to the full output productivity. And we will carry these higher costs of excess shifts and overtime and inefficiencies for the better part of the year. But I would say nothing out of the ordinary. This is more, yes, a challenging but manageable transition. I'll take the chance to mention that we actually, on the new Frigidaire Gallery from Control Cooker, was scored number one by Consumer Reports, so the product is very good this morning. So we have no issues on the product side, it's more to get the production up and running.

Operator: And your next question comes from the line of Henrik Christiansson from Carnegie.

Henrik Christiansson: Yes, good morning. A question on cash flow and what do you expect for 2024? Are you done with the working capital release or is there more to come? And then also on the one off charge to take in the quarter, how much of that will be cash negative for 2024?

Therese Friberg: Yes, so we don't give any cash guidance besides the CapEx that we have in the report. But yes, we can say that, of course, with the charge that we now took in the fourth quarter, yes, that will be progressing during the year to come. And of course, that is linked to that we're saying that the savings will also come progressively during the year and that is then very much linked to the cash outflow that will also then come during the remainder of the year. And then when it comes to working capital, we are pleased with that we were able to continue to reduce and optimize inventory during 2023. Of course, that was to the expense of also having a lower payables level during 2023. So yes, we always have the ambition to continue to work on our working capital and now as the markets are expected to stabilize into 2024, in percentage of sales we have the ambition to continue to improve the working capital level.

Henrik Christiansson: And just to follow up on that, how big will that, over that one off charge, how much negative will that be in 2024 in terms of cash?

Therese Friberg: Yes, I think that, I mean, we took the whole SEK 2.5 billion and that is all severance cost and we're expecting to pay out the majority of that in 2024.

Henrik Christiansson: Great. And then also to follow up, CapEx, you're going for SEK 5 billion to SEK 6 billion, you're in the last inning of this ramp up in Springfield, is that the normal sort of cash flow CapEx rate SEK 5 billion to SEK 6 billion going forward or is there room for that to come down going forward when Springfield is on?

Therese Friberg: I mean, of course, we are also having a lot of additional projects, and it's not only CapEx going into the large transformation and transition programs, but to say that, and of course, we will continue to evaluate the CapEx level continuously going forward, depending on the investments that we see and the payback that we see on those investments, so not giving any indication, really, for further years out.

Operator: And your next question comes from the line of Jordan Meghan from Deutsche Bank.

Jordan Meighan: Hi, there. It’s Jordan Meighan from Deutsche Bank. Thanks for taking my questions. I just want to go back to your balance sheet and comments on investment grade. I think 3.9x net leverage at the end of the year, maybe a touch higher if you add back those leases. Can you just talk about the path of getting back 2x? Is that sort of changed a bit on this outlook? And secondly, and slightly related to that, any progress on asset sales? I think your press release points to some potential negative factors that could impact the timing there somewhat. So yes, to a bit of clarity, that would be great.

Jonas Samuelson: Yes. No, I think the investment grade rating was reaffirmed by S&P late in the year. So I think we're on the right path when it comes to that. And in terms of the leverage ratios that you mentioned, of course, they're highly sensitive both to EBITDA and to cash flow. And even though we do see some timing risks mainly to our divestments which they pursuing those vigorously and we see a lot of value in divesting non-core assets and so that will progress throughout the year and the years to come. So in combination with the work we're doing to reduce costs and improve our EBITDA and to generate positive cash flow, we have a favorable outlook on the main debt pressures.

Operator: And your next question comes from the line of Johan Eliason with Kepler Cheuvreux.

Johan Eliason: Yes, hi again. Thanks for taking my follow-up question. I was wondering about this divestment program. You mentioned some issues around the price level. I think you've talked about the SEK 10 billion benefit eventually, if and when you sell [inaudible] and Olympic in Egypt. I guess the price level probably refers to the properties, which eventually ended up at a bit lower level than you've initially assumed. But how is it going for the businesses? Are you getting into any discussions? Are you seeing price levels that you thought when you announced this last summer being relevant or how should we think about it?

Jonas Samuelson: I mean, you're on the right topic there. Of course, the property values have come down a bit. And of course, there is a certain amount of geopolitical attention in the Middle East. So we can't shy away from that. That might have an impact on timing and potential valuation. However, we are progressing well with the preparation preparations for divestment and we're seeing a lot of interest in the assets that we have indicated that we're looking at divesting. So no issues, it's just to be prudent in our guidance.

Johan Eliason: And regarding the comment about Middle East, are you seeing further discussions on the European brand business that you talked about, [Sanosi and Tapanan] et cetera what you had? Or is that sort of in the same stage as of now?

Jonas Samuelson: Yes, I know those are all in the same sort of stage of evaluating the path forward, yes.

Johan Eliason: Okay. And talking about the outlook, you have a neutral volume outlook for most markets that you are in, but you sort of indicated that the beginning of the year will probably be tough, for example, in Europe. And we got detailed guidance from World Food on Q1 volumes. They talk about 8% to 9% down, if I remember it correctly. Is that something you want to see as a starting point for the European volumes?

Jonas Samuelson: So we obviously don't give detailed quarterly outlooks for the volume, but I think we're probably a little bit more optimistic than that.

Operator: And your next question comes from the line of James Moore, Redburn.

James Moore: Oh, thanks for taking a follow-up. I wondered if I could explore the North American business a little more. Would it be possible to say where unit production at Anderson is now? Are you now at 100 % to plan or is there still something on that side? And where is Springfield really compared to where you want to be? And I guess what I'm trying to get my head around is assuming flat volumes from here and the usual pricing dynamics in the North American market, at what point do you think we get to normal in terms of profitability and the ending of double costing and all those topics? Is it still a year away or two years away?

Jonas Samuelson: Yes, so Anderson is pretty much fully up and running in terms of output. The opportunities for further productivity improvement are still very much there, but I wouldn't say that we have any issues in Anderson right now to produce the desired volume in sort of regular production without any extraordinary events, but there is a lot of productivity improvements still to be had. When it comes to Springfield, we ran out the last production of what we call the legacy products done in the fourth quarter. We closed the facility in November and we continued then the ramp-up by adding those final product categories of the new architecture to our production in the new Springfield factory. And there we are seeing, but which is expected but probably a little bit more than we had in our initial guidance, let's say, that we saw inefficiencies in terms of having to run over time and run excess shifts and so on in order to get the production output. And we did lose some volume in that period and we're not able to fully kind of participate in the market demand in the quarter for cooking products. But as we go into 2024, we see that gradually working its way out. Right now, we're producing in a say reasonably undisturbed manner but still with a lot of extra cost. And those extra costs will work themselves out throughout the course of the year. So to answer your question, by early 2025, we should be running at, let's call it, full regular production in all of our North American facilities. Having said that, there will still be sizable productivity opportunities also in 2025 and beyond, both in terms of production output, productivity and product cost initiatives. So, that's going to be an ongoing work for the coming years.

James Moore: Just so I understand, that's really helpful. Are you saying that sort of broadly, actually, you're doing the kind of cooking volumes you want to do but just in a very uncompetitive or costly way?

Jonas Samuelson: Yes. That's broadly right, we did lose some volume in Q4 and we were not able to, so we had to be let’s call it conservative in terms of our sales in the fourth quarter as we were ramping down ramping up, and that to some extent continues into the beginning of the year. But broadly we were able to meet market demand through a lot of overtime and extra shifts and things like that, but at a fairly high cost.

Operator: And our final question comes from the line of Timothy Lee from Barclays.

Timothy Lee: Thanks very much for taking my question. I have a question on the outlook gain, so you are now neutral on the markets outlook in terms of units year-on-year for all of the regions, but you are also seeing negative impact on the business from volume price or mix perspective. So what does that mean for the overall revenue expectation for 2024 for this? That means you are expecting some revenue decline in the year because of those still negative impact, but overall market is kind of neutral. What do you think about your market shares perspective?

Jonas Samuelson: Yes, from an organic perspective, we do expect market volumes to be relatively neutral as mentioned, and we expect to gain volumes in our key categories in building kitchen and in laundry in particular, in the sort of mass premium segments of those. And however, we will have a fairly significant negative carryover price impact from the lower price points that we had towards the end of the year compared to the average of the year of 2023. So there is a carryover impact going into 2024 that turns the total organic contribution negative. And then, of course, we're offsetting that by strong cost contribution and also with certain factors.

Timothy Lee: And this is still will be like still overhang on the top line side, but there will be improvement in the profit level that's the overall direction for 2024.

Jonas Samuelson: Yes, so we don't give specific earnings as you know, but those factors that I mentioned are there, of course.

Timothy Lee: Understood. Can I follow up a little bit on the margin than for North America in particular. So how much was that loss that we saw in the fourth quarter to be from the relocation? How much from the efficiency reduction from that transition as well? And how much was core? I'm just trying to see how was the level of the core profit at a particular level that we should expect you will be soon sometime in 2024.

Jonas Samuelson: Right. So by far the biggest impact on the result in Q4 was the negative price in North America. That was largely, if you look year-over-year for North America in Q4, that negative price was largely offset by cost efficiency. So it was a relatively neutral year-over-year effect. Of course we had the ambition to have more of the cost savings fall through to the bottom line in North America specifically, but that was not possible due to the elevated price pressure. So as we go into next year, we more or less expect that pricing level to stay where it is, and that has a negative organic effect particularly for the first half of the year. And then as we go through the year, we have, as mentioned, significant additional cost savings both in external factors and in cost productivity that impact as we go through the year, but more heavily weighted to the second half of the year.

Timothy Lee: Okay, thanks.

Jonas Samuelson: Okay. Thank you. Thanks for all those questions and for the interaction. And in summary, when we look back at the challenging 2023, we're confident that the strong mixed development driven by product innovation and aftermarket sales growth, in combination with the accelerated cost and organizational focus initiatives that we've announced set us up for performance recovery towards our financial targets as the market situation normalizes over time. Thank you very much and look forward to seeing you all soon again.